Capital III, Chapter 32 - Part 1

Money Capital and Real Capital. III.

“The mass of money to be transformed back into capital in this manner is a result of the enormous reproduction process, but considered by itself, as loanable money-capital, it is not itself a mass of reproductive capital.” (p 505)

In other words, it is the massive scale of production, and the mass of surplus value this produces, which creates an increasing mass of potential money-capital. It is only potential money-capital at the stage the surplus value is realised, because it depends on what happens to it after this stage.

An increasing absolute amount, but declining relative amount, goes to provide for an ever more lavish lifestyle for the exploiting classes, as unproductive consumption increases. As the mass of productive capital increases, an increasing amount of the total realised value of the commodity-capital has to be reinvested in productive-capital to reproduce it. And, of the surplus value, an amount will be used to fund expansion internally.

The rest of the realised surplus value will then be thrown into the money market, as loanable money-capital. But, as seen in previous chapters, and in Capital II, even parts of the other realised value may act as loanable money-capital, for a time. The money taken as revenue, by the capitalist, as profits and interest, or by other exploiters as rent and taxes, will not all be spent immediately. It will sit in bank deposits, available to be loaned until required. The portion of profit to be accumulated internally, will also not be all spent immediately, for that purpose, and will sit in bank deposits until required. And, as seen in Capital II, the reserve funds required to cover the wear and tear of fixed capital, will also sit in bank deposits until required.

Even the portion of the realised value of the commodity-capital required to reproduce the productive-capital will not be spent immediately. The longer the turnover time of capital, the more advanced capital is required to cover this period. But, not all of this advanced capital is laid out immediately. For example, suppose the turnover time is ten weeks, and £100 per week is required to cover wages. The advanced variable capital is then £1,000, but, because only £100 per week must be laid out, in week 1, £1,000 of the advanced variable capital can be sitting as a bank deposit, as loanable money-capital. In week 2, £900 is left in the account and so on. This is why capital seeks to make the management of these money flows as efficient as possible, because, in this way, money-capital that is not being used to finance productive-activity, in one way, can then be used to produce profit in another. The money must be made to operate as capital, for as much of the time as possible.

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