The 1,000 kilos of cotton comprise a part of the commodity-capital of firm A. To the extent that this £100 of credit provided to firm B, is a new additional credit, it is only a reflection, therefore, of the fact that firm A's commodity-capital had expanded by £100, or 1,000 kilos of cotton, which is a reflection of the fact that its own productive capital had expanded, to produce this additional cotton.
“Loan capital and industrial capital are identical here. The loaned capital is commodity-capital which is intended either for ultimate individual consumption or for the replacement of the constant elements of productive capital. What appears here as loan capital is always capital existing in some definite phase of the reproduction process, but which by means of purchase and sale passes from one person to another, while its equivalent is not paid by the buyer until some later stipulated time.” (p 481)
Credit functions in two stages here. In the first stage, a commodity goes through a series of transformations, in order to reach its final form. Cotton is transported to a spinner who produces yarn, which is sold to a weaver, who then provides a tailor with woven cloth, so that the tailor can produce the suit, as the final commodity.
All along this chain, credit facilitates the process, as the cotton supplier supplies the spinner, and obtains payment at some later date, whilst the spinner does the same in relation to the weaver and so on. But, once the commodity has assumed its final form, as a suit, credit then takes part in the second stage, which is the transfer of the suit from one hand to another, until it reaches the final consumer. For example, the tailor may sell the suit to a wholesaler, who sells it to an exporter, who ships it from China to Britain, where it is bought by an importer, who sells it to a retail chain, who eventually sell it to a consumer. At each of these stages, the suit, which comprises part of the commodity-capital of each of these firms, is sold using credit.
“It follows, then, that it is never idle capital which is loaned here, but capital which must change its form in the hands of its owner; it exists in a form that for him is merely commodity-capital, i.e., capital which must be retransformed, and, to begin with, at least converted into money. It is, therefore, the metamorphosis of commodities that is here promoted by credit; not merely C — M, but also M — C and the actual production process. A large quantity of credit within the reproductive circuit (banker’s credit excepted) does not signify a large quantity of idle capital, which is being offered for loan and is seeking profitable investment. It means rather a large employment of capital in the reproduction process.” (p 482)
Credit facilitates the expansion of production beyond the bounds of what consumption would otherwise have imposed upon it. If the supplier of cotton could only supply it provided the spinner had money up front to pay them, and if the spinner could only have that money if the weaver had money to pay them for the yarn etc., the cotton may never get supplied in the first place, and this capital would never be produced.
But, the credit enables the production to occur irrespective of any limitation of consumption. As a result, of the production occurring, spurred on by the credit, workers are put to work harvesting cotton etc. As a result, these workers have incomes to spend, which means that consumption increases. As consumption increases, so an increased flow of capital returns, which prompts additional accumulation, and further increases in production, facilitated by a further extension of credit.
“The maximum of credit is here identical with the fullest employment of industrial capital, that is, the utmost exertion of its reproductive power without regard to the limits of consumption. These limits of consumption are extended by the exertions of the reproduction process itself. On the one hand, this increases the consumption of revenue on the part of labourers and capitalists, on the other hand, it is identical with an exertion of productive consumption.” (p 482)
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