Rereading Capital – Volume Two

Nasser Paydar

Part One: Metamorphoses and Circulation of Capital Chapter 1: The Money-Capital Cycle

The capital circulation process is carried out in three stages as follows.

First: The capitalist buys and takes possession of the commodity of labour power by agreeing to pay money. (Circulators of money – commodity)

Second: The purchased labour power is consumed in the production process and creates a commodity that has a value higher than its price.

Third: The new product is sold in the market and converted into money. In other words, the (commodity-money cycle) is completed.

Let us examine each of these stages. Our assumption is that the products are sold in fixed conditions and at their value.

First stage: This stage represents the conversion of money into commodities. The buyer pays money and receives goods, the seller, on the contrary, gives goods and receives money. But the form of exchange is not important. The discussion is about the specific nature and consumption characteristics of the commodities that exchange for money. Money is transformed into means of production on the one hand and into labour power on the other. The “commodity-money cycle” or the first stage of the money-capital cycle is composed of two components: money – means of production and money – labour power.

Two types of purchases in two distinct markets, the commodity market and the money market. The qualitative division of the commodities that money is spent on buying also indicates a quantitative division that is quite characteristic. The commodity of labour power carries a mass of surplus labour for which no rial is paid. With the price of 1 hour of labour, a 10-hour day of labour is purchased, and if this contract is concluded with 500 workers, an additional 4,500 hours of labour time are placed at the disposal of the buyer of labour power without any price. Thus, the “money-commodity circuit” and its distinct components are not only a relationship by which money is allocated to the purchase of two commodities in two separate markets, but also a clear quantitative relationship between the monetary components specific to the purchase of means of production and specific to the purchase of labour power. In the latter, a large volume of surplus labour is taken over by the buyer without any price.

The volume of means of production must be purchased to the extent that it can be transformed into products by the purchased labour force. This transaction must be carried out in such a way that a large volume of surplus labour accrues to the capitalist. The capital that creates value in the process of being transformed into labour force and means of production is called productive capital. The money spent on the purchase of means of production and labour is called (money-capital). The phase of the “money-commodity cycle” is a phase of the cycle during which value-capital is transformed from a monetary form into a productive form and becomes productive capital. In other words, capital is advanced.

Money-capital plays the important role of postponing the payment of labour-power to a future time and also ordering means of production that are not available on the market. Although the owner of money and the holder of labour-power face each other as owners of commodities, the former appears from the very beginning as the owner of the means of labour and production. The means of production are the property of others in the eyes of the worker, and the worker is also a being under his control in the eyes of the capitalist and will be an organic part of his capital. Therefore, the money-commodity circuit is a relationship that makes one party a capitalist and the other a wage slave. It is only with the development of capitalist production that money-capital becomes the natural form of the capital circuit, because the emergence of this phase requires a high level of development of commodity exchange on the one hand and the separation of the independent producer from his means of labour on the other.

Stage Two: The Role of Productive Capital

The circulation of capital begins with the money-commodity cycles and must end with “commodity-money”, but the transformation of money-capital into two different commodities, means of production and labour power, has created conditions that make the immediate continuation of circulation impossible, and an inevitable break must be overcome. The capitalist has not bought the worker as a slave. He has purchased his labour power for a certain period of time and wants to use it to transform the existing means of production into a new product, to make his money-capital productive capital, to seize a huge volume of surplus labour from the purchased labour time and to achieve surplus value. All this says that the mission of the first stage is to pave the way for the beginning of the second stage or the phase of capital’s fertility. The premise of the expansion of “money-commodity” into “money-means of production” and “money-labour power” is that the doer possesses these values ​​in monetary form. But he loses money in this act, and in order to remain the owner of money, his loss must entail the recovery of money. This is possible only through the sale of goods, so he must become a producer of goods. The wage worker also spends his wages on the purchase of necessities of life. Therefore, he must receive his wages in money at certain intervals, and the capitalist appears to him as the owner of money. All these components prove that the process under discussion requires a high level of development of commodity production. In other words, when production through wage labour becomes general, it indicates that commodity production has become the general form of production, an event that at the same time implies a greater division of social labour. On the other hand, the very conditions that give rise to the basic condition of capitalist production, the wage-earning working class, become the real driving force of the transition from the previous commodity production to the capitalist commodity production. Capitalist production, with all its expansion, brings the previous forms of production under the scourge of liquidation and struggle. It destroys production for the satisfaction of personal needs and makes the sale of the product the basis of work. In this mode of production, all actions become necessities of the exploitation of labour power, and it is only in this mode of production (capitalism) that in the course of its historical development it overturns the entire economic structure of society by organizing the labour process and by the enormous development of technology.

As long as the means of production are in the capitalist’s possession, they are his capital even outside the production process, but labour power only assumes the form of existence of capital in the production process. For the worker, labour power is only his saleable commodity, but for the capitalist, the buyer is capital itself, the only component of capital that is the source of the endless valorisation and creation of capital.

Stage Three: Greater commodities – More Money

The commodity, as the existential form of capital, is commodity capital when it emerges from the production process. If the production of the whole society is capitalist, all commodities are commodity capital from the beginning, and eventually capital in the form of a commodity must function as a commodity, the products from which capital is formed and produced for the market must be sold. This is the commodity-money stage.

Let us follow the important elements of this stage and the events preceding it with an example. The present commodity of a capitalist is 1000 meters of patterned velvet fabric worth 100 pounds. In its production, 90 pounds of raw materials and depreciation were used, 1 pound of labour were paid, and 9 pounds of new value or surplus value were created. The price of the commodity is assumed to be equal to its value. This value is realized in the sale. The question is, what makes this simple act of circulation, the sale of the fabric, a function of capital? We will summarize the answer in a few short sentences below.

1. The consumer nature of the goods has not changed, and the fabrics are produced as consumer goods, our assumption is that the product is sold at its value. So far, we have not seen any significant change.
2. In the meantime, something has happened. Value was first cloth, now it is money. In money-commodity, we had money in the form of monetary capital. In commodity-money, the product has actually taken on the role of capital in the production process before the beginning of this period.
3. The 91 pounds of productive capital, composed of 90 pounds of means of production plus 1 pound of wages, has now become 100 pounds. The workers have produced 9 pounds of surplus value. The 100 pounds of cloth now consists of 90 million tomans of fixed capital, 1 pound of variable capital, and 9 pounds of surplus value.

It is clear that the commodities ready to enter the commodity-money circuit are all capital. The former fixed and variable components are productive capital, plus the capital added or the newly produced component by its variable part (surplus value). Commodity-money is the circulation of commodity capital into money capital. As long as this capital added to value remains in the form of commodity capital, the production process is stagnant. Commodity capital neither creates products nor creates value but is only employed to varying degrees in the formation of products and value, in proportion to the speed with which it is sold and influences the expansion or contraction of reproduction. In this way the circulation process creates components that are more or less independent of the amount of value and that influence the extent of the expansion or contraction of accumulation. An element that appears here as the speed of sale or the acceleration of turnover.

If we divide the total price of 100 pounds for 1,000 meters of velvet into its components, we will have:

A – 90 pounds, equivalent to 900 meters of velvet, for labour and production equipment (raw materials, auxiliary materials, and depreciation costs)

B – One pound, equivalent to 10 meters of fabric, for wages paid to weaving workers.

C – 9 pounds, equivalent to 90 meters of velvet, is the amount of surplus capital or surplus value resulting from the exploitation of workers.

If the capitalist succeeds in selling 900 meters, he has only recovered the cost of the tools and raw materials. If he sells 910 meters, he has recovered all his fixed and variable capital, and only if he sells all 1000 meters has, he obtained all his capital plus the surplus value produced by the workers. The essential point here is the origin of the surplus capital. After the end of the commodity-money stage or the sale of all the velvets, the capitalist gains 9 pounds more than the 91 pounds of money capital he had advanced, in other words, more than the money capital he had entered the money-commodity cycle. But neither of these two stages played any role in the production of 9 pounds. This figure was produced solely in the production process, in the gap between these two stages of money-commodity on the one hand and commodity-money on the other, it is surplus labour or unpaid labour of wage workers. Another subject worth considering is the different circulation of this added capital with total capital. Capital began its circulation from money-commodity or money capital, but this capital created in the production cycle begins its circulation from commodity-money. Previously, there was no money capital ready to enter the money-commodity cycle. Later in the production process it was born by the variable part of capital and now in the form of a definite part of the commodity capital or commodity capital enters the commodity-money circuit. In fact, it begins its circuit from here, from commodity-money. The fact is that this entire circulation or organization can be summarized and depicted in the form of money-commodity-money, by explaining these very important points: First, the second money capital or money capital leaving the commodity-money circuit is much greater than the money capital entering the money-commodity circuit. Second, the entire capital added to it is produced in the circle of production, in the interval between the first and second stages of the circuit.

Stage Four – Complete Tour

So far, we have seen that money-commodity or money capital was divided into two components: labour power on the one hand and raw materials and the means of production in general on the other. These two components entered the production process and became productive capital. Capital was born here and was ready to enter the commodity-money stage. Now let us examine the total movement or the expanded form of the circuit. In the whole process, capital is seen as a value that goes through a chain of continuous and reciprocal transformations. Two stages of this process belong to the sphere of circulation and the other to the sphere of production. In each of these stages, the value of capital acquired a specific form that was consistent with the function of that stage. During the process, it not only maintained itself but also increased. In the final stage, it returned to the same form from which it started at the beginning of the process. On this basis, the whole process is a circuit.

Value-capital in this circuit, two stages of circulation including money capital and commodity capital, goes through a production stage in the form of productive capital. Capital that accepts all these forms in the course of its complete circuit, discards them, and in each of them performs a function appropriate to that form is industrial capital. The industrial attribute here indicates production based on capitalism. Therefore, money capital, commodity capital, and productive capital are all industrial capital. The circuit of capital is routine only when all three stages occur one after the other. If a stop occurs in the first stage, money effectively becomes a hoard. Stoppage in the second stage is the cause of the non-functioning of the means of production and the unemployment of the worker, and in the third stage it ensures that goods are not sold. In the general formula, the product of the production stage appears as something different from the elements that make up productive capital.

For example, cotton, the spindle, and labour have an existence distinct from yarn. This is true whenever and wherever the result of the production process is an object. Even when a part of the product enters the process of re-production as an element. For example, when wheat attains the state of seed, the product is still only wheat and has a different form from the tools of labour, fertilizer, and labour. In the meantime, of course, the transportation industry has its own characteristics. Here, production and consumption are not separate. The work of this branch is the movement of people or goods. No new product is produced; the product of labour is the movement that occurs and is not separate from production. Let us not forget that here too, the exchange value of the product, like the value of any other commodity, is determined by the value of the elements used in production. Industrial capital is the only mode of capital in which it is not only the appropriation of surplus value or surplus product but also its production that is the responsibility of capital. Industrial capital is the epitome of the capitalist mode of production. Its existence implies the existence of a class antagonism between the capitalist class and the working class. To the extent that it dominates or appropriates social production, the technical and social organization of labour and therefore the economic-historical type of society are transformed. Other forms of capital, which had previously appeared within the framework of previous or declining conditions of production, not only become subordinate to it, not only do their functions adapt to it, on the basis of which they move, live, die, remain, and collapse. Money and commodity capitals, which act as factors of specific branches of business alongside industrial capital, are simply different functional forms of existence that industrial capital adopts and discards in the environment of circulation. These are modes of existence that have become independent and have evolved separately in the light of the social division of labour.

Explanation: The above points have a key position in determining the nature of the dominant mode of production of each society and recognizing the economic-historical nature of societies. In the twentieth century, we witnessed a new arrangement of the bourgeois political economy. A type of political economy that was created in a continuous chain of misleading theories such as “dependent capitalism!!, peripheral!!, dominated!!, commercial!!, rentier!!, single-base!!, oil!!” by the Paul Sweezy, Paul Barans, Semiramis, Mendels, Leninist, Maoist, Trotskyist parties and other circles, the market of nationalist anti-imperialistic flourished a section of the bourgeoisie, became the basis for the twisted version of the democratic revolution, the alignment of the people and the anti-people, the path of non-capitalist growth, the establishment of a national democratic republic and the like. Through all these channels, it became a poisonous theoretical weapon of the bourgeoisie to shut down the class struggle of the working masses. Despite their differences and distinctions, these theories were homogeneous and common in their alienation from the Marxian anatomy of the capitalist mode of production. They all showed an astonishing insistence on denying, distorting, reducing, and distorting the reality of the development of the capitalist mode of production in a large part of the world, especially the denial of the dominance of capitalism in the countries of this part. In this way, and with the help of this denial, they tried to expel the working class of societies from the real bastion of the class and anti-capitalist struggle. Most of these theories and theorists relied on the false conclusion that capitalism had grown in some societies, but this growth did not occur in the transition to widespread industrial accumulation!! but rather thanks to “merchant capital” partnered with imperialist finance capital!! And on this basis, what developed and dominated was not industrial capitalism but commercial capitalism!!

From the very beginning of the critique of political economy, when writing the Grundrisse, Marx nullified all the assumptions that fostered these illusions by dissecting commodity production, the dynamics of its expansion, and then the emergence of the relationship of buying and selling labour power and the development of capitalism. In the above discussions, he clearly considers talking about a category called “merchant capitalism” to be completely unfounded, illusory, and misleading. He clarifies that: In the capitalist mode of production, all previous forms of capital, including commercial and usurious, find the role of floating particles in the new production; money, commodity, and productive capital become organic circles of the capital circuit. A capital whose source of birth and self-expansion is only the circle of production, only the surplus labour of the worker and the exploitation of the wage worker. Wherever we talk about capitalism, its visible identity is definitely and inevitably industrial capital. In other words, what makes the mode of production capitalist production is the role of industrial capital. The issue is not how much capital is present at each stage of the social capital organization of a country; what is at stake is that the capital present in each of these circles is an organic part of the capital being valorised through the exploitation of labour. Commercial capital can be advanced by the merchant with an appearance independent of industrial capital, but only in order to play a role in the circulation of value-added capital or capital whose variable part generates all values ​​and surplus values. In view of these points, the very term “commercial capitalism” is a misleading category and devoid of any material objectivity. The same is true of the formulation of the liberal nationalist or national left political economy of the twentieth century. Expressions such as “oil economy”, “rent capitalism” and the like are vulgar. The source of all this theory-making has been the attempt of the bourgeoisie to shut down the class struggle of the working masses. Everyone has tried to suggest that the root of poverty, misery, and hunger is not in the existence of capital but in the lack of industrial development!! That the problem is not capitalism but its non-industrialization and commercialization!! That we must stop fighting against capital and allow “national industry” to flourish!! That we must fight alongside the industrial capitalist against the commercial capitalist!! And so on!

Let us follow Marx’s argument. If we consider M-C…P…C’-M’, where M (primary money), C (commodity purchased with primary money), P (productive capital), C’ (more commodity than the money-commodity circuit) and M’ (more money than the money paid in the money-commodity circuit), as a special form of the circular movement of capital, then this form will have the following characteristics.

1– It appears as the circuit of money capital because industrial capital in its money form is the starting point and return of the whole process. Money is not used here as money; it is money capital or the money form of capital. It specifies that the main goal of the movement is not use value but merely exchange value. It proclaims that money-making is the sole driving force of capitalist production because the process of circulation begins with money and ends with more money.

2 – The production process here represents a rupture between (money – goods) on the one hand and (more goods – more money) on the other. A process that screams with all its threads and textures and makes it clear that resorting to production is simply resorting to the exploitation of labour power to obtain more money or, in fact, more capital.

  3 – The characteristic feature of the formula M-M’ (original money – added money) is that on the one hand the value of capital determines the starting point and the valorised capital the ending point, and on the other hand money capital appears in the form of money that creates money.

4 – If we examine the circuit of money capital in its unique form, we see only the process of valorisation and accumulation. Consumption here is purely productive consumption. Money capital is divided into the price of labour power and the means of production, wages are paid to the worker only insofar as his labour power is a commodity required for the process of valorisation and accumulation. Even the capitalist’s consumption is for his survival as a capitalist and as a figure involved in the valorisation process. Consumption in this process is everywhere the consumption required for the transformation of original money capital into increased money capital through the exploitation of the worker in the process of production.

The process of the circuit of capital, the unity of circulation and production, and the circuit of money capital is the most characteristic form of the emergence of the circuit of industrial capital. A process in which the Value appreciation, accumulation and money-making are the real goal and series of movements. Money capital, as the present form of all the stages of the circuit, takes over this entire circuit and brings it to a conclusion in that part of the capital, namely variable capital, is the source of the production of surplus value. Money capital plays a fundamental role in this process. The payment of wages is a monetary payment. The worker recognizes the capitalist as the owner of money, he wants food and the necessities of life to survive and needs money to obtain these. Money capital forms the transitory prelude in the continuous repetition of the circuit of productive capital. This happens when industrial capital is first invested in the form of money capital. The general form of the circuit of industrial capital when the capitalist mode of production is assumed is the circuit of money capital.

Chapter Two: The Circulation of Productive Capital

The general formula for the circuit of productive capital is: P…C’M’…P where P is the primary productive capital, composed of labour power and means of production, first transformed into commodity capital (C’) or commodity-capital increased in the process of production through the exploitation of labour power and then into increased money capital (M’), and finally as renewed and increased productive capital, ready to begin a new round of circuit or accumulation. This circuit is in fact the renewal of the cyclical production of surplus value and expresses the task that industrial capital in its productive form performs not once but cyclically and repeatedly. In this form of circuit two things are visible. First, if in M-M’ or the circuit beginning with money capital and ending with increased money capital it was the production loop P that determined the gap between the first and last rounds of the circuit, this is not the case here. From the time when productive capital opens the first new round of circuit until it is transformed into increased productive capital at the end of the circuit, we do not witness any break. The break appears at the end of the cycle. Where a new round of circulation must begin. Secondly, the total cycle is reciprocal and inverse to the circulation of money capital. There we were dealing with M-C-M. Here we are faced with C-M-C.

1- Simple reproduction

We begin with the assumption that commodities are sold at their real value and the surplus value resulting from the exploitation of workers is immediately used for the personal consumption of the capitalist. In this case, as soon as the commodity-capital C’ is converted into money M’, a part of the money that represents the value of capital begins and continues the new circuit of industrial capital. The other part, or surplus value, which initially has the form of a commodity, leaves this circuit and enters the general circulation of commodities. In other words, it is allocated by the capitalist to purchase goods, whether physical goods or services. To be more precise, if we denote the surplus value produced in C’ by c, this c, which has been a continuous part of the total C’, will henceforth take a different path and follow its circuit not in the form of productive capital but in the form of commodities and the general circulation of commodities. Let us return to the example we had earlier. There we were talking about 1000 meters of patterned velvet cloth worth 100 pounds. Of this amount, 91 pounds were capital advances in the form of means of production and the price of labour. 9 pounds were also the newly produced value or surplus value. The first figure, or 91 pounds, for 910 meters of velvet, enters the new circuit of productive capital in the field of clothing production in the form of value-capital, and 9 pounds of surplus value, equivalent to 90 meters of velvet, exits this circuit. It enters the general circulation of commodities and is used in the series of personal purchases of the capitalist. Here c-m-c (commodity added in the production process – money increased in the production process – commodities that the capitalist buys for his personal use using the surplus value) is embodied as a simple commodity circuit. In the circuit of this component of capital, its first circuit c-m is mixed with the commodity circuits of capital C’-M’, it is its continuous component. In our specific example, it is located within 1000 meters of velvet or 100 million tomans, but its second stage m-c is located outside the circuit of productive capital, the capitalist uses it for personal consumption and in this way enters the general circulation of goods. From this we conclude that:

First – when commodity capital C’ is transformed into money capital M’ or (M + m) or primary productive capital and surplus value produced, these two, which were until then one and the same, are separated from each other.

Secondly – ​​with this separation their circuit path also becomes different. C-M-C continues its capital circulation, but c-m-c enters the commodity circuit.

Thirdly – if the entire surplus value, i.e. c or m, does not reach the capitalist’s personal consumption and part or all of it is mixed with C or M as additional capital, then the value of the capital present in the circuit will change before the end of the cycles. In our example, the capital that begins the new circuit of circulation will be 98 pounds or 100 pounds instead of 91 pounds. The allocation of part of (C’) to the capitalist’s personal consumption not only does not make any dent in its role as commodity capital within the general circuit of capital, but quite the opposite, it makes this role even more clear. What the owner of capital takes out of the process of capital’s circulation and puts into the circuit of commodity circulation for his own expenses is the unpaid labour of the worker. Capitalist production is the production of capital, but the reproduction of the capitalist is also a continuous part of this process.

2 – Accumulation and reproduction on a large scale

The nature of capitalist production is the fertilization of value – the capital invested and the production of more and more surplus value, it is also clear that the surplus value must enter the accumulation process and play the role of additional capital. The surplus value may be completely accumulated and may be a part of it in the form of income, personal consumption of the capitalist. Both cases are normal, but here, for the purpose of facilitating the examination, we start from the assumption that its whole is accumulated and enters the production cycle or the circulation of capital. In such circumstances, we will have this formula. P…C’-M’-C’ where C’ at the end of the formula is the embodiment of the beginning of a new circulation of capital in the form of labour power (L) and means of production (MP). P is the increased productive capital that begins a new cycle of circulation. The important difference between this round and the previous one is that the initial money capital has increased and become larger due to the surplus value produced. But as soon as the circuit begins, this difference disappears and the latter money capital takes the same path as before. The same rule applies to the increased productive capital. But if we compare M-M’ with P-P’, each has a different meaning from the other. M-M’ is the advanced industrial capital which has entered the cycle of production in the form of money capital, has produced money and now, on the eve of a new, fatter circuit, continues its work in the form of a larger money capital. This is not the case with P-P’. Here we witness the circuit of productive capital. Productive capital, whose circuit P-P’ is the evidence of the end of its circuit and P does not represent surplus value. It represents that the surplus value of production has accumulated and is being valued. P’, in contrast to P, also informs us that the value of the original capital is plus the value of the capital that has been produced and accumulated as a result of it. The very essential point here is the precise dissection focus on that key element or nature that gives identity to this whole process or circuit and confers on it the nature of the circuit of productive or value-added capital. Money capital can only have a monetary function, and commodity capital can also only have a commodity function. The difference between them is the difference between money and commodities. In the same way, industrial capital in the place of productive capital can be simply composed of elements that are present in every other labour process, every other production process. To be more precise, the means of production and labour power are present even in the non-capitalist production process. But here, in our present discussion, everything is closed around a completely different element that creates a closed loop. Labor power here is the other labour power, the commodified labour power of the wage worker. Labor power that is purchased and creates a value far in excess of its own price. It is this element that gives the whole circuit a different nature and makes it the circuit of value-adding capital. It is in light of the role played by this element that money capital is no longer the old money capital. It is rather a link in the circuit of industrial capital. Commodity capital is also not a commodity produced in the old mode of production. On the contrary, industrial capital is in the form of a commodity. In other words, the function of money and other commodities is the function of industrial capital in the various stages of its circulation. Accordingly, it is completely wrong to attribute their characteristics to money as money and commodities as commodities. In the same vein, it is also very misleading to attribute the characteristics of productive capital to the means of production. What identifies and characterizes all of these is the labour of the wage worker.

3 – Accumulation of money

The immediate and maximum conversion of surplus value into productive capital is the nature of the capitalist mode of production, but the realization of this is subject to certain conditions. The capitalist can use the surplus value produced to establish a new workshop, or to expand the existing business. In both cases, to achieve the goal, he needs a certain amount of new capital, which the surplus value obtained from the production cycle must be sufficient to advance. The normal course of action is that the surplus value resulting from one cycle of capital organization is not enough to do the work. In such circumstances, the only way forward for the capitalist will be to store the surplus value obtained in the form of money, save it and turn it into a treasure. The action by which this volume of surplus value is practically removed from the cycle of valorisation increases in value with each round of reproduction of productive capital, but this increase is not due to the use of the reserve itself, but on the contrary, it is a new surplus value that is obtained by the productive capital present in the production process and is added to the previous surplus value. How long this period will be and how far this process will continue is a question whose answer can only be sought in the volume of capital required to establish a new workshop or expand an existing business on the one hand and the volume of surplus value produced in each round of productive capital on the other. The essential point in this regard is that this reserve is in no way the kind of hoarding common in pre-capitalism. Here we are dealing with a reserve that leaves behind a period of equipment and provision. It plays the role of a certain money capital that, in the process of its completion, is an advance in the form of productive capital. It is true that it is not currently adding value and has fallen out of the round-robin process, but the goal before it and the process it is going through is the process of equipping it to add value.

4 – Accumulation – Fund

Accumulation – Fund is a form of the same money reserve that we explained above. The difference is that money-fund was precisely in the monetary state and went through the process of replenishment for the advance in the form of productive capital. But accumulation – fund, the summoning of the same money-fund, is in emergency situations to solve the problems on the way to the circulation of productive capital. Accumulation – fund enters the circulation process of capital, without becoming a part of it. Accumulation – fund should not be confused with this or that component of the circulating part of constant capital. The latter component is in fact a part of the value of capital within the production cycle that the capitalist actually uses as necessary to meet the needs of the valuation process, but accumulation – fund is not. Surplus value is a reserve that urgently leaves its monetary state and enters the circulation process.

Chapter 3: The Circulation of commodities – Capital

C’-M’-C…P…C’

The difference between this form of the circuit and the other two forms is that: in the first form, the circuit begins with money capital and the circuit process is interrupted by the production process; in the second form, productive capital is the initiator and the entire circuit with its two complementary stages appears as a means of renewing production; in the third form, the sum of the circuits with its two opposing stages opens the circuit process. Let’s expand on the subject a little. The first form (money capital – productive capital – commodity capital) establishes the cyclical process of the state (money capital – commodity capital… increased commodity capital – increased money capital). Here the production process is located between two complementary and reciprocal stages of the circulation of capital. The production process is completed before the stage C’-M’ is reached. Money as capital is first invested in the means of production and labour power, these means are transformed into products – commodities and are transformed again into money. This is a closed circle. It can end here; the owner of capital can stop his business and do whatever he wants with his increased money. At the same time, he can continue to work. (Money capital – productive capital – commodity capital) can be both the last round of the circuit of capital and can play the role of the first round of the circuit of capital that has just entered the field.

The second form is the reverse. In – M’ – C… P(P’) C’ P… (productive capital… fertile commodity capital – increased money capital… increased productive capital) the entire process of circulation takes place in the interval between the original productive capital and the increased productive capital. The original productive capital is a productive capital, and its function is to carry out the process of production as a precondition for the cycle that follows it. The increased productive capital is no longer a process of production, but the manifestation of the renewed production of industrial capital in a productive form, and this productivity is due solely to the transformation of money capital into labour power and means of production, or in fact to the exploitation of labour power.

In the third form (increased commodity capital – fertilized money capital – commodity capital…productive capital…added commodity capital) two stages of the circulation process open the circular process. This circuit ends with fertilized commodity capital and in this respect is similar to the second figure. In figure 2, productive capital began its new process with increased productive capital, here too it begins with increased commodity capital and the whole process is seen as C’….C’. What distinguishes this figure from the previous two figures is briefly:

1 – It is only in the third form that the point of departure towards fertility is not primitive capital in search of surplus value, but on the contrary, value – capital fertilized. The increased commodity capital is in fact the value of capital fertilized in the process of production and the carrier of surplus value and therefore has a decisive influence on the entire process of circulation. For it is not only the circulation of capital value, but also the circulation of surplus value from the very beginning.

2 – All three circuits have one common feature. Capital exits the process in the same form in which it entered it. In fact, it assumes its primitive form in order to continue the process of circulation. M, P, C’ are the forms in which capital value is advanced. In the meantime, M and P are the primary monetary and commodity capitals which at the end of the circuit, although they attain the state of M’ and P’, can appear in their original form and, for example, be advanced again in the same amount in simple reproduction, but in the third form the story is different. Here C’ is the capital value with surplus value which is both the starting point of the circuit and its final link. Reflection on the above points once again confirms the fact that as soon as the capitalist mode of production has taken hold in a society, every commodity in the hands of every seller is a capital commodity. It possesses this quality at the very first moment of its transfer to the merchant, otherwise it is a commodity that has become the successor of a primitive capital commodity, and only its form of existence differs.

Chapter Four: The Three Forms of the Circumnavigation Process

If we put all three forms of the capital cycle together, all the prerequisites and requirements of the process will appear as a result. Each moment will be seen as the origin of movement, the point of transition and the point of return. The entire process demonstrates the unity of the production process and the cycle, and the production process finds an intermediate form between the cycle forms. In the study so far, it was assumed that value-capital in each of its existential forms, namely money-capital, productive capital and commodity-capital, enters the field completely, in this assumption the expression of the existence and field of each form indicates the end of the function and absence of the other form. Each stage occurs in a break with the other stage and in its absence. For example, productive capital appears when money capital has finished its work, has undergone transformation and is no longer known. Commodity capital emerges from the process of transformation of productive capital and with its presence there is no trace of the previous form. In the same way, money capital appears after the role played by commodity capital and with its appearance the function of its predecessor has ended. In this way and with this assumption, the circulation of productive capital, from its initial form to its increased state, does not only express the periodic renewal of this capital, but also equally reflects the discontinuity and fragmentation of the cyclical dynamics. In other words, production is carried out in an interrupted and cut-off manner instead of being continuous. But capitalist production is not really like this and discontinuity is not an indicator for it. In the capitalist mode of production, we are faced with the continuity and discontinuity of the cycle of capital organization. Continuity here plays the role of an indicator and is associated with the technical basis of production. In the previous example, 1000 meters of patterned velvet are transported to the market like commodity-capital, while the materials required for the cycle of valorisation enter the production process and are being transformed into productive capital. Commodity capital leaves its existing form and becomes money capital, while the old money capital is being transformed into new productive capital. At the same time that the new 1,000 meters of velvet are being transformed into money, the old 1,000 meters of velvet are undergoing the second stage of their circulation, in order to leave the form of money capital and become productive capital. All the components of capital undergo the process of circulation one after the other, entering together at different stages of this circulation. Accordingly, industrial capital, with the continuity of the circulation, is at the same time in all stages and in all forms. The circuit of industrial capital in its uninterrupted continuity is not only the unity of the processes of circulation and production, but also the embodiment of the unity of all three of its circuits. It is clear that of the total capital advanced in the production cycle, only a part of it has the specific form of industrial capital. The rest has the form of money or commodity capital. What is the volume and proportion of capital in each of these forms and situations? This is a question whose answer is determined by the total amount of capital on the one hand and other components related to the requirements of the process of organizing capital. We will discuss this further. For the time being, let us continue the discussion of continuity and discontinuity in the process of circulation. Capital, as a component of social capital, a part of the total capital of a society, plays different roles in various transformations and different stages of its cycles, is present everywhere, and performs different roles in a neighbouring and accompanying manner. Each component successively leaves one stage and enters another, abandons one form of role-playing and assumes another. It passes through all these stages and performs all these functions in succession. This sequence of role-playing is carried out in such a way that the return of each component of capital to one form requires the return of another component to another form.

Capital as a value that is fertile is not only the creator of class relations. It is not only the entailer of a specific social reality based on wage labour. Capital, while being all of these, is also a movement. It is a circular process with different stages. A process whose three forms of circulation are the circulating aspects of a single element and the expression of the presence of this element in all these forms. Even when it is not in the circle of production, it is an organic part of productive capital and performs a task that is an inevitable necessity for the valorisation of capital in general. If it currently employs apparently unproductive labour power, the exploitation of this power is the vital and inevitable condition for the realization of the surplus value resulting from the exploitation of the productive worker and the working class in general. Capital must be seen only as movement. A movement without stagnation that at the same time implies the independence of value. This independence is by no means a pure abstraction. On the contrary, it is a reality that we observe in the movement of capital. Value both preserves and increases itself in the various stages of this movement or circuit, and it does so as a value that has become independent. Capitalist production exists and continues to exist as long as value-capital is fecundated and as an independent value it goes through its circuit. Value as capital acquires an independent existence and by its movement it preserves this independence and increases its intensity.

In the era when the capitalist mode of production has developed and become dominant, a significant part of the commodities present in the process of circulation [money capital – commodity capital – means of production and labour power] represent means of production, commodity capital appears and acts as other, on this basis from the point of view of the seller [commodity capital – money capital] the transformation of commodity capital into money capital takes place, but this is not an absolute rule. On the contrary, industrial capital within its cycle, in the stages in which it functions as money or commodity, regardless of whether it plays the role of money-capital or commodity-capital, its circuit intersects with the commodity circulation of the most diverse other modes of social production – provided that they are commodity production. Whether the commodity is the product of slavery, the product of the Chinese peasant, the Indian petty producer, the East Indian peasant, the Russian serf, the wild hunter-gatherer, in any case it is placed in the form of a commodity and money against the commodity and money that represent industrial capital. Not only in the circuit of industrial capital, but also in the circuit of surplus value, which commodity-capital carries and is spent in the form of income. The origin of these commodities and the nature of the mode of production from which they emerged are indifferent. They function as commodities in the market and, like commodities, enter the circuit of industrial capital. Moreover, they also enter the circuits of surplus value that this capital carries. What is true of these commodities is also true of foreign money; money here functions as a world currency. Two points are important in this regard.

1 – As soon as money capital is transformed into means of production, these means are no longer commodities, they constitute an existential form of industrial capital with a productive function and are in fact productive capital. Their origin becomes devoid of subjectivity and role and they have no other existence apart from a form of industrial capital. However, the replacement of these means requires their renewal of production and in this respect, it seems that the capitalist mode of production is dependent on other forms of production. But let us not forget that the transformation and transformation of all previous forms of production into capitalist production is a rebellious and powerful tendency of this system. Its effective weapon in this regard is to draw the aforementioned modes of production into its own circular flow. Capitalism itself is the highest level of development of commodity production. The role played by industrial capital in advancing this process is very decisive, and this is what causes all direct producers to be transformed into wage labour.

2 – The commodities that enter the circular flow of industrial capital and are of the type of means of subsistence or necessities for the reproduction of the labour power of the working masses, regardless of their origin and method of production, appear in the form of commodity-capital, in the form of commercial capital vis-à-vis industrial capital. Commercial capital, according to its role, encompasses the commodities of all forms of production. The premise of capitalist production is production on a large scale. Accordingly, the premise of sales in this system is also mass sales. This requires the intervention of the merchant and the role of commercial capital in the dynamics of capital organization. However, as long as the industrial capitalist in a given branch produces the means of production needed by capitalists in other branches, this transaction can be carried out directly and without the need for the intermediary of the merchant.

Capitalist production is commodity production as a general form of production, but only because, firstly, it is based on the relation of buying and selling labour-power. Labour-power is also a commodity in it, the worker sells his labour-power as a commodity, and secondly, the worker sells this commodity or labour-power only at a value determined by the cost of its reproduction. To the extent that labour develops into wage-labour, the producer also becomes an industrial capitalist. On this basis capitalist production and, in this respect, a high level of commodity production only appears when the direct agricultural producer also becomes a wage-labourer. In the relation between capitalist and wage-labourer, the money relation, the relation of seller and buyer, becomes the inherent and homogeneous relation of production. This relationship is fundamentally based on the social nature of production, not on exchange, because exchange itself here arises from production. The bourgeois opinion-making machine suggests the opposite and hangs on this upside-down view that the foundation of the mode of production must be sought in exchange!!

The capitalist puts less value into circulation in the form of money and takes more out of it. He puts more value into circulation in the form of commodities in order to take more value out of it in the same form. As long as he is an industrial capitalist, the value of his supply is always greater than the value of his demand. Otherwise, if the value of his supply and demand is equal, his capital has not appreciated at all and is not really capital at all and has not played the role of capital. The capitalist must sell more dearly than he has bought, but he is able to do so only because the capitalist production process, the process of exploitation of the worker, has increased the value of what he has bought and raised it very considerably. He is able to sell more dearly, not because he sells his commodities at a value higher than their value, but simply because he sells them at a value much higher than the sum of the values ​​of the elements involved in their production. He has not bought the labour of the worker, he has bought his labour-power, and for the consumption of this commodity (the labour-power of the worker) he has paid only the price of one hour or much less. The greater the difference between the capitalist’s supply and demand, the more his surplus of goods supplied exceeds his demand, the more violent will be the surge in the valuation of his capital. Supply and demand are his means. The aim is to produce more massive surplus-value. What is true of the individual capitalist is exactly and completely true of the capitalist class. When the capitalist is only the embodiment of industrial capital, his demand consists of the demand for means of production and labour. He buys the means of production at a value lower than the value of his capital and accordingly supplies less than the commodity capital. In relation to labour, the value of this demand is determined by the ratio between his variable capital and his total capital. For this reason, in capitalist production, this demand grows much less than the demand for means of production. The worker allocates his wages to the purchase of means of subsistence and the largest part of it to vital necessities. The capitalist’s demand for labour is in the form of his indirect demand for the worker’s necessities of life. This demand is equal to the worker’s wages or the variable part of capital and is not a riyal more than that. If the worker saves a part of his wages, his demand for manufactured consumer goods is reduced by the amount of this savings. The capitalist’s maximum demand is given by the formula C=c+v (value of means of production plus wages of workers) but his supply is c+v+s (means of production or fixed capital employed, variable capital and surplus value produced). If his commodity capital is 120 consisting of 80 fixed, 20 variable and 20 surplus values, then his supply is 120 and his demand is 100. This means that demand is 20 percent smaller than supply.

Let us explain further how this capital is returned. Let us assume for the time being that the total capital is £5,000. Of this, £4,000 is allocated to the fixed part, £800 to the circulating part of the fixed capital, and £200 to the wages of the workers. In order for the entire circulating part of the capital (the means of production and the wages of the workers) to return to the capitalist during a year of valorisation, it must have five turnovers in the year. If this happens, then at the end of the first year, a commodity capital will have £6,000. Because in each turnover, £200 of surplus value has been produced. Our other assumption for the time being is that the capitalist consumes the entire surplus value and spends it on his own living expenses, leisure, and pleasure, and in the meantime only converts the amount C equivalent to the means of production into new productive capital. In such a case, the appearance of the story is that the capitalist’s demand will be equal to his demand in terms of value, but the movement of capital does not confirm this. As a capitalist, he only demands 80 percent of the value of his supply. He consumes the other 20 percent as a non-capitalist. He spends on satisfying his own needs and pleasures, which has nothing to do with his capital account. As a percentage, as a capitalist, his demand is 100 and his supply is 120; as a leisure person, he has a demand of 20 and a supply of exactly zero. It is only by calculating the total of these that his supply and demand reach a state of balance and become equal. All these assumptions belong to non-capitalist production in the form of production whose aim is not to produce capital and surplus value for the purpose of increasing capital. Accordingly, there can be no talk of industrial capital here. Capitalist production is not the production of needs, pleasures, pleasures or the satisfaction of wants, it is the production of capital and surplus value for the purpose of capitalization. The above assumptions are of course technically unrealistic and impossible. On the one hand, the capitalist is forced to have a reserve of capital for himself to cope with price fluctuations and sales under favourable conditions, and on the other hand, he cannot avoid accumulation and capitalization. Achieving the latter goal depends on him extracting part of the surplus value from the capital circulation process, saving it, and increasing this reserve to be sufficient to expand the workplace or establish a new business. As long as this hoarding continues, the capitalist’s demand does not increase, money stagnates and cannot remove from the commodity market the volume of goods it has taken out of it to supply the commodities. 

Chapter 5: The Time of Circulation

As we have seen, the capital cycle is composed of a production arc and two circulation arcs. The time capital is present in the production arc, the production time, the duration of its presence in the other two arcs is called the circulation time, and the total of this time is called the capital cycle time. The production time of capital must also be distinguished from the time capital functions in the production arc. These two are different. A component of fixed capital, including machinery, buildings, warehouses and storage centres for products and raw materials, or all of what is called fixed capital, is present in the cycle, it is part of productive capital, workers working with these devices or in these centres are also all productive labour, but these machines, equipment, buildings gradually enter the value of their products into the production process in proportion to their lifespan, during different periods of circulation and in the form of depreciation. Each time in each production cycle, they transfer a very small part of their value to the product. The rest is present in the production process, thanks to the labour force that uses it, it plays a role in the valorisation of capital, but they do not enter the production process of the product and are not absorbed into the new product. Let’s leave aside the other part of fixed capital, consisting of raw and auxiliary materials, all of which do not enter the production process directly and at once and are not consumed. Some are in storage and ready for use, they are present in the process of capital circulation, but this presence does not guarantee absorption into the new product, it is subject to a kind of stoppage. The latter situation can even be seen in the production curve itself. For example, grain that has been cultivated, leather that goes through its chemical process, wine that goes through a fermentation period in the cellar are among these. In these cases, the production time is longer than the labour time.

The excess of production time over labour time resulting from any of the above states indicates that the means of production do not absorb labour in these states and, accordingly, no surplus value is produced. To be more precise, productive capital does not create surplus value during the entire period of time that represents the excess of production time over labour time. Although all these stops are inseparable from the production process, they do not witness the production of surplus value. In this regard, the tendency of capitalist production is basically to shorten the difference between labour time and production time as much as possible. Leaving aside production, capital is also present in two arcs of circulation as complementary arcs of the arc of production. The transformation from commodity form to money and from money form to commodity, which we have discussed earlier. In the first cycle, the conversion of commodities into money occurs simultaneously with the realization of surplus value, and in the second cycle, the conversion of capital value into elements of production or labour power and raw and auxiliary materials. Circulation time and production time repel each other. As long as capital is in circulation, it does not function as productive capital. It neither produces commodities nor creates value or surplus value. The more the components of capital remain in the circulation cycle, the smaller the part of capital that is constantly in the production cycle becomes. In this way, the contraction or expansion of the circulation time has an inverse effect on the contraction or expansion of the production cycle. The more the former is contracted, the more capital with its given amount performs the function of productive capital. If the circulation time reaches zero, this function or role of capital as productive and self-expanding capital rises to the maximum. For example, the capitalist delivers the produced products directly and at the same time receives the goods needed for the production cycle. Circulation is as necessary for the production of a commodity as production itself, and in this regard, the factors of circulation are also as necessary as the factors of production. But this does not mean at all that we should consider these two, i.e. the factors of production and circulation, to be the same!!! The capitalists who buy and sell together neither create any grains of commodities nor produce any surplus value, there is an important distinction between CM and MC. A difference that has nothing to do with the commodity form and monetary nature of capital but stems precisely from the nature of the capitalist mode of production. Both CM and MC are in and of themselves the representation of a given value from one form to another, but (C’M’) is at the same time the realization of the surplus value contained in C’. This is not the case with MC. This is also why selling is more important than buying. MC is a necessary act for the valorisation of the value contained in M, but it is not the process of realizing surplus value.

The existence of commodities as use values ​​imposes important restrictions on the commodity circulation of capital in C’M’. If commodities are not sold within a certain period of time, they deteriorate and lose their value and surplus value. The sooner a commodity deteriorates, the sooner it must be sold after production. The greater the volume of commodities that deteriorate, the greater the risk of a decline in profits and the more hysterical the capitalists’ struggle to apportion the lost surplus value over the prices of other commodities becomes.

The risk of perishability of goods, the loss of a percentage of surplus value, the limitation of the time of competition, and in short, the reduction, however insignificant, of profits, has, since the very beginning of the development of capitalism, driven the owners of capital and later the capitalist governments to do anything to escape this problem, including the greatest genocides and holocausts, and even more horrifically, to ultimately pass the cost of all these atrocities and savagery onto the shoulders of the same mass of workers. In addition to depriving humanity of most of the achievements of human knowledge in history and directly allocating all these achievements to improving the productivity of social labour and increasing capital profits, the capitalist system has also launched the most horrific campaigns to prevent the spoilage of goods, at the cost of polluting and making all the necessities of life and the environment of humans deadly. It has mixed all food, clothing, fruits, vegetables or any other need of humanity with thousands of deadly poisons with this same goal and in order to reduce losses or prevent the decline of profits.

Chapter 6: The Costs of Circulation

First: Genuine Costs of Circulation

1 – Buying and selling time:

The transformation of capital from commodities to money, or vice versa, is a transaction that takes place in the form of buying and selling. The time spent on these transactions is, from the capitalist’s point of view, the time of the capital cycle, a necessary part of the time of renewal of production. Our assumption is still that commodities are sold at their value, and on this basis these transformations are nothing more than the transformation of value from commodity to money or vice versa. Even if commodities are not sold at their value, the sum of the transformed values ​​remains constant, because the more one-party gains, the more the other party loses. CM and MC are transactions that take place between buyer and seller, and their completion requires the expenditure of time. Especially since each party must resort to all sorts of tricks, strategies, and solutions to seize a greater share of the surplus value in the goods, wage an exhausting war against each other, and compete, which takes time. When capital is part of the capital circulation circuit in table, let us not forget that in this circuit and in the maze of transactions, no rials of surplus value are produced, not only is there no production, but the longer the capital travels this circuit, the greater the volume of capital present in this arc, the less time it can function as value-adding capital. Whether the transactions are carried out by the owners of capital or by other individuals, does not fundamentally change the situation. Especially since each party must resort to all sorts of tricks, strategies, and solutions to seize a greater share of the surplus value in the goods, wage an exhausting war against each other, and compete, which takes time. When in the calculation table, capital is part of the circuit of capital circulation. But let us not forget that in this circuit and in the maze of transactions, no rials of surplus value are produced, not only is there no production, but the longer the capital travels this circuit, the greater the volume of capital present in this arc, the less time it can function as value-adding capital. Whether the transactions are carried out by the owners of capital or by other individuals, does not fundamentally change the situation. Let us assume that the force involved in the transaction is a wage worker. A worker who earns his living by selling his labour power. In this case, he is not a producer of surplus value. In other words, while being a worker, the worker is not productive. His usefulness to the capitalist is not in the productivity of his work, on the contrary, it is in making this unproductive link in the process of reproducing production as short as possible. Let us go further. Let us assume that the worker in question, like any other member of the chain, is exploited, and is exploited to the utmost. For example, out of his 10 hours of daily work, only one hour is allocated to his living expenses, and the rest is surplus labour or capital and the capitalist’s profit. This will not make him productive or the reason for his productivity either. Neither of the two parts of his work, neither the necessary hour nor the nine surplus hours, produce any rial of value or surplus value. But for capital, there is a very fundamental difference between the two parts of this worker’s work. When an unproductive worker works 10 hours and receives only one hour as wages, the capitalist, instead of bearing the cost of 10 hours of work, pays only the cost of one hour. Every 10 hours of work is an inevitable requirement of the cycle of valuation, organization, and renewal of capital production, and accordingly, every riyal of reduction in its cost is a riyal in increasing capital’s profit. The greater the volume of capital advanced in the field of purchasing unproductive labour power, the greater the capital present in the curve of production and exploitation of productive labour power is reduced. This is precisely why capitalists try to change, as far as possible, the balance between the productive and unproductive parts of capital, the balance between capital advanced in the exploitation of productive and unproductive labour power, in favour of the former and to the detriment of the latter. A balance whose establishment is a branch of the rebellious contradiction inherent in capital, and its manner is determined under the pressure of this contradiction.

2 – Bookkeeping

The process of capital circulation requires, in addition to buying and selling, bookkeeping. A portion of labour time, whether in the form of administrative labour or in the form of tools such as pens, paper, and the building where these tasks are performed, has been used in this regard from the very beginning. A realm that in the present era has taken the form of a huge, extensive, complex, and endlessly organized system of capital bureaucracy, whether governmental or non-governmental. The labour force employed in this field is generally unproductive labour. Productive and unproductive labour will be discussed in its place. For now, we will briefly mention a few points. The purchase and sale of labour power go through two different phases. In the first phase, labour power leaves the hands of the worker and is owned by capital. It becomes capital, and the capitalist becomes active in how it is consumed. It can be consumed anywhere, in any field, and for any purpose. The second phase is the phase of consumption of labour by capital. Productive labour is work that, after passing through the first phase, becomes a variable component of productive capital and is consumed in the process of producing a product. Productive labour can be physical or intellectual, but in both cases, it is a direct creator of value and surplus value. The work of a teacher, nurse, physician, translator, actor, cabaret singer, and journalist is productive, although it is not physical. Capital consumes it in the production cycle of education, health, sanitation, music, newspapers, translated texts, and in the process of consuming it, it achieves new values ​​or added value. Unproductive labour is labour that is consumed in a cycle other than the production cycle and does not create any value or added value. Bookkeepers, marketers, salespeople, warehousemen, accountants, and the vast majority of people who are exploited in the field of sales are not productive workers. A very fundamental and decisive point in this regard and in this discussion is that productive and unproductive labour are equally necessary for the cycle of production and valorisation of capital. Just as productive and unproductive capital are complementary and indispensable components. What is created by the productive worker must go through its own process of organization in order to realize its existing surplus value. For this, capital needs the unproductive worker, without whom production would be meaningless and the process of re-production would be impossible. Let us add one more point. It was said that labour power becomes capital after sale, the undisputed property of the capitalist. In other words, the buyer makes himself a capitalist. There is an exception to this passage. Labor power can be sold and not make the buyer a capitalist and therefore not create any surplus value, even if the work is productive. A relatively large population of construction workers, electricians, welders, repairmen, builders, soldiers, gardeners, computer assemblers, painters, sell their labour power to people who are not capitalists at all. The buyers may themselves be workers, but they need to buy the labour power of these workers to build a house or repair their household appliances.

3 – Money

The product produced, whether it is a commodity or not, is the material form of wealth. The commodity is the general form of the product in capitalist production. A huge volume of products is produced in the form of commodities and must necessarily take the form of money. This volume of commodities is constantly increasing, and in parallel the amount of gold, silver, money that acts as a medium of circulation, a means of payment or in the form of a reserve also increases. The commodities that play the role of money do not reach individual or productive consumption; they are fixed social labour that is a requirement of the circulation cycle and therefore constitute a part of the cost of capital’s circulation.

Second: Maintenance costs

The net costs of circulation, which were described above, do not enter into the process of value formation, because in the capitalist’s eyes they are part of the advanced capital or productive capital. This ruling does not apply to maintenance costs. These may be the result of the production process and are also present in the cycle of circulation. They may also be the unproductive costs of labour, whether living or materialized, which can have a value-creating role for the individual capitalist and constitute an addition to the price of the commodity. These points require explanation, and we will try to explain this very briefly below, by examining the specific areas of these costs, by giving specific examples.

1 – Commodity reserve in general

Commodity capital in the process between production and consumption acts as a commodity reserve. This state of capital or commodity reserve appears twice in each round of reproduction. Once in the form of commodities that enter the production process, and again in the form of a product that leaves this process and is sent to the market to become productive capital. From the point of view of the capitalist and the advanced value-capital, the commodity reserve or the state that commodity-capital assumes is a deeply unwanted, involuntary and very unfortunate stoppage that must end as quickly as possible, the commodities must be sold at the earliest opportunity, and commodity-capital must give way to productive capital. Let us not forget that the stopping of commodity capital in the market as a commodity reserve requires the existence of buildings, warehouses, reservoirs or quantities of fixed capital. At the same time, it requires the payment of wages to the labour force that must transport the goods to these centres. The problem does not end there; the goods are in danger of spoiling and therefore additional capital must be spent in the form of tools and wages of the worker to prevent their spoiling. These costs do not belong to the production process, they are necessary in the circulation cycle and inevitably enter the dynamics of value formation, at the same time they are different from the costs of the first type, for example, bookkeeping. Their role is not to transform the value form of capital from one form to another. They are a vital necessity for the preservation of commodities – capitals and, in this regard, an indispensable condition for the preservation of values. They do not create any new use values, but they preserve the values ​​produced or at least reduce their waste.

Contrary to the ideas of economists, including Sismondi (Jean Charles Léonard de Sismondi), the costs under discussion are a natural phenomenon of the mode of commodity production in general and capitalist production in particular. A brief explanation is necessary in this regard. Reserve appears in three different forms: productive capital, individual consumption goods and commodity reserves. The relationship between the three forms is such that the increase of each is accompanied by a decrease in the other two forms, although all three forms can increase in absolute terms. For example, if production only satisfies the needs of the producers themselves and the social product does not take the form of commodities, the commodity reserve will be only a very small part of production. In such a situation, the subsistence commodities will assume a relatively larger volume.

The reserve in the form of productive capital consists of the means of production or the raw and auxiliary materials required for the production process. It is the essence of the capitalist system that it increases the productivity of labour to the maximum possible level. With the increasing scale of production and the productivity of labour, a much larger volume of machinery and raw and auxiliary materials are needed in the production cycle. These means must be available in advance and in reserve. The volume and time of storage of these commodities, or in fact commodity capital, is a function of the conditions of the day and the level of historical development of capitalism. The less reliable the rapid supply of materials, the more expensive and backward the transportation network, the more uncertain and difficult the transfer of materials, tools and materials from the place of production to other areas where they are to be used as capital, the greater the volume of productive capital in reserve. The credit system also plays a role in this transition. When the components of productive capital must be traded directly and with immediate payment, the capitalist will certainly prefer to increase the volume of purchases and store larger amounts of productive capital. The opposite is true of purchases on credit. Some commodities, or rather commodity capital produced in areas such as agriculture, enter the market at certain points in time and their re-entry into the market requires the passage of time. These commodities constituting productive capital must be stored by the industrial capitalist, or otherwise by the merchant, and in any case, they assume the role of reserve commodities.

2- Storing specific commodities

In capitalist production, the commodity is the general form of the product. The more this system grows, the more the volume of goods, commodity capital and commodity-capital increases. Every commodity that does not go directly from the production process to the sphere of productive or individual consumption acquires the state of reserve. Reserve that assumes various productive forms, the subject of consumption or commodity reserve and assumes an independent state. With the development of capitalism, the degree of dependence of the rate of production on the direct demand for goods becomes continuously smaller and, on the contrary, it becomes increasingly dependent on the volume of capital at the disposal of a single capitalist, on the dynamics of valuation and the need for self-expansion of these capitals. In this regard, the volume of products that are produced in each sphere of production and put on the market in the form of commodity-capital grows enormously. The continuous expansion of capitalism is accompanied by the rapid growth of the commodification of labour and the transformation of the majority of the population into workers. A population whose wages are the cost of living required to reproduce its labour power, and a significant part of these needs must be available in the form of reserves on the market. All of these are natural phenomena of capital, and all play a role in the ever-increasing growth of the commodity reserve. It was said above that whatever the social form of reserve may be, it requires buildings, warehouses, boxes, materials and supplies to prevent the product from being wasted. All of these are costs, costs that, whether in the form of objectified labour or living labour, form part of social labour in any case. They are not spent on the production of the product, they are even deducted from it, but they are unavoidable expenses of capital, and now the important question is to what extent and how do these costs enter into the value of the commodity?

If the capitalist fails to sell his products for a while, the process of capital appreciation has not stopped during this time. All the costs of storing the product have also been added to his losses. The capitalist cannot sell his commodities at a higher price under the pretext of prolonging the circulation cycle and keeping them in storage. No buyer is willing to pay a higher price for such goods. If capitalists resort to hoarding and sell their commodities at an exorbitant price, this increase in price and overselling has nothing to do with the lengthening of the circulation time of the commodities. Its root must be sought elsewhere. We will do this later, in its place. The storage of commodities is normal to the extent that it is a condition of the circulation of commodities and arises from the needs of this circulation. If it exceeds this limit, if the commodities are piled up, this piling up is not a normal part of the circulation process, it is not a real need of the circulation cycle of goods or a change in the state of capital, which arises from the failure to sell the commodities. In this case, the costs do not enter the value of the product.

Third: Transportation costs

The total costs of circulation, which arise from the transformation of the commodity, are not included in the value of the product; they are the costs of realising value and, from the capitalist class’s perspective, are a fraction of the surplus value. In the meantime, the costs of transport have their own importance and require separate consideration. The use value of commodities is realised in their consumption, and this consumption, whether productive or individual, usually requires a change in the location of objects. The philosophy of the transport industry stems from this, and on this basis the productive capital advanced in transport adds to the value of the commodity. The extent of this increase is determined by the depreciation of the means of transport on the one hand and the value of the labour force involved in this process on the other. Transport is not just the movement of a product from one geographical area to another. Cotton that goes from the combing section to the spinning section, coal that is moved from the mine floor to the surface of the earth are also forms of transport of products.

In the capitalist mode of production, the productivity of labour and the value it creates are inversely related. This relationship is also true in the transport industry. The more productive the labour force, the less living or dead labour is required to transport goods. The more productive the transport industry, the less value it adds to the value of the commodity, other things being equal. The capitalist mode of production reduces the cost of transportation for a single commodity through the ever-increasing development of technique, the ever-increasing concentration of investment, and the increasing productivity of labour in this area. Capitalism increases the role of social labour, whether materialized or living, in the realm of transportation by transforming ever-increasing quantities of products into commodities and then replacing nearby markets with distant markets. On the one hand, the transportation industry creates a branch of production and becomes a field for the advance of productive capital; on the other hand, it appears as a continuation of the production process in the circulation cycle and for the circulation dynamics.

Part 2: The Turnover of Capital

Chapter 7: The Turnover Time and the Number of Turnover

If we consider a given capital, the total time of its circulation is equal to the time of production and circulation, this is the period that the capital passes from the moment of payment in the form of value-capital until its return to its starting point. If we consider this entire cycle, we see three distinct states in it: first: M…M’, second: P…P, third: C’…C’. The third state differs from the other two in one way. If we take M…M’ as the starting point, at the end of the first cycle we are faced with the value of the first paid capital plus surplus value. This surplus value cannot enter the new process of production. If we consider P…P or the production process as the starting point, at the end of the cycle we are still faced with the value of the first capital along with surplus value, and if reproduction is simple, the surplus value can leave the circuit process. Now let us consider C’…C’ as the starting point. Here, unlike the two cases above, the new circuit cannot begin only with the value of the initial capital, because we are dealing with a previously valorised capital value, of which the value of the initial capital constitutes only a part. If the subject of the study is the effect of the return on the dynamics of the formation of surplus value, we must resort to the first case, if the effect of the return on the formation of the product is the object of interest, we can take the second case as the basis. The third case is the basis for the work when we want to explore the relationship of individual capital with the movement of the total social capital.

When the circulation of capital is not a single act but a periodic process, we call it the turnover of capital. The duration of this turnover is the time of production plus the time of circulation. If we ignore the influence of individual events, then the difference between the turnover times of capitals will be a function of the different areas of their advance. If the working day is the natural unit of measurement of the function of labour power, then the year is the usual unit of the turnover time of capital. If we represent the year as the general unit of return of capital by U, the time of turnover of a given capital by u, and the number of turnover periods by n, then our calculation formula will be n = U/u.

Chapter 8: Fixed Capital and Circulating Capital

1.Distinctions of Form

A part of fixed capital, including machinery, buildings, tools and equipment that are present in the production process for different periods of time (short or long), is called fixed capital. The basic characteristics of this part of capital are as follows.

First: It gradually transfers a part of its value to the commodities being produced.

Second: Its major and essential component, although not included in the product, has a completely effective and decisive influence on the labour process.

Third: As long as it is present in the labour process in a certain form of consumption, it retains its important role as a factor of production, even until the last remnant of its value is completely transferred.

Fourth: The extent of its impact on the volume of production in each turnover of capital can be calculated not by its transfer value but by its total value.

Fifth: It does not leave the labour process and its effective role until it is scrapped.

Sixth: Only a part of it that is transferred to a new commodity enters the circulation process from the production cycle.

Seventh: The longer its life and the slower its depreciation, the longer its impact and presence in the production process.

Eighth: Like other components of capital, it circulates, but not essentially in the form of consumption, which is present in the circulation flow in terms of value. In this respect, they are similar to auxiliary means, coal or light, with the important difference that the latter must be constantly replaced.

What gives fixed capital its special character is the special way in which it circulates. A way which allows this capital, on the one hand, to transfer only a small part of its value to the product and, on the other hand, to influence the process of production with its entire consumable existence. Let us bear in mind that this role is only possible in the production process. A machine is fixed capital only when it enters the production process; outside this process it lacks this role and is therefore not fixed capital.

The other component of fixed capital which enters the new product, such as raw materials, is called the circulating component of fixed capital. In the chemical industry and agriculture, this component is sometimes combined with auxiliary means. The substances added to the soil to make it fertile, although they play the role of productive, do not enter into the body of the new product (¹), at the same time their effect may remain for several rounds of cultivation and harvest and gradually be depreciated, a feature which makes them similar to the fixed component of capital. Many products of a given sphere of capital accumulation can be used as fixed capital in other spheres, but they are fixed capital only when they enter the cycle of production. A pig is fixed capital in agricultural matters, but if it is slaughtered for its meat, it no longer plays this role.

Regardless of the basic error in distinguishing between fixed and variable capital or the different states of fixed capital, economists also make important mistakes in defining economic concepts. For example, they use the criterion of being movable or not to be movable as a criterion for distinguishing fixed and circulating capital. While a movable object such as a ship or an animal such as a cow can be fixed capital. Many instruments of labour are movable and transferable while being fixed capital. In the first volume of the book, it was said that the means of production in the labour process, independent of the specific social conditions in which they are used, can be divided into instruments of labour and the predicate of labour (what the work is done on, for example, land, water). But it is in capitalist production that these can be transformed into capital. Here we must complete the above point in such a way that the instruments of labour fulfil the role of fixed capital in this mode of production. Perhaps the material characteristics of this instrument of labour allow it to have another use, but it is clear that in this use it will no longer be fixed capital. Here, regarding auxiliary materials and their role in production and commodities, I refer the reader to Chapter 8 of the original second volume of Marx’s Capital (²) .

The specific circulation of fixed capital has its specific reversal. A part of this capital that enters the product is transformed into money in the process of circulation from commodity to money. This is also true of that part of the value of the instruments of labour that enters circulation with the product. In the proportion that these instruments of labour (fixed capital) give their value to the product, they themselves exit the circulation process. Let us consider a machine whose price is 900 pounds and whose life span is 15 years. In other words, the time of reversal of its total value is 15 years. The machine transfers its value bit by bit to the product, bit by bit it is transformed into money until at the end of 15 years it ceases to function and exits the circulation process.

Part of the productive capital is spent on purchasing labour power. The capitalist buys this power like any other commodity, but for a certain period of time, for example, one day, and uses it in the production process. During this period, labour power not only transfers its one-day value to the product, but also produces surplus value several times that value. This is a topic that we will not discuss at the moment and in this section of the study of the circulation of capital. For the time being, what we are saying is that the variable component of capital or labour power transfers its value to the product by entering the production cycle. The product is converted into money, and money is converted back into labour power. This is what makes variable capital similar to the circulating part of constant capital and distinguishes it from fixed capital. It is in this regard that the total of these two components, namely variable capital and the circulating part of constant capital, is called circulating or fluid capital. We can summarize the above points in a few sentences below.

A– The definitions of fixed and circulating capital forms originate from the role that value-capital plays in the process of transformation. The basis of the definitions is not the role of the forms of capital in the process of valorisation. In addition, only productive capital can be divided into fixed and circulating capital. This rule does not apply to money-capital and commodity-capital.

B– In a transformation of fixed capital, circulating capital has several transformations. The constant part of capital is fixed capital as long as it remains in the process of production while transferring part of itself to the product, and the product leaves the production cycle as a commodity. A machine is fixed capital as long as it continues to transfer its value drop by drop to the products, while still being in the process of production.

C– Unlike circulating capital, fixed capital is advanced once for its entire life; the means of production representing it do not need to be replaced in each transformation. At the end of its life, it is withdrawn from circulation at once and replaced by new means with the same role. The value of capital, which is advanced as a fixed part of capital in the existence of means of production, performs its various forms of circulation, not in material form but in value form, before being discarded. A part of the value of the means of production, not a part of the substance of the means, enters the product and is transformed into commodities and money.

D – The circulating part of productive capital is also always present in the production process; without their presence there is no production. Their difference from fixed capital is that in each cycle they are replaced by other materials and resources of the same type and with the same role.

2 – Components of fixed capital – replacement, repair and accumulation

Different elements of fixed capital have different lifespans and payback periods. For example, in the railway, rails, sleepers, stations, substructures, bridges, tunnels, locomotives, and wagons have completely different payback periods. Some may last for years, while others may need to be replaced after a few years. There are many factors that determine the payback period for fixed capital. The more these items are used, the faster they depreciate. Natural factors also play a role in this; with the waste and damage they cause. The type and quality of the mashie have their own important influence.

The depreciation resulting from the fall in the price of the means of production is another important factor in the life of machinery. Machines enter the market at a lower price than their predecessors, and the capitalist prefers to remove the previous means of production from circulation. The progress of technology and its effect on labour productivity and competitiveness also plays a similar role, encouraging the capitalist to scrap the machine early. The difference in the life span of the various means of fixed capital also applies to the parts of a given machine. Some parts require replacement and replacement sooner than others. Let us turn to other points that are important in the case of fixed capital, especially in the process of gradual expansion of the capitalist enterprise. It has been said that fixed capital gradually transfers a part of itself, not in the form of a body, but of value, to the commodity and converts it into money. The average time of this part of value being transferred to the commodity plays the role of a kind of cash reserve which the capitalist can spend on improving machinery or expanding his enterprise, instead of accumulating it to replace the present means of production, at a given time. From the perspective of society, this is a kind of large-scale reproduction that can be “outward” (involving the expansion of the scope of production) or “inward” (making the machinery more efficient). This extensive reproduction does not originate from the conversion of surplus value into additional capital but is a part of fixed capital that is separated from the main body, transformed into goods and money, and replaces the depreciated part of fixed capital. Fixed capital has specific maintenance costs. Part of this cost is guaranteed by the labour process. A machine that is not in the production cycle becomes obsolete and incurs waste, without playing a role in generating the cost of this waste. The use of a machine in the production process and the compensation of this cost is a natural gift that the worker gives to capital, one hundred percent free. Labor takes on the task of maintaining fixed capital completely free of charge in two ways. First, it transfers the value and materials of labour to the product and thereby maintains it; second, it maintains the use value of the fixed part of capital even without transferring it to the product through its use in the production process.

In addition to the above, fixed capital still requires labour to maintain itself. In order for a machine to work properly, it must be cleaned regularly, a task that is performed by the worker. Capital also places this task on the worker without paying any wages. The story does not end there. Machines need to be repaired. Repairs in some areas must be planned and carried out at certain intervals. This is the case with railways, airplanes, and even industrial machinery in factories. These repairs require capital and labour. Capital and labour that are sometimes not included in the fixed capital advance. Apart from these, sudden events also occur that necessitate repairs. The main point is that these costs, which are related to any kind of repair, cleaning and in any case ensuring the health of the machine in the production process, are all included in the calculations related to the average life of the machine. It is not only the average depreciation cost that determines the value share of fixed capital in the output of a payback period, but also the total recent costs.

The capital added in this way is different from the two forms of fixed or circulating capital, but it is more similar to the latter. The capitalist wants the machine not to stop, and in this regard he makes every effort to repair and eliminate its defects. This work requires rapid financing and is paid for in the same way as the price of raw materials or the wages of workers. In the case of rented real estate, which is considered fixed capital for its owners, the law of capital distinguishes between depreciation due to the life of the building and repairs required for its maintenance. The former is borne by the owner, and the latter is borne by the tenant. Insurance, which is specific to unusual natural disasters such as fire, flood, earthquake, and the like, has a distinct status and is paid from the surplus value.

Explanation: Marx’s reference to the insurance system and the fact that its cost is deducted from the capitalist’s surplus value is a matter of the special conditions of those times. Insurance companies are among the largest investment giants, a significant part of their profits is taken from the paid labour of the working class, each worker pays a part of his necessary labour for pension insurance, medicine and treatment, housing, automobiles, household appliances or other items. Another part of the profit of these giant trusts is, as Marx points out, a share that they receive from the total surplus value resulting from the exploitation of the working class. At the same time, insurance companies play an octopus role in the accumulation of capital in all existing economic areas and areas of exploitation of the working mass.

Determining the costs of repairs and depreciation based on the social average creates inequalities for the different capitalists in each sphere of production in terms of the amount of these costs. Some machines have a longer life span, and some have a shorter one than this average. But the increase in the price of goods that results from these costs is the same for everyone. This affects their profits. Similar to the situation where competition, the formation of production prices and the general rate of profit affect the distribution of surplus values ​​among different capitals according to their degree of productivity and organic composition.

¹Marx’s reference to the absence of substances such as fertilizers in the new product is in no way contradictory to the chemical and pathogenic effects of these substances on, for example, fruits, vegetables, and plant products. Marx’s point here is essentially focused on how the value of the various parts of capital is transferred to the products.

² “The circumstance that this portion of the auxiliary materials does not pass bodily into the product but enters into the value of the product only according to its own value, as a portion of that value, and what hangs together with this, namely, that the function of these substances is strictly confined to the sphere of production, has misled economists like Ramsay (who at the same time got fixed capital mixed up with constant capital) to classify them as fixed capital.”

Chapter 9: The Aggregate Turnover of Advanced

Capital, Cycles of Turnover

We have seen that fixed and circulating capital have different payback periods, and the payback periods of different components of fixed capital are not the same. We will discuss the differences in the payback periods of the components of circulating capital at the end of this chapter. For the time being, let us consider the following points.

1- The total payback period of the advanced capital is the average payback period of all the different components that make up this capital.

2- In this study, we are faced not only with quantitative differences but also with qualitative differences. Circulating capital is converted into commodities and money in each payback period. This is not the case with fixed capital. So, we must find a homogeneous index for the different reversals of different capitals. An index that is a common criterion for determining the average of the reversals. If we take P…P as the basis, the above distinction negates this homogeneity, but in M…M’ this homogeneity exists. Let us consider a machine worth 800 pounds, 80 pounds of which are depreciated every year and converted into commodities and money. Monetary capital becomes productive, commodity capital and continues its circuit. When we examine fixed capital from this perspective or its value form, we see a homogeneity between it and circulating capital.

3-The above eighty million fixed capital, as part of the annual depreciation of the fixed capital of 800 pounds, participates in 5 rounds of withdrawal in a year, and in each of these withdrawals, 200 pounds circulating capital is converted into goods and money. The total capital that withdraws during a year is 1,080 pounds, which is 8% more than the paid-in productive capital. (Surplus value is ignored and the focus is on the value of fixed and circulating capital as a homogeneous index for calculating the social average withdrawal of the total paid-in capital.)  

4. The reversal of the value of the capital paid is separate from the time of its actual reproduction. A circulating capital of 200 pounds reverses in year 5, but ignoring surplus value, the real figure at the end of each cycle is 200 pounds. The durability of fixed capital increases with the development of the capitalist mode of production, but the continuous development of technology makes the replacement of machinery faster. In this regard, the important point is that the multi-year cycle of related reversals, during which the process of capital appreciation is clearly influenced by the efficiency of its fixed part, determines one of the important foundations of the cyclical cycle in which business passes through successive periods of stagnation, moderate prosperity, golden prosperity and crisis. The time during which capital is advanced for appreciation varies from one stage to another, but a crisis is always the beginning of very large new investments.

5- The method of calculating the return on investment or determining the average payback period is such that we consider the payback time of different parts of the capital. We calculate the amount that is returned in a year, then we divide the total capital by this amount. For example, the total capital is $500,000. ($250,000) Fixed capital is in the form of machinery. The life of the machines is 10 years, and their annual return is $25,000. $125,000 is spent on purchasing equipment with a shorter life and is still fixed capital. Its payback period is 2 years and $62,500,000 per year. The last $125,000 is allocated to purchasing raw materials and labour. This component is returned twice each year. In this example, the capital is returned to $337,500 per year, and therefore the average time for its total return is about 18 months.

6- The capitalist may pay the wages of the workers daily, weekly, monthly, and in a place like Iran, once every several months. The criterion for calculating the social average of the return is not the day the wages are paid.

Chapter Ten: Theories Related to Fixed and Circulating Capital

The Physiocrats and Adam Smith

The physiocrat François Quesne saw the difference between fixed and circulating capital as the difference between initial and annual payments. He rightly saw this distinction as a matter of the production process and related to productive capital. Like all physiocrats, he considered only agricultural capital to be productive and saw this difference as specific to this sphere. Later, the physiocrats accidentally extended this distinction to industrial capital. What Quesne failed to understand was that the difference between the two forms of payment appears when the money paid is transformed into the fixed and circulating components of productive capital, and that this money therefore also constitutes two different forms of payment. Payments that are related to the cycle of production and the role played by productive capital and are different from money or goods in the market. Quesne, of course, rightly saw the distinction between the two parts of productive capital as related to the difference in how they are transferred to the product.

Adam Smith took a step forward, the Physiocrats considered only agricultural capital as productive and limited their scope of study to how the farmer’s capital is recycled. Smith generalized the problem to all forms of productive capital. In this regard, the discussion of the separation of payments and how the components of capital are recycled, which the Physiocrats called initial and annual payments with reference to planting, harvesting and harvesting crops, was changed to fixed and circulating capital. At the same time, Smith introduced some points that were the subject of much discussion. Among them, he said: “There are two different ways of using capital to bring income or profit to its owner.”

The methods of using value as capital for the purpose of profit are a matter related to the different spheres of capital accumulation. It is a question of which territory the capitalist should put forward in order to make a profit or in what form, for example, productive, commercial, predatory, profitable, etc., he makes his capital profitable. This discussion has nothing to do with how the various components of productive capital are transformed. Smith is also behind the Physiocrats in this passage because he crushes and throws away the basis they had put forward for distinguishing the existing distinctions in the transformation of the fixed and circulating components of productive capital. In one place he accepts that commercial or predatory capital can also be profitable for their owners despite their non-productiveness, and in another place, focusing on industrial and agricultural capital, he says that these capitals “do not bring any profit to their owners as long as they are in the hands of their owners or remain in such a form.” Smith is not clear what he means, but perhaps he is referring to capital that has been used to produce and sell goods and has acquired the form of commodity-capital. Capital that leaves its owner by sale and is transformed into money capital, without creating any profit in this particular process. If this is what he means, he is in a serious state of confusion and is mixing things up. The capital he is referring to was previously productive capital, and its commodity-capital state is only a form of its circulating transformation. This capital with this characteristic is neither fixed nor circulating, because this separation belongs to the sphere of production. What Smith describes as circulating capital in the following is actually money or commodity capital which, by assuming these forms, is distinguished from and contrasted with productive capital. Their existence does not indicate the capitalist’s division of productive capital into fixed and circulating components. On the contrary, both fixed and circulating capital assume these forms in the process of circulation and are transformed into money or commodity capital. Smith makes his misconception even more obvious with the example he gives. He says: “Merchant’s capital is entirely circulating capital.” By merchant’s capital he means commodity-capital. Capital that does not belong to the process of production and is not a circulating component of productive capital, but he does not distinguish between commodity capital and circulating capital. Continuing his discussion, he also lists other confusing matters. He suggests that commodities and money become profitable for their owners as soon as they change form!! He calls capital a creator of value by virtue of its being fixed capital!! He sees machinery as commodity capital and circulating capital!! Instead of searching for the difference between fixed and circulating capital in the different types of circulation of the constituent elements of productive capital, he searches for it in the distinct forms of a single capital!! According to his view, identical objects can be both fixed and circulating components, productive capital and commodities, depending on their place in the process of existence of capital!

Smith changes his assumptions by a blatant contradiction without substituting a correct point for a previous incorrect analysis. He had previously argued that capital benefits its owner by two distinct uses: fixed and circulating and then claimed that different occupations require different proportions of fixed and circulating capital. In this way he abandons his belief in a separate provision of fixed and circulating capital and accepts that these are different components of productive capital. But his series of capitalist confusions and superficialities is long. He is unable to distinguish the real difference between fixed and circulating capital. In the examples he gives so far, it appears that machinery and instruments of labour are the fixed part of capital, while raw materials and labour power constitute its circulating part. But in speaking of their distinction, instead of referring to real foundations, he relies on completely false criteria, and he touches upon such factors as the change or non-change of owner, the transfer or non-transfer of capital, its circulation or non-circulation, and the manner in which it is fixed or not in the means of work! Components that are completely irrelevant. Consider a copper mine. Here, none of the elements of the production process, from labour to auxiliary materials, water, etc., physically enter the product. The coal, although completely consumed, only transfers its value to the product. The worker remains standing, and only the value he creates during his work becomes part of the value of the copper. None of the components of productive capital change hands, no change of ownership occurs, none of the components of productive capital circulate, none of them physically enter the product. And our question to Smith is, where is the capitalist according to his definition?! Let us now consider another industry, such as spinning, in which the components of the production process enter the new product in the form of raw materials. The auxiliary means, instead of transferring value, enter physically into the composition of the product, and it differs greatly from the first industry. What determines the distinction between fixed and circulating capital in both spheres or in the whole realm of the advance of productive capital is not the completely false and irrelevant indicators that Smith mentions, but the same valid factors that we have explained earlier. Circulating capital is completely consumed in each round of turnover, transfers its value to the product, and gives its place to new materials and supplies, but fixed capital is not like this, it gradually and bit by bit gives its value to the product, goes through a period of erosion and transfer of value, and is replaced at the end of this period. This is also true of labour power.  The difference between a machine and labour power is not that the former is purchased once and for all, while the worker is not purchased forever. The difference, so far as the present discussion is concerned, is that the purchased labour power enters completely into the value of the product, while the machine transfers its value to the product bit by bit.

Smith equates the purely apparent transformation of commodity capital in the process of circulation with the real changes which the elements of productive capital undergo in the process of production!! Let us turn to another, much more terrible mistake of Smith. He claims that: “If that capital is employed for the purpose of obtaining future profit, this profit is obtained either by remaining with the employer or by moving away from him, in the one case we are dealing with fixed capital, in the other with circulating capital.” Smith is a prisoner of a terrible empiricism on the question of profit. A rotten imperialist attitude which he has borrowed from capital and the crude capitalist. In the price of the product, both the price of raw materials, auxiliary means, labour power or circulating capital in general is replaced, and the cost of depreciation of machinery is compensated, but these substitutions themselves do not create surplus value and profit at all. It is only the capitalist who, in accordance with his own anti-human interests, sees surplus value as the product of the exchange of goods and their exchange, and the source of profit is elsewhere. The physiocrat was a step ahead of Smith in this passage. At least he did not connect the exchange of values ​​to the exchange of products and saw them as a phenomenon of the production process. In the above statement, Smith clarifies that fixed capital creates surplus value by establishing itself in the production process!! And the circulating capitalist does the same thing or the same creation of surplus value by escaping from the production process and into the circulation cycle!! With this deeply distorted and false statement, he denies and distorts the entire distinction between the circulating component of constant capital and variable capital. Furthermore, he subjects the entire secret of the capitalist mode of production, the true origin of capital and the sole source of all capital in the world to the worst distortions and falsifications.

One of the important errors of Smith’s view was that he considered the fixed or circulating nature of capital to be their fixed properties, while this is not the case. We have explained in the study of the work process that titles such as instruments of labour, materials, and products of labour undergo change according to the plans that a single object establishes in this process. The fixed or circulating nature of capital is also the same and is determined according to the role that capital plays in the labour process or value creation. Another of his many errors is that he confuses the difference between the fixed and circulating components of productive capital with the difference between productive capital and money or commodity capital. Let us clarify once again that the difference between fixed and circulating capital is a matter related to the production process and specific to productive capital. It is only in this form of capital that circulating and fixed find their true meaning. Smith does not understand this issue and does not distinguish between the difference between productive capital on the one hand and commodity-capital or money-capital on the other. The physiocrats contrasted variable capital with fixed capital. But what they considered under this heading was not labour power but the means of subsistence of the agricultural worker, which, along with raw materials, was auxiliary and equal to them!! They considered it as fluid capital. They did not see the difference between labour power and other components of circulating capital, and in this regard, they considered the power that creates surplus value not to be labour but to be nature, and consequently, from their perspective, it was only agricultural work that was the source of value. Although Smith did not limit productive capital to agricultural capital, he was clearly influenced by them in his analysis of the role of the worker. When the physiocrats replaced labour power with the means of subsistence of the worker, they practically denied the distinction of this power with raw materials and left no place for it in the production of surplus value. Smith had a different analysis in some places, but under the pressure of theoretical turmoil, he still equated labour power with raw and auxiliary materials!! Variable capital is similar to circulating capital in terms of being replaced in every turnover, but in the production process, it is transformed from a fixed and definite quantity to a variable quantity, not for the worker but for the capitalist, and plays the role of the only component of capitals value-added.

Chapter 11: Theories of Fixed and Circulating Capital

Ricardo

Before pointing out Ricardo’s mistakes, given the importance of the issue, let us once again point out the fundamental and general problem that all the custodians of bourgeois political economy, from the Physiocrats to Smith, Ricardo, or their ancient, modern, and contemporary predecessors, are trapped in this particular issue. The departure from the process of circulation instead of the process of production, the inability to understand the difference between these two departures, the confusion of the difference between fixed and circulating capital with the difference between constant and variable capital, the inability to understand the distinction between the two fixed and variable parts of circulating capital, the disclosure of the difference between the transfer of value from capital to a new product and the creation of new values, are among the key issues that this group carries in their opinions, despite the differences and disagreements they have with each other. Under the pressure of these class distortions, these economists fall into the abyss of chaotic weaving, here and there they come into contact with a corner of truth, but even in this contact they occasionally stumble into contradictions. The result of all this helplessness, confusion, and class contradiction is that they ultimately fail to have a deep, coherent, and solid understanding of the true source of surplus value production or what is the true secret of capitalism’s existence.

Ricardo calls the means of work equipment capital and the circulating part capital advanced in exchange for labour! A meaningless phrase borrowed from Smith. He does not distinguish between variable and circulating capital and seeks the basis for the difference between the different parts of capital not in the process of valorisation but in the dynamics of circulation. Ricardo has made serious mistakes so far. Among them:

1. He considers the difference in the degree of solidity of fixed capital and the diversity in the organic composition of capital or the ratio of its fixed and variable components to be equivalent!! While the former, as far as it relates to the production process, only determines the amount of value transferred from fixed capital to new goods and the duration of the life of this capital. But the latter reveals the diversity in the production of surplus value. If, instead of contemplating the internal mechanism of capitalist production, we look only at the procedures, then these differences intersect. In the course of the distribution of social surplus values ​​among the capitals advanced in different territories, the differences in the investment period and the life of fixed capital on the one hand, and the differences in the organic composition of capital, both affect the process of formation of the general rate of profit and the price of production to the same extent.

2 – From the perspective of the cycles, on one side is fixed capital and on the other side is circulating capital or wages and materials of labour. But from the perspective of the process of production and valorisation, fixed and variable capital are opposite poles. In terms of the organic composition of capital, in different conditions of advance or different areas of investment, fixed capital may be more than variable or vice versa, the latter may be more than the former. The issue that concerns how the total capital is distributed between the means of labour on the one hand and labour on the other hand, the opposite is true for the process of circulation and the opposition between fixed and circulating capital, here it is completely indifferent for the former which part of the circulating capital is allocated to the materials and supplies of production and which amount is spent on the purchase of labour.          

Political economy speaks of the advance of capital for labour power by the capitalist. The reality is the opposite. It is the worker who, depending on whether the wage is daily, weekly or monthly, advances and surrenders his labour to capital. The capitalist does not pay the wage at first, so that later he takes the labour power from the worker and exploits it. He first appropriates the labour power, produces with it a mass of values ​​and surplus values, and then makes a small part of it the wages of the worker.

Let us return to Ricardo and his fundamental errors. Variable capital (wages) is the part of capital that is spent on the purchase of labour power. It increases its value, not only reproducing itself, not only reproducing that part of the capital that was spent on the purchase of labour power, which creates surplus value. It creates values ​​for which no payment has been made. It changes itself and produces a value greater than itself, several times or more than itself. For this reason, it acquires the variable attribute and is distinguished from constant capital by this indicator. All these obvious and transparent facts can be seen only when we consider capital from the perspective of the production and valorisation process. This is something that political economy and its theorists such as Smith and Ricardo and others escape from. They observe capital from the circulation process and in this observation, they throw an iron curtain over the entire difference between constant and variable capital. There is an essential difference between these two types of analysis. In the production process, we only encounter constant and variable capital. In the circulation process, on the contrary, we speak of fixed and circulating capital. The debate is over how to transfer the value of capital to new products and when to return the capital advanced. Ricardo, falling into this abyss, is unable to see the source of the production of surplus value. He completely loses sight of the origin of surplus value. This is a major disaster that has befallen political economy from Smith to Ricardo and others. They begin to recognize capital from the circulation gap!! They do not see the essential difference between the constant and variable parts of capital with respect to their role in the production process. They are unable to grasp the fact that constant capital, whether fixed or circulating, does not create any value and only gives its existing value to the product. As they wheel around in the ups and downs of the circulation process, they only stare at the distinction between fixed and circulating capital, this distinction that the former gives its value gradually to the product, while the latter enters the new commodity all at once. The manner in which the value of the capital advanced is transferred to new commodities, the time of return of the various components of this capital, whether this return is gradual or complete and direct, and the nature of these become the top and bottom indicators or criteria for their understanding of capital and the capitalist mode of production. In doing so, political economy brings its fetishizing role to perfection. It suggests the economic and social character of objects, which is based on their role in the production process, the natural nature of these objects!! When it speaks of fixed capital, it sees fixedness as an identity that is always distinct from the circulating capitalist. It does not understand that all these identities are, first, the product of the specific position of objects in the capitalist production process, and, secondly, that a substance that is fixed in one situation may not have this role in another.

Chapter 12: The Working Period

Let us consider two different production establishments, for example, a spinning mill and a locomotive factory, with an equal working day of 10 hours. In the first, a certain quantity of yarn is produced every day. In the second, the work process is continued with the same daily time for 3 months to produce a locomotive. Although the daily work in both establishments is the same, there is a significant difference in the duration of production. By duration of production is meant the work process in the time required to produce a product in a complete form and send it to the market as a commodity. This difference in duration does not only occur between different productions. It also exists within the territory of a production unit. It takes less time to build a residential house than it does to build a factory. The difference in the duration of production leads to a difference in the speed of return on investment.

Let us assume that equal capital, with an equal combination of fixed and variable parts, fixed and revolving, labour time and rate of surplus-value, is advanced in these two spheres. For spinning, each day of work is one unit, but for locomotive-building, for example, 100 days is one unit. In the former we are dealing with the daily work, and in the latter with the “labour period.” In the latter sphere the product of daily labour is only a certain part of the product of a continuous period of labour. The effect of interruptions and disturbances in the process of production, such as crises, on the product of labour in these two distinct spheres—one discontinuous and the other continuous—is quite different. In the latter, locomotive-building, not only the labour itself but the continuous act of production is severely interrupted. When the labour process is interrupted or disrupted, the means of production and the work already done are wasted. Depending on whether the labour period is long or short, additional amounts of capital are required for the continuous costs. Wages must be paid periodically, raw materials must be procured and put into the production process, none of which can be released from their periodic role, without passing through this period as a final product, and play the role of returned capital. On the contrary, as a component of the product being formed, they are locked up within the production process and remain there in the form of productive capital. Here, the increase in production time inevitably leads to a decrease in the speed of capital turnover. Equal capital in these two processes, namely the daily process on the one hand and the quarterly or longer periods on the other, despite the equal volume, is spent in completely different ways. In one we witness a weekly turnover of capital, while in the other a period of several months is required for this turnover.

In the pre-capitalist era, the construction of facilities that required a long-term work process was carried out only by governments and was not possible for individual capitalists. A private owner of capital would not undertake the construction of a dam or a large water supply facility. With the emergence of capitalism, especially after the emergence of joint-stock companies, large investment firms and the credit system, this situation changed. The role of private capitalists or financial trusts increased. Developments such as cooperation, division of work, and the use of new machinery that increase the individual daily product of labour reduce labour time and, in turn, the length of the work cycle. The use of machinery helps to reduce labour time in the construction of bridges and roads. The threshing machine shortens the period of work required to convert wheat into finished commodities. These improvements require an increase in the fixed part of capital, but they are sometimes made possible by the development of cooperation. The period of work for the construction of a railway can also be shortened by increasing the number of workers and their simultaneous attack on the construction of buildings. In this case, the payback period is shortened by the growth of the capital advanced, both in the means of production and in the labour force. Explanation: The shortening of the working period and thus the period of capital’s return, which Marx refers to, has taken on very stunning dimensions in our time and at the same time has become a deadly weapon in the hands of capital to intensify the exploitation of workers even more deadly. For many years, capital in the agricultural sector has reduced the time for planting, tending and harvesting crops by using chemical fertilizers and various methods known as “soil improvement”. It has replaced the annual cultivation with two or even three harvests per year. Cultivation in greenhouses also plays an effective role in reducing the working period for crop production. In the field of construction, the mass production of prefabricated walls has significantly reduced the duration of the period for the establishment of real estate or residential complexes. In this way, capital increases the pressure of exploitation of workers and at the same time has expanded the scope of its brutal exploitation of the quasi-free labour of women and children as far as possible.

Chapter 13: The Time of Production

Working time is always production time, but the reverse is not true. In order to become wine, grapes must undergo a period of fermentation after being pressed and then undergo a period of readiness and consumption. Grains, after being planted, need nine months to sprout, grow, and be ready for harvest. Pottery, after being cast, must be dried and kept in the heat for some time. In all these examples, the stages of the production process do not involve any specific labour, but only occasionally require some form of labour. In other words, in all these cases the production time of the capital invested is composed of two distinct periods. The period in which capital is in the labour process and the period in which it is outside the labour process in the form of an unfinished product. Thus, the labour and production periods do not coincide. The latter is longer than the former, and the product can only be used after the end of the production process and its time. More precisely, it changes from the form of productive capital into the form of commodity capital. The longer the production time that is surplus to labour time, the longer the payback period. This interval can be shortened artificially. In earlier tanning, it took 6 to 18 months to inject tannic acid into the skin. This is now done by pump at intervals of one and a half months. A striking example of the difference between working time and production time can be seen in the American shoe industry. Here a significant part of the costs is due to wood, which must remain in storage for 18 months and dry so that the Molds do not warp. Accordingly, before it can enter the specific working process, the capital must wait 18 months in the production process without doing anything. The payback period of the capital will be correspondingly longer. The difference between working time and production time is more noticeable in agriculture than in other areas. The more unfavourable the climate, the more intensive the specific working period for the production of the product, as, for example, in Russia this total time is summed up in 130 to 150 days.

The difference between production time and working time became the fundamental basis for the union of agriculture with the rural secondary industries. When the peasants had to stay at home for many months of the year, they could spend this time in tanning, shoemaking, blacksmithing, knifemaking, and the like. In this direction, merchants were found who invested in the exploitation of the labour power of this population. The more capitalist production completed the separation between industry and agriculture, the more firmly the rural worker’s dependence on the secondary industries became. In most branches of industry, such as mining, working time was regulated from the beginning to the end of the year. The costs of the capital turnover process were also distributed regularly, if market conditions were stable, in such a situation the return of capital was divided into definite periods throughout the year. The opposite was true of investments in which the working time was only a part of the production time, and here a marked imbalance arose. Accordingly, although the same volume of circulating capital is accumulated in comparison with the first spheres, this capital must be advanced at once and for a longer period. Here, the life of fixed capital also differs significantly from the time when it actually functions as productive capital. For example, in agriculture, if this fixed capital is a plowing ox, the same fodder that is sometimes needed for its presence in work must also be advanced for the period of interruption. Which will increase the cost of producing the product. In these fields, the idleness of fixed capital is part of the conditions of production, just as, for example, the wasting of some cotton is a natural part of the spinning process. The difference between working time and production time in forestry, animal husbandry and other spheres also has a significant effect on the process of capital turnover and the costs of producing the product.

Chapter 14: The Time of Circulation

All the situations we have examined so far that caused differences in the periods of circulation and the turnover of capital in various fields arose from within the process of production. But the turnover time of capital is the sum of the period of production and circulation. Accordingly, the length of the cycle also affects the turnover period. One of the circles of the cycles is the time of sale or the period during which capital remains in the form of a commodity-capital. Changes within this time can also cause additional costs such as warehousing and the like. The time of sale of goods can be different for different capitalists. In other words, this period can differ not only for capitals advanced in different areas but also for individual capitals. An important factor in the difference in the time of sale and, consequently, the difference in the return period is the distance and proximity of the place of production to the sales market. The shorter this distance and the faster the goods and capital are available to customers, the shorter the period of circulation and return of capital will be. Although the improvement of means of communication and transportation has no effect on the relative difference between the times of the cycles of different capitals, it accelerates the transfer of goods to the market. In this regard, the continuous increase in means of transportation such as the number of ships and railways causes goods to be transported to their destination without being piled up in ports and similar centres and to proceed to their destination quickly. This also divides the return of money into different periods, so that some of the goods take the form of money-capital, while the other part is in the form of goods-capital. This in turn shortens the return period. Apart from these, the increasing role of means of transportation and mass investments in this area leads to an upward trend in the importance of some commercial highways or ports and trading centres, while it plunges other centres and transportation lines into a recession or even closure. This can also affect the time of sale of goods produced in different regions, the duration of the cycles of various capitals and finally the return period of these capitals.

With the development of the capitalist mode of production and the expansion of means of transport, the cycle time of some commodities is shortened. This development simultaneously leads to the increasing development of the world market and the transport of goods to all parts of the world. The volume of goods in transit increases enormously, the part of social capital that is in the form of commodity-capital grows enormously, and the development of this part at the same time causes the advance of huge volumes of capital in a stable and revolving manner in the transport network instead of in the fields of production. The ever-widening internationalization of the trade in goods, the continuous modernization of transport facilities, the export of products produced from one continent to all other continents or to the most distant parts of the world, all together shorten not only the first part of the cycle, or the time of sale, but also its second part, the process of re-conversion of money into elements of productive capital, or the time of purchase. The differences that arise in this transition during the reversal period create one of the material elements of the different terms of credit.

The volume of contracts for the delivery of goods, which is itself a function of the dimensions of the expansion of capitalist production, is one of the factors that accounts for the difference in the time of return of capital. The delivery contract, as a transaction between seller and buyer, is an action that belongs to the market, that is, the environment of the cycle, and accordingly its effect on the length of the return time also originates from the sphere of the cycle, but is immediately reflected and reacted in the sphere of production. This reaction is not specific to payment deadlines and credit conditions; the opposite is also true for cash payments.

Let us now turn to the second stage of the time of circulation or the time of purchase. The period in which capital is transformed from the money form into productive capital. It goes without saying that a certain part of the capital advanced is always in the form of money capital. A part which therefore belongs to the sphere of circulation and not to production. We have already seen that the lengthening of the distance between the centres of production and the market for sale, or the prolongation of the time during which capital remains in the commodity form, causes a delay in the transformation of money capital into productive capital. In the case of the purchase of commodities, we have also seen (in Chapter 6) that the time of purchase and the distance or proximity to the main centres of raw materials cause these materials to be purchased for longer periods and stored in warehouses as a productive reserve of productive capital. This in turn will make it necessary to advance a larger volume of capital for a longer period at a time, despite the same rate of production.

Chapter 15: Effect of the Time of Turnover on the Magnitude of Advanced Capital

Let us consider a commodity-capital which is, for example, the product of a period of nine weeks’ work. In examining the subject, firstly, we ignore the value added to the product and resulting from the depreciation of fixed capital, and secondly, the surplus value produced in the period in question. In this way, the total value of the product will be the value of the advanced circulating capital, consisting of wages and the price of raw and auxiliary materials. Let us assume that the value of this capital is £900, the cost per week is £100 (nine hundred parts per nine), the production time corresponding to the working time is nine weeks, the cycle time is three weeks, and the total payback period is twelve weeks. After nine weeks, the advanced productive capital is converted into commodity-capital, it remains in the latter state for three months, and it is at the beginning of the thirteenth week that the new process of production begins. A process which implies three weeks of cessation in every three months of production. If production is to be uninterrupted and carried out each week at the same rate as before, there are only two ways. The first way to reduce the scale of production is to divide the £900 over the entire time of production and circulation constituting a period of withdrawal, instead of dividing it into nine months and £100 per month, and to reduce its monthly amount to £75. In this case, the second period of work can be started at the beginning of the tenth week, immediately after the first period of work and three months before the beginning of the second period of withdrawal. The important question is whether this is compatible with the basis of the capitalist mode of production. The answer cannot be in the affirmative. Self-expansion, the continuous and increasing development of accumulation are inherent in capital; the development of production in the various branches of industry requires a certain amount of advance capital. This amount can vary, rise or fall within a range from a minimum to a maximum, but its reduction below the minimum limit results in capital failing to meet the competitiveness and other reproduction requirements. This minimum is not a fixed figure in reality; the greater capitalism becomes, the less capital required for advance increases. The second way is that investment is impossible by reducing the scale of production and reducing the volume of advance capital each week, in which case, contrary to the first case, uninterrupted production can only be achieved by increasing the volume of circulating capital. We can cite three distinct examples for this.

First example: The capitalist advances £1,200 instead of £900. During the first nine weeks, the £900 advanced ceases to be productive capital and assumes the form of commodity-capital. The first round of work reaches its end, and with this money the second round of work cannot be started. In order not to interrupt production, an additional £300 is advanced in the remaining three months. Here the first round of withdrawal is 12 weeks long and the first period of work is 9 weeks long. The capital that is advanced at the beginning of the 13th week returns, in the last three weeks an additional capital of £300 is put into operation and a new period of work of nine months begins. The second round of withdrawal opens at the beginning of the 13th week, when the £900 advanced capital has returned, but before that, at the beginning of the tenth week, the second period of work has begun with £300. At the beginning of the 13th week, with these 300 pounds of additional capital, one-third of the work of the period has been done and 300 pounds have been converted from the form of productive capital into commodity-capital.

Now let us turn to the second example. Let us assume that the work-period is 5 weeks, the cycle time is 5 weeks, the payback period is 10 weeks, the weekly investment is £100, and for the sake of convenience we take the year to be 50 weeks. In this case £500 is allocated to the work-period and £500 to the cycles, and the process of work and payback of capital takes the following form.

working period	Weeks	additional capital	times of turnover
First	1st to 5th	500	End of week 10
Second	6th to 10th	500	End of week 15
Third	11th to 15th	500	End of week 20
Fourth	16th to 20th	500	End of week 25
Fifth	21st to 25th	500	End of week 30

If the cycle time is equal to zero and therefore the work-periods are equal to the capital return periods, then in the above example, assuming a work-period of 5 weeks, the number of returns in a 50-week year will be equal to 10 times and the volume of capital returned will be equal to £5,000.

Let us consider a third example, in which the work-periods are 6 weeks, the cycle-periods are 3 weeks, the weekly capital advanced is £100, and the number of weeks in the year is 50. Here, weeks 1 to 6 constitute the first work-period. At the end of the sixth week, we are faced with a commodity-capital of £600, which is reversed at the end of the ninth week. The work of the second period opens from week 7 and lasts until the end of the twelfth week, in weeks 7 to 9 an additional £300 of capital is advanced. At the end of the ninth week, £600 of capital is reversed, of which £300 is advanced in weeks 10 to 12. £300 is returned as commodity capital at the end of the twelfth week and £600 at the end of the fifteenth week. The third work-period occurs between weeks thirteen and eighteen, during which £300 is advanced in weeks thirteen to fifteen, £600 is returned, of which £300 is paid for weeks sixteen to eighteen. At the end of the eighteenth week £300 is released and £600 is returned as commodity capital at the end of the twenty-first week.

The above examples indicate that in the relationship between labour-periods, the time of cycles and the total period of capital turnover, three situations can occur: first: the working period and the circulation period are equal. second: the working period becomes longer than the circulation period. third and finally, the working period becomes shorter than the circulation period. In each of these situations, first, the capital turnover will undergo changes, and second, the locked-up money capital will be affected by these changes.

Chapter 16: The Turnover of Variable Capital

1-The Annual Rate of Surplus Value

We begin with an example. In this example, the total circulating capital is £2,500. £2,000 of that is raw and auxiliary materials or components of fixed capital and the remaining £500 is allocated to wages. The turnover period is also 5 weeks, of which 4 weeks are the working period and one week is the circulation period. It is clear that the capital is also divided between the working and circulation periods, and in this case £1,600 is fixed and £400 is variable in the first part. In the second part we have £400 fixed and £100 variable. We assume a weekly capital advance of £500 and a year of 50 weeks. The total annual product is £25,000 for 10 reversal periods. These data say that:

The £2,000 advanced in each working period will be reversed 12 and a half times. This figure is the result of dividing the 50 weeks of the year by 4 weeks, the number of weeks in each cycle of work. If we multiply 12 and a half by 2000, we arrive at the figure of £25,000, of which £20,000 is fixed capital and the rest is variable capital.

The variable component of the circulating capital is £500. The variable capital present in the total £25,000 of the annual product will also be £5,000. If we divide this figure by 500, the denominator or the figure 10 is the number of cycles of capital turnover per year. The figure 10 at the same time expresses the ratio between the total surplus-value produced in the year and the volume of the variable capital advanced or the wages of the workers in the same year. A ratio that indicates the rate of surplus-value and the degree of pressure of exploitation of the workers. What gives meaning and accuracy to this calculation here is precisely this, otherwise and specifically, the extraction of this average for the number of cycles of turnover would be inaccurate.

In all the above investigations, in which we have followed the transformation of the various parts of capital, we have said nothing about the fate of a very essential part of it, or the surplus value produced. It is time to examine the creation and dynamics of the changes or transformation of this part. Let us begin by assuming that £100 of advanced variable capital produces £100 of surplus value every week. In such a situation, a variable capital of £500 will produce £500 of surplus value at the end of five weeks. If we multiply this by 10, we get a total annual surplus-value of £5,000, and the comparison between this figure and the 25,000 annual social product is exactly the same annual rate of surplus-value as we have been discussing. This rate is equal to 1,000 per cent. One point needs explanation and should be sufficiently considered. In our example, the variable capital advanced during a reversal period is £500, and the surplus-value produced by it is also £500. In this case we have a rate of surplus-value of 100 per cent, which is in reality the rate of surplus-value of a reversal period. The fundamental question is why we do not generalize this rate of surplus-value to the year and consider it as the annual rate of surplus-value, in other words why we should multiply the rate of one period of return by the number of periods of return of capital in the year to calculate the annual rate of surplus-value? The answer is that we have not advanced 10 completely separate but equal capitals 10 times in a year, but on the contrary we have employed only one capital 10 times and the same capital each time. To be more precise, a capital of £2,500 has accumulated 10 consecutive times and at the end of each 5-week cycle has reached the point of return. The variable part of this capital, £500, has created £500 of new surplus value in each of these five-week periods, and £5,000 of surplus value in the course of a year. These data clearly state that the total capital we are discussing is £2,500. Its variable part is also only £500. This capital has undergone 10 reversals. During the year it has given rise to a social product of £25,000. In each reversal it has created £500 of surplus value, and consequently its annual volume of surplus value has reached £5,000. Here the rate of surplus value before us is not the sum of 500/500, but quite the opposite: 5,000/500, i.e. 1,000 per cent.

Let us consider another example. A variable capital of £5,000 is reversed only once during the year. The cycle time is zero. The length of the reversal period is equal to the time of the working period. Variable capital is advanced by £100 each week, and we assume a rate of surplus value of 100%. The weekly variable capital creates £100 of surplus value and produces £5,000 in 50 weeks. This surplus value is equal to the variable capital advanced in the year, and therefore the annual rate of surplus value does not exceed 100%. Let us examine these two examples carefully; all the data are the same. The volume of the weekly variable capital, the volume of the labour force, the intensity of exploitation and the rate of exploitation, the number of working days, the amount of variable capital employed during the year all coincide, but the annual rate of surplus value in the first example is 1,000% and in the second case only 100%. What is the story? Can any other factor besides the rate of exploitation or the degree of exploitation be responsible for these differences?!! The answer is definitely negative and to clarify the issue, it is enough to do this. Let us advance the £5,000 variable capital in the second example by £1,000 each week during a 5-week reversal period. Let us continue the same operation with the same £5,000 during the 50 weeks of the year. At the end of the year, after 10 reversals, £5,000 variable capital has been employed, but £50,000 surplus value has been produced. Thus, the rate of surplus value here will also be 1,000%. The labour process is measured in time. If the length of the working day is known, the total working time can be calculated in hours, of course, taking into account the number of workers. If the working day is 10 hours, the number of working days in a week is 6, and the number of workers is 10, then we have a working time of 3,000 hours. Variable capitals are in circulation for the same amount of time as the working days and the rate of surplus value of the unit, when the same amount of labour power is put into motion in the same time interval. Let us look at the same examples as above. The variable capitals that are actually present and used in the working process are equal, but the capitals advanced are not, on the contrary, they are unequal. In the first example, out of £500 of capital advance in 5 weeks, £100 enters the flow of product production weekly. This is not the case in the second example. In the first 5 weeks, we see £5,000 of capital advance and only £100 of weekly consumption in the production of goods. In the second 5 weeks, £100 of £4,500 enters the flow of product production, in the third 5 weeks, £100 of £4,000, in the fourth 5 weeks, £100 of £3,500, and in the fifth week, £100 of £3,000 enter the flow of product production. This trend continues in all cycles of reversal, with a decrease of £500 each cycle but with a weekly consumption of the same £100. In all these reversals, we see the presence of a large volume of capital advance but without entering the process of product production and only ready for consumption for subsequent periods. The higher the ratio between these two components of variable capital, the volume of the advance and the quantity used in the process of production of the commodity, the higher the annual rate of surplus-value we shall find. The first capital is paid in the amount of £500 for 5 weeks, and at the end of this period it begins a new round of reversal, repeating this process 10 times during the year. This leaves us with two real components.

First, the capital paid in here is only 5 times larger than the capital employed in a week and consumed in the production of commodities, while the second capital returns once a year and is therefore 50 times the amount that enters the flow of product production during the week. In this way, the number of reversals changes the ratio between the capital advanced, and the capital employed in the production process.

Secondly, the period of return of the first capital is 5 weeks, the same capital returns 10 times a year, on the one hand it finds the function of a capital of 5,000 pounds and on the other hand it is always and in all cycles the same 500 pounds, 5 times the weekly capital is being converted into commodities and in each cycle it creates its own surplus value.

The above points make it clear that in order to calculate the annual rate of surplus-value, one should not consider the total variable capital paid in, but only the variable capital entered into the process of production of the product during the year. The capital consumed in the process of production of goods is not the total capital advanced, but the volume of variable capital that is reversed during the year. To put it more precisely, the annual rate of surplus-value should be sought in the result of dividing the volume of surplus-value produced annually by the variable capital reversed during the year. These points also make it clear that the annual rate of surplus-value is very different from the rate of surplus-value of this or that reversal period. Only in one case do the two coincide, and that is the condition that the variable capital paid in has only one reversal during the year.

2-The Turnover of the Individual Variable Capital

In the first example or “A”, the cost of purchasing labour power was 100 pounds every week, totalling 500 pounds sterling. These 500 pounds, after consumption, becomes the subsistence needs of the workers or the labour needed by the capital. It is used in the production process of the product and at the end of the reversal period, it not only creates 500 pounds of surplus value and becomes 1000 pounds. We witness the same situation in the case of the second capital or “B”. Both capitals A and B allocate 500 pounds sterling each to the purchase of labour power in the first 5 weeks, replacing these 500 pounds with a new 500 pounds plus an additional 500 pounds. So far, we have not seen any significant difference. The differences occur from now on. Let us examine them.

At the end of the five weeks, both capitals A and B spend £500 on the purchase of labour-power, as in the first round, but what happens to both capitals is not only not the same but also shows the greatest difference. Capital A spends £500 on the purchase of labour-power, which it has already created together with another £500 and which, after its creation, has been transformed at the end of the period of reversal into commodity capital and then into money capital. This capital now replaces the previous £500 with the £500 it has created. The same thing happens in the other ten periods of reversal. Accordingly, we are dealing with the same variable capital of £500 for the whole 50 weeks of the year. The £500 has created £1,000 of value in each of the ten rounds, and the sum of the surplus values ​​it has created has reached £5,000.

This is not the case with capital B. Here we are dealing with a variable capital of £5,000, of which £500 is advanced every five weeks and enters the production process, but this £500 is not converted into commodity capital and then into money capital at the end of the five weeks. The £500 at the beginning of the next five weeks is not the result of the valorisation of the previous £500, it does not replace the previous capital as part of the £1,000 of value created. On the contrary, it is part of the £5,000 capital, of which £500 is gradually advanced every five weeks and enters the production process. This variable capital creates £5,000 of new value during the year, and its annual rate of surplus value does not exceed 100%. The number of its annual reversals is only once and not 10 times.

3-The Turnover of the Variable Capital from the Social Point of View

Let us not abandon the above examples. Capitals A and B each exploit 100 workers during the year. Each of these workers works 10 hours a day, 6 days a week. The weekly wage of each worker is one pound. Therefore, 100 workers in 50 weeks, 100 times 50 times 6 times 10, equals 300,000 hours for capital A, and another 100 workers work the same number of hours for capital B. In both cases, the weekly wage of each worker is one pound, and therefore the 100 workers exploited by capital A receive 5,000 pounds in 50 weeks of the year, and the 100 workers exploited by capital B receive the same amount. The total wage of 200 workers throughout the year is equivalent to 10,000 pounds sterling. So far everything is the same, now let us turn to the differences.

1 – The money that the workers exploited by capital A receive is not only the monetary form of the value of their labour power, but also, from the second round, the monetary form of the value of the product of labour, i.e. wages plus the surplus value produced by them. This is not the case with capital B. Here too, money is undoubtedly the means of payment of wages, but the wages of the workers are not the same value that they themselves have produced. The payment of wages from this point on can only take place from the beginning of the second year. The shorter the period of return, the sooner the variable part of capital is transformed into the monetary form of the product-value produced by the worker as a replacement for the variable capital. This product consists of the value of labour power and the surplus value produced. In the operation of capital A, the time when the capitalist has to pay money from the stock is quite shorter, the total capital paid in relation to a given scale of production is also less, and in this respect the amount of surplus value that the capitalist captures during the year at a given rate of surplus value will be greater. Why? For the obvious reason that the capitalist can employ workers with the same surplus values ​​they have created much more often, exploit them and recapitalize the results of their exploitation. In a given circle of production, with the shortening of the period of return, the variable capital paid in money, as well as the circulating capital, generally decreases and, conversely, the rate of surplus value increases.

2. In both spheres A and B, the workers’ pay for the means of subsistence they purchase with variable capital, which has become in their hands a means of circulation. They do not, for example, merely withdraw wheat from the market, but also replace it with a value in the form of money. But the money which the workers exploited by capital B convert into means of subsistence is not the money form of the value-product produced by themselves, which enters the market during the year. Whereas for the workers exploited by capital A it is exactly this, i.e., the value-product produced by themselves.

3. In relation to circulating capital which is actually employed, whether variable or constant, when the period of turnover is due to the period of labour, we are faced with a situation in which, with a greater number of annual turnovers, elements of the constant and variable capital in circulation can be supplied by its own products, e.g. ready-made clothing, coal, etc., whereas in other cases, at least, this does not occur during the year. 

Chapter 17: The Circulation of Surplus Value

In the previous chapter we saw how the difference in the number of capital turnovers produces differences in the annual rate of surplus-value even though the amount of surplus-value produced during the year remains constant. Moreover, even if the rate of surplus-value remains constant, there are necessarily changes in the amount of surplus-value converted into additional capital, and in this respect in the amount of annual surplus-value. In the present analysis we must also bear in mind the examples of the previous chapter. Capitalist A has a continuous periodic income. Apart from the first round of turnover, which he uses to advance his capital, in other periods he pays this expense from the surplus-value produced in the advance turnovers. Therefore, he does not need to secure capital from elsewhere. The opposite is true of capitalist B. He also witnesses the production of the same amount of surplus-value by his exploited workers in the same period of time, but this surplus-value is not realized and cannot be spent in the form of personal or productive expenditure.

A part of the productive capital, including the additional productive capital required for the repair or completion of fixed capital, now requires a new analysis. Let us begin with capital A. Here this part of the capital, in whole or in part, does not require any payment at the beginning of new periods of return. As already stated, the capital has been produced and provided in the process of valorisation of the previous period.

In the case of capital B, the above is impossible. This part of the capital must have been paid from the beginning, at the very beginning of the investment. Both capitals pay these costs, but how and in what way is the factor that distinguishes their situation. A pay it from the surplus value he produces, in fact he converts the surplus value into additional capital. B is obliged to have provided and paid it from the beginning.

If we consider the role of credit, this issue becomes very important. Let us assume that capitalist A did not have the necessary capital at the beginning and borrowed all or part of his productive capital from banker P. The capital of banker P consists of the surplus values ​​that other capitalists, for example Ali, Mahmoud and Naqi, have acquired through the exploitation of the workers in their investment area. Capitalist A has borrowed and advanced these surplus values ​​from the bank. For this reason, he does not yet consider this action as the accumulation of his own capital, but this is precisely the advance of capital for the owners of the surplus values ​​deposited in the bank. Capitalist A is an agent or partner in this. He uses a volume of surplus value belonging to others in the form of capital and exploits a number of workers with it, paying a share of the new surplus values ​​resulting from the exploitation of his workers as interest to the bank and the aforementioned capitalists. Here we are really dealing with expanded capitalist production.

The expansion of production may be carried out in small amounts. For example, a part of the surplus value is spent on raising the productivity of labour and increasingly intensifying the exploitation of workers or producers of the same surplus value. It may be allocated only to the purchase of raw materials and the payment of wages. In this case, the fixed capital does not change, but the conversion of surplus value into additional capital causes the prolongation of the daily work and the intensified and greater exploitation of workers.

The increasing number of capital turnover periods leads to a greater organization of the surplus values ​​produced and their transformation into additional capital. In this regard, conditions and periods appear in which there is no need to repair and improve the instruments of labour. The extension of the daily work is also not in order, the expansion of the entire business on a proportionate scale, including buildings and installations or the area of ​​cultivation, even within a certain area, requires a significant volume of additional capital. A capital that can be provided by accumulating the surplus values ​​​​resulting from the exploitation of workers in several consecutive capital turnover periods. This makes the necessity of accumulating money more important than the actual accumulation or the transformation of surplus value into productive capital. Surplus values ​​​​must be accumulated in the form of money capital to be sufficient for the required additional productive capital. This is the case from the perspective of the individual capitalist, but with the development of the capitalist mode of production, we have witnessed the development of the credit system. The surplus values ​​which this or that capitalist alone cannot convert into new productive capital are placed by them at the disposal of a bank or a credit institution, and other capitalists advance them. With the capital arising from the said surplus values ​​and the exploitation of the working masses, the latter capitalists produce a mass of new surplus values and pay a share of it in the form of interest to the bank and through it to the owners of the surplus values ​​who are creditors of the bank.

1. Simple reproduction

In simple reproduction, the entire surplus value produced is consumed by the capitalist. Even in this form, a component of surplus value must be in the form of money and not of products. Otherwise, it cannot be transformed from money into products for consumption. The transformation of surplus value from the form of a primitive commodity into money must be examined more closely. For this purpose, we consider the simplest form of the problem, the circulation of metallic money.

The volume of metallic money in a country must be sufficient not only for the circulation of commodities, but also to counteract the fluctuations of the circulation of money, the fluctuations due to the speed of circulation or any change in the price of commodities. The volume of money is always equal to the product of the money in circulation and what has taken the form of treasure or hoard. This mass of money or precious metal is a treasure that has been accumulated little by little. Every part of it that is consumed must be replaced. This replacement is carried out by exchanging a part of the product of the labour and production of one society with another. One country gives commodities and receives precious metals from the other country. The volume of production or supply of precious metals of each society must be equal to the minimum erosion of these metals, apart from ornamental gold and silver. In addition, the volume of the said precious metals must increase simultaneously and proportionally with the annual increase in the volume of the social product of labour and production. Consequently, a part of the product of the labour and production of society must be converted into coin every year.

According to the law of the circulation of commodities, the volume of money must equal the money required by the circulation, the money hoarded, the fluctuations of contraction or expansion of the circulation, and the reserve – the necessary means of payment. What is paid with money is the value of the commodities. A part of this value is surplus value. The fact that the surplus value has no cost to the seller of the commodities does not change the essence of the problem. Let us assume that the producers are all independent owners of the means of production and that the circulation of these commodities takes place directly among them. In this case, ignoring the constant component of capital, the annual products can be divided into two groups according to their similarity to capitalist production. Part A consists of the means of subsistence required by the producers. Part B consists of products that are necessary for the process of expanding production and are otherwise luxuries. Group A represents variable capital and B represents surplus value, and their division with this combination will have no effect on the amount of money required by the process of circulation of products. The value of the commodities that have entered the circulation remains the same and the volume of money required for the circulation of this value will also remain the same. To summarize this section, the fact that surplus value is a component of the value of commodities does not in any way change the volume of money required to start up the various enterprises or enterprises. In bourgeois economy, the existence of surplus value is a concept in itself. Therefore, not only is the existence of surplus value accepted, but the existence of a part of the mass of commodities within the circulation, consisting of surplus product and representing a value other than the value advanced in the form of capital, is also assumed.

The value of the commodity – the capital that the capitalist pour into circulation is greater than the productive capital that he has paid in the form of labour power and means of production. All capitalists know this, it is something that is the secret of their being capitalists, the secret of their social and class existence and the secret of the existence of capitalism. All owners of capital think and say that they want to divide this surplus or surplus value produced by the workers among themselves; to increase its volume, they eliminate the workers from existence and to increase their share of it, they fall on the lives of competitors and partners like wild animals. The problem of political economy is not the existence of surplus value itself, the problem is that this surplus value must be converted into money before it can be spent, and the question is where does the money needed for this come from? This question is usually given many incorrect and misleading answers, which are a waste of time to deal with. The real argument is that there is no such problem with this formulation, and therefore it is meaningless to pose it as a question in this vein. If a certain quantity of commodities is to be circulated at a rate of x times 1000 pounds sterling, whether part of the value of this product is surplus value or not? Even whether the commodities have been produced under capitalist conditions or not? It cannot have any bearing on the amount of money necessary for their circulation. If a question is to be asked, it is properly, from where and how is the amount of money necessary in a country for the circulation of all commodities obtained? The real question is this.

Here is a point to keep in mind. From the point of view of capitalist production, the individual capitalist is the starting point because he puts capital into circulation. The money that the worker pays for the means of subsistence was previously the capitalist’s variable capital and was apparently first put into circulation by him to purchase labour power. It is true that we are faced not with one starting point but with two starting points. The capitalist and the worker are both starting points, and all other parties must either receive money from these two classes for what they do and for the possibilities they receive, or they are partners in the ownership of surplus value, partners in the industrial capitalist, i.e., recipients of rent, interest, and the like. All this is true, but even taking all of this into account, as we have seen, it is ultimately the capitalist who remains the starting point of the circulation of money. Accordingly, the question under investigation is: how can the capitalist class, for example, put a capital of £500 into circulation and extract £600 of money from the circulation process? To find the answer, let us turn to an example again. At the same time, let us not forget that all this analysis, calculation and discussion we have been doing is in relation to the simple reproduction of commodities and only within this scope. Let us explain the example. The capitalist owner of a farm has purchased £4,000 of means of production. He has paid £1,000 for the purchase of labour power. He has achieved a rate of surplus value of 100%. Accordingly, he has become the owner of a product worth £6,000. A product that must be put into circulation and traded. He has advanced £5,000 in the form of instruments of labour and labour-power, or fixed and variable parts. But this capitalist, while he has concentrated his whole intelligence, senses or being on the most brutal exploitation of the workers and is thinking of the most abundant profits, must also provide for his own means of subsistence, comfort, pleasure and recreation. All this requires the bearing of costs. Let us suppose that he needs £1,000 during the period of capital turnover and until the end of the year for this normal subsistence. Let us remember again that we are talking about simple reproduction and the essential characteristic of this form of reproduction is that the entire surplus value resulting from the exploitation of the workers is spent and expended by the capitalist. This means that the capitalist has actually withdrawn and spent £1,000 from circulation during the year or the period of turnover. He has bought the various commodities he needs and the money he has paid for their purchase, while it exists as a constituent part of the money supply in circulation, but he has withdrawn this money from circulation in the form of products. We were talking about £4,000 of means of production, £1,000 of the price of labour-power, £1,000 of surplus-value. The question was, the capitalist, or indeed the capitalist class, has put £5,000 into circulation; how can he withdraw £6,000 from circulation? So far, we see that he has withdrawn and spent £1,000 from circulation during the year.

This means that there is money in circulation equivalent to £4,000 for the purchase of means of production and £1,000 for the purchase of labour power.

Let us continue the search for an answer. The sphere of investment of one part of the capitalist class is the digging, extraction and production of gold. They possess all the components of their product in the form of gold, which must be replaced by fixed capital, variable capital or surplus value. Thus, if some capitalists put into circulation a commodity-value greater than the paid-in money capital, another part puts into circulation a money-value greater than the commodity-capital. If some groups of the capitalist class take out more money than they inject into the circulation, another group or groups inject more than they take out.

On the assumption that in the example under consideration, the production of 500 pounds of gold is sufficient to compensate for the annual depletion of money in circulation. Let us focus on this point and for the time being leave aside the fate of the remaining products of production, which require money for their circulation. The surplus value produced in the form of commodities acquires the money it needs to be liquidated within the circuits, even because another annual surplus value of the same amount has been produced in the form of gold. This ruling also applies to the other components of the 500 pounds of gold which replace the money-capital advanced.

In examining the problem of the return of capital, it is necessary to consider other points. Among them are:

First: We have already seen that a change during the period of reversal, if accompanied by other conditions remaining constant, requires new money-capital in order to continue production on the same scale as before. Therefore, the circulation of money must be sufficiently flexible.

Second: If all other conditions remain the same. The time, intensity and productivity of labour do not change, but the balance between surplus value and wages changes, the former decreasing and the latter increasing. In this case, the volume of money in circulation will not be affected. Because on the one hand, wages rise and more money is required, but surplus values ​​fall and less money is needed to organize them. Even prices, although they may change for the individual capitalist, remain unchanged for the total social capital. Some say that as wages rise, more money is made available to workers, their demand for goods increases, and the price of goods inevitably increases!! Others argue that as wages rise, capitalists begin to raise the price of goods. Both groups claim that with the occurrence of high circulation of commodities, a greater volume of money is required.

Our answer to the former is that with the increase in wages, the increase in demand and the increase in prices, immediately some parts of free capital, stagnant, engaged in speculation or content with low profits, take the lead in the production of necessities of life and necessary products, supply increases and prices return to their original state.

In the case of the latter, the answer is even clearer. If the capitalists could have raised prices just at their own will, beyond the operation of the laws of capital and the capitalist mode of production, as soon as wages increased, they would certainly have done so without increasing wages. The fact is that all of this is the fabrication of excuses and the architecture of brutal justifications for intensifying the pressure of exploitation of the working masses, for reducing the price of labour power ever more drastically and for increasing the rate of surplus value ever more rebelliously. In passing, let us clarify three points.

1 – It is a general law that, other things being equal, an increase in prices increases the volume of money required for the circulation of products. But here a reversal occurs and causes and effects are reversed. It is the increase in prices that necessitates an increase in wages. An increase in wages does not cause an increase in prices.

2. In cases where wages rise only in a limited local area, it may and can become the cause of an increase in the price of products in that particular area. This can have several causes, the description of which is perhaps unnecessary.

3. A general increase in wages can raise the price of goods produced in industries with a low organic composition of capital, low productivity of labour, and a superior role of variable capital over fixed capital, but in industries with a high organic composition and a superior role of the fixed part of capital over its variable part, it leads to a fall in prices.

Explanation:

The above point will most likely raise the question for the vast mass of workers in the world and in particular workers in Iran that if capitalists are not able to raise prices at their own will and at will, if increasing wages is not the weapon used by the owners of capital to raise prices, then why do we witness this happening in our lives every day and decade after decade? The discussion of raising the wage bill has not yet begun, prices are soaring and soaring and never taking the path of return and decline. This question is very right and correct, but what Marx says is also a statement in every respect, scientific, precise, measured and based on an organic and radical dissection of the capitalist mode of production. The price of goods is not fundamentally determined based on the will and whims of this or that capitalist. In a certain process and under the pressure of internal factors and levers of capital, they are formed, emerge and become dominant for a certain period. Price is the monetary expression of the value of the commodity. The value of each commodity is calculated by the socially necessary labour inherent in it. Socially necessary labour is the average amount of labour that is necessary in any given historical, economic, and social period and condition to produce a given product, with reference to the level of labour productivity and other factors. Commodities are rarely sold at their real value, and most often they are made available to the buyer at a lower or higher price. Selling commodities below their real value does not necessarily entail a loss. Quite the opposite, commodities can be sold much lower than their real value and at the same time bring huge profits. The process of price formation is usually such that various producers put their manufactured products on the market. Each unit of these goods can have a completely different origin value, depending on the specific production conditions of its field of production, the degree of labour productivity, the organic composition of capital, and the cost of the fixed and variable parts of capital concentrated in the commodities. But these goods compete with each other in the capital market. Competition, in turn, is influenced by two determining factors: supply and demand. These two factors determine which part of the total commodities, the part produced in areas with the highest labour productivity and organic composition of capital, the part with the average level of these components, or finally the part with the lowest level of labour productivity and organic composition of capital, are the main responders to the needs of customers? Let us not forget that the discussion is not only about the consumer commodities produced, but the main thing is also about the products of the fixed and circulating components of fixed capital. The total goods produced are ultimately sold as the total value, or the socially necessary labour concentrated in them, but each unit of products is sold at a price based on the aforementioned components, under the pressure of supply and demand, which is called the price of production. Price arises in this way, but is it so everywhere, always, in all countries and in all conditions?

The answer is clear to every worker in every corner of the world. It is definitely not so. Capitalists and especially the capitalist state can influence the process of price formation and emergence in various ways. They can resort to hoarding, confront the vast number of consumers of the most vital necessities of life of workers with an extreme shortage of supply, they can, hand in hand with all the institutions of capital power, start raising the prices of goods and impose these prices on the working masses. All this can be done very simply and without any cost. The fundamental point in all these cases, however, is that firstly, even in each of these cases, the owners of capital and their state still start raising prices from the same internal channels of capital and riding the wave of the inherent functions of capital, for example, hoarding disrupts the balance between supply and demand or the simultaneous and united action of capitalists in raising prices, regardless of whether it is planned or not, is carried out with reference to the existence of sufficient demand for the sale of products. Secondly, and more fundamentally, in no way, never, and under no circumstances is the increase in wages the source of rising prices. If in the hell of capitalism in Iran, a stunning wave of rising prices follows every rial increase in workers’ wages, then what is not the reason for this is the increase in wages. The direct cause of the incident is that the capitalist class knows the stagnant, worn-out, and weak situation of the labour movement well, and it is also fully aware of the workers’ acute and vital need to buy the most basic necessities of life. Taking advantage of this opportunity, they, united and in unison, begin to raise prices brutally and criminally.

2- Extensive reproduction

In the extensive reproduction of money, we do not encounter any complicated problems for the circulation of money. The surplus capital which is necessary for the operation of the growing productive capital is provided by a part of the surplus value. This part has not been consumed in the form of revenue but has entered the circulation in the form of money-capital. With this additional productive capital, a mass of surplus commodities has also entered the market as its product. At the same time, a part of the surplus money which is needed for the organization of these commodities has also entered the circulation. This surplus money is advanced in the form of additional money-capital and returns to the capitalist in the course of the return. Now, considering the whole matter again and in the same way as before, the question arises: where does the surplus money which has been increased for the organization of the surplus value, which is now in the form of a commodity, come from?

The general answer to the question is the same as that which arose in the discussion. The sum of the prices of the commodities in circulation has not risen because of the rise in the price of a given commodity. The volume of commodities has increased, and in order to prevent a disturbance in their circulation, a certain amount of additional money is necessary. This money must be provided by economizing the use of the money present in the circulation process or by converting previously hoarded money into money in circulation. If these expedients do not suffice, then an additional production of gold will be necessary. A part of the surplus product must be exchanged directly for gold. The total labour power and social means of production expended in the annual extraction of gold and silver as the tools of circulation constitute a large part of the expenses of the capitalist mode of production, or of the mode of commodity production in general. The production of this amount of gold takes some of the possible and additional means of production, consumption, or real wealth out of the reach of society. At the same time, by doing this, the productivity of social labour can be increased to the extent that the cost of the circulating machine is reduced. In this regard, to the extent that the expansion of the credit system fulfils this role, capitalist wealth will increase, whether by allowing a significant part of the production and labour process to be carried out without the intervention of money or by solving more problems of commodity circulation with less money.

Let us consider another case. When there is no direct expansion of production, but a part of the surplus value realized is stored for a more or less long period to be converted into productive capital later. We will examine this in a society in which the dominant production is capitalism and there is, of course, no third class apart from the working class and the capitalist. The total purchases of the working class are equal to his wages, the variable capital advanced by the capitalist class. By selling the products produced to the working class, this money returns to the capitalist class and with the return of that variable capital of the capitalist class it again assumes the form of money. Let us suppose that the total variable capital employed and not advanced by the capitalists is equal to 100 times x pounds sterling. The capitalist class buys labour with this money, and the first transaction is made. The workers buy goods with this money, and the money goes back to the capitalists. In fact, the second transaction takes place and this process continues. Let us not forget and we see exactly that the working class can never buy a part of the product that represents fixed capital or surplus value. If the accumulation of all sides of money represents the division of the surplus import of precious metals among the capitalists, the question arises: how does the capitalist class accumulate money? The answer can be summarized in the following points.

1 – Bank deposits that are accumulated in the formal form of money – capital. 

2 – Government deeds, which are not capital at all and only represent claims on the “national product”.

3 – Shares, as long as they are not counterfeit and the product of fraud. These are documents of ownership of real capital belonging to a company or vouchers for the surplus value that arises annually from these capitals.

Part Three

Reproduction and Circulation of Total Social Capital

Chapter 18

Introduction

The direct process of production of capital is the process of labour and valorisation. The reproduction of capital is composed of this process and the two distinct periods of circulation or cycles of commodity and money capital. The sum of these is called the circuit of capital. From whichever side we look at this circuit, the specific and direct process of production is only a link in it. A link that is seen both as the medium of the process of circulation and the process of circulation is considered its medium. The continuous appearance of capital in productive form in both cases is conditioned by its transformation during the process of circulation. At the same time, reproduction is the necessary condition of the transformations that capital constantly undergoes within the cyclical environment and appears alternately in the form of money-capital and commodity-capital.

Each individual capital is an independent part of social capital. The movement of social capital includes the sum of the movements of its components or the turnover of individual capitals. If the transformation of an individual commodity is a link in the chain of transformation of the world of commodities, then the turnover of an individual capital is also a link in the circuit of social capital. This circuit includes, on the one hand, the purchase of labour power by the capitalist and the liquidation of the worker in the process of capitalist production, and, on the other hand, the purchase and consumption of goods by the working class from the owners of capital. In the first part of this book (Volume II), we examined the various forms and states of capital in the process of circulation. In the second part, we examined the circulation as a cyclical or reversible process, and we investigated the ways in which the various components of capital complete their circulation at different intervals, the factors that cause different durations of work-cycles and circulation-cycles. In both parts, the subject of our investigation was individual capitals. In this part, we examine the process of circulation of individual capitals as components of social capital and, consequently, the circulation of the total social capital.

2 – The Role of Money as Capital

Monetary capital is an element of social capital with the following two indicators.

First: It has an initiating role and is like a stimulus that sets the entire production process in motion. The dual function of the commodity in the form of commodity and money is a sign of the commodification of the product; capitalist production also requires the emergence of capital in the form of money or money-capital as the stimulus and starting point of the process. All elements of capital such as raw materials, machinery and labour must be purchased sequentially with money. What is true for individual capital in this case is also true for social capital.

Second: Depending on the length of the capital turnover period and the variable ratio between the labour-cycle and the circulation-cycle, this value-capital, which is constantly paid and renewed in monetary form, assumes a different ratio in relation to the productive capital in operation. But independent of this ratio, it is in all circumstances a part of the value-capital present in this process. It can act as productive capital, take refuge alongside productive capital in monetary form and play a role.

Regarding the first point, it is important to remember that the field of action of capital and the scale of production are not determined by the volume of money. The volume of production can be increased by intensifying the pressure of exploitation of workers or by lengthening the working day, but even assuming an increase in wages, there will be no proportion between the increase in production and the amount of money capital paid. Capital can, by exploiting labour more intensively or by lengthening the working day without advancing more money capital, take free water, land, forests, and natural elements into service and make them the source of an increase in the volume and value of the product. The instruments of labour and fixed capital may, without the need for additional capital, last longer or be used for more hours a day, in which case the period of return of the fixed component will be shorter and the delivery of the elements of reproduction will be faster. Although the increase in the productivity of labour does not increase the value of goods, it increases the volume of output without the need for additional money capital. This increased productivity can cause the reproduction of more fixed capital, put several machines into operation instead of one, help to preserve fixed capital by putting it into operation more and preventing its unproductive wear and tear, and provide a basis for greater accumulation. The progressive concentration of individual capitals in the hands of a single person is another factor that, without the need for a larger capital advance, can increase the productivity of labour and increase the volume of output, and finally, with faster turnover, a larger amount of productive capital can be used with less money capital.

As to the second point, it is quite clear that a part of the social labour and means of production must be spent every year on the purchase of the money required to replace worn-out coins. This implies a reduction in the scale of production. Depending on the length of the turnover period, a certain quantity of money capital is required to put productive capital into circulation. The division of the turnover period into a labour-period and a circulation-period also gives rise to an increase in money capital in latent or suspended form. Capital must exist somewhere in order to be spent on the purchase of the necessities of the production and circulation process. The need for money-capital, in so far as it arises from the length of the labour-period, is subject to two factors. First, every single capital must take the form of money (other than credit) in order to be transformed into productive capital. This is the nature of commodity production in general and of capitalist production in particular. Second, over a relatively long period of time, labour-power and means of production are continuously purchased without the product being converted into money during this period, which necessitates the advance of a certain amount of money. The final point is that in post-capitalist social production, money will become completely irrelevant.

Chapter 19:

Theoretical Backgrounds, Analyses

The Physiocrats

Kenneth Waltz considers the only field of accumulation of capital value to be the agricultural sphere. The field in which the process of reproduction with any specific social characteristics is combined with the process of natural reproduction. He sees the product of the previous year as the starting point of the production cycle, he is aware that a part of the product containing the value of the previous capital reappears in the same natural form, without entering the circulation process, remaining in the hands of the farmer-producer to be used as capital. The physiocratic view, contrary to the imagination of many, including Kenneth Waltz himself, who hung himself under the feudal banner, was the first coherent view to deal with the picture of capitalist production. He realized that agriculture is managed capitalistically and in the form of an enterprise under the management of the capitalist farmer. The person who directly engages in cultivation and labour is the agricultural worker. Production does not only produce consumer commodities, but it also creates value, and the goal of value creation is the acquisition of surplus value in production, not circulation. The worker here is the producer of surplus value, and the farmer is the appropriator of surplus value. The physiocratic view of capitalism was severely criticized by people like Friedrich Albert Lange and Gabriel Bonnot de Mably on the one hand, and by defenders of landed property on the other. Adam Smith takes a step back in his analysis of the reproduction process. At best, he confirms the correct views of Kenneth Waltz and uses the names of fixed and circulating capital for his “primitive and annual provisions”. At the same time, he also confirms the errors of the Physiocrats, claiming, for example, that “no capital is capable of setting productive labour in motion as much as the farmer’s capital, not only making servants but also animals productive workers, but also making nature a productive force alongside the workers without any cost, such that the value of his labour is not less than the value of the labour of the workers.”   With the familiar intelligence of a bourgeois economist and a view that is entirely focused on profit, Smith puts workers and animals together and says: “The effect of workers and animals in agriculture is to produce value in the same way as workers in manufacturing, in proportion to their consumption, the capital advanced and the profit of this capital are not, they produce a much greater value, in addition to the farmer’s capital and his profit, they also regularly produce the owner’s interest. The interest of the land is like the result of the forces of nature that the landowner has transferred to the farmer!! In manufacturing there is no productive work of any amount that has such a large reproduction!! Their nature does nothing, it is man who does all the work. The capital that is advanced in agriculture not only sets in motion more productive work than the capital of the same amount in manufacturing, but it adds a much greater value to the annual product of the land and the labour of the country”!

What Adam Smith does not find in his analysis is that surplus value is not created by land, cattle, sheep, nature or fixed capital, but by labour and the variable part of capital. The share of the landowner, merchant, real estate owner and the like is not provided by the miracle of animals and nature, but by the surplus value produced by labour. Compared to the “mite”, he is extremely backward and regressive, he sees the emergence of value-fixed capital in a new form not as the result of an important stage of reproduction, but as a component to distinguish fixed capital from circulating capital!! He says: “The seed of capital is fixed, it does not change owners, it does not circulate, the capitalist’s profit is not obtained from sales but by its increase.”

Adam Smith

1- General theories

Smith believes that: “The price of every commodity is composed of three parts: wages, profit, and interest on land… This statement, which is true for every particular commodity, is also true for all commodities. The sum of the price of the annual produce is the sum of these parts”!! In the midst of this baseless anatomy, Smith suddenly remembers capital and is forced to make room for it. He sees the solution in opening the door to the distinction between net and gross income. Net income is that share of the gross income of the population of a large country that remains at their disposal after deducting the costs of maintaining fixed and circulating capital. These are Smith’s statements, and our explanation is as follows:

1 – He only considers simple reproduction, he only takes into account the cost of maintaining capital, net income is only a part of the annual product. A part of this product is not divided into wages, profit or interest, but is converted into capital, both at the level of society and in relation to the individual capitalist.

2 – The individual capitalist or the capitalist class obtains, in place of the capital used in production, a product – a commodity, the value of which includes the compensation for the capital used (the reproduction of this capital) plus the wages of the workers, the profit of the capital and finally the interest of the owner. In other words, the value of each commodity is definitely the socially necessary labour embodied in it and the market price of the commodity, the product of the sum of the price of the fixed and variable capital used in it, plus the average profit or a share of the surplus value created by the workers, which is allocated to each unit of the commodity.

Smith continues: “The lowest normal rate of profit must always be a little more than the compensation for the social losses and damages suffered by capital. Net profit is this surplus… Gross profit is this net profit plus a portion saved for these possible losses.”

The part of gross profit, which is here recommended as an insurance for production, is a portion of the surplus value or unpaid labour of the worker, which is practically transformed into capital, that is, the saved-up material for reproduction. The costs of maintaining fixed capital are not new investments, but the cost of repairs is not one of these costs, but is a part of the price of capital paid, which the capitalist pays gradually and from the surplus values ​​obtained from the exploitation of the workers, instead of paying them all at once at the beginning.

Smith says: “The total cost of maintaining fixed capital must necessarily be excluded from net income. The raw materials required for the operation of fixed capital and the product of labour required to transform these materials into desirable goods should not be considered as part of net income, but the price of this labour can be a part of this income, because the wages of the workers go to their consumption. In other types of labour, the wages paid for the labour and the product in which this labour is embodied are both part of this consumption.”

Here Smith is faced with the distinction between workers employed in the production of means of production and labour employed in the production of means of consumption. In his view, the value of the goods produced by workers is first the sum of the wages received, which are income for the workers themselves, but have taken the form of means of production, and are not consumable either for themselves or for others. Accordingly, they are not an element of the annual product involved in the consumption of social capital. Smith puts the above points together, but he forgets that what he says about wages is also true for the surplus value converted into income, interest on property or the value elements of the means of production belonging to the capitalist class. All of these also have the form of means of production, are not consumable and can only be spent on the provision of consumer goods produced by workers in other sectors after being liquidated. Smith is so absorbed in calculating net and gross incomes with the abacus of whether or not goods are consumable or not or the formal form of values ​​that he fails to see and analyse the role of surplus values. In this regard, he forgets that capital employed in the form of instruments of labour, fixed capital, does not generate income, income, interest on property and profit are all surplus value or unpaid labour of the worker. If Smith had gathered and made coherent his scattered thoughts and beliefs about fixed and circulating capital, he could have summarized them all in the following two paragraphs. 

First – The annual social product consists of two parts, the part that produces the means of production and the other part that produces the means of consumption, each of which requires a separate examination.

Second – The total value of the part of the annual product that consists of the means of production can be divided into the following parts.

1 – The value of the means of production or the value that has been used in the production of these means, in other words, the value – capital that is only renewed and appears in a new form.

2 – The value of the capital that has been spent on the purchase of labour power or the sum of the wages paid in this field of production,

3 – The value that consists of the profits of the owners of the industries of this sector, of which the interest on land is also a part.

In the first part, a part of the values, constituting the fixed capital reproduced and consisting of all the individual capitals employed in this part. They always play the role of capital; they do not constitute any part of the net income either for the individual capitalist or for society. The situation of the other part of the values, the part which becomes the price of labour-power, the income and profit of the capitalist or the rent of land, is different. For their recipients they have the form of income, but for society they are not income, but are considered a part of the total social capital, while the annual social product of any society is only the sum of the products of its capitalist members. Many of these products, by their very nature, play only the role of means of production; even goods that could have a consumer role, such as raw and auxiliary materials, are still used for new production. They act as capital, and of course this role is not in the hands of their producers, but only in the hands of those who employ them. These people are the capitalists of the second sector, the sector of production of means of consumption. They are the ones who employ a part of the capital or products of the capitalists of the first sector in the form of the means of production they need (the fixed part of capital). This part of the capital belonging to the capitalists of the sector of production of means of production, which is now employed by the capitalists of the sector of production of means of consumption, acquires from the social point of view the role of consumption – a source through which the capitalists and workers of the first sector organize their incomes.

If Smith had consolidated and refined his chaotic ideas, he would probably have come close to this: a certain value component of one type of commodity – capital, that is, the means of production, by the operation of which the total annual social product is created, while at the same time being profitable for the employed workers and the individual capitalists in their field of work, is not income for society but capital. The value component of another type, or the means of consumption, is for the individual capitalists producing this sector, value – capital, and at the same time forms part of the social income. If Smith had organized his general ideas about the reproduction of social capital, he would perhaps have come to the above summaries, but in any case, the result of the analysis for us is as follows.

First: There is no doubt that social capital is simply the sum of individual capitals, that the annual commodity product is the sum of the commodities produced by individual capitals, that the decomposition of value-commodities into different components that applies to each individual capital is also true for society. All of these are true, but the form in which these facts appear and manifest themselves in the process of reproduction of social capital is different.

Second: Even in simple reproduction we see not only the production of wages and surplus values, but also the direct production of fixed capital. It is true that daily labour produces only two components of value: the necessary (the worker’s wages) and the surplus (profit, rent, etc.), but at the same time it replaces the fixed component of capital that has been consumed in the production of the means of production.

2 – Decomposition of exchange value

Smith’s theory that the price or exchange value of every commodity, and consequently of all commodities constituting the social product, is composed of three components: wages, profit, and rent, can be reduced to the profoundly unfounded notion that the value of a commodity is simply the sum of wages and surplus value!! He says: “The value that the workers of manufacture add to the materials is divided into two parts, one part being their wages and the other part being the profit of the employer.” And elsewhere he says: “The total annual produce of the land and labour of every country consists of two parts. The part which is allocated to the replacement of capital or the renewal of the means of subsistence, the commodities and products of capital, and the other part which consists of the profit of the capitalist and the interest of the landlord.”

Smith, apparently, in the midst of all the confusion, also turns his attention to the following point: “Only one part of capital produces income – its variable part – the part that performs the function of capital in the hands of the capitalist and for him, then produces income for himself, the worker. The capitalist spends a part of his capital on the purchase of labour power, converting it into variable capital, and with such a transformation, not only this part of capital, but also his total capital acquires the role of industrial capital. Labor power in the hands of the worker is only a commodity, a commodity that he lives by selling. This commodity becomes variable capital in the hands of its buyer, the capitalist. Smith says: “The value of the product in manufacture is composed of the wages of the workers and the profit of the capitalists, but in agriculture the workers, in addition to reproducing a value that is equal to their own consumption and the capital that employs them (variable capital) plus the profit of the capitalist farmer, regularly reproduce the interest of the landowner.”

The interest that Smith intends is, in any case, a part of the surplus value, and therefore the value of the commodity in his calculations can ultimately be divided or reduced to the same two components: the worker’s wages and the capitalist’s profit. This very incorrect and unfounded conclusion leads Smith into a misleading and one-sided analysis of the components into which the value of each commodity or the entire annual social product is divided. It is under the pressure of this analysis that he declares: “Wages, profit, and rent of land are the three sources of all income or all exchangeable values, and all other income is derived and divided from these three sources!! Calculations and conclusions that are full of confusion. Including:

1. All members of society who do not participate directly in the process of reproduction, whether workers or non-workers, can obtain their share of the annual product for their consumption from the classes that receive this product, namely, industrial capitalists, landowners, and workers. The shares of these members, unlike the primary ones, are considered secondary incomes. Incomes whose recipients, the priest, the prostitute, the king, the mercenary, the Supreme Leader, the executioner, the minister, the religious authority, the general, each give themselves the right to consider their own occupations as the source of these incomes.
2. And it is in this regard or in the continuation of these analyses that Smith’s absurd intellectual confusion is revealed more than ever. He, who initially, despite all his incorrect conclusions, finally saw correctly the elements that make up the value of commodities and the total value created by these elements, suddenly begins to take a reverse direction, draws a line on the real origin of incomes and assigns their current composition or formulation as the real source of all values!!. This still leaves the door open to the field of popular economics.

3 – The fixed component of capital

Smith, in the abyss of error he has fallen into, resorts to magic to drive the fixed component of capital out of the value of commodities. “One part of the price of wheat pays the owner’s interest… Another part becomes the cost of maintaining workers and animals!!… The third part will be the farmer’s profit… The fourth possible part will be allocated to replacing the farmer’s capital or the wear and tear of the livestock.” (Smith, with the class instinct of a representative of capitalism, in most places considers workers and animals to be the same and puts them together) Let’s get to the essence of his argument. Here, in continuation of the above statements, he insists that “the price of agricultural implements, for example, a horse or any other means of labour and production is ultimately composed of the same three components of profit, wages and interest.” In short, Smith’s entire argument is a tedious repetition of the same previous statement that the price of commodities is the sum of wages, profit and interest!! He is unable to see the very simple fact that the price of production of each commodity is the price of the fixed and variable capital employed in it, plus a share of the surplus value produced by the workers, which, within the framework of the natural laws of capital, goes to each unit of the commodity and to the capitalist who owns it. Unable to analyse the root of the matter, Smith falls into the abyss of the worst contradictions. He accepts and repeatedly emphasizes that the workers create values ​​in the process of production that are in addition to the value of the capital that employs them (variable capital). They produce both the price of their own labour power and the profit of the capitalist and the rent of the land. He continues the discussion and concludes that the total product of the labour process and therefore the total annual social product is composed of wages, profits and interest. The total price of these and the price of each commodity are also composed of these three components. What is completely forgotten in the meantime is the fate of the fixed component of the capital that is used in the production of the commodity and determines part of its price. We have already said that Smith’s focus is on simple reproduction, however, let’s see what happens to this component of the value of the commodity?

1 – So far it is clear that Smith considers the value of a commodity to be equal to the volume of labour to which the worker has added a wage, he accepts that the worker produces surplus value in addition to his wages. His understanding of the quantitative calculation of surplus value or how it is distributed is not currently under discussion. The important point is that surplus value is a set of values ​​for which the capitalist pays nothing, the value of the commodity is the socially necessary labour of the worker that has crystallized in it. A part of the total value of the commodity is this surplus value, which is equal to the worker’s wages or the capitalist’s variable capital. Based on this, the rest of these values, or in fact surplus value, should also be measured in the same way as a part of the total values. 2. What is true of the goods produced in an enterprise is also true of the total annual product, and what is true of the daily work of an individual productive worker is also true of the annual work of all productive workers. Smith accepts that “the productive working class, by the work it does during the year, fixes the total value of the production of this year in the annual product” and, as we have repeatedly seen, he sees the total of these values ​​as composed of wages, profits, interest, and more precisely wages and profits. (Let us clarify that Smith’s conception of productive and unproductive labour or their role in the production of values ​​and surplus values ​​is not at all the subject of investigation here.) For the time being, all our search for Malal’s sensitivity and interest is focused on what finally becomes of the constant part of capital contained in these products and their values? Why does Smith not mention this? And where does this omission come from? We must investigate this. Smith’s first major mistake is that he equates the value of the annual produce with the annual product – the annual value!! The former includes the total value of the elements used to prepare the annual produce. Elements and values ​​that were themselves produced in the previous year or even in previous years. These are means that only transfer their value to the new product, values ​​that existed, were previously produced and now appear in the process of producing new goods, the latter is not at all like that. It is simply the product produced in the last year. Smith is unable to distinguish the difference between the two.

But this mistake of Smith, for all its importance, is rooted in another fundamental error. He commits this grave error because he fails to recognize the dual nature of work, its abstractness and its concreteness. He does not understand that it is the abstract work of man that creates value, and that the specific work merely expresses the form of utility of the commodity. The commodities produced with varying utility during the year are the result of massive social labour employed in a complex system, in thousands of different branches. It is in the same process and within this system that all or part of the value of the means of production (machinery and raw materials or previous dead labour) is also consumed, transferred to new products and thus preserved. The total annual product is the result of all the useful labour expended during the current year, but only a fraction of the total value of the annual product produced during this year. This is the part of the annual product – the value which is the result of the work done in that year. Smith observes the specific work or useful process of the total social product produced during the current year but is unable to contemplate the fact that the abstract socially necessary human work done in that year determines only a part of the total value of this product.

4 – Smith, Capital and Income

The capitalist spends a part of the capital advanced to purchase labour power and converts it into variable capital. This part or the purchased labour power is consumed in the production process and creates new values ​​in the form of commodities. What has happened so far is the renewal of the said value part or the reproduction of the variable part of capital. The worker, in turn, spends his wages on the purchase of the necessities of life, he buys the means that are needed to reproduce his labour power. The amount of money equal to the variable capital advanced is the role of income for the worker. This income remains with the worker as long as he can and has the possibility to sell his labour power to the capitalist. The worker’s commodity, labour power, only functions as a commodity when it is embodied in the body of capital and put to work. Here, various processes of production and cycles are intertwined that Smith does not separate.

First: The money that the capitalist allocates to the purchase of labour power is not spent but is advanced for the purpose of valorisation and is therefore money-capital. But what has been done to this extent is only an exchange and necessarily belongs to the sphere of circulation.

Secondly: The purchased labour power becomes an active part of the production process, the worker acquires a special natural form of capital, different from the natural form of the means of production or other elements of capital, and by expending his labour power he creates value and surplus value.

Third: By selling the produced goods, the capitalist replaces part of their value with the advanced variable capital and in this way succeeds in purchasing labour power again.

Smith does not distinguish between the above stages. He says, “That part of the capital, which is spent on the treatment of productive labour, after it has served the capitalist in the function of capital, becomes revenue for the labourer.” This is wrong. The money which the capitalist pays as wages serves the capitalist in the function of capital only if he combines it as labour-power in the body of the material elements of his capital and thus makes his capital productive capital as a whole. Labour-power in the hands of the labourer is only a commodity, not capital. It is after sale that the capitalist employs it in the process of production as capital. What here plays two roles is labour power. As a commodity in the hands of the labourer, which is sold at its value like any other commodity, and as capital in the hands of the capitalist, which creates both value and use-value. It is not money that acts twice, it is labour power that plays two roles. The part of the capital paid to the worker in the form of wages is the value he himself has created. Before he receives the price of his labour-power, the worker has produced and handed over to the capitalist a value much greater than that. Thus, on the one hand, the purchase and sale of labour-power establish the position of labour-power as an element of capital, inasmuch as the worker, by his labour, continually produces and hands over to the capitalist variable capital equal to the price of his labour-power. On the other hand, the constant sale of labour-power becomes the source of the worker’s life and appears to be an income for his subsistence. The meaning of income here is simply the appropriation of values ​​that are affected by the repeated and continuous sale of labour-power. These values ​​serve only the continuous reproduction of the commodity (labour-power) that must be sold. Smith says: “The valuable part of the product produced by the worker, which becomes his wages, becomes his source of income.” This is not wrong, but this does not at all change the nature or amount of this part of the value of a commodity. The value of labour power, like any other commodity, is determined by the amount of socially necessary labour required to reproduce it. A value that can at the same time be called a source of income for the worker. The problem is not in this naming. A very obvious problem with Adam Smith is rooted in his understanding of income and the relationship of income to the value of the commodities produced by workers. He insists on the completely false belief that the value of new commodities is not the result of the labour and exploitation of the mass of workers, which constitutes wages and surplus value, or the income of the worker and the surplus value of the capitalist, including profit and interest on land, but on the contrary, it is income that constitutes the total value of the commodities produced by workers! An inference that is wrong in every respect. It is only the first that constitutes the second.

Smith views the volume of what he calls the worker’s income in a completely opposite way, instead of seeing it as a share of the value of the goods produced by him. He sees income as constituting the value of the goods that the worker has created!! But the reality is something else, it is a share of the new values ​​produced that determines the volume of the worker’s income, the reverse is not true. The basis for determining the worker’s wages, as has been stated, is not a certain proportion of the product of his labour and production, but simply the social labour necessary for the reproduction of labour power or the price of the commodities that are necessary and vital for the reproduction of this labour power.

To summarize, Smith wrongly believes that the price of any commodity or the entire annual social product is composed of wages, profit, and interest. This unfounded notion leads him to summarize the value of the commodity in the sum of wages and surplus value. He is unable to recognize the true source of surplus value and does not see the variable part of capital as its sole source. On the contrary, he considers the allocation of a component of capital to the purchase of labour power, or variable capital, to cause the transformation of the entire capital into industrial productive capital and the transformation of all components of capital into producers of surplus value!!! His theory of the composition of value from wages, profit, and interest leads him to consider the entire annual product of labour to be the wages of the workers and the profits and interest of the capitalists and landowners. In this regard and under the pressure of this gross error, he attributes the role of the source of value to various occupations, loses the origin of incomes and sees them themselves as the source of values!! Smith does not distinguish the value of annual products from the product-value of the current year!! He fails to recognize the dual nature of labour, abstract and concrete. He does not understand that abstract labour is the creator of all values, and concrete labour merely expresses the form of utility of the commodity. In this confusion of class-specific ideas and in the blindness of other very important questions, he fails to see the transfer of old values ​​to new products in the process of production, how these values ​​are transferred and preserved, and their effect on the value of new commodities. Smith does not distinguish between the stages of circulation and production of capital. He does not distinguish the phase of purchasing labour power, which is part of the cyclical movement, from the phase of consuming labour power in the circle of production, which is the process of creating surplus value. When he speaks of the income of the worker and the values ​​produced annually by him, instead of seeing the latter as constituting the former, he takes the opposite approach. He does not explain the value of labour power by the value of socially necessary labour or the price of the means of subsistence necessary for its reproduction, but instead attaches it to income, does not decompose the annual values ​​of production into wages and surplus values ​​or “incomes”. He considers the latter to constitute the total annual values ​​of production. Smith replaces the correct way of understanding capitalism with the wrong way.

Adam Smith’s Heirs

David Ricardo: The evidence is overwhelming that he is also echoing Smith’s views. Let us look at this part of his statement.

“It must be understood that the whole of the production of a country is consumed. But it makes a great difference whether the said products are consumed by the persons who produce value or by those who have no part in the creation of value. When we say that income is saved and added to capital, we mean that a part of the income added to capital is consumed by the productive rather than the unproductive workers.”

David Ricardo accepts the theory of the decomposition of the price of a commodity into wages and surplus value, his differences with Smith can be summarized in the following points. 1 – He eliminates land rent from the list of necessary components of surplus value. 2 – He decomposes the price of a commodity into the same variable capital and surplus value. In addition, to calculate the amount of value, unlike Smith, he does not start by adding wages and surplus value but takes value itself as the starting point.

Frank Ramsey criticizes Ricardo for dividing the product only into wages and profits and neglecting the replacement of fixed capital. What Ramsey sees here and calls fixed capital is in fact not the fixed part of capital, but the total fixed capital.

            Jean-Baptiste Say Relieves himself of some of the difficulties. He says with a   flourish, “The value of all products is distributed in the form of income in society.” He continues that “the total value of each product consists of the profits of the landowners, capitalists, and artisans.” “Say” calls wage the profit of the artisan. Putting these sentences together, he concludes that the income of society is equal to the gross value produced.

Pierre-Joseph Proudhon claims the discovery of “Say”. ” Storch” accepts Smith’s ideas and criticizes “Say” for not applying them correctly and accurately. He says, “If it is accepted that the income of a nation is equal to the gross product, no capital (no fixed capital) should be deducted from it. In this case, such a nation can consume the whole value of its annual product unproductively, without any damage to its future. The products that constitute the fixed capital of a nation are never consumable,” “Say is silent as to how the existence of this fixed component of capital agrees with the Smithian analysis!! An analysis that sees the value of a commodity as only wages and surplus value and does not include any fixed capital in the calculation.

J.-C.-L. Simonde de Sismondi (Sismondi) has no precise discussion on this subject and has not expressed any clear opinion. John Barton, Ramsay and Antoine-Elisée Cherbuliez try to go a step further than the Smithian view. Their failure is that they approach the matter one-sidedly from the outset, not distinguishing the difference between the value of constant and variable capital from the difference between fixed and circulating capital.

John Stuart Mill cherishes Smith’s legacy and echoes his views. As a result, Smithian confusions have survived and his dogmas remain the articles of faith of the devout followers of political economy.

Chapter 20

Simple reproduction

1 – Problem Statement:

The annual product is composed of two parts: the social product. The part that replaces capital. (social reproduction) and the other part that is consumed by the working class and the capitalist. In other words, the annual product includes both productive and unproductive consumption components. The present chapter is dedicated to the study of simple reproduction, and we will analyse this from the form of circulation: Commodity capital – money – Commodity… The production process…. We start with commodity capital, along with money and added Commodity. In these rotations, the task of the phenomenon of consumption is necessarily determined, because the starting point is C’ = C + c. Commodity capital C’ consists not only of the value of constant and variable capital, but also includes surplus value. Both individual and productive consumption are the subject of analysis in this area. In the circuits P…C’-M’-C…P and M-C…P…C’-M’ the movement of capital is the starting and ending point and necessarily includes consumption. The important, direct and primary question in the investigation is how the value-capital consumed is replaced in annual production and how this replacement is intertwined with the surplus value of the capitalists and the wages of the workers. Let us not forget that the focus of our discussion is on simple reproduction.

2 – Two parts of social production

The total social product and therefore the total production of society is divided into the following two parts.

First – Means of production: Goods that, by their nature, reach productive consumption, or have the capacity to play this role.

Second – Articles of consumption: All goods that, by their properties, are consumed by capitalists and workers. In each of the two above sectors, the entire sphere of production to which it belongs is considered a general branch of production. Both sectors together constitute social capital. The capital within each sector is composed of two different components.

1 – Variable capital: The value of the social labour power of each sector or living labour exploited by capital there.

2 – Fixed (Constant) capital: The value of the total means of production employed by each sector. This capital is composed, in turn, of fixed components such as buildings or machinery and the circulating component of fixed capital such as raw materials, auxiliary means and semi-finished commodities. The total value of the annual product in each of the two sectors consists of two components. The component that embodies the fixed capital used up in the production of the product does not create or carry any new value and merely transfers its value to the new surplus-value. The second component is produced by the annual labour or the total labour of the workers exploited in each sector. Of this component, one part is used to replace the variable capital paid in, and the other is the capitalist’s surplus-value. The total annual product of each sector is divisible by the value transferred from fixed capital + variable capital + surplus-value. Of the fixed capital used up in the production of the annual social product, the raw materials, auxiliary materials, and semi-finished commodities are all consumed and transfer their value to the new product, but this is not the case with fixed capital. In each round of turnover, only a part of it enters the composition of the annual product in the form of depreciation and transfers its value to the product. To examine simple reproduction, we use the same names: constant capital C, variable capital V, surplus-value M, and the rate of surplus-value 100*M/v. Figures will be in millions of pounds sterling.

A. Production of means of production

Let us consider a capital of 5,000 million pounds, composed of C 4,000 and V 1,000, and a rate of surplus value equal to 100 percent. Its commodity product is: +1,000 M = 6,000 4,000 C+1,000 V, which is available in the form of means of production.

B. Production of consumer commodities

Here too we are dealing with a capital of £2,500 million, consisting of C 2,000 and V 500, and its commodity product is 2,000 C+500 V+500 M = 3,000 in the form of consumer commodities. Thus, the total annual commodity product will be as follows:

1 – Means of production: 4,000 C+1,000 V+1,000 M = 6,000

2 – Consumer goods: 2,000 C+500 V+500 M = 3,000

The total value of the product is 9000 pounds commodities. Let us recall that we have deliberately set aside the fixed capital present in the production process and the part of it that enters the product as depreciation. The focus of our calculations is on simple reproduction. A form of reproduction in which the entire surplus value is in the form of unproductive consumption. For the time being, we will also ignore the monetary circulation of transactions and focus only on the transactions themselves. In this regard, three important points are worth considering.

First: The wages of 500 and the surplus value of 500 produced in sector 2, or the sector of production of consumer goods, are consumed by the workers and capitalists of this sector because they are consumer goods, in other words, they are transformed into products and eliminated.

Second: The wages of 1000 and the surplus value of 1000 produced in sector 1, which are produced in the form of means of production in this sector, are allocated to the purchase of consumer goods from sector 2. These items are exchanged for the fixed component of 2000 of the capital of this sector, which are consumer goods, and are eliminated from circulation.

Third: What remains is the 4,000 fixed capital of department 1. This figure is composed of means of production that can only be consumed in this department 1. It is settled in the mutual exchange between the capitalists of this department. Just as the 500 wages and the 500-surplus value of department 2 were settled and assigned within the same department.

3 – Exchange between the two sectors: wages and surplus values ​​of sector 1 against fixed capital of sector 2

The wages of 1000 and surplus value of 1000 of sector 1 in the form of means of production are exchanged for the fixed capital of 2000 of sector 2, which is in the form of consumption. The capitalists of sector 2 exchange their fixed capital of 2000 units, which is in the form of consumer goods, for the necessary means of production constituting their fixed capital in sector 1, and in this process prepare their fixed part of capital for valorisation. At the same time, the workers of sector 1 receive consumer goods from sector 2 in the form of their wages, and the capitalists of this sector receive consumer goods in the form of their surplus values. The exchange is carried out in money. The circulation of money is of decisive importance here. The wages of the workers of both sectors must be paid in the form of money. The process of exchange is as follows.

First: In sector 1, the owners of capital have paid 1,000 million pounds sterling in wages to the workers. With these wages or this amount of money value, the workers go to the capitalists of sector 2, the producers of means of consumption, and with this amount, they purchase the necessities of life, and in this regard, half of the constant component of capital in sector 2 is converted into money. Following this action, the capitalists of sector 2 spend the money received, 1,000 million pounds, on purchasing the means of production they need from sector 1. Up to this point and in the midst of this transaction, the value of the variable capital of sector 1, 1,000 million pounds, which existed as a part of the annual product of this sector in the form of means of production, is converted into money and becomes possible for it to function as money capital in the hands of the capitalists of this sector and be spent on repurchasing labour power.

Second: Now it is the turn of the surplus value component of commodity capital in sector 1. This component can also be exchanged for another £1,000 million of fixed capital in sector 2. This exchange in turn requires money, and the money required can be paid for in various ways. We assume that half of it is provided by the capitalists in sector 2 and the other half by the capitalists in sector 1. In this case:

Department 2 spends the 500 million pounds it has provided on the purchase of means of production and with these 500 million pounds it purchases the means of production which are in the hands of the capitalists of Department 1 in the form of surplus value and as a part of the product of the years. In this way, in the course of this transaction, another 500 million pounds of the fixed capital of Department 2 is replaced. We say another 500 million pounds because we remember that earlier, 1,000 million pounds of it was compensated by the wages of the workers of Department 1 and in the process of purchasing means of consumption from Department 2, so that up to this point three-quarters of the fixed capital of Department 2 has been replaced and organized. At the same time, the capitalists of Department 1 have also realized half of their surplus value and converted it into money.

The next step is for the capitalists of department 1 to allocate the £500 million received from department 2 to the purchase of means of consumption from the same department. In doing so, department 2 sells another £500 million of its fixed capital to department 1 in the form of annual consumer product, thereby recapturing or, in other words, recycling £500 million. It then purchases the same amount of means of production from department 1, thus replacing its entire 2,000 units of fixed capital. This last transaction also enables the capitalists of department 1 to convert into money and actually realize another part of their annual product, which is the surplus value for the remaining £500 million.

What is quite important and remarkable here is that Department 2 has converted the whole of its fixed capital, £2,000 million, which was in the form of consumer goods and the main part of its annual product, back into the means of production it needs. In addition, it has also secured or recycled the whole of £500 million which it had put into circulation as a separate capital from these investments and to solve the existing monetary problems. The same is true in a different way of Department 1. This department has not only exchanged its variable capital, which was in the form of means of production, for means of consumption, but has also recycled the £500 million of capital injected into the circulation process. A review of what we have said so far also makes it clear that the realization of the whole process required a capital-value which had to be put into the circulation in the form of money. This money was provided and paid out by the capitalists of both departments, but they received it back in full, as we have seen. In other words, the capitalists of both sectors did not add to their capital in this simple reproduction, but they did not lose a single riyal either. Let us not forget this point: they captured a large volume of surplus value that they spent on their livelihood, well-being, luxury, and pleasure.

IV. Exchange within Department II

Necessities and luxuries:

In simple reproduction, which is the subject of our current study, the workers of sector 2 purchase with their wages a part of the means of consumption and necessities of life that they themselves have produced in this sector. The product of their labour is now in the possession of the capitalist class, and the workers buy only a part of these goods and consumer items from the capitalist class in the amount of the wages they have received. By selling this part of the product of labour and exploiting the workers, the capitalists completely recycle the variable capital that they had paid in the form of wages. What has happened in this transition is that the workers have produced a mass of products, the entire product has become the property of the capitalist class. The worker producers have merely received the price of reproducing their labour power under the name of wages and in the form of money, and now with this same wage and in the same amount they buy a part of the product of their labour that is in the possession of the capitalists. By selling this part of the product, the owners of capital have appropriated it and recycle the entire wages that they had paid. In other words, they acquire all their variable capital anew. The consumer goods production sector, or sector 2, is composed of many and varied branches of industry, but all of these branches can be divided into two main ones as follows.

A: The branch of production of essential consumer goods. The branch that produces the subsistence products and vital necessities of the working class and at the same time the consumer goods needed by the capitalists. There is no need to explain that when we talk about the necessities of life in the realm of capital existence or the scope of capitalist production, there is no place for Arabs in terms of whether they are useful or harmful to humans. These goods can be opium and deadly poisons, or they can be produced in the form of bread and medicine.

B: The branch of production of luxury consumer goods which produces a part of the consumption of the capitalist class and the capitalists who buy them allocate a part of the surplus value resulting from the exploitation of the workers to this work. The workers cannot afford to buy them. Accordingly, the variable capital or the wages paid in both branches of this branch are returned directly in the form of money to the capitalists of section 2A who produce necessary and vital consumer goods. As has been said, the workers are not able to buy ornaments or luxury goods, they spend their entire wages on the purchase of the urgent necessities of life from the capitalists of section A. But the situation is different in the case of section 2B. Here the product-value is entirely luxury commodities, and its organization requires other transactions. Let us suppose that 500 million pounds of variable capital and 500 million pounds of the total surplus value of section 2 are distributed between the two branches of this branch as follows.

Branch A: £400 million in wages of workers and £400 million in surplus value of capitalists, a total of £800 million.

Branch B: £100 million in wages of workers, £100 million in surplus value of capitalists, a total of £200 million.

The workers of branch B have received £100 million in wages; they give this money to the capitalists of branch A and in return receive £100 million in necessary consumer goods from the said capitalists (branch A). In this transition, on the one hand, the variable capital of branch B returns to this branch, and on the other hand, the capitalists of branch A obtain £100 million in luxury goods. The latter capitalists (branch A) have already paid £400 million in wages to the workers of this branch; they also recycle all these £400 million by selling to themselves the goods that these workers have produced.

So far, the task of the variable capital of both branches has been clarified, let us investigate the fate of surplus values. Let us suppose that the capitalists of both branches A and B distribute their incomes, or surplus values, in equal proportions between necessary and luxurious consumer goods. For example, each allocates three-fifths of the 400 million pounds of surplus values ​​to necessary necessities and two-fifths to luxurious goods. In this case, the capitalists of branch A spend 240 million pounds on necessary consumer goods and 160 million pounds on luxurious goods. The capitalists of branch B also spend 60 million pounds on necessary consumer goods and 40 million pounds on luxurious goods. By what exchanges is this organization accomplished? The story goes like this: out of the total £100 million of luxury products in this branch, capitalists B consume £40 million themselves and give the equivalent of £60 million to capitalists A, who in return receive consumer goods.

Thus, for the whole of section 2 and its dual branches, we have:

400 units of variable capital and 400 units of surplus value A

+

100 units of variable capital and 100 units of surplus value B

———————————————————-

1000 million pounds

In the meantime: 100 units of surplus value and 400 units of variable capital A are exchanged for 500 units of variable capital A + B,

At the same time 500 units of surplus value A and B are exchanged for 100 units of surplus value B + 100 units of variable capital B + 300 units of surplus value A. In this way the total of 1,000 million pounds goes through its process of realization.

If we follow the reproduction in the same proportions, calculating the constant capital of both branches, then we will have for the whole sector 2.

Branch A: 1600 fixed capital + 400 variable capital + 400 surplus value, total £2400 million

Branch B: 400 fixed capital + 100 variable capital + 100 surplus value, total £600 million

And as a total sum: 2000 fixed capital + 500 variable capital + 500 surplus value = £3000 million

Now, having determined what has happened within branch 2, let us turn to the total exchange between branches 1 and 2 in the process of simple capitalist reproduction. In this connection, we will witness the following transactions taking place.

1 – Value – The new annual product (variable capital and surplus value) reproduced in the form of means of production in sector 1 is equal to the value of the constant capital present in the annual product of sector 2. If the former becomes smaller than the latter, sector 2 is unable to replace its constant capital. If it is larger, some of it remains unused. In both cases. The assumption of simple reproduction breaks down.

2 – In the annual product of the sector of production of consumer goods, the variable capital paid to the workers producing luxury goods is exchanged only in the amount of its value for the surplus value of the capitalists producing necessary consumer goods, but it is by this exchange that the variable capital paid by the capitalists producing luxury goods returns to them and the total variable capital of sector 2 is organized. After this transaction, the capitalists of sector B own 100 units of their variable capital. The capitalists of sector A also get their variable capital back by selling 400 units of subsistence consumer goods to the workers of the same sector. All capitalists in both branches appropriate 500 units of their surplus value.

Every crisis temporarily reduces the consumption of luxury commodities. It delays the conversion of variable capital of this branch into money capital. The dismissal of workers in this area also adds to the deterioration of the situation. The emergence of these conditions and their expansion into a recession in the market for the sale of goods also affects the process of capital production.,

Explanation: Here, while describing the process of simple reproduction and the manner of exchange between the two basic sectors of capitalist production, Marx correctly, with all the necessary precision, without leaving any room for any kind of error or misinterpretation, speaks of the effect of the crisis on the process of circulation or exchange of the products of the two sectors in simple reproduction and specifically in the areas of production of luxury commodities. To be more precise, Marx here, in this specific discussion, does not speak at all about the root of the crisis, about the origin and real grounds for the emergence of the crisis. Quite the opposite, he speaks about its consequences and effects on the process of capital circulation and exchange between sectors. This is what Marx said, but many, including a large number of “famous Marxist theorists”! Especially in the Second International, with a completely different interpretation of Marx’s dissection of the process of capital organization and exchange between the two basic sectors of capitalist production, have inferred and then suggested that crises arise from the core of the capital circulation process!! As if it is the decrease in the number of customers and consumers of goods or the decline in the purchasing power of the working masses that are the driving force behind the outbreak of crises!! As if it is the imbalance of the growth of accumulation in the basic sectors of capital production and the disruption in the circular flow of capital that gives rise to, nurtures and erupts the crisis!! These are ideas that are all more baseless and misleading than the others. Always, in all eras, but more than ever in recent times, with the explosive intensification of crises and the unprecedented expansion of their origins in the existence of capital, the leftist bourgeoisie has been the subject of controversy worldwide.

Raising the banner of capitalist justice!!, the movement to rationally prevent the deepening of the class divide!! The messianic glory of the decline in the share of workers and the increase in the share of capitalists in the annual gross domestic product, even the party and union campaigns of the humanitarian challenge of the decline in wages that have been launched under various banners since the end of the last century until today, all bear the stamp of these inversions of the capitalist crisis on their foreheads. Their problem is not poverty, misery, slumber, ruin, lack of health, lack of medicine and other gloom of the working class but finding a way to confront the escalating crises inherent in capital. The idea of ​​theorists, founders and flag bearers of these campaigns is that the cancerous growth of unemployment, the ever-increasing decline in real wages, the stormy decline in workers’ purchasing power and, in a word, what they call “insufficient consumption” are the real root of the emergence and intensification of crises. If the capitalists show a little mercy, boil their generosity, fire fewer workers, do not abolish unemployment insurance, and add a few riyals to the wages of the working masses, capitalism will solve the problem of market stagnation, prosperity will prevail everywhere, crises will cease to rage, and the capitalists will begin to give generously and increase workers’ wages with ease, security of mind and “boundless generosity”!! In this regard, everywhere will be safe and secure, the danger of the working masses revolting against capital will be eliminated and finally, as their great ideal, the survival of capitalism will be guaranteed!! What they are completely unable to see and understand is the real root of the crisis of capital. Capitalist production is not fundamentally the production of the means of subsistence and necessities of human life, and a change in the number of consumers of these forms of goods is the source of the volcano of crisis!! Capitalism is the mode of production of capital. The largest part of what it produces is capital and it is advanced in the form of capital. All its internal mechanisms are mobilized to increase the productive power of labour in every possible way, to produce the maximum capital with the minimum labour force. The crisis boils precisely from here, from the depths of this process, the process of excessive production of capital and the forced rise of the organic composition of capital, which makes the rate of accumulation surpassing the rate of production of surplus value, the downward trend of the rate of profit, and finally the outbreak of the crisis, inevitable and inevitable. Our discussion here is not to analyse the issue of crisis. We will only limit ourselves to this point, so that we can deal with it in detail in our place, in a re-reading of the third volume of Capital.

V. The Mediation of Exchange by the Circulation of Money

Despite all the above discussions, we are still only halfway through the process of organizing the two sectors of social capital, the production of means of production and the production of means of consumption. According to what has been said, the cycles between the two main sectors of capitalist production have flowed as shown in the diagram below.

1 – In the circulation of capital between departments 1 and 2 with the data:

Department 1 – 4000 constant + 1000 variable + 1000 surplus values = 6000

Department 2 – 2000 constant + 500 variable + 500 surplus value = 3000

The exchanges between 2000 constant capital of department 2 for 1000 variable capital and 1000 surplus value of department 1 have been completed. We leave 4000 units of constant capital of department 1 alone, to follow the fate of variable capital + surplus value of department 2.

2 – We remember that this section has two sub-sections called branches A and B.

A: (400 variable capital + 400 surplus value)

+

B: (100 variable capital + 100 surplus value)

=

2000 variable capital and surplus value of section 2

Here:

First: 400 units of variable capital A circulate within this same branch. With the wages they receive, the workers purchase the equivalent value-product from the capitalists of the branch in which they are exploited.

Second: According to the previous assumption, the capitalists of both branches spend three-fifths of their surplus values ​​on the purchase of necessary means of subsistence and two-fifths of it on the purchase of luxuries.

Third: Based on the same assumption, three-fifths of the surplus value of branch A, amounting to 240 units, is allocated within this branch by its capitalists to purchase the necessary means of life.

Fourth: Two-fifths of the surplus value of branch B is also purchased in this branch by its capitalists.

Fifth: Parts of the capital of each branch have not yet completed their dynamic organization. In branch A, 160 units of capitalist surplus value remain. In branch B, 100 units of workers’ wages and 60 units of capitalist surplus value remain undecided. The process of exchange continues and proceeds in such a way that 100 units of workers’ wages and 60 units of capitalist surplus value of this branch are spent on purchasing the necessities of life from the capitalists of branch A.

Another look at the organization of variable capital and surplus value in two parts 1 and 2 of social capital

1. 4000 C + 1000 V + 1000 M = 6000  
2. 2000 C + 500 V + 500 M = 3000  

The exchange process takes place as follows.

1 – Sector 1 pays the workers of this sector 1000 pounds sterling as wages in money.

2 – The workers of sector 1 buy means of subsistence from the capitalists of sector 2 with their wages equal to 1000 pounds sterling.

3 – The capitalists of sector 2 buy means of production of the same amount from the capitalists of sector 1 with the above 1000 pounds.

So far, the capitalists of Section 1 have recovered all of their paid-in variable capital.

4 – The capitalists of sector 2 buy means of production worth 500 pounds sterling from capitalists 1.

5 – The owners of capital in sector 1 spend the same 500 pounds received on purchasing consumer goods from sector 2.

6 – The capitalists of sector 2 buy means of production with the additional 500 pounds from capitalists 1.

7 – Sector 1 spends the last 500 pounds received on purchasing consumer goods from sector 2.

The total value of the above transactions is 5,000 pounds sterling, and in the meantime the 500 pounds that the capitalists of section 2 in the fourth row of this diagram injected into it from outside the circulation process have also returned to them.

In the above transactions we see that a certain volume of value of money is sufficient for the circulation and organization of the mass of products produced. The shorter the reversals, the faster the circulation of money in circulation, the less money will be required. If the number of successive transactions is known, the total amount of money required is a function of the total prices or values ​​of the circulating commodities. How much of the total value is surplus value and what volume of value-capital is in this transition is indifferent. The process of organizing the annual products of Section 2 together with the variable capital and surplus value of Section 1 thus, with the relatively detailed description we have given, finally reaches its conclusion, but the actual course of events in the same year finds the shadow of two factors hanging heavy over its head.

1-The presence of commercial and financial capital: Commercial capital in its first appearance always takes the form of money, the merchant, in the sense of the owner of this component of capital, is not the producer of any goods. Regarding financial capital, it should also be said that with its emergence and role, it exhibits a very special, influential and growing intervention in the process of circulation of industrial capital.                                       

• Distribution of surplus value: It is a requirement of capitalist production that surplus values ​​reach the hands of the industrial capitalist at one place, but the rule of this method of production and the dynamic necessity of capital appreciation is that it is distributed among different groups of the capitalist class. A portion goes to the landowner in the form of property interest. A portion is appropriated in the form of interest on money by the banker, usurer, and numerous institutions that pay loans. After these, it is the turn of the state and the broad and extensive state institutions. A subject that, in the current conditions of capitalism, has its own story and its explanation requires writing a special book. There is no room for this discussion here, but in a few sentences, within the framework of the specific topic at hand, it can be briefly said that the state, as the general and nationwide planning institution of the social capital of each country in various fields, economy, politics, law, culture, organization of economic, police, military, security, legal, civil and political coercion of capital against the working class, yes, by playing all these roles, is practically the power that guarantees the reduction to the last possible limit of necessary labour and the absolutely unlimited and ever greater increase of the surplus labour of the working masses in favour of the capitalist class. In this regard, the state, as the institution regulating relations between different sectors of capital and the world bourgeoisie, in a word, as capital personified in the structure of the political, legal, economic and social order, has a gigantic share in the total surplus values ​​resulting from the exploitation of the working class.

6 – The Constant Capital of Department I

The £4,000 of fixed capital in Department 1 is the only part of the annual product of Departments 1 and 2 that remains and has not yet been assigned. It is a part that has not been created in value terms this year or in the last process of reversal. It already existed and entered into this process, but in our specific example it constitutes two-thirds of the total annual product of this department. So long as we were talking about the individual capitalist, the procedure was that the producer of the means of production sold his products and bought the commodities he needed. This is no longer the case. The question is about the reproduction of social capital. It is the total capital of which two-thirds of its annual product remains in the form of means of production in Department 1. The owners of this product are all capitalists who produce the means of production, the variable capital of both sections has been completely exchanged and has completed its cycle of organization. The surplus values ​​of both sections have also completed their reproduction process. In section 2, the entire fixed capital has also been recycled and returned to the owning capitalists. All this has been done, and only section 1 has two-thirds of its products remaining in the form of fixed capital, a part of capital that is unable to exchange with any other component of social capital, because all the other components have completed their cycle of exchange. All these restrictions complicate the circulation and organization of the 4,000 pounds of fixed capital of section 1, but these same restrictions in turn have also determined and facilitated the circular and circuitous path of this component. The fixed capital of the first sector must be exchanged by the capitalist class that owns it and among the individuals of these same owners. Similar to the situation we witnessed in the production of consumer goods. There, too, a significant share of the annual product was traded within the same specific sector, here too there are a large number of capitalists who must exchange 4,000 pounds of means of production among themselves, replacing it with the worn-out and depreciated part of fixed capital. The fixed capital of the first sector is a huge mass of means of production in very diverse forms, from machinery and installations to all kinds of semi-finished goods, spare parts, raw materials with different properties, uses, types, roles and qualities, which can be used in a large number of fields of work and production. The capitalists of these fields, branches and sub-branches, each of which needs to renew and replace its previously used and worn-out means, need each other’s products to resume the process of advance and reproduction of their capital and are ready to exchange products with each other. It is here, in this market, that the fixed capital of Section 1 completes its organizational dynamic.

7 – Variable capital and surplus value in both sectors

What we have seen so far indicates that the total value of the annual social product in simple capitalist reproduction is composed of the following components:

1. The value of the variable capital of sector 2 that has been reproduced during the year.

2. The new surplus value that you have produced in this same sector 2.

3. The value of the variable capital of sector 1 that has been reproduced during the year.

4. The newly produced surplus value of sector 1.

Accordingly, so far as simple reproduction is concerned, the total value of the annual product is equal to the value of the means of consumption produced during the year by the annual social labour. In this form of reproduction, it must be the same, since everything produced is consumed.

The daily social labour of the working class is composed of two components. Necessary labour, which in our example creates a value of £1,500, and surplus labour, which yields £1,500 of surplus value to the capitalists. The sum of these gives rise to an annual product worth £3,000. This figure is also equal to the total use-value produced in the year. Here is a very important point. The fact that the total value produced in a year is equal to the total use-value created in the same year does not in any way mean that all the values ​​were produced in Department 2, that is, in the production of means of consumption. The constant capital of department 2 has been reproduced and returned to its owners in this way, having been exchanged for the reproduced variable capital and newly created surplus value of department 1. This is precisely why, for the capitalists of department 2, the value of their product is divided into constant capital + variable capital + surplus value, while from the social point of view the total product of 3,000 million pounds of department 2 consists of variable capital and surplus value. More precisely, the constant capital of department 2 is equal to the variable capital and surplus value of department 1. These two components of the social product exchange their natural forms with each other in the course of exchange. The fact is that of the 3,000 units of the social product annually, 1,000 units are produced in department 2 and 2,000 units in department 1.

The next important point is that although the daily social labour, that is, the labour performed by the entire working class throughout the year, is divided into two components: necessary and surplus labour, or wages and surplus value, even in simple reproduction, thanks to this daily social labour, the fixed capital of section 2 reproduces and maintains its value in the process of organizing the annual product. The capitalists of both sections also receive surplus value in proportion to the rate of exploitation, equal to or several times the total wages of the workers. In our present example, of the value of 3,000 pounds produced annually, two-thirds of it is exchanged in the form of use values ​​for the wages of the workers of section 1 and the surplus values ​​resulting from their exploitation, and it is through this exchange that the fixed capital of section 2 is recycled and re-advanced.

However, so far as we speak of simple reproduction, no part of the daily social labour in either department 1 or department 2 is employed in producing the value of constant capital. There is only the 1,000 surplus-value and variable capital of department 2 plus the 2,000 surplus-value and variable capital of department 1 added to the 4,000 and 2,000 of constant capitals 1 and 2. The new value created in the form of means of production is not yet constant capital, it only has the property of being transformed into constant capital. The values ​​produced in the last year in department 2, which have the definite form of consumption, (equivalent to 1,000 pounds) are the result of one-third of the daily social labour performed in this department in the form of definite work of the type of baking, weaving. The other component of value, namely (£2,000), is not the daily product of the social labour of this sector, but is a fixed component of capital which was not produced this year, was previously advanced, appeared in the form of new means of consumption, and, following exchange with the new values ​​produced in the sector of means of production, has resumed the role of fixed capital.

8 – Fixed capital of both departments

The annual product under investigation consists of the daily social labour of one year with the same value of 9000 units in the two main departments of capitalist production, namely departments 1 and 2, with the following components:

1 – The existing fixed capital (C) of the two departments, consisting of 2 daily labours, with a value of (4000 + 2000 = 6000) units.

2 – The necessary labour performed during the year, V)) consisting of half of the total daily labour in the annual production with a value of 1500 units

3 – Value – the product of annual labour V + M = 3000 units

4 – The value of the total product composed of C + V + M = 9000 units 

It seems that the total annual daily labour of 3,000 units of value is employed in the production of means of consumption, and of this volume of value no part is spent on fixed capital. In other words, no part of the annual social labour is spent on the production of means of production. This is a riddle that has already been posed, and its solution has been explained. The value of the product of the annual labour is equal to the value of the products of department 2 in the year. (3,000 units) But this value-product is two-thirds greater than the annual labour done in this department. Only one-third of the total annual social labour is done in this department. The other two-thirds, with a value of 2,000 units, is done in department 1. 

This 2000-unit value of the labour of the workers of department 1 has been transferred to department 2 in the process of exchange between departments as constant capital. Here it has entered the production process as a whole and has consequently assumed the role of a 2000-unit value component within the annual social product of department 2. Why does the matter seem so complicated? The reason is that the value of the constant capital of department 2 has been transferred entirely to the annual social product of this department and has practically taken the form of very diverse consumer goods. A mass of goods that are all necessary for consumption and cannot be advanced in their existing form as constant capital. This gives rise to the illusion that two-thirds of the products have been created as new values ​​without any work having been done to produce them!! While the annual work done in the production department of the means of production has entered the production cycle of department 2 in the form of constant capital and has become an important part of its annual product.    

9 – A Retrospect to Adam Smith, Storch, and Ramsay 

    We continue with the above example. The total value of the product is 9,000 units. 6,000 are the means of production that serve the fixed capital. The other 3,000 are the means of consumption and can be divided into wages and surplus value. The value of this component, which is in fact the value of the total social income, determines only one-third of the total value of the annual product. All consumers, workers and capitalists alike, consume only these 3,000 units. The other 6,000 are the means of production and their only role is to replace the fixed component of capital. This is a point that Storch understands, although he is unable to prove it. He confines himself to saying that the value of the annual product is divisible into capital and profit, and that “the products that constitute the capital of a nation cannot be consumed in any way.”

Meanwhile, “Smith” puts forward a fantastical, fossilized idea. He claims that the total social product has the role of income and is formed from the surplus value of the capitalists (profit and interest) plus the wages of the workers. A theory that has become an eternal dogma of political economy and has been supported by very popular discussions and examples. The proponents argue that consumers are forced to pay the entire value of the product to the producers. In this context, they cite the process of forming the price of a linen shirt as an example. That the spinner of yarn must pay him the entire value of the linen, consisting of the price of seeds, fertilizer, fodder, livestock, wages of workers, the fixed capital value component of the linen, etc. The weaver must pay not only all these costs, but also the wages of the weaving workers, the capitalist’s surplus value and dozens of other costs. The tailor must also bear all these various expenses that affect the weaver or those related to transportation, real estate and many other costs. The shirt buyer is obliged to pay all of these items at the time of purchase as the market price of the commodities.

The above argument or calculation is certainly not wrong, and every elementary school child is familiar with it. The problem is that economists do not stick to this correct statement themselves, they cite the above example and at the same time declare that: the value of all consumer commodities is like this.

What is absolutely true is that, firstly, the value of the total annual social product is composed of the value of fixed and variable capital plus the surplus value produced during the year. Secondly, the value of each commodity is determined by the socially necessary labour embodied in it, or the value of fixed capital, variable capital and surplus value, which is allocated to it from the total surplus value produced based on the rate of profit and the price of production. Accordingly, it would be incorrect to put forward the above statement that the explanation of the list of components of the value of commodities is true for “the value of all means of consumption”. Because it excludes non-consumable goods. The aforementioned statement can only be correct if the word consumption is generalized to both forms of consumption, both productive and unproductive. With this generalization, then the value of any commodity, whether consumer or means of production, will be composed of fixed and variable capital and the surplus value contained in it. If we divide the total value of the product, which is 9,000 units, into 6,000 fixed capital, 1,500 variable capital and 1,500 surplus values, and examine the 3,000 units consisting of surplus value and wages only with the feature that they are income, then it seems that there is no variable capital. All that is there is only constant capital and income. What a variety of calculations that political economy in general and Ramsey in particular makes!! With the explanation that he also projects constant capital under the name of fixed capital!!

10 – Capital and Income: Variable Capital and Wages

The total value of the annual product is greater than the total value of the labour expended during the year in its production. If we subtract from the total value of the annual product the value added to it by the labour of the current year, the remainder is not exactly the value that has been reproduced. It is only the value that has appeared in a new form of existence. Why does the difference between the value of annual labour and the social product produced in the year not coincide? The reason is that the relatively large mass of values ​​that are recreated and preserved each year by the annual labour of the workers are values ​​that were produced by the masses of workers in previous years and even more distant times and have become fixed components of constant capital.

Let us consider another point. Let us once again look at the value of 9,000 units of the social product, combining 4,000 C, 1,000 V and 1,000 M of Part 1, plus 2,000 C, 500 V and 500 M of Part 2, from a social point of view. Only one-third of the annual labour is devoted to the production of means of consumption. Two-thirds of it is entirely spent on the production of means of production. Means that can be consumed and advanced only in the form of fixed capital. On this basis, in capitalist production, the largest part of the annual social labour is basically in the service of the production of fixed capital. The difference between this mode of production and the mode of production of savage tribes is not what “Senior” says, but precisely this, in that:

A: It allocates the largest share of its annual production to the production of fixed capital.

B: When the savage man made an axe, hammer or arrow, he was aware that he was not spending his working time on the production of consumer goods, but rather he was satisfying his own need for a means of production. This is a subject that becomes mysterious in capitalist production.

A group of political economists are not willing to accept the fact that the theory “what is capital for one person is income for another and vice versa” has no general application. It may be true in a limited sense, but as a general rule, it is false and invalid. Why? The answer requires an explanation of the following points.

1– Variable capital initially exists in the hands of the capitalist as money capital. Up to this point it is only money capital, not variable capital at all. This money capital is potentially variable because it can become so. With this money, the capitalist buys labour power and converts it into variable capital. From this moment on, the said money is capital for the capitalist and only wages or the price of labour power for the worker. With these wages, he reproduces his labour power in order to sell it again and continue his life as a seller of labour power. The “scholars” of political economy “whitewash” here and make a great invention!! They discover that with the money he receives, the worker is able to constantly sell labour power and earn a living in this way!! So, this money is his capital!! And he should also be considered among the capitalists!! Perhaps this nonsense seems very amazing, but in any case, it is an important theory in the theorizing work of the great scholars of political economy!

2. Let’s go to the exchange of 1000 M (surplus value) and 1000 V (variable capital) of section 1 with 2000 C (fixed capital) of section 2. The workers of sector 1 sell their labour power to the capitalists of this sector. With this money, they buy necessities of life from the capitalists of sector 2. What is happening in this transition from the worker’s perspective is the sale of labour power as a commodity on the one hand and the purchase of consumer goods to reproduce labour power on the other. Now let’s follow the same story from the perspective of the capitalist of sector 2. He is a seller of goods. He has a mass of consumer goods. What he had before was his fixed capital, which was converted into consumer goods in the production process and now must be sold as a commodity so that the money from its sale first becomes money capital, then means of production and finally regains the role of the previous fixed capital. Here, it is not the variable capital of sector 1 that is converted into 1000 units of fixed capital of sector 2, but the money that played the role of money capital for sector 1 and was paid to the worker in exchange for the purchase of labour power. The worker receives it as wages and spends it on the provision of his necessities of life. For the worker, this money is not capital but merely wages. For the capitalist of sector 2, it has not yet played the role of constant capital. It is only then that he enters into trade with the capitalists of sector 1, with which he buys means of production and recovers half of his previous constant capital. The result of all the trades in this process is that sector 1 once again acquires the value of its variable capital in the form of money, a form in which it can be transformed into the variable element of its productive capital. In order to be able to appear again as a buyer of commodities, the worker must first play the role of seller of labour power. The matter is different with regard to the variable capital of sector 2. Here, if we consider the process of circulation of commodities between the collective capitalists and the collective workers, these exchanges take place directly. The capitalists spend 500 units of value on the purchase of labour power. The workers, with the money they receive (wages), return the entire 500 units to the capitalist for only half of what they themselves have produced, and in this way make his variable capital available to him for further advance. In addition to these, they have created another 500 units of value, which are appropriated by the capitalist in the form of surplus value and become the cost of his consumption needs. (In simple reproduction) And finally, the workers have also recreated and preserved the entire 2000 units of value of the capitalists’ fixed capital in this section (2).

Having examined the exchange of the various components of annual reproduction, let us review the results of the previous year’s work. The production process has disappeared in its product; the worker has sold his labour-power and has produced surplus-value in addition to its equivalent. The workers of department 1, by spending their wages, take out 1,000 units of consumer goods from department 2, and in doing so convert 1,000 units of the constant capital of this department from the form of commodities into money. Department 2, by purchasing 1,000 units of the product equivalent to the variable capital of department 1 from this department, takes its constant capital out of the form of money and converts it into its new constant capital. At the same time, the value of variable capital 1 returns to department 1 in the form of money. In the course of these transactions, the capitalist of department 1 always has his variable capital in his hands. First as money capital, then in the form of productive capital, then as value-commodity capital, and finally again in the form of money, which is placed against labour-power.

Since the variable capital of department 1 is always in one form or another at the disposal of the owners of capital, it cannot be said in any way that it is converted into income for anyone. What is real is that 1,000 units of value in the commodities of department 1, or half of the product of the exploitation of the workers of this department, acquires the form of money by being sold to department 2, and by this act department 2 replaces half of its constant capital. What is interpreted as income is not variable capital 1 in the form of money. As soon as this money is converted into labour power, it loses its role as the cash form of variable capital. The exchanges carried out by the working class with the money received as wages are by no means exchanges of variable capital but merely exchanges of the value of the labour power of this class which has acquired the form of money.

11 – Replacement of fixed capital

    A part of the value of constant capital, consisting of the means of labour in the proper sense of the word, or constant capital, is transferred to the product in the process of production. This is done under the condition that the said means continue to function as elements of productive capital and only a part of them enters the product in the form of depreciation. On this basis, only those components of fixed capital are counted in the annual reproduction which have a life of more than one year. Needless to say, even long-lived means of labour may be damaged and require replacement. This does not affect the basis of our calculation. The value element of the means of labour transferred to the product is also very different from the cost of repair. This element, like the other components of the product, undergoes its realization process, but it is only after the product is converted into money that it is distinguished from the other components.  Raw and auxiliary materials must be provided again at the beginning of each new round of advance. Just as labour power must be purchased. The reverse is true of the depreciation of fixed capital or of the part of fixed capital which enters the product by wear and tear. The money equivalent of this part does not return to the productive capital which gave birth to it by its wear and tear but is dissolved in it and becomes a part of it. It is placed beside it and remains in its money form until the period of reproduction of fixed capital, which may be a few years or years, is over. During all this time, the money equivalent of the depreciated values ​​of fixed capital are accumulated here year after year and stored together until the life of the instruments of labour in question comes to an end and their replacement becomes a necessity in the process of production and reproduction of capital. This hoarding is itself an element of the process of capitalist reproduction. Let us return to our original diagram. Section 2 included. 2000 C + 500 V + 500 M. The total use value produced here is equal to 1000 units. The product’s constituent elements are also in the ratio 2/3 C + 1/6 V + 1/6M.   

The proportions that can vary under different conditions. A subject that is of equal importance for our present discussion. Here the main focus of the analysis is how sectors 1 and 2 exchange. If all the branches of production belonging to sector 2 are imagined together, then the relative value of C in the product of this sector plays the role of an average value. Let us not forget that the annual social product of sector 2 is all consumer goods, and therefore their components, from the equivalent of 2000C to the equivalent of 500V and 500M, can each contain a combination of C, V and M. We said that 2000C plays the role of an average by imagining the sum of all the branches of production of the means of production in one place. This means that any amount of various goods whose value is 000C + 500V + 500M will have the form 2/3C + 1/6v + 1/6M in terms of ratio. 2000C can be broken down in terms of value as follows.

1333.3C + 333.3V + 333.3M = 2000C

We see the same thing in the case of variable capital in Section 2 as follows:

333.3C + 83.3V + 83.3M = 500V

And finally, the surplus values ​​of this sector can also be decomposed using the same ratios.

333.3C + 83.3V + 83.3M = 500M

If we add Cs 1, 2 and 3 together, we get 2000. The same rule applies to the variable component and the surplus value of the three components of the diagram. By examining the entire diagram carefully, we can see that the constant capital-value contained in the 3000 units of the social product of sector 2 is actually located in its 2000C and not in its 500V or 500M. In other words, the entire part of the goods of sector 2 that represents constant capital-value is located in this 2000C. In this respect, it is this component of sector 2 that is exchanged with the outside of this sector. The exchange that takes place between this component and the variable capital and surplus value components of sector 1. In the case of sector 1, everything related to the exchange of constant capital-value of this sector must be limited to the examination of its 4000C.

1 – Replacement of the value component of depreciation in the form of money

It has been said that 2000C of section 2 is exchanged for 1000V+1000M of section 1. The value-commodity 2000 which constitutes the fixed capital of section 2 also contains a component which represents the depreciation of fixed capital. In other words, the assignment of the cost of depreciation of fixed capital must be determined here and in the exchange between this same 2-C and section 1. This component or what is to compensate for the depreciation of fixed capital must not and cannot be immediately exchanged in natural form but must take the form of money and be stored. In the exchange between 1000V+1000M of section 1 on the one hand and 2000C of section 2 on the other hand, it must be borne in mind that the former does not contain any depreciated value component of fixed capital. This element or this constant component of depreciation is only maintained in 2000C, the first or 1000V+1000M in the process of exchange of the components of 2000C, in other words, the component compensating for the depreciation of fixed capital that cannot be immediately converted from monetary form to fixed component is located in this same 2000C, section 2. Here a problem immediately arises. The entire 1000V+1000M of the first sector, which is the production goods, must be exchanged for the entire 2000C of the second sector, which is the consumption goods, but a part of the 200C of the second sector, which is the compensation for the depreciation component, must take the form of money. This money cannot come out of the fixed capital of the second sector, because the 2000C cannot pay for itself. On the contrary, it must be extracted and guaranteed from the first sector, and more specifically from the surplus value component of this sector. In fact, the first sector must cash in this depreciated component in the process of exchange with the second sector. In the meantime, it is very important to remember one point. The money advanced in the period, in order to return to the capitalist producer, must be exchanged for an equal volume of goods. Therefore, the first sector cannot pay more than its value when buying the 2000C, unless, for example, it pays 2000 units of value and only gets 1800 back from the second sector. In such a case, 1 must provide 200 units in money to 2C. Money that is no longer available to 1. Even then, we will encounter another problem, that sector 1 will face a surplus of 200. This will destroy the whole foundation of simple reproduction. Accordingly, we must delve into the matter. Something that political economy evades and remains silent about, but what is the matter? The answer is not simple and straightforward. To find it, we must go through a maze of possibilities.

We base the first possibility on the same assumption as above. That 200 units of depreciation value are hidden in 2000C of department 2 and must be hoarded in the form of money. Department 2 sells its entire 2000C for 1 but receives only goods worth 1800. In this way, 2000C of department 2 is decomposed into two components 1800 and 200. The first component is used up with the means of production of department 1, and the second component must take the form of hoarding. With this assumption, we have the following exchanges.

(1) 1000V+1000M

(2) 1800C+200c (d)

Let us follow the process of exchange:

First: Sector 1 buys 1000 C from Sector 2 in the form of consumer goods with 1000 pounds of wages of its workers.

Second: Sector 2 buys 1000 units of value in the form of manufactured goods from Sector 1 with this money. This transaction results in a return of the variable capital of Sector 1, and its capitalists are able to buy the labour power they need.

Third: Sector 2 advances 400 pounds and buys the same amount of means of production from M-1.

Fourth: M-1 purchases consumer goods from C-2 with the same 400 pounds.

Fifth: Sector 1 advances 400 pounds and buys consumer goods from Sector 2 with that.

Sixth: Sector 2 purchases the same 400 pounds of means of production from M-1.

The results of the transactions so far are as follows.

1 – Department 1 has taken possession of 1000V+800M- of 2000C and can allocate 1000 to the wages of the workers and 800 to the consumption of the capitalists. It also has 400 pounds in money.

2 – Department 2 has 1800 units of value in the form of ready means of production in advance, and 400 pounds in money.

3 – Each of the departments has recycled the 400 pounds that they injected into the circuit of circulation.

4. Meanwhile, department 1 still has 200 pounds of means of production and department 2 has the same amount of means of consumption. According to our assumption, sector 1 can buy 200 units of consumer commodities from sector 2, but the important problem is that sector 2 must save 200 pounds as depreciation costs of fixed capital and keep them in money form. As a result, the 20% surplus value of sector 1 is unable to find a replacement and cannot complete its organizational dynamics. So, this entire assumption is invalid, and the above transactions do not solve the problem of capital reproduction, even simple reproduction.

Let us turn to another assumption. The assumption that M-1, instead of being in the form of means of production requiring sale, plays the role of a part of the surplus value of the share of the landowner or the capitalist who lends money. The futility and invalidity of this one is much more obvious than the first one. The capitalist who appropriates the entire surplus value must sell the commodities in order to pay the interest or rent of the land as the share of the landowner and the moneylender. A process that is without guarantee and will not necessarily solve the problems. The third assumption is a set of baseless and sterile solutions of political economy. For example, attaching to the role of those who are called unproductive workers, such as doctors and employees, the “great mass of the people”!! The meaninglessness of which does not need explanation. The fourth assumption is also preoccupied by some people. That instead of direct exchange between the two parts 1 and 2, the producing capitalists attach themselves to the merchants and make them the openers of all dead ends.!! The founders of this assumption are so confused and stupid that they forget that the problem is not in the form and appearance of the parties to the exchanges. The problem is that eventually 200 units of means of production M-1 must be sold, whether in simple or extensive reproduction, and the money advanced by the capitalist producer must return to him. None of these solutions go a step towards solving this problem.

2 – Replacement of fixed capital through exchange of means of production

Rejecting all the above assumptions, what remains is that capital does not stop at replacing depreciation with money and takes the path of substitution through the means of production. In this regard, it has no choice but to purchase 1000C from sector 2 in the form of consumer goods with the 1000 pounds wages of its workers, in the same way as above. Sector 2 also buys 1000 units of value in the form of manufactured goods from sector 1 with this money. Even the advance of £400 by each of the two sectors at two different points in time remains valid, because the idea that only the capitalists of one sector put into circulation the entire money necessary for the exchange of commodities is an illusory and false idea. There is an even more false hypothesis. That sector 2 itself advances money with which to realize the entire depreciation of fixed capital and its dynamic organization. For example, let us consider the owner of a spinning mill. His spinning machine loses part of its value in the form of depreciation. The spinner buys the cotton he needs from the cotton mill, and in this passage, for example, £200 enters the circulation. The cotton mill buys yarn from the spinner and returns £200 to him. The spinner uses this as a means of covering the depreciation of the machine. This assumption carries the contradiction that the spinning capitalist must actually put £200 out of his own pocket to cover the depreciation of his fixed capital. However, the contradiction in the above assumption is mostly formal. Section 2 consists of a mass of capitalists whose fixed capital is not in the same condition. A group of them is faced with the situation of having to renew their entire machinery and replace their fixed capital. The rest are in different conditions with regard to the extent of depreciation and the length of time they have to renew their machinery. In view of this division, let us suppose that of the £400 that the capitalists of Section 2 put into circulation for exchange with Section 1, half of it belongs to the first group of this group. The group that, by selling its goods, has to replace not only the circulating part of the fixed capital but also the fixed part of their capital. In this case, the entire £400 advanced by the capitalists of Section 2, which has reached the capitalists of Section 1 in the process of purchasing the means of production, now returns to Section 2 from the capitalist class of the latter section for the purchase of consumer goods. But this money is divided, and half of it becomes the share of the capitalists of the first group of Section 2. This group has received £200 in cash, which, by being converted into means of production, establishes the sexual elements of capital. This money, now spent by its owners as in the early days of the business, returns to them over the years as a component of the depreciation of fixed capital. The second group of capitalists in Section 2 have not yet purchased any goods from Section 1 for their £200, but Section 1 uses the £200 it has received from the first group of capitalists in Section 2 for the sale of fixed capital components to purchase consumer goods from Section 2 of Section 2, and this group recycles its fixed capital with this money.

12 – Reproduction of monetary materials

The total annual gold production between 1871 and 1875 was 170,674 kg, with a value of approximately 476 million marks, with Australia, the United States and Russia being the leading producers. In 2006, this figure exceeded 2,500,000 kg, with an estimated value of $1,500,000,000,000 (one trillion and 500 billion US dollars) per year. The position of countries in terms of production has also undergone a serious change. Today, China, South Africa, Australia, Indonesia, Peru, Russia and Canada hold the first to seventh places in the gold mining sector, respectively.

The production of gold, like the production of all other metals, belongs to the production of means of production. Let us suppose that the total annual output of gold amounts to 30 units of value, and that the ratio between its components is 20C + 5V + 5M = 30. In such a situation, 20 must be exchanged for the constant capital of the other branches, but the 10 units of value resulting from the sum of variable capital and surplus value can only be exchanged for 2-C. The capitalists producing gold naturally begin by purchasing labour power, but they pay the wages of the workers not with the gold they produce, but with the money they have previously saved. With this money, the workers buy consumer goods from sector 2, and capitalists 2 appropriate the equivalent of 5V of sector 1. However, these capitalists do not return all of this money to sector 1 in the usual way and given the extent of their need for gold. They buy the equivalent of 2 units of gold from capitalists 1. Although the gold producers have not recovered all of 5V, they can begin reproduction. Because 2 units of the wages received by their workers have actually returned to them in the process of exchange with sector 2. The other 3 units are also available in the form of money in sector 2. Money, which has the necessary reserve function there and has no other role than compensating for the depreciation of the fixed component of fixed capital, is not considered for it. This money does not have the ability to be converted into fixed capital, nor is it used to pay wages because sector 2 has already advanced its variable capital. For all these reasons, the three units of money in question must be transferred completely from 2-C to 2-M, and conversely, the equivalent volume of goods must be transferred from 2-M to 2-C. The result of all these assumptions is that a portion of surplus value is stored in this sector as a hoard. But this hoard is not limited to this. The capitalists who produce gold enter their surplus values ​​into circulation in the form of gold and purchase consumer goods from sector 2 in exchange for them. In the latter sector, only a portion of this gold acts as the raw material of fixed capital. The rest again takes the form of hoarding and is stored there. Each of these points serves to prove the assumption that we emphasized somewhere in the previous discussion. This assumption is that at the beginning of the capitalist mode of production, hoarding or hoarding of money plays a decisive role in the development of this mode of production.

                   As capitalism expands, the quantity of money in circulation will increase on all sides. In this connection, the role of gold in increasing this quantity will decrease. This brings us back to the objection once raised against Tock: How can any capitalist extract his surplus value in the form of money from the annual product? In this context, a summary of what we have said so far provides us with the following points.

There must always be enough money available to convert the various elements of the mass of commodities produced annually. This is in no way affected by the fact that a component of the social product consists of surplus value. Even on the completely false assumption that this factor is eliminated, the exchange of commodities still requires a certain amount of money. The important question is where does this money come from? And it is only then that the search for the source of the money needed for the circulation of the capitalists’ income, or surplus value, also takes its place. Questions that have so far received more or less the necessary answers. But there are two reasons why the second question is so prominent.

     First: If we see the capitalist only as a manifestation of capital and ignore his existence as a consumer, then his use of money is considered merely as a reserve of surplus values ​​as commodity capital, in other words, his use of surplus value is not seen as living expenses. In the dominance of such a view, the search inevitably becomes relevant as to where the money necessary for the exchange of capitalists’ income comes from?

Second: When the owners of capital introduce certain amounts of money into the circulation in the form of income, it is implied that they are paying the monetary equivalent of the goods out of their own pockets and from outside the process of capital appreciation in return for the purchase of a part of the annual product. This is a purely illusory idea that completely hides the origin of the money paid. What the capitalists spend under the name of “income” is merely a part of the surplus value or unpaid labour of the workers under the instigation of their exploitation. The capitalist sometimes buys colourful consumer goods, endless personal real estate, a world of ornaments, a galaxy of amenities and entertainment facilities, but does not bring a single riyal from anywhere else except the result of the exploitation of the working masses. He does not incur any costs at all in the process of purchasing these products, facilities, comforts, an earthly paradise of prosperity and an endless world of pleasure. It is with a brutal, cancerous and octopus-like grip on the work and values ​​created by the working class that he inevitably pours money and showers the markets with money.

In previous discussions, we saw that Adam Smith sees the total value of the social product as decomposable into V+M. In his calculations on how the annual social product is reproduced, he considers the value of fixed capital to be zero. In this regard, for example, in the case of our hive or the organization of 9,000 units of annual product, he considers the explanation of the fate of 3,000 units of value composed of V+M in parts 1 and 2 to be sufficient. Smith says, “The circulation of the products of each country consists of two components. Exchanges between merchants on the one hand, and between merchants and consumers on the other. Both circulations take place continuously and simultaneously and each requires a certain amount of money. The value of the goods traded between merchants can in no way be higher than the volume of exchange between them and consumers. The first circulation is in the form of wholesale and requires large amounts of money. The latter, on the contrary, can be realized with small money and is carried out more quickly.” We see that the whole discussion revolves around the exchange of wages and surplus values, or, as Smith himself puts it, revenues. Thomas Toke is also a prisoner of this fallacy and, despite his efforts to show some differences between his views and Smith’s, he ultimately repeats the same inversions.

2 – Industrial capital must initially advance money for all its fixed components. This money only returns to it gradually and in the process of valorisation over the years. On this basis, the capitalist who owns this capital must initially put much more money into the circulation than he takes out of it. In all branches of industry where the length of the production-period is longer than the work-period, the injection of money into the circulation for the purpose of purchasing labour-power or means of production is necessary during the period of withdrawal. The means of production are withdrawn directly from the commodity market, and the means of consumption are withdrawn again directly, but quite partially, by the workers with their wages and by the capitalists with a portion of the surplus-value. During this period, the money which the capitalists put into circulation is spent on the liquidation of the value of commodities and the surplus-value latent in them. With the cancerous development of the capitalist mode of production and the need for the construction of railways, ports, the drainage of the land, the digging of canals, the importance of this matter becomes a hundredfold.

3 – If other capitalists, regardless of the cost of fixed capital, withdraw more money from the circulation than they put into circulation for the purchase of labor power and the circulating part of fixed capital, capitalists producing gold and silver, in addition to precious metals, constantly put money into circulation and withdraw goods from it. Here, fixed capital, with the exception of its worn-out component, the main part of variable capital and all surplus value minus the possible savings of the capitalists are all poured into circulation in the form of money.

4 – It is quite true that land, buildings, houses, machinery, livestock and all the components that make up fixed capital are also in the circulation cycle like commodities. They are present in the production-cycle and sometimes the work-cycle circuit, their value is gradually transferred to the product. In this connection and as a need for their repair, maintenance and reprocessing, a certain quantity of money is always required in a latent and inactive state. All this is certainly true, but it must be borne in mind that money is not the medium of all exchanges within the reproduction process. When the needs of the production process are met, when the production cycle is put into operation, the entire process is taken out of circulation.

The same rule is true of all products whose producer is also the direct consumer. A consumption which may be productive or unproductive. In view of all this, a certain quantity of money required for the annual circulation of the product already exists in society. It has been accumulated bit by bit. This money does not belong to the product-value of the current year. In their disputes about the circulation of banknotes, Toke’s fellow-scholars and even his opponents have always been forced to return to the hypothesis of pure metallic circulation, they have done so very superficially, and this superficiality has been inevitable for them. The simplest form of money circulation which has evolved spontaneously suggests that:

A: With the increasing development of capitalism, money capital assumes a major role as a means of paying wages. The more this mode of production develops, the more rapid, widespread and ubiquitous the process of transforming products into commodities becomes, the more important money assumes a position. The volume of money in circulation must be sufficient to liquidate commodities. The greater part of this money is in the form of wages which industrial capitalists must pay to purchase labour power.

B: The lump-sum payments for the replacement of fixed capital, the successive withdrawal of values ​​from circulation, over a long process to cover the costs of this replacement in the form of savings, the differences in the size and length of the return period, and other similar matters, make the ebb and flow of money in capitalist production for the exchange of annual products and the spontaneous growth of these fluctuations inevitable.

13 – ” Destutt de Tracy’s” theory of reproduction

Antoine Destutt de Tracy, the “great logician”!! In response to the question of where the profits of industrial capitalists come from? He says: “They sell whatever they produce at a higher price.” De Tracy then draws a diagram of buying and selling and points to transactions between capital owners, the sale of commodities to wage earners, to free-riding capitalists, and the like. In his calculations, he forgets that the transactions of capitalists, as he describes them, not only do not produce any profit, but are also full of losses. For if overselling is to be the source of profit, each and every one will sell more expensively than the other. Exchanges between overselling sellers also have high costs, and consequently what is born in this way is not profit but entirely loss. Of course, “ Destutt ” has opened a way out for himself in the world of fantasy. This way, that capitalists do not sell only to themselves, but also give and take with wage earners. But this way is also very wrong. No profit flows from it. Selling to workers means that the wages they receive for buying necessities go back to the capitalist, and again there is no profit in this transaction. Now the question arises as to where the capitalist gets the workers’ wages from. A question that is apparently unimportant to Destutt. Furthermore, he still does not find it acceptable that selling to wage earners is unprofitable because he insists that the capitalists will eventually make a profit by selling at a higher price. The literal translation of this insistence is that, for example, the capitalist has paid the workers £100 in wages but sells them the products of their labour for £120. Now the question is, where do the workers get these £20? To make a profit for the capitalists?!! They have only received £100 in wages. They have no other money to pay that would be the profit of the seller of the commodities.

Destutt is still not convinced and continues that the workers’ wages are 100 pounds, but the capitalist only gives them 80 units of product to recover these 100 pounds. This is not an unusual scenario, but it is not as complicated as Destutt’s version. Rather, in the sense that all capitalists, or in fact the capitalist class, did not give them 20% of the workers’ labour from the very beginning. The problem of the “great logician”! But this is that on the one hand, he sees the insufficient wages of the workers as the cause of the destruction of industry, and on the other hand, he finds the root of profit in precisely this looted wage!! According to what he weaves together, the only way to rake in profits is to steal wages. Reducing wages also destroys industry and inevitably ruins the capitalist’s house. If wages are paid in real terms, that is, enough to reproduce labour power, there will be no source left for the capitalist’s profit to boil.

The next way to find the source of profits is to sell to the greedy capitalists or to those who, under the name of interest or rent, have acquired a part of the surplus value. But this way too not only does not lead anyone to the promised land or the centre of the boiling and overflowing of profits, but it also drives them towards the cemetery. The profiteering and usurious capitalist has appropriated a share of the surplus value. Let us suppose that the total surplus value of the industrial capitalist was £200 and £100 of it went to this group. They in turn spend £80 on their own livelihood, comfort and entertainment, and give £20 to the wretched servants, very well! Now they themselves spend £80 on buying their own consumer goods from the industrial capitalists, and all their servants do the same with their £20. The result of all these transactions is ultimately one thing. That the £100 of surplus value that one stratum of the capitalist class has taken from another stratum is now returned to it. Where is the high price in this and where does a drop of profit come from in these transactions, exchanges and circulations? All this gibberish and gibberish serves only one purpose. To conceal the true source of the overflow of surplus values ​​and profits, surplus value and profit is simply the unpaid labour of wageworkers. It has no other origin.

Chapter Twenty-One

Accumulation and Reproduction on

an Extended Scale

Capitalist production is the production of surplus value, the excessive increase of surplus value through the uncontrolled encroachment of surplus labour at the expense of necessary labour, the conversion of surplus values ​​into additional capital, the cancerous self-aggrandizement of capital, and the explosive accumulation of capital in the world. Accumulation in this mode of production is also naturally extensive accumulation, and our discussion of simple reproduction, with all its elaborations, was ultimately an entry into this mode of accumulation and reproduction. The capitalist converts his surplus value into money and spends this money or monetary capital on purchasing new labour, raw materials, other circulating components of fixed capital, and in short, the necessities of the cycle of valorisation of his capital. For example, if in the previous round he had 4,000 fixed capital and 1,000 variable capital units, if these 1,000 variable capital units in the production process and imposing a rate of exploitation of 100 percent, and in our era, several hundred percent, and in the hell of Iranian capitalism, 1,500 percent, on the working mass, produce 1,000, several thousand, or 15,000 units of surplus value, now in the next round the same capitalist enters the field of accumulation with a larger or much larger volume of capital in fixed and variable forms. For example, with 4800 fixed and 1200 variable, 5000 fixed and 2000 variable or 12000 fixed and 3000 variable he continues the advance process. He transforms the greatest volume of surplus values ​​into additional capital or new capital. He employs more labour power with a more brutal intensity of exploitation, with more massive surplus values, he increases the amount of his additional capital and follows the chain of further accumulation, more intense exploitation, more massive surplus value, greater accumulation. In this case, several important points must be assumed.

First, the existing surplus value must be sufficient to accumulate both for the increase of fixed capital and for the establishment of a new enterprise or the development of an old one. The provision of this volume of surplus value may require the hoarding and saving of small amounts of surplus value over a certain period, before the development of production begins.

Secondly, production on a large scale introduces the prerequisites and facets of its realization into the real process of life before it occurs. Let us clarify the matter with an example. Capitalist A begins to save money for a year or several years, in each round of annual sales of products he saves a part of the money that is equivalent to or represents the surplus product and necessarily the carrier of surplus value. He accumulates this surplus value and transforms it into money-potential capital. Money that is not yet capital and is not in any way considered surplus social wealth but plays the role of money-potential capital due to the purpose it has. A process that has its own difficulties, and before we explain these difficulties, we must explain other points.

First: Accumulation in Section 1

1 – The Formation of a Hoard:

            Investments, whether in the various branches of industry belonging to Section 1 or in   individual form, regardless of their size or technical conditions and market situation, are at different stages in the process of forming potential money-capital. A group of capitalists, whether for the purpose of advancing capital in an enterprise or for the development of an existing enterprise, see their potential money-capital as sufficient and convert it into productive capital. They buy means of production, elements of fixed capital and expand production. Others are not in this position and continue to accumulate money-capital. The encounter between these two groups of capitalists is such that, for example, A sells his annual product of 400C+100V+100M=600 to B. He withdraws 100 units of surplus value from the circulation and accumulates it. These 100 units of money are only the monetary form of the surplus product that is accumulated. It is hoard-making, and treasure is absolutely not capital, this work is done simultaneously by many people. Dozens of people repeat the same work of capitalist A. In this process, these capitalists accumulate a large volume of money – potential capital, but at the same time they create significant obstacles to the circulation of money. They cause stagnation of money and make the work of the cycles difficult. However, it must be emphasized that in simple commodity circulation, and long before this circulation acquired the character of capitalist commodity circulation, hoard-making took place in some way, and it is also quite important that the amount of money in society is always greater than the amount of money that actively exists in the cycle. The important point that melts the heart of the entire bourgeoisie is that with the growth of the credit system, all potential capitals, through concentration in banks and financial institutions, come out of their passive state, become active and find the role of capital ready to serve or money-capital ready to be transformed into productive capital. But what should capitalist A due to complete his own hoard-making, the answer is that he should only sell, sell the annual product, not buy, and destroy the entire surplus value hidden in the surplus products. The continuous production of surplus product carrying surplus value is the necessary condition for his hoarding. In the specific discussion of the present, which is periodically examined in particular within Section 1, the natural form of the surplus product as a part of the total annual product is the same as the natural form of fixed capital. The means of production in the production sector are the means of production. An important question here is what role does the surplus product play in the hands of capitalist B and what use is it for? First of all, let us note that if capitalist A withdraws money from the circulation for his surplus values ​​and making hoard it, he simultaneously puts commodities into the circulation without taking any commodities out of it. This enables capitalist B and many of his fellows to pour money into the circulation and take nothing out except commodities. Commodities which, in our present study, by their natural form in capital B and similar capitals, will be a fixed or circulating part of constant capital.

In simple reproduction we saw that the reproduction of capital is by no means the mere buying and selling of commodities and the completion of transactions with each other. A very misleading understanding that has been instilled by the guardians of political economy and free trade from the physiocrats to Adam Smith. It is not a question of the simple buying and selling of commodities, it is a question of the recycling, replacement and renewal of all components of capital, in all their forms, whether constant, variable, fixed, circulating, monetary and commodity, with all the separate characteristics of each of them. That, for example, fixed capital gradually and in the long term transfers its value to the product. The money necessary to replace it must be gradually saved, the entire value of the constant capital of section 2 must be exchanged for the surplus value and variable capital of section 1. The specific problems of this exchange, such as the one-sided purchase of the constant capital of section 2 from the surplus-value component of section 1 and vice versa, or all the other cases already explained to the extent necessary in Chapter 20, will all have their full and complete importance in the study of the process of extensive reproduction. Insofar as simple one-sided exchanges occur, that is, in one place only purchases are made and, in another place, only sales take place, these purchases and sales must be balanced in some way. Let us not forget that equilibrium in the very structure of the capitalist mode of production is essentially a matter of chance. Nevertheless, it is the imperative of capital’s valorisation that, in order to organize itself, whether in simple reproduction or in extensive reproduction, it provides conditions under which, thanks to its effects, current exchanges between sections 1 and 2 can be realized. These conditions, as much as they are necessary for carrying out transactions and balancing exchanges, can also be problematic and disrupt the equilibrium if disturbed. The achievement of balance between sectors and the organization of capital is fundamentally based on the assumption that one-sided purchases and sales will compensate each other. All these components also unanimously cry out that when we speak of the capitalist form of commodity production, money is not only a means of circulation, but also money-capital or money capital.

2 – Additional Constant capital

The worker does not only recreate the value of his labour power with his labour, he does not only preserve the value of constant capital for the capitalists, but in addition to all this he produces surplus value several, sometimes several dozen times more than what he receives in the form of wages. This surplus value takes the form of surplus product in the annual social product. In the case we are now considering, this surplus product is itself, from the beginning, the means of production used to manufacture the means of production, but this surplus product must be advanced by the capitalists B1, B2 and B3 in order to fulfil the role of additional fixed capital. Before that, and as long as this surplus product has not been sold or is still in the hands of the hoarders A, it plays only the role of money-potential capital. As long as we consider the volume of reproduction only from the point of view of department 1, we are necessarily confined to simple reproduction, because so far there has been no talk of the formation of additional fixed capital. The surplus labour under consideration is also simply the same quantity of labour which constitutes the surplus value of the capitalists in simple reproduction. In simple reproduction we assumed that the entire surplus value of department 1 is spent in the form of revenue in exchange for the commodities of department 2 and only renews the fixed capital of this department. In order to pass from simple reproduction to extensive reproduction, the annual product of department 1 must produce elements of fixed capital for its own department rather than carrying the elements of fixed capital of department 2. This transition is not usually made without difficulty, but the property of department 1, which simultaneously produces the means of production of both departments, makes the task easier.

If we examine the problem only in terms of the volume of value, we conclude that the core or basis of extensive reproduction is born in simple reproduction, the material basis of the matter being that the surplus labour of the working class of department 1 is directly spent on the production of the means of production and the creation of the additional fixed capital of this department. On this basis, the formation of potential money-capital with the capitalists A1, A2, A3 and their co-workers, through the successive sale of the surplus product, without any expenditure of money-capital, is practically the simple monetary form of the additional fixed capital produced in department 1. The successive transformation of the additional potential productive capital into potential money-capital or treasure by the capitalists A1, A2 and A3 is subject to the successive sale of the surplus product or the unilateral sale of commodities by them without any purchase. The larger and more numerous the productive capital employed in a country and the labour force exploited by this capital, the more developed the productive power of labour and, consequently, the more rapidly the technical means of production of the means of production are expanded. The surplus product produced and appropriated directly by the capitalists A 1, 2, 3, etc. of section 1, although it is the real basis of capital accumulation or extensive reproduction, firstly, it plays such a role only in the hands of the capitalists B 1, 2, 3, etc. of this section. Secondly, as a reserve, as money capital that is formed bit by bit, it is completely unproductive. In this form, the surplus product moves along with the production process but is outside the process. It is even a burden for capitalist production, it becomes a potential money capital, and the utilization of this volume of surplus value becomes an active sphere of the life of the credit system and paperwork. But in this way, in another form, in the form of money capital, it exerts the greatest influence on the accelerated development of capitalism. The important point here is that the quantity of money in the country, the velocity of circulation, etc., must be assumed constant. Money must be sufficient for both active circulation and hoarding. The conditions that were also in place for simple circulation. The important difference is that the function of savings is different here, and the quantity of money must also be larger. Because: firstly, in capitalist production, all products, except for a small part consumed by the producers and the precious metals produced, are completely transformed into money. secondly, in this mode of production, the volume of commodity capital and its value are not only absolutely greater but also grow at a very astonishing rate. thirdly, the constantly increasing variable capital must be constantly transformed into money capital. fourthly, the formation of new money-capitals is synonymous with the expansion of production, and the hoarding of this money-capitals requires money.

3. The Additional Variable Capital

In the first book (Capital-Volume One) we saw that in the capitalist system there is always a huge reserve of labour. We also know that capital can, without any increase in the number of employed workers, burden them with much more work and obtain much greater surplus values ​​than by intensifying their exploitation. In the first volume we also showed that a given capital can, without further accumulation, expand its sphere of production within certain limits, but here we are talking about the accumulation of capital in its specific sense. We are talking about a situation in which the expansion of production is conditioned by the transformation of surplus value into additional capital and is necessarily accompanied by the development of the general bases of capitalist accumulation.

Second: Accumulation in Section 2

Our assumption so far was that capitalists A 1, 2, 3, of sector 1 sell their surplus product only to capitalists B 1, 2, 3,.. in the same sector. Now let us assume that instead of selling in sector 1, these capitalists sell their surplus product to sector 2. This is conditional on the fact that they do not buy any consumer goods in return for the sale. This is because the basis of the work of these capitalists is based on saving money from the sale of surplus product and converting it into money – potential capital. This exchange poses problems. The conversion of C-2 from the commodity form into the natural form of constant capital requires that not only the whole of V-1 but also at least a part of M-1 is exchanged for a component of constant capital 2 in the form of commodities. But now the capitalists A of section 1 sell their surplus product to C-2 without purchasing any commodities. These capitalists withdraw the money from the sale from the circulation and convert it into potential money capital. The act of locking up a component of constant capital of section 2 in the commodity form prevents it from becoming productive constant capital, and in this way creates surplus production and becomes an obstacle to the reproduction of capitals B of section 2. If we consider the entire social reproduction composed of two parts 1 and 2, we see that the conversion of the surplus product of capitalists A of section 1 into potential money capital practically results in the inconvertibility of a part of the equivalent commodity capital in section 2 belonging to capitalists of section B of this section. In this way, not only does extensive reproduction not occur, but it also creates limitations for simple reproduction. To be more precise, events such as the formation of potential additional money capital in section 1 and the accumulation of commodity reserves in section 2 without undergoing the process of conversion into productive capital, in other words, the emergence of surplus money capital in section 1, relative overproduction in section 2, the disruption of the reproduction of the latter section… all testify to the existence of the forced contradictions of capitalism, contradictions that are also evident in simple reproduction. The important point is that the conversion of all or part of surplus value into additional capital is a prerequisite for real accumulation, but that accumulation reduces consumption!! is a distortion of political economy. It contradicts the nature of capitalism because it suggests that consumption is the driving force of capital!! In the light of all this, let us examine the accumulation in department 2 more closely, starting with the problem of converting a part of the commodity capital of this department back into its natural form of productive constant capital. I have already seen that 1-1000V+1000M was exchanged for 2000C of department 2. But now, of the 1000 units of surplus value of department 1, half of it, i.e. 500 units, has been converted into the additional constant capital of this department itself. These 500 units cannot be exchanged for 2-C, and consequently the total of what can be exchanged from department 1 with department 2 and its constant capital is only 1500 units of value, instead of 1-1000V+1000M=2000. In this connection, 500 units of C-2 are also undecided, they cannot be transformed from a commodity into productive fixed capital, because there is no equivalent for exchange against them. These 500 units here represent surplus production and correspond to the 500 units of new additional capital in sector 1. It is possible that this same 500-unit surplus production in sector 2 also disrupts the fate of the 1,000 units spent by the workers in sector 1 on consumer goods and their return to the capitalists of this sector. As for how to challenge this problem, arguments are usually made to the effect that the type of inference from the existence of 500 units of consumer goods produced in sector 2 and not in a condition to be sold to sector 1 should be changed. This means that these 500 units should not be considered surplus production in principle, but rather necessary elements for the continuation of the reproduction process. The same account should be opened for it as was opened earlier for the surplus product of section 1 and its transfer to potential additional productive capital. From here it should be assumed that the 500 units of C-2 remaining in the warehouses are the consumption reserve absolutely required for the reproduction process, while at the same time emphasizing the necessity of providing an additional money capital for the continuation of work, and this amount of capital should be provided. Against the above inference or solution! The answer is that: First – the formation of reserves and its necessity is true for both sectors, so far there is no talk. Capitalists 1 and 2 both stockpile goods and only the type of goods they hoard is different. Second – if the current year ends with a stockpile of goods in sector 2, it has begun with a similar stockpile on the other side and accordingly these stocks should be eliminated from both sides. Third and the main point is that the contradictions and problems discussed did not exist in simple reproduction. It is in extensive reproduction that they rebel and impose their existence.

Third – Schematic representation of accumulation

We examine reproduction with the following diagrams.

A: 1-4000C+1000V+1000M =6000

     2-1500C+376V+376M =2252 

Total annual product:          8252

The total annual product here is less than in the previous diagrams. Previously it was 9000, now it is 8252. We could have taken it more, even 10 times, if we have taken it smaller there is only one reason, the change in the quantity of items is in no way an indicator of the distinction between simple and extensive reproduction, the components of the social product in each of the sectors can undergo quantitative change without any change in the form of reproduction. What distinguishes the two simple and extensive forms of reproduction is not the quantitative amount of the components but the qualitative type of allocation of these components. Let us take the second diagram as an example.

B: 1- 4000C+875V+875M = 5750

     2-1750C+376V+376M = 2502

Total annual product:          8252

The annual product is the same in value in both diagrams, but the composition of the elements of the product differs in terms of their functions and the role they play in them. In B, reproduction begins and continues in the same way as before, in A the situation is different. B represents simple reproduction and A represents extensive reproduction. In B, the sum of V+M of section 1 is equal to C of section 2, but in A they are different, the first being 2000 and the second only 1500. In this regard, we must examine diagram A more closely. We assume that in each of the sections half of the surplus value is spent as income and the other half becomes additional capital. With this assumption, in sector 1 what can take the form of income is 1000 units of workers’ wages plus 500 units of capitalists’ surplus value. The sum of these figures is equal to 1500 units of fixed capital in sector 2 and can therefore be exchanged without any problem. Let’s not forget that the 4000 units of fixed capital in sector 1 also do not face any particular problem in reproducing themselves because this is achieved through trade between the different branches of the same sector. What remains is the fate of the remaining 500 units of surplus value in section 1 and V+M in section 2. These are the elements that must be determined how they will be exchanged within their own section and between the two sections. Let us recall that in section 2, half of the surplus value is also to be allocated to the additional capital. To be more precise, here too, 188 units must be converted into new capital, of which 48 units are allocated to the new variable capital and 140 units are to be considered for the additional constant capital.

Here we encounter a new problem. The 140 units of surplus value of department 2 can only be converted into productive capital by replacing it with the same amount of surplus value of department 1. Needless to say, the surplus value in question (department 1) is only means of production and is consumable in both departments. This replacement is also possible only by a one-way purchase within department 2. Because the 500-surplus value of department 1 is to be converted into additional capital in the same department. Department 2 must therefore buy the 140 units in cash without returning the money to department 1 through the subsequent sale of its commodities. But we must see where the source of the money for this transaction lies. Let us search everywhere.

Let us start with 376 units of variable capital in sector 2. This amount of value has been paid as wages to the workers in this sector, and the workers return it in the form of money to the capitalists in sector 2 in exchange for the purchase of consumer goods. So far, no new money has been created that can be removed from the circulation. Accordingly, it must be accepted that it is not a source of monetary accumulation; sector 2 has the advantage over sector 1 that the workers it exploits must purchase the consumer goods they need from this sector. This may tempt the capitalist, full of greed for profit, to do two things.

1. He steals and refuses to pay the workers’ regular wages, keeps a percentage of the same 376 units of the current wage for himself, either by trickery or force, does this repeatedly, and in this way accumulates a significant amount of money capital. This is, of course, also done perfectly by the capitalists of Section 1. The problem, however, is that the capitalists do not pay wages to the workers out of dignity and generosity. If they do not, there will be no workers, and no value, surplus value, or capital will be produced. In addition, these wages are so low that they are not sufficient to reproduce the labour power of the working class. Now, if these wages decrease again and a portion of them is stolen, the wave of workers’ strikes, which is always ongoing, will erupt. The situation may get even worse, and the result of all this, especially since hanging wage theft in this way is unlikely to solve the problem of accumulating additional monetary capital, another solution must be thought of for this task.
2. It was said earlier that in section 2, unlike section 1, the workers are forced to buy all the consumer goods they need from the capitalists of this section. In other words, the capitalists do not just buy the labour power of the workers, they sell what these workers produce to them themselves; this situation can help the owners of capital to recover a volume of wages paid from the workers without any compensation. This goal may be achieved, for example, partly in the system of payment of wages in kind, partly by cheating in the dynamics of capital circulation. But the problem is that this trickery cannot be turned into a routine solution for the formation of additional productive capital. Therefore, the search must continue. Everything indicates that it is difficult to untie the knot. We must see what way is left? And what should be done to withdraw this money from circulation and form potential surplus money capital? There seem to be two “ways”!! And of course, none of the previous ways is more productive. First, some capitalists in sector 2 should cheat others and rob them of their money. This is possible, but the result will not be a solution to the problem of potential surplus money capital in sector 2, but only a thinning of one sector of capitalists at the expense of the fat profits of another. Second, a part of the surplus value in sector 2, which is specific to the necessary means of subsistence of the capitalists in this sector, should be converted into variable capital within this sector. In this regard, we should continue the investigation and give examples for various cases.

First example

1. Simple reproduction diagram:

      1-4000C+1000V+1000M = 6000 

      2- 2000C+500V+500M = 3000    

The total annual product: 9000

Let us assume that in diagram B: section 1 half of the surplus value, i.e. 500 units, is accumulated, then (1)-1000V+500 = 1500 must be replaced by 1500 units of constant capital 2. This leaves 4500 units in section 1 that must be accumulated. Replacing (2C = 1500) with 500 units of surplus value and 1000 units of variable capital 1 is something we have already seen in simple reproduction.

Now let us consider that of the 500 units of surplus value in department 1, 400 units are allocated to constant capital and 100 units to variable capital. The 400 units can be added to 4000 units without delay and there is no obstacle. In this case department 1 consists of 4400C constant, 1000 variable and 100 units of surplus value, the latter of which must also be converted into variable capital. Department 2 purchases 100 units of means of production from department 1 (equivalent to 100M), and department 1 will then have 4400C + 1100V, the variable component of which is in the form of money. In department 2 there is a fixed capital of 1600. In order to put this fixed capital into use, 50 units must be added to the variable capital available. This brings the figure from 750 to 800. So far, 150 units have been added to the fixed and variable capital of department 2, and the total of these 150 units has been deducted from the surplus value of this department. Therefore, out of the total 750 units of the variable capital value of this department, only 600 units remain. At the same time, its total annual product also takes the form = 3000 1600C + 800V + 600M.

After this, the 150 units of consumer goods produced in sector 2, which are converted into (2)-100C+50V, reach the workers in their natural form. 100 units are consumed by the workers in sector 1 and 50 units by the workers in sector 2. Now the changed situation of the two sectors on the verge of accumulation is as follows:

      1-4400C+1100V+500M = 6000 

      2- 1600C+800V+600M = 3000    

The total annual product: 9000

Capital account status

1-4400C+1100V= 5500 

            2-1600C+800V= 2400    

The sum is 7900 and the variable capitals of both sectors are in money form.

The capital situation at the threshold of production was as follows:

       1-4000C+1000V= 5000 

       2-1500C+750V= 2250    

The total capital at the beginning was 7250 units. If the trend continues like this, we will have it by the end of next year.

      1-4400C+1100V+1100M = 6600 

                  2 -1600C+800V+800M = 3200    

Let us again assume that accumulation in sector 1 continues in the same proportion. Of the total 1,100 units of surplus value, 550 are spent in the form of income and 550 become additional capital. 1,100 units of constant capital 2 are replaced by 1-V. 550 units of surplus value 1 are also exchanged for the same amount of consumer goods in sector 2. The sum of the value of these two transactions by sector 1 amounts to 1,650, while the total fixed capital 2 is only 1,600 units. The 50 units of deficit must be supplied by the 800 units of surplus value of the capitalists of sector 2. If we leave aside money, the result of the transactions is as follows:

In sector 1 4400C + 550M is converted into capital. 1,650 units of consumption of the capitalists and workers are also realized by means of the commodities C-2.

In section 2, we have 1650C, 50 of which are taken from the 800 units of surplus value 2, plus 800 units of variable capital and 750 units of surplus value remaining. If the organic composition of capital in this section remains constant, then for the 50 units of additional constant capital, 25 units of variable capital must also be included. This is the amount that must be deducted from the 750 units of surplus value of this section. By doing this, the picture of the constituent elements in section 2 will look like this.

2 -1650C+825V+725M = 3200    

In sector 1, 550M of capital must be added. If the previous ratio remains the same, there must be 440 units of fixed capital and 110 units of variable capital. The latter figure is realized in exchange for 725 units of surplus value in sector 2. This means that a volume of 110 units of consumer goods will be consumed by the workers of sector 1 instead of being used by capitalists 2. The capitalists convert these 110 units into capital instead of consumption. This leaves only 615 units of the total 725 units of surplus value in sector 2. But the story does not end there. By converting the aforementioned 110 units into fixed capital, 55 units must also be set aside for variable capital. This figure must again be deducted from 615, and finally, by this process, our diagram will take the following form.

1. (4400C+440C) + (1100V+110V) = 4840C +1210V = 6050
2. (1600C+50C+110C) + (800V+25V+55V) = 1760C+880V= 2640                                             

The total product will also reach 8,690 units.

If reproduction continues in this manner, we will face the following scenario at the end of next year.

      1-4840C+1210V+1210M = 7260 

      2 -1760C+880V+880M = 3520    

And the total product will amount to 10,780 units.

These calculations can be continued with the same coefficients, ratios and indices, and if we do so, after 5 years of extensive reproduction, the total capital in sectors 1 and 2 has increased from 5,500C+1,750V = 7,250 to 8,784C+2,782V = 11,566, and has actually grown by 160%. The total surplus value was initially only 1,750 units but has now increased to 2,782 units. The surplus value consumed in the first year was 500 units for sector 1 and 600 for sector 2. At the end of the fifth year, it has reached 732 for sector 1 and 764 for sector 2, which indicates a growth of 134%.

Second example

Here we assume the total annual product to be 9,000 units. All this product is in the form of commodity capital. The ratio of the fixed to the variable part of capital is 100 to 20 or 500%. We are considering a situation where the growth of capitalist production is impressive, the productivity of labour is increasing, the productive power of social labour is flourishing. The relative surplus population of the working class is constantly growing. The annual product in the example under consideration, ignoring the deficit, is as follows:

1-5000C+1000V+1000M = 7000 

2 -1430C+285V+285M = 2000    

The capitalist class of sector 1 consumes half of the surplus value and forms the other half into additional capital. In this situation, it is necessary to exchange 1500 units of value from sector 1, consisting of 500 surplus value and 1000 units of variable capital, for the constant capital of sector 2. But constant capital 2 is only 1430 units, it has a deficit of 70 units, which must be deducted from the 285-surplus value. If we do this, we have the following situation.

1. (5000 C+500C) +(1500V+M)  
2.  (1430 C + 70 C) + 285 V + 215 M

The 70 units that are converted into constant capital in department 2 require a variable capital of 70/5, equal to 14, to circulate. These 14 units must be deducted from the 215 units of surplus value of department 2, in which case only 201 units of surplus value remain, and our diagram will look like this: 2-(1430C+70C)+(285V+14V)+201M The exchange of 1500 constant capital of department 2 and 1500 variable and surplus value of department 1 is a simple reproduction process and does not require discussion. But it is quite clear that in extensive reproduction the sum of V+M of department 1 is greater than the constant capital of department 2. So, let’s see what has happened and how the process will proceed. Just as department 1 must supply the additional constant capital of department 2 with its surplus values, so department 2 must supply the additional variable capital of department 1. The accumulation in department 2 must be such that a larger part of the total production and therefore a larger part of the surplus product is reproduced in the form of necessary means of consumption. In extensive reproduction it is absolutely not sufficient that 1-V + M equals 2-C. Quite the contrary, it must be balanced with 2-C plus the surplus product added to it, plus the additional constant capital required for the development of department 2, and exchange is possible. In the example we have examined, we saw at the beginning that the constant capital of department 2 was smaller than 1-V + M. For this reason, 70 units of surplus value of 2 were added to 2-C. Equilibrium was established and a kind of simple reproduction took place within extensive reproduction.

What for section 1 is only the simple exchange of income for means of consumption, now for section 2 it is not only the re-conversion of fixed capital in the manner of simple reproduction, from the form of a commodity to the natural form, but beyond that, the conversion of a component of the surplus product from the form of means of consumption into fixed capital. This is the necessity that extensive reproduction imposes. Let us review the process of reproduction once again. Our diagram, referring to what has been said, is as follows:

1. 1-      5000C+500M+1500V+M =7000
2. 1500C+299M+201M = 2000 

The 500 units of surplus value added in section 1 of capital are decomposed into 417 fixed and 83 variables. The latter component (83) draws its equivalent from the surplus value of section 2; section 2 purchases the same number of elements of fixed capital and increases its existing volume. The increase of 83 units of the fixed component of capital in section 2 also necessitates an increase of 17 units of variable capital in this section. The result will be this.

1-(5000C+417C) +(1000V+83V) = 5417C+1083V = 6500

2-(1500C+83C) + (299V+17V) = 1583C + 316V = 1899

The capital in Section 1 has increased from 6000 units to 6500. In Section 2, it has also increased from 1715 to 1899. If this trend continues, at the end of the third year, we will have 7629 in Section 1, 2229 in Section 2, and a total of 9858 capital units.

Third: Exchange of fixed capital of Section 2 in case of accumulation

In the exchange of 1-V+M with 2-C, several scenarios can be observed.

1 – In simple reproduction, these two are equal and are easily exchanged.

2 – In extensive reproduction, the rate of accumulation must be considered above all. In the examples so far, we have taken the rate of accumulation to be 50% of the surplus value of section 1 and assumed it to be constant for successive years. At the same time, we have taken into account the ratio in which the additional capital is divided into constant and variable components, which is changing. This presents us with three different cases. In the first case, half of the surplus value and the variable component of the capital of section 1 are equal to the constant capital of section 2. This means that 2-C is less than 1-V+M. It must be so, because otherwise accumulation cannot take place. In the second case 1-V+M/2 is greater than 2C. This problem can be solved by a slight increase from 2M to 2C and proportionally by 2-V. In the third case 1-V+M/2 is less than 2C. In such a situation, sector 2 is unable to reproduce its entire fixed capital, to solve the problem it must buy from sector 1, but it has no need to accumulate more variable capital, because the fixed capital has been reproduced with this purchase only at its previous value. Simple reproduction is not compatible with the capitalist mode of production. Capital accumulation, that is, real capitalist production, is impossible in this way. In other words, extensive reproduction negates the assumption of equality between 1-V+M and 2C. However, even in extensive reproduction or real capitalist accumulation, it is possible for 2C to not only equal 1-V+M but also exceed it. This means that there is overproduction in sector 2. This event causes capital to flee from sector 2 to sector 1.