Capital-Value

Capital is not a thing but an historically determined social-relation between capital and wage labour. It is historically determined, because it can only arise at a point where markets have already grown, on the back of generalised commodity production and exchange, by petty commodity producers, to a size that is sufficiently large that it justifies capitalist production, at least for some commodities. But, it can also only arise when, on the one hand, money-capital has been accumulated in the hands of some members of society, and when, on the other, there exists other members of society, who have no other means of subsistence than by selling their labour-power, and where, therefore, labour-power itself arises as a commodity, to be bought and sold in the market. Capital, as this social relation, however, is manifest as things in different forms – money-capital, productive-capital, commodity-capital. Whatever the form, or shell it takes, what remains constant, within that shell, is the capital-value.

The money-capital possessed by the capitalist, as Marx states, is, in its strictest definition, merely this capital value in money form. It is, thereby, the same capital value as the productive-capital, it is used to buy, and equally the same capital value as the commodity-capital, whose sale is realised by it. In each of the exchanges of the circuit of capital, therefore, this capital-value remains constant. It simply changes the form of its manifestation. This is a further proof of Marx's argument that surplus value does not result from exchange, but only from the creation of new additional value, by the expenditure of labour, within the production process.

When capitalist A uses £1,000 of money, in their bank account, to buy means of production from B, for the purpose of engaging in capitalist production, the £1,000 of money, instantly becomes £1,000 of money-capital. In other words, the thing £1,000 of money, whether it is gold coins, or merely an entry of deposit in a bank account, is not itself capital, or even money-capital. It is only a money shell, whose content can be filled in a number of ways. For example, money may not only be used as a shell containing capital-value, it can be a shell that contains revenue. Then, the money is not used to buy productive-capital, but only to buy commodities required for personal consumption.

It is only when the money is actually used to buy productive-capital, whether that productive capital be constant capital, in the form of machines, raw material and so on, or variable capital in the form of labour-power, that it becomes money-capital, and is (assuming that commodities exchange at their values) tautologically, therefore, merely the money equivalent of the value of that productive-capital. As Marx points out, money-capital can only, thereby, exist fleetingly. No sooner is its nature as money-capital determined, in the act of buying productive-capital, than it ceases to exist in that form, because the capital value now exists in the form of productive-capital, whilst the money-capital has once more become simply money, whose content as either capital or revenue is yet again waiting to be determined.

When capitalist A, therefore, exchanges this £1,000 of money-capital, for means of production with a value of £1,000, owned by capitalist B, this is an exchange of capital. A exchanges a capital value of £1,000, contained in the shell, or in the form, of money-capital, and obtains, in its place, a capital value of £1,000, in the shell, or in the form, of productive-capital. This is an exchange of capital with capital. Similarly, Capitalist B exchanges £1,000 of capital value, in the shell of commodities, the form of commodity-capital, for £1,000 of capital value, in the form of money-capital. But, as stated above, this money-capital only exists as such fleetingly. In reality, this money-capital is only potential money-capital, because it is only such, if it is itself again used to buy productive-capital. What capitalist A gives to B is not money-capital, but only the money shell. In the very act of exchange, the capital value of the money-capital, its capital content, leaves that shell, and enters the shell of the productive-capital obtained in exchange. Capital value only enters that money shell, in the possession of B, to the extent that it is used to buy productive-capital.

But, as Marx sets out, in Capital II, a portion of this £1,000 can never be used as money-capital, because a portion of this £1,000 represents the surplus value, produced by capitalist B, in their production process, and a portion of that surplus value must always be used, by capitalist B, and other exploiters, who share in that surplus value, to buy consumption goods. In other words, a portion must always be used as revenue not as capital. As Marx points out, at the heart of expanded reproduction remains simple reproduction. In other words, before a capital can expand its production, it must first, at least, reproduce its original scale of production, it must reproduce the labour-power, and means of production, it had at the start of the previous circuit.

As Marx puts it, therefore, capitalist production is always based on the circuit M – C – M, even where it appears as M – C – M'. If, for capitalist B, they advance £600 of money-capital, to buy means of production, and a further £200, to buy labour-power, then, with a 100% rate of surplus value, they produce £200 of surplus value. The value of their commodity-capital is then £1,000. They sell the commodities, that comprise this commodity-capital, to capitalist A, and obtain, in exchange, £1,000 of money-capital. However, if they continue to produce, on the same scale, as under simple reproduction, only £800, of this potential money-capital, is actually used as money-capital. That is, of this £1,000, £600 is once again used to replace the means of production, consumed in the production of the commodity-capital, and £200 is used to once again hire labour-power, to process those means of production, and again reproduce the commodity-capital. The remaining £200, of the £1,000, is not used as money-capital at all, but is used, by capitalist B, as revenue, to purchase the consumption goods they need themselves to live.

So, as Marx says, at the heart of this circuit is M (£800) – C (600 + 200) – M (800). The surplus value of £200 produced in the production process as surplus value, is not, in fact, realised as £200 of money-capital, because it is destined, not to function as money-capital, to be exchanged for productive-capital, and thereby change its form, as capital value. It is always destined, merely to become revenue, to be used to buy consumption goods, for the capitalist. Moreover, as Marx sets out, in Capital II, Chapter 20, this surplus value of £200 can only be realised, itself, because the capitalist, previously, throws an equivalent £200 of money, as revenue, into circulation.

In reality, at the start of the circuit, capitalist B does not throw £800 of money into circulation, but £1,000. They throw £800 of money into circulation as money-capital, used to buy means of production and labour-power, but they must themselves live during this process, and so, to buy the consumption goods they require, they throw a further £200 of money into circulation. So, the actual circuit, looked at from a flow of money, is this. M £1,000 (800 c + 200 r) – C £1,000 (800 c + 200 r) – M £1,000 (800 c + 200 r).

In other words, capitalist B starts with £1,000 in money. Of this, £800 represents money-capital destined to be used to buy productive-capital (c). The other £200, in their possession, by contrast, is destined to fund capitalist B's consumption needs (r), during the period of the production process. Capitalist B, thereby exchanges £800 of capital value, in its money form, for £800 of capital value, in the form of productive-capital. At the same time, they exchange £200 of money, as revenue, for £200 of commodities, required for their personal consumption. They have then thrown £1,000 of money into circulation, which is now in the hands of workers, and other capitalists, and thereby available for them to buy the commodities which comprise the commodity-capital of capitalist B, which has an equal value of £1,000. But, having now exchanged this £1,000 of capital value, in the form of commodity-capital, for £1,000 of capital value in the form of money-capital, B is now, in reality, at the same position they started at, with £800 of this £1,000 actually representing capital value, in its money form, ready to be thrown into circulation once more, to reproduce the productive-capital consumed, and £200, of the £1,000, actually representing money as revenue, destined only to be used to meet capitalist B's consumption needs. The money they receive back, at the end of the circuit (£1,000), is only equal in value to the money they threw into the circuit to begin with (£1,000), M – C – M.  It is only the value of the money thrown into circulation as money-capital (£800), whose value has expanded to £1,000, and which returns to them.  The £200 they spent as revenue does not return to them.   It was not advanced as capital value, but spent as revenue.

Moreover, as Marx describes, in Capital II, even where we have a situation of expanded reproduction, so that not all of the £200 of surplus value is used, by capitalist B, as revenue, to meet their consumption needs, this circuit remains at the heart of this expanded reproduction. In order to realise the £200 of surplus value, capitalist B, still has to throw into circulation £200 of money themselves, in addition to the £800 of money thrown into circulation to buy productive-capital. The only difference here is that instead of this £200 being thrown into circulation, only to buy consumption goods, they throw some of it into circulation to buy additional means of production.

When capitalist B throws their £1,000 of commodity-capital value into circulation, therefore, and receives in exchange £1,000 of money-capital, this is again an exchange of capital with capital. In reality, A does not exchange £1,000 of commodity-capital for £1,000 of money-capital, but exchanges £1,000 of commodities for £1,000 in money. The real process is that the commodity-capital value of £1,000 is metamorphosed into £1,000 of money-capital value. The £1,000 of capital value leaves the shell of the commodity form, at the point of exchange, and enters the money form received in exchange. For simple reproduction to continue, £800 of that capital value, equal to the capital value that commenced the circuit, must remain in that money-form, until it is exchanged for productive-capital, once more, whilst £200 must assume the form of revenue, not capital, so as to be exchanged for consumption goods, to meet the needs of the capitalist.

This £200 of revenue, expended by capitalist B, to buy consumption goods, from some other capitalist, is then an exchange of revenue with capital, because the money in the hands of B, functions as revenue not capital, but in buying commodities, it realises the commodity-capital of some other capitalist, C. Capitalist C, exchanges a part of their commodity-capital, equal to £200 of capital-value, for £200 of potential money-capital, paid to them by B, but, for B, that £200 is not advanced as capital, but only spent as revenue. B does not advance this £200 of value for the purpose of its self expansion, but only to obtain an equal value of commodities required for personal consumption. For C, just as previously for B, what they receive is only money, not capital. Whether this money shell is filled with a content of capital value, or only acts as revenue, depends upon the function for which the money itself is used.

For B, the exchange is simply an exchange of £200 of value, in the form of money, as revenue, for £200 of value in the form of commodities. Similarly, when capitalist A bought means of production from B, what they bought was not capital, but only commodities. They exchanged £800 of value in the form of money, for £800 in the form of commodities. Likewise, B did not sell them £800 of capital, but £800 of commodities. In the same way that the £800 of capital-value left its money shell, in the process of the exchange, so it entered the commodity shell, as part of that exchange. Neither the money nor the commodities, in themselves, represented capital. They were merely things, shells, which contained the capital value. The value itself only functions as capital value, because of the specific function to which it is used, as a means of expanding value through the production process. In other words, the commodities that make up the means of production exist as capital-value, only because they function as productive-capital, as a means of expanding value. The money-only exists as money-capital, as capital value, to the extent that it is used to buy productive-capital. The final commodity product, the commodity-capital, exists as capital-value, because it already represents expanded value, it contains surplus value, and its only function is then to be realised in its money form, so that the circuit can be reproduced.

When Capital A uses their £200 of money-capital to buy productive-capital, in the form of labour-power, however, this is immediately an exchange of capital with revenue. In the case of the exchange between A and B, A exchanges £800 of capital value in the money form for £800 of capital value in the commodity form. B exchanges £800 of capital value in the commodity form for £800 of capital in the money form. But, for the worker, the commodity they sell, labour-power does not exist for them as capital value, as commodity-capital. It is only ever just a commodity. For B, their commodity-capital is defined as commodity-capital, precisely because it already represents expanded capital value, it already contains surplus value, prior to being sold. But, the worker's labour-power, does not contain any surplus value.

What distinguishes labour-power, from the commodity-capital of the capitalist, is that, although both exchange at their value, the worker only obtains an amount of value equal to that which they have to expend for its reproduction, whereas the capitalist obtains an amount of value greater than that they have advanced for the production of the commodities they sell. The difference for the capitalist is then that an additional amount of surplus value has been created in the production process, an amount of additional value, for which they have not paid. The capital value of their commodity-capital is greater than the capital value of the productive-capital used to produce it, or the money-capital advanced to buy that productive-capital. But, this expansion of capital value arises not as a consequence of any of the foregoing exchanges, but only as a consequence of new, additional value being created in the production process.

The worker then exchanges an amount of value in the form of labour-power, equal to £200, and obtains in return a value of £200 in the form of money paid to them as wages. In reality, the worker, if taken as workers as a whole, could simply have been given, by capitalists as a whole, commodities required for their reproduction, equal to this £200, because the £200 in money, is, in any case, used to simply buy those commodities. It is an exchange not of capital, but simply of one commodity, labour-power, for another, or series of others.

But, looked at from the perspective of capitalist A, they exchange a capital value, in its money-form , of £200, for a capital value of £200, in its form as productive-capital (variable-capital). Capitalist A gives to the worker £200 in money. The worker gives to capitalist A a commodity (labour-power) with a value of £200. In the process of exchange, the capital value of £200 leaves the shell of its money form, and enters the shell of its form as productive-capital (labour-power). Whilst the labour-power for the worker is not capital, but merely a commodity, for capitalist A, the labour-power is capital, precisely because, in the production process, it expands capital-value. It produces surplus value equal to £200.