097 The circulation-process of capital

  1. Since the production-process P is embedded in the circulation formula M — C … P … C‘ — M‘, capital always produces with the commodities C that it has purchased. Hence the cost of production does not immediately appear to capital as labour expended on its product. It is true, as pointed out earlier, that capital reckons in its process of value formation and augmentation not only the new labour flowing from the current consumption of labour-power, but also the old labour already materialised in the means of production and simply transferred to the new product as making up the latter’s total labour embodiment. From the point of view of its circulation-process, however, capital regards labourpower, the source of value-forming labour, and the means of production both of which it has purchased as commodities, as expenses or costs incurred in production. Thus the formation and augmentation of value that takes place in the process of production is submerged beneath the surface of the circulation-process of capital; each individual capitalist in his actual chrematistics hopes to gain a greater surplus value by reducing his production-costs. This satisfies at least the first part of the circulation principle of capital, the principle of „buying cheap and selling dear.“ By the same token, the time that the production-process requires is viewed by capital, not as the whole length oflabour-time required for the provision of the product, but as the production-period, i.e., as the time interval between the investment of capital in the elements of production such as labour-power and the means of production and the reappearance of capital in the form of the newly produced commodity. This production-period together with the circulation-period, or the time spent by capital in the phase of circulation, now appear as the time-factors constraining the efficiency of value-augmentation. If the elements of production such as labourpower and the means of production are considered as expenses, the duration of time itself either in production or in circulation is also viewed by capital as a cost. This means that capital, whether in the forms of money and commodities or in the various stages of the production-process, cannot stand idle even for a moment.
  2. These new considerations certainly do not nullify the formation and augmentation of value in the production-process of capital; on the contrary, they flow from this fundamental fact. Yet capital as a circulation-form, bewildered by these considerations, does not apprehend the exact nature of production as the process of value formation and augmentation. Each individual capitalist only vaguely sees that production lies at the root of his profit-making activity. Because the value of a commodity is realised in money only through the elusive motion of prices, the substance of economic life is always covered by the mystery of the commodity-economic forms. Just as a commodity value, the social norm of exchange, can only be revealed in fluctuating prices through recurrent trade, so is surplus value which is the meaningful outcome of the production-process realised only in the form of profit accruing to each individual capitalist as the difference between the selling price and the production-cost. If there is a socially normal profit, though individual capitalists always earn more or less than the norm, it is because all the particular forms of the motion of capital pursue, in the final analysis, one and the same end in the production-process, namely, the augmentation of value. No particulars of the motion of capital can suppress this fundamental fact even though it is not immediately apparent in the commodity-economy. It instead „makes a detour“ in revealing itself through the phenomenal forms that are peculiar to the circulation-process of capital. The origin of capital was first explained in the Doctrine of Circulation. Although the substantive content of the activity of capital was later established to lie in the value augmentation in its production-process, this does not exempt the motion of capital from the various restrictions to which, as a circulation-form, it is subject. The circulation-process of capital must now develop the forms appropriate to its operation.
  3. I have already stated that capital, being the self-motion of value, cannot stop when it turns over once but must repeat the same process ad infinitum. Its terminal point M‘ is, therefore, also necessarily its restarting point M in the circular motion of capital M — C … P … C‘ — M‘, as depicted below in the diagram. Viewed in this way, however, the motion of capital is no longer simply the circuit of money-capital (M — C … P … C‘ — M‘) which begins and ends with the form of money. It is also the circuit of productive capital (P … C‘ — M‘.M-C …. P) which begins and ends with a stage in the production-process, as well as the circuit of commodity-capital (C‘ -M‘ . M — C … P … C‘) which begins and ends with the form of commodity stocks. All three circuits together make up the circular motion of capital. In actual practice, indeed, capital is always divided in an appropriate proportion into the three constituents: money-capital M, productive capital P, and commodity-capital C‘, so as not to interrupt the process of production. In other words, when a major part of capital is engaged in production ( … P … ), another part of capital must be preparing for subsequent production (M — C), and still another part must already be selling products in the market (C‘ — M‘). The metamorphosis of capital through time thus translates itself into the asset structure of capital; it is an observed fact that a business firm is spatially divided into the factory, the sales office, and the purchasing department. As the routine operations of production, sales, and procurement are repeated, capital goes through each of these phases in tum and augments its value. That part of capital which takes the forms of commodities and money in the process of circulation is called circulation-capital by Marx in contrast to productive capital which is the rest of capital concurrently engaged in value formation and augmentation at various stages of the process of production. As the commodity is sold for money, and as the money once again buys commodities in the form of the means of production and labour-power, circulation-capital transforms itself into productive capital. When, however, the process of production is over and commodity stocks are built, productive capital is once again reconverted into circulation-capital. Thus the two forms of capital, one always changing into the other, are but the two sides of one and the same thing: the motion of capital.