Wednesday, 13 January 2016

Money-Dealing Capital

Money-dealing capital is a branch of merchant capital.

“A portion of industrial capital, and, more precisely, also of commercial capital, not only obtains all the time in the form of money, as money-capital in general, but as money-capital engaged precisely in these technical functions. A definite part of the total capital dissociates itself from the rest and stands apart in the form of money-capital, whose capitalist function consists exclusively in performing these operations for the entire class of industrial and commercial capitalists. As in the case of commercial capital, a portion of industrial capital engaged in the circulation process in the form of money-capital separates from the rest and performs these operations of the reproduction process for all the other capital. The movements of this money-capital are, therefore, once more merely movements of an individualised part of industrial capital engaged in the reproduction process.” (Capital III, Chapter 19, p 315)

Money-dealing capital, therefore, has to be distinguished from money-lending, or interest bearing capital. Every firm, has to have people employed in these commercial functions of buying and selling, which become the specialised functions of merchant capital, but also in the functions of book-keeping, receiving and making payments and so on, which become the specialised functions of the money-dealing capitalists. These functions all form part of the circulation phase of the circuit of industrial capital. They deal with the metamorphosis of commodity-capital into money-capital, and of money-capital back into productive-capital.

The circuit of productive-capital is P.. C' – M'. M – C... P. Marx, also expands this to the formula.

This demonstrates Marx's point that functioning productive-capital always begins its circuit from its possession of a quantity of physical productive-capital, which must at least be physically reproduced in kind. The production process results in the creation of commodity-capital, C'. This commodity-capital breaks down into two components, firstly the component C, which is the physical portion of C', which must go to replace the commodities – means of production and labour-power – consumed in its production. The second component is c, which is the remainder of the commodity-capital, which constitutes the surplus product, and when sold constitutes the surplus value, s.

In this expanded circuit, it can be seen that M is merely the money equivalent of C, the portion of the commodity-capital required to reproduce the physically consumed commodities that comprise the productive-capital. It is then metamorphosed into C, the reproduced productive-capital. Because M is always just the money form of the value of this productive-capital, then as Marx sets out in Capital I, in respect of the constant capital, its value at this point of the circuit must always be the same as in the previous part of the circuit. In other words, it is the same as the M in the part of the circuit, M – C... P, because if the value of the constant capital has changed from the historic prices paid for it, this higher value of the constant capital is itself reflected in the value of the commodity-capital C', and must be so for reproduction to continue on at least the same scale, because this value must be recovered, in the value of the commodity-capital, in order to physically reproduce the constant capital, in kind.

The circuit of productive-capital always begins with P, not with M, and the value of P, of the commodities that comprise it - means of production and labour-power - is always determined as with every commodity, by the labour-time currently required for its production, and not the labour-time required for its production at some time in the past, which gave rise to its historic price.

A productive-capitalist employs workers to deal with the portion of this cycle – C' - M'. M - C… P. Even productive-capitalists, therefore, employ workers in unproductive labour, as part of this circulation time, of their capital.  That is some are sales staff, who sell the completed products, some are buyers, who use the firms realised money-capital, to buy means of production, some are responsible for hiring workers and so on. The selling functions also form the basis of the activities of independent merchant capitals. The productive capitalist also employs cashiers, responsible for taking payments from buyers of its products, as well as making payments for the commodities bought by the firm. It employs book-keepers and other such staff to deal with the recording of these payments and receipts. It is these commercial functions that form the basis of the activity of independent money-dealing capitalists.  It is in order to reduce their costs of circulation that the productive-capitalists transfer some of these functions to the specialised merchant capitals.

Those merchant capitalists who specialise in selling, must have part of their capital available to buy the commodities produced by the productive-capitalists, as well as the capital they advance in the form of constant capital in the shape of buildings, equipment and so on, as well as variable capital, in the shape of their own workers. The merchant capitalists who specialise in money-dealing, however, do not buy or sell any commodities. They only move the money-capital of other capitalists from one place to another. They must advance capital themselves in the form of constant capital (buildings, machines and so on) and variable capital (workers) required to perform these specific functions.

Both types of merchant capital, as capital involved in the overall circuit of industrial capital, share in the total surplus value on that basis. Their capital is included in the calculation of the total social capital advanced, for the purpose of establishing a general annual rate of profit, and they claim that average profit, accordingly on the basis of the capital they advance. 

By contrast, money-lending or interest bearing capital, stands completely outside of the circuit of industrial capital. Its circuit is merely M – M'. It lends money-capital, to productive and merchant capitals, but that money-capital only acts as money-capital, when the productive-capitalist or merchant capitalist metamorphoses it into productive-capital, or commodity-capital. Where money-dealing capital, as merchant capital, claims its share of the total surplus value, i.e. the average rate of profit, on the capital it has advanced, money-lending capital does not receive profit at all, because its activities are completely outside the circuit of capital. What interest-bearing capital obtains is not profit, but interest, and that interest is only the market price of the use value of the capital it lends, i.e. the use value of capital to be self-expanding value.

Firms of specialised book-keepers, accountants and auditors are forms of money-dealing capital. But, also those aspects of the activities of banks, which deal with payments also comprise money-dealing capital. Firms of factors, who take on the responsibility of collecting money owed to businesses, and who charge a fee for doing so, are also money-dealing capitalists. In past times, those businesses that arranged the shipment of gold to cover international payments were money-dealing capitalists. Today, a similar role is played by the various Bureaux de Changes, Forex dealers, as well as companies such as PayPal, Apple,Pay and so on.

Because many of these functions are carried out by banks and other financial institutions, who also are involved in lending money and money-capital, the distinction can become blurred between those functions which represent money-dealing capital, and those that represent money-lending, or interest-bearing capital, but these are two entirely different, and distinct forms of capital, operating under completely different laws of motion.

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