July 3, 2009

Vol II, Part Two in 10 Pages or Less. My Brain Hurts.

Part Two: The Turnover of Capital
Returning to the text after a six month break has proven to be a little challenging; especially considering this section is rather dry in its object of analysis and Marx’s own method of presentation. Unfortunately I fear that I replicate the rather dry form/content under discussion here in my own engagement with it.

At the most general level, if you look at the Contents page of Vol. II, you notice that Marx is moving through: (1) the specific and interrelated forms/circuits of capital – money, productive and commodity – each with their own necessary function within the dynamic of capital, yet in their interrelatedness, capital cannot be reduced to any one circuit (e.g., see Ch. 4); (2) into circulation (costs) which poses then question; (3) of turnover of capital and the interrelated yet specific temporalities of its components (Fixed/Circulating, production time vs. working period, general circulation, variable capital (and importantly, the location of surplus-value within this temporal dynamic), etc, into finally; (4) the reproduction of total social capital. One can see a similar move here that Marx conducted in Volume One: where the commodity form – the ‘hieroglyph’ of capitalism – opened into ever larger and expansive forms and processes. The task here then is to connect the multiple forms, circuits, and turnovers of capital into a larger and more general process of accumulation and expansive dynamic.

Though somewhat buried in my discussion here, I should emphasize that Marx continues his immanent critique of political economy in order to not only to show the errors of political economy (here, Smith’s conflation of fixed/circulating capital and the displacement of the constant/variable capital component) but to also account for how/why these conflations or lacunae are necessary appearances of the socio-economic form. In other words, that these are not merely falsities, but falsities that are necessary at the level of political economy, industrial book-keeping, accounting, etc. Having read Postone recently, he would differentiate these two into two categorical levels of Marx’s understanding of capital: one of the deep structure of capital (value, labour-power, etc) and the appearances in everyday (prices, wages etc). Thus Marx is working within the conceptual apparatus of political-economy, working through its categorical logic in order to expose spaces through which a deeper structure of socio-economic categories are operating. It’s as if these forms are latent in political-economy itself, without the necessary move to bring these to the fore. With that......

Chapter Seven: Turnover Time
Marx begins by summarizing what was discussed in Chapter Four – namely the dynamics of each specific circuit of capital and their unique qualities. He reminds us that C’...C’ “does not begin the process as capital advanced, but as capital value already valorized, as the total wealth existing in the form of commodities, of which the capital value advanced forms only a part. (234)” This is important as the commodity circuit necessarily entails prior augmentation – and thus an open and dynamic process of valuation (prior, present and anticipated). While the other circuits were necessary to the overall process due to the specific qualities of their forms and fetishistic effects, they, taken in themselves, appear segmented into a series of similar yet singular circuits; i.e., their beginning component (e.g., P for production, M for money advanced) did not explicitly entail prior augmentation – thus not containing within their specific circuit the opening out and multiplicity of the other circuits. Once again, the commodity stands in as a primary form that contains (or mediates/structures) larger processes.

In contrast to this emphasis on the commodity circuit, Marx returns to the question of how political economy fails to understand the complexities of the interrelated circuits in one dynamic – reminding us that poli-econ and industrialists have fetishized M…M’. This is not just an error though, but is a necessary and real ‘appearance’ (i.e., necessary for the operation of calculation – what Marx earlier had called “a symbolic reflection in the imagination” p. 211).

With that, Marx begins by defining his concepts. Following classical political economy, turnover here is understood as when “the circuit of capital...is taken not as an isolated act but as a periodic process…The duration of this turnover is given by the sum of its production time and its circulation time. (235)”

He ends this short chapter by noting that while the day “forms the natural measuring unit for the function of labour-power” (think of Ch. 10 of Vol. I), so “the year forms the natural measuring unit for the turnovers of capital in process. (236)” One question would be, why? Additionally, how can we think of this fiscal-year (derived obviously from industrial production) in relation to other temporal forms of capitalism (the temporal compression of financialization, etc)?

Chapter Eight: Fixed/Circulating Capital
Building off and clarifying the categories of political economy, Marx notes the distinction between fixed and circulating (or ‘fluid’) capital by noting that fixed entails that a “part of its value always remains fixed in it as long as it continues to function, and remains distinct from the commodities that it helps to produce” while the latter are “all other material components of the capital advanced” (238). Towards the end of the chapter he makes this distinction clearer: “The elements of fluid capital are just as permanently fixed in the production process – if this it to be continuous – as are the elements of fixed capital. But while the elements of the form that are fixed in this way are steadily renewed in kind (the means of production by new items of the same kind; labour-power by ever-repeated purchases), the elements of fixed capital are neither themselves renewed as long as they last, nor does their purchase have to be repeated. (248)” If I understand this specific distinction correctly, the key point is that fixed capital traverses multiple production processes (the slow wear of a machine which is incrementally transferring its value to a commodity over successive production cycles) as distinguished from the capital outlay which is exhausted within the single production circuit process. Tying together these two forms of capital outlays, both necessary for the production, will allow Marx to pose problems related to the hoard, credit, joint-stock companies, etc.

However, more important than the distinction within fixed/circulating capital, is the distinction between variable/constant capital and fixed/circulating capital – which Smith, Ricardo and others failed to comprehend. Here, he tentatively notes that political economy’s conflation of the two sets emerges from the following points (both originally from Smith); (1) physical immobility is misunderstood as the sole determination of fixed capital, and; 2) that the circulation of value is confused with an inherent property of the material itself – “as if things, which are never capital at all in themselves, could already in themselves and by nature be capital in a definite form” (241) We will see this repeated again and again in the later chapters.

Chapter 9: Overall Turnover of Capital Advanced
The logical problem that needs to be answered is, if there are multiple turnovers of fixed/circulating capital, it is “necessary…to reduce the separate turnovers of the various parts of the fixed capital to a similar form of turnover, so that these differ only quantitatively, in the duration of their turnover (262)” – in other words, to generalize turnover cycles.

This then reveals the necessity of credit (actual and apparent variations of turnovers) as well as business cycles/crisis:
“The result is that with the cycle of related turnovers, extending over a number of years, within which the capital is confined by its fixed component, is one of the material foundations of the periodic *cycle* [German text has ‘crisis’ here] in which business passes through successive periods of stagnation, moderate activity, over-excitement and crisis. The periods for which capital is invested certainly differ greatly, and do not coincide in time. But a crisis is always the starting-point of a large volume of new investment. It is also, therefore, if we consider the society as a whole, more or less a new material basis of the next turnover cycle. (264)”

If we had more time, it might be useful to think this along with other theories of the ‘business cycle’ and its relation to credit, but that would take us well beyond our general discussion. Another point for consideration is what concept of crisis is being posed here? Obviously, here, crisis actually sustains the system (similar to Schumpeter’s ‘creative destruction’) – where large capital outlays in fixed capital underwrite more specific and periodic interruptions and/or crises of production/circulation. These crises in turn spawn new outlays of fixed capital.

Chapter 10 and 11: The Physiocrats, Smith and Ricardo

Marx then works through the classical theories of fixed and circulating theories in relation to turnover:

Quesnay proposes the categories of avances primitives and avances annuelles, which Smith would later render as fixed, and circulating respectively. Although Quesnay correctly sees this distinction as internal to production itself (productive capital), he fails to see that this distinction extends beyond agriculture – i.e., the only production that Quesnay sees as ‘productive’ or value creating. It’s interesting to note Marx’s admiration for Quesnay though, as the first person that tried to systematically comprehend the production process – and correctly saw valuation coming from production itself, albeit via agriculture.

Smith generalizes these terms, extending them to the economy as a whole, yet with some fundamental errors. Without reproducing the extended criticism that Marx levels at Smith’s theory, suffice it to note that Marx’s main criticism is that Smith fetishizes the fixity (materiality) and circulation (fluidity) of some elements of production and circulation, failing to clarify his terms. Marx argues that he fetishizes these forms “as if…[these] characteristic[s] belonged to these things materially, by nature, and did not rather derive from their specific function within the capitalist production process. (281)”

More importantly, however, this confusion over fluid/fixed capital then gets more muddled in relation to the capital outlay for labour in the production process. Ultimately Smith does not understand wages as circulating capital; rather he finds the commodities that constitute the means of subsistence for the worker as fixed.

…it is only within the production process that the value laid out on labour-power is transformed (not for the worker, but for the capitalist) from a definite, constant quantity into a variable one, and the value advanced in capital value, in capital, is thereby transformed for the first time into self-valorizing value. But because it is not the value laid out on labour-power that Smith defines as a fluid component of the productive capital, but rather the value laid out on the worker’s means of subsistence, it is impossible for him to understand the distinction between variable and constant capital, and thus the capitalist production process in general. The characteristic of this part of capital as variable capital in opposition to the constant capital laid out on the objective elements of product formation is buried underneath the characteristic that the part of capital laid out on labour-power belongs to the fluid part of the productive capital with respect to the turnover. This burial is made complete in so far as in place of labour-power it is the workers’ means of subsistence that are counted as an element of productive capital. (291-92)”

In other words, this confusion/conflation of various components of fixed and circulating capital WITHIN productive capital, and Smith’s extension of this out into the market, confuses both the dynamic internal to production (and the internal forms of productive capital) and its relation to circulation (i.e., commodity capital). Those following Smith would fail to see capitalist valuation as effected by labour power in the production process, set in motion by variable capital. This is where Ricardo’s labor theory of value comes in – though, as Marx notes here, it replicates Smith’s basic confusion over fixed/circulating.

Ricardo inherits Smith’s conflation of fixed and circulating capital with constant and variable capital. Marx argues that following Smith, Ricardo and other classical economists “no longer distinguished at all between the portion of capital laid out on wages and the portion of capital laid out on raw material, and only formally distinguished the former from constant capital in terms of whether it was circulated bit by bit or all at once through the product. The basis for understanding the real movement of capitalist production, and thus of capitalist exploitation was thus submerged at one blow. All that was involved, on this view, was the reappearance of values advanced. (297)”

In other words, the categorical distinctions – between fixed/circulating, between that set and the constant/variable set, and the distinction between productive and circulating capital – had delimited the ability to see the relationship between value and labour-power. In one of the more powerful statements from these chapters, Marx argues that without the concept of variable capital, the distinction between value (both as process and objectified) and labour power (the subject of valuation) is lost: “if we are to speak of a material difference that affects the circulation process, this is simply that it follows from the nature of value, which is nothing other than objectified labour, and from the nature of self-acting labour-power, which is nothing other than self-objectifying labour, that labour-power constantly creates value and surplus-value as long as it continues to function; that what presents itself on its side as movement, as the creation of value, presents itself on the side of its product in a motionless form, as created value. (300)”

Along with this obscuring of the valuation process in the conflation of his own categories, Ricardo continues the material fetishism that was seen in Smith earlier – namely the fetish that “transforms the social, economic character that things are stamped with in the process of social production into a natural character arising from the material nature of these things. (303)”

Marx ends the chapter on Ricardo with a general statement on the errors of classical political-economy following Smith (304-5):
(1) “The distinction between fixed and fluid capital is confused with the distinction between productive capital and commodity capital. (304)”
(2) “All circulating capital is identified with capital laid out or to be laid out on wages.”
(3) The confusion over variable/constant capital and its relation to fixed/circulating capital is eventually reduced to merely fixed/circulating capital. Constant and variable capital is lost.

Chapter 12, 13 and 14: The Working Period, Production Time and Circulation Time

In these chapters Marx distinguishes between multiple temporal periods part and parcel of the larger turnover cycle: (1) working period (not to be confused with the working day), (2) production time, and finally (3) circulation time – each illuminating specific tendencies or compositions of capital outlays. Generally speaking, turnover time, thus, is understood as “the sum of its production time and its circulation time. (309)”

(1) Working Period
Distinct from the working day (Vol. 1, Ch. 10) the “working period” is “the number of inter-related working days required, in a particular line of business, to complete a finished product. (308)” This is important because the production process includes multiples interruptions, disturbances or crises – ones that are not recorded within the category of the ‘working day’. This then allows for an analysis of the differential transfer (from means) and creation of (labour) value to commodities over different working periods.

The category of the working-period enframes the relationship between fixed and circulating capital within the production process and allows for an analysis of the differential relationship between the two. For example, Marx, introducing the notion of “reflux,” explains that:
“According to the duration of the working period, and thus also the period till a commodity ready for circulation is completed, the portion of value that the fixed capital surrenders layer by layer to the product mounts up, and the reflux of this portion of value is delayed. This delay, however, does not necessitate a renewed outlay of fixed capital. The machine continues to operate in the production process whether the replacement for its wear and tear flows back quicker or more slowly in the money form. It is different with circulating capital. Here not only must capital be tied up for a longer time, in proportion to the duration of the labour process, but new capital must continually be advanced for wages, raw and ancillary materials. The delayed reflux this has a different effect in the two cases. Whether the reflux is slower or quicker, the fixed capital continues to operate. The circulating capital, on the contrary, becomes unable to function when the reflux is delayed, if it is tied up in the form of unsold, or unfinished and not yet saleable products, and there is no additional capital to renew it in kind. (314)”

I quoted this as I think this is a clear explanation of these categories within Marx’s larger project. Related to the differential capital outlays that the ‘working-period’ illuminates, Marx also notes the role of credit in this dynamic, and the by-product of concentration and acceleration:
“If the shortening of the working period is thus generally bound up with an increase in the capital advanced for this shorter time, so that the amount of capital advanced increases to the degree that the time of advance is shortened, we should remember that, apart from the total volume of social capital available, it comes down to a question of the extent to which the means of production and subsistence, i.e. disposal over them, are fragmented, or united in the hands of individual capitalists, i.e., the extent reached by the concentration of capital. In so far as credit mediates, accelerates and intensifies the concentration of capital in a single hand, it contributes to shortening the working period, and with this also the turnover time. (313)”

(2) Production Time
Production time is the working day plus those interruptions or natural developments (chemical reactions, fermentation, etc) necessary for the creation of a final commodity. This differentiates how the productive capital is actually applied in the production process, here as two periods: “a period in which the capital exists in the labour process, and a second period in which its form of existence – that of an unfinished product – is handed over to the sway of natural processes, without being involved in the labour process. (317)” In other words, “the working period and the production period do not coincide (317).” This divergence illuminates variations in different production processes (industry proper, transport, agriculture, etc) and how specifically the outlay of circulating capital is unique to that specific branch.

Here Marx reintroduced the role of the productive stock and its function in relation to the variations in production time. What’s interesting is that, just as credit allows for the extension of turnover time, this often takes the form of a productive stock – adding yet another intersection between multiple (synchronic) circuits, here, one between an extended production process and the market conditions that affect the acquisition of this stock. The reason I think this is important is this is yet another sight that makes this a general form of multiple capitals in relations to each other – here linking production and circulation; in other words, we move out of the realm of an individual capital circuit and into a much larger (and determinative) social process. This also sets the stage for the later discussion of how Dept I and Dept II are related. Anyway, here, after discussing market conditions, transport, proximity to market, etc Marx writes:

“All these circumstance affect the minimum capital that must exist in the form of productive stock, and thus the period of time for which advances of capital have to be made, and the volume of capital that has to be advanced at once. This volume, which also has an effect on the turnover, is determined by the longer or shorter time for which circulating capital is tired up in the form of productive stock, as only potentially productive capital. On the other hand, in so far as the extent of this stagnation depends on the greater or lesser possibility of rapid replacement, on market conditions, etc. it itself arises from the circulation time, from circumstances that pertain to the circulation sphere. (323)”
This also opens the possibility of the onset of crisis not so much from overproduction, but of the inability to replenish the productive stock in an extended production time.

(3) Circulation time
Circulation time is understood as a dual process: selling time (as commodity capital) and buying time (conversion into money capital). As for the former, Marx notes again that it is essential that an individual capital finds an outlet for their commodity capital; in effect they are exposed to market conditions – not is the outlet itself necessary for the reproduction/accumulation of capital, but that within the time it takes to deliver the commodity, market conditions (prices) can fluctuate. Under the rubric of selling time, Marx outlines multiple factors that affect the relative difference of selling time between individual capitals: distance of market, means of communication and transport (“the speed of movement in space is accelerated, and spatial distance is thus shortened in time” p. 327), etc. However, the most interesting aspect is how this takes on a general social process of successive waves of goods constantly entering/exiting the market. For those interested in social geography, Marx’s description on pages 328-329 of this process – both of acceleration and spatial concentration – is interesting. As Marx connects selling time (commodity capital) to its necessary component, buying time (money capital), he makes the following observation:

“If the progress of capitalist production and the consequent development of the means of transport and communication shortens the circulation time for a given quantity of commodities, the same progress and the opportunity provided by the development of the means of transport and communication conversely introduces the necessity of working for ever more distant markets, in a word, for the world market. The mass of commodities in transit grows enormously, and hence so does the part of the social capital that stays for long periods in the stage of commodity capital, in circulation time – both absolutely and relatively. A simultaneous and associated growth occurs in the portion of social wealth that, instead of serving as direct means of production, is laid out on means of transport and communication, and on the fixed and circulating capital required to keep these in operation. (329)”

As for buying time – Marx notes that the spatial distance between production and market not only causes a delay of selling time, but also a delay of the conversion of capital back into its money form (or at least its destination as a reinvestment in the new production circuit). He notes how if trade between nations occurs, not only do the products have to reach market, but the payment also has to return to the site of production – thus a delay before that money returns to begin a new production cycle – what he calls the “delayed reflux of money” 331). Marx notes that because of this delay, credit is essential for keeping the continued process of capitalist production going – above and beyond the double-delay in circulation time. It is interesting to think how the financialization of the world economy has affected this process, both in the emphasis of finance speculation, but also through technology harnessed. How do contemporary production circuits experience this differential at the level of selling/buying time that Marx is emphasizing here? Is the latter obliterated, while the former remains (Wal-Mart production in the SOE’s of China, etc)? What crisis-possibilities can we imagine now through Marx’s understanding of circulation time?

Finally, Marx notes that political-economy often overlooks this constant process of capital moving through its multiple forms (money, productive and commodity) and that the money form’s constant presence in this process – as credit, at purchase, etc - is “very necessary for the understanding of the bourgeois economy. (333)”

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

The problem here is “the influence of circulation time on the valorization of capital” (334). I found this chapter mind-numbing, with Marx working through the intricate differences between the composition of capital and its forms within various turnover scenarios. For those interested, you can jump to page 355 for the results of his analysis.

The most important aspect in this exposition is that, as a general rule, capital is set free via the turnover process (and necessarily so as it functions to continue reproduction). Marx traces this process as capital moves through its various forms and, more importantly, the composition of its forms within a larger process of reproduction. He summarizes:

“as far as he total social capital is concerned, considering the fluid part of this, the setting-free of capital is the rule, while the simple mutual replacement of portions of capital functioning successively in the production process must form the exception. For the equality of working period and circulation period, or the equality of circulation period and a whole number of working periods, in other words a regular proportion between the two components of the turnover period, has nothing at all to do with the nature of the case, and can therefore occur, by and large, only exceptionally….A very significant portion of the social circulating capital, which is turned over several times in the year, will thus periodically exist in the course of the annual turnover cycle in the form of capital set free. (355)”

Why is this important? This “set-free” capital – or the social circulating capital – becomes the credit in which the system can maintain itself at the level of interruptions/delays at the level of multiple individual capitals. Additionally, Marx notes how the contraction of the turnover period creates a ‘surfeit’ of money capital. In a passage that differentiates between relative surplus and surfeit money capital, Marx writes:

“We can see from this how a surfeit of money capital can arise – and not only in the sense that the supply of money capital is greater than the demand for it; the latter is never more than a relative surplus, which is found for instance in the depressed period that opens the new business cycle after the crisis is over. It is rather in the sense that a definite part of the capital advanced is superfluous for the overall process of social reproduction (which includes the circulation process), and is therefore precipitated out in the form of money capital; it is thus a surplus which has arisen with the scale of production and prices remaining the same, simply by a contraction in the turnover period. The mass of money in circulation, whether this is larger or smaller, does not have the slightest influence on this. (358)”

This chapter ends with Marx looking at various cases of how price is affected by circulation/turnover fluctuations. I have to admit that I glossed over this section as I am more interested in the ‘transformation problem’ (value into price) that so many have harped on (Bohm-Bawerk, Sweezy), rather than the fluctuation of price in relation to circulation/turnover fluctuations. But maybe I missed something important…..Andy?

Chapter 16: The Turnover of Variable Capital

Returning to the distinction between fixed/circulating capital and variable/constant capital, Marx notes that:

“What these two parts of the circulating capital – the constant and the variable – have in common, and what distinguishes them from fixed capital, is not that the value they have transferred to the product is circulated by commodity capital, i.e. circulates through the circulation of the product as a commodity. A portion of the product’s value, and hence of the product itself circulating as a commodity, of the commodity capital, always consists of the wear and tear of the fixed capital, or the part of the fixed capital’s value that it has transferred to the product in the course of production. The difference is rather that the fixed capital continues to function in the productive process in its old shape through a longer or shorter cycle of turnover periods of the circulating capital (=circulating constant+circulating variable capital), while any single turnover has as its precondition the replacement of the entire circulating capital that enters the circulation sphere from the production sphere in the shape of commodity capital. (370)”

With this restated distinction, Marx then turns to dealing with variable capital’s function/transformation within the turnover period. The most important section being where Marx distinguishes, within the component of advanced capital, that surplus-value is ONLY produced when applied. This is Marx’s answer to Ricardo/Smith and others who had conflating the fixed/circulating and variable/constant distinction:

“The circumstances that differentiate the ratio between the advanced and the applied variable capital affect the production of surplus value – at a given rate of profit – only in so far as they differentiate the amount of variable capital which can actually be applied in a definite period of time, e.g. in one week, five weeks, etc. The variable capital advanced functions as variable capital only to the extent that it is actually applied; not during the time for which it remains advanced in reserve without being applied. But all circumstances that differentiate the ration between advanced and applied variable capital can be summed up in the difference in turnover periods (determined by a difference either in working periods or in circulation periods, or in both). The law of surplus-value production is that, with the same rate of surplus-value, equal amounts of functioning variable capital create equal masses of surplus-value. So if equal amounts of variable capital are applied by capitals A and B for the same space of time at the same rate of surplus-value, then they must produce equal amounts of surplus-value in this time, no matter how different may be the ratio between the variable capital applied in the time in question and the variable capital advanced during the same time, and hence how different also the ration between the mass of surplus-value produced and the total variable capital advanced, rather than that actually applied. (374-5)”

From this distinction between advanced and applied, Marx moves into various examples of how this effects the turnover of variable capital, which leads him to posit an equation outlining the annual rate of surplus value, or S’: S’ = s’vn/v = s’n, wherein s’ = real rate of surplus-value, v=variable capital advanced and n=annual number of turnovers. Thus if there is only one turnover in the year (n=1), you get S’=s’ x 1 = s’. In other words, turnover affects the annual rate of surplus-value even if the mass of surplus value remains the same across individual capitals. To clarify the definition of advanced, Marx reminds us that this “capital value is always advanced and not genuinely spent, in that one this value has gone through the various phases of its circuit [e.g., M – P – C – back to M] it returns again to its starting-point, and moreover, it does so enriched with surplus-value. This is what characterizes it as advanced. (382)”

In the section on the turnover of individual variable capital, Marx reminds us that based on the turnover period, and the resulting augmentation of value through this circuit, that in its own turnover cycle, it is a completely NEW value created; a different value, yet still in the same form (variable capital – see 386).

The last few pages of this chapter has some really interesting observations related to the turnover of variable capital:

a) Marx suggests that in a communist society (a rare projection for him) through planning “the society must reckon in advance how much labour, means of production and means of subsistence it can spend, without dislocation, on branches of industry which, like the building of railways, for instance….” “In capitalist society, on the other hand, where any kind of social rationality asserts itself only post festum, major disturbances can and must occur constantly…(390)”

b) The notion of effective demand emerges to show how “prices rise, both for the means of subsistence and for the material elements of production. During this time, too, there are regular business swindles, and great transfers of capital. (390)” On the next page, Marx ties effective demand, wages, and the reserve army of workers into the fluctuations of prices, demand and wages.

c) In a long footnote Engels includes some cursory notes on contradiction and crisis that Marx had jotted down. It reads: “Contradiction in the capitalist mode of production. The workers are important for the market as buyers of commodities. But as sellers of their commodity – labour-power – capitalist society has the tendency to restrict them tot heir minimum price. Further contradiction: the periods in which capitalist production exerts all its forces regularly show themselves to be periods of over-production; because the limit to the application of the productive powers is not simply the production of value, but also its realization. However the sale of commodities, the realization of commodity capital, and thus of surplus-value as well, is restricted not by the consumer needs of society in general, but by the consumer needs of a society in which the great majority are always poor and must always remain poor. This however belongs rather to the next Part. (391)”

Chapter Seventeen: the Circulation of Surplus-Value

Here Marx is trying to logically explicate accumulation within the conceptual apparatus he has outlined thus far. This provides a transition into Part Three, which will deal with simple reproduction and accumulation at the level of society.

Marx is outlining an expanding and accelerating system of interconnected turnovers; where one capital emerges from a turnover cycle with real accumulation (in money) this then becomes the basis for credit to someone else. Marx returns to the stages of the development of the surplus money capital: in its most basic form, the latent hoard – but in its expanded social form – social capital (most clearly expressed in credit).

Marx then moves into preliminary outlining simple reproduction and accumulation (i.e. capitalization of surplus-value)

Simple Reproduction:
Surplus value is consumed unproductively by its “owners, the capitalists. (399)” However, the bulk of this section seems to be a working through of the problem of reproduction in regards to the assumption that “the total quantity of money must be equal to the quantity of money required for circulation plus a sum of money existing in the hoard form which increases or decreases according to the contraction or expansion of circulation…(403)” In other words, if money is hoard, or value unproductively consumed by the capitalist class, from where does the money come from that replaces/sustains reproduction? In critiquing Tooke, Marx argues that the “question is not: here does surplus-value come from? But rather: were does the money come from which it is turned into? (404)” Tooke and other have failed to deal with this question – and Marx provides a curious answer – the problem itself does not exist:

“the general answer has already been given: if a mass of commodities of x times £1,000 is to circulate, it in no way affects the quantity of money needed for this circulation whether the value of this commodity mass contains surplus-value or not, or whether the mass of commodities is produced under capitalist conditions or not. Thus the problem itself does not exist.” He continues later “there does exist, from the standpoint of capitalist production, the semblance of a special problem. For here it is the capitalist, the man who casts the money into circulation, who appears as the point of departure. The money that the worker spends in payment for his means of subsistence existed previously as the money form of the variable capital, and was therefore originally cast into circulation by the capitalist as a means of purchase or payment for labour-power. (407-9).”

The worker’s payment for his means of subsistence is only secondary (think of Smith’s error outlined before) – rather “In point of fact, paradoxical as it may seem at the first glance, the capitalist class itself casts into circulation the money that serves towards the realization of the surplus-value contained in its commodities. But note well: it does not cast this in as money advanced, and therefore not as capital. It spends it as a means of purchase for its individual consumption. Thus the money is not advanced by the capitalist class, even though this class is the starting-point of its circulation. (409)”

Here is a great example of Marx’s mode of immanent critique – where taking the problem posed by Tooke and others as, at one level, a false question, but accounting for why there is a ‘semblance’ at the level of appearance (i.e., political economy).

Accumulation and Expanded Reproduction
Marx makes the (logical) transition to accumulation by positing a historical moment of development:

“Hence the increased supply of precious metals from the sixteenth century onwards was a decisive moment in the historical development of capitalist production. In so far as we are dealing with the further supply of money material needed on the basis of the capitalist mode of production, we can say that on the one hand surplus-value is cast into circulation in the product without the money for its conversion, while on the other hand surplus-value in gold is cast into circulation without its previous transformation from product to money. (418)”

The distinction between unproductive surplus-value (capitalist consumption) and productive surplus-value (reinvestment) is a matter of application since it exists in both forms.

Towards the end of this section Marx returns to the necessary function of credit in expanded reproduction, and this can only happen with a diversification of forms of surplus-value (what was called ‘capital set free’) into various bearers of value, since expansion would clearly run into limitations of metallic money production/circulation. Marx notes that capitalists “all possess a certain money fund which they cast into the circulation sphere as means of circulation for their consumption, and of which each receives a certain part back again from the circulation sphere. But this monetary fund is then precisely a circulation fund, acquired by the conversion into money of surplus-value…(422-423). Specific examples are: (1) bank deposits, (2) government bonds and (3) shares. He argues “In all these cases, there is no storage of money, and what appears on the one hand as storage of money capital appears on the other hands as the continuous real expenditure of money. Whether the money is spent by the person it belongs to, or by other people, by people in debt to him, does not affect the situation. (423)”

This rather short section on understanding the circulation of surplus-value in regards to accumulation (in contrast to simple reproduction) sets us up for Part Three – The Reproduction and Circulation of the Total Social Capital.

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