Notes on Marx’s Capital

Capital – Karl Marx

A Critique of Political Economy

Volume 1 – The Process of Production of Capital

Part One: Commodities and Money

Chapter 1 – The Commodity

A sociological theory of the market.

Marx does not see the market simply as an institution in which individuals meet to exchange commodities, to be understood in isolation from the production of commodities, for exchange has implications for production.

The market is a place in which the labour of individual producers is brought into relation with that of other producers, and so of society as a whole.

The market is a particular way of allocating social labour, appropriate to a particular kind of society in which individuals work independently of one another to produce goods for the use of others.

Thus the relation between individual producers in a commodity producing society is not directly recognised as a social relation- the producers do not get together to plan production as interdependent members of society.

Instead the social relation between these producers takes the form of a relation between things, between goods they exchange for one another.

The exchange ratio, or exchange value, of commodities, is not, therefore, merely a relation between inanimate objects, but it expresses the relation between the labours of individuals who have produced those commodities.

This idea is the basis of Marx’s theory of value.

Commodity – something produced for sale and not for immediate consumption

It has both use-value and exchange-value.

A thing has a use-value if it can find a use.

The use-value refers to the physical properties that make it potentially an object of use.

“Exchange-value appears first of all as the quantitative relation in which use-values of one kind exchange for use-values of another kind” (p. 126)

Value expresses the fact that the commodity is the product of social labour, of a part of the labour-time of society as a whole, and not simply the private labour of a particular individual. Thus: the substance of value is “human labour power in the abstract”, “homogenous human labour”, “human labour-power expended without regard to the form of its expenditure” (p.128).

The magnitude of value is determined by the labour-time socially necessary to produce the commodity, defined as “the labour-time required to produce any use value under the conditions of production normal for a given society and with the average degree of skill and intensity of labour prevalent in that society” (p.129)

The commodity is a thing (a “use-value”) that embodies a certain portion of society’s labour-time (a “value”).

Behind the distinction between use-value and value lies that between useful (“concrete”) and abstract (“social”) labour.

Useful labour “is labour whose utility is represented by the use-value of its product, or by the fact that its product is a use-value…i.e. productive activity of a definite kind, carried on with a definite aim” (pp. 132-3)

The value of a commodity does not express these concrete characteristics of particular labours, it expresses the common quality of labour as social “homogenous” labour (abstract labour). The basis on which different useful labours can be compared as simple expenditures of labour time is the fact that the same individual can perform a whole range of different kinds of useful labour. Abstract labour is social labour, i.e. the expenditure of human labour-power insofar as such expenditure is socially necessary.

The value of a commodity does not represent the amount of labour actually expended by a given individual, but that portion of social labour that is credited to that commodity. It is only in exchange that the producer finds out how much of his labour-time was socially necessary. This is precisely what exchange does: it validates the socially necessary character of the labour-power expended in producing a particular commodity as that commodity is compared in the market with others.

Since value is a purely social phenomenon it cannot find any direct natural expression, but can only be expressed in the relation between commodities.

The imperatives of commodity exchange give rise to money.

It is exchange that gives rise to money and not money that gives rise to exchange.

Money is itself a form of social relation.

The value of the commodity, which is really simply an expression of the portion of social labour embodied in the commodity, appears to be an inherent and semi-natural property of the commodity, its price.

The exchange relation, which is really only a relation between amounts of social labour embodied in the commodities in question, appears to be a relation that exists between commodities themselves, without reference to the producers.

The fetishism of commodities arises from the fact that commodity producing labour is not directly social. Commodities are produced by individuals working independently of one another. Although the total of these individual labours is the total social labour devoted to producing the total social product, these producers do not come into contact with one another until they exchange their products. Hence the social character of their labour only appears in exchange, and they exchange their labour for that of others only by exchanging products.

“To the producers, therefore, the social relations between their private labours appear as what they are, i.e. they do not appear as direct social relations between persons in their work, but rather as material relations between persons and social relations between things” (p. 166)

Thus value appears to be an inherent quality of the product that dictates to the producer rather than vice-versa.

It is the fourth section that clearly differentiates Marx’s theory of value from that of the classical political economists, especially Ricardo.

Marx does not see exchange relations simply as the quantitative market relations between commodities. Marx sees exchange relations as the particular social form through which the labour of producers who work independently of one another without reference to social needs can be brought into relation with one another and so with the needs of society. Thus for Marx exchange relations are a form of social relations of production: the market regulates the interdependence of producers who appear to be working independently of one another.

The idea that exchange relations reflect the amount of labour-time expended on particular commodities was not original: it was central to all of classical political economy.

The idea that Marx introduces is the idea that exchange is a particular system of social relationships and not simply an institution through which prices are mechanically derived from labour-times.

For Marx, value is a characteristic only of a society in which the relations between producers as members of society are regulated through the market.

This has a fundamental effect on Marx’s theory of value. It is through his examination of form of value that Marx was led to argue that exchange value is not an expression of labour-time (of the amount of time actually spent by the labourer), but is an expression of value.

Value, in turn, does not simply express labour-time actually embodied in the commodity (either individual or on average), but the socially-necessary labour-time, the portion of the total labour-time of the society allocated to that commodity, the labour-time of the individual producer in relation to the labour-time of society as a whole. This relationship cannot be found in the individual commodity, or in the relationship of the individual producer to that of the commodity, but only in the relationship between producers that manifests itself in the exchange relation between commodities.

Hence, for Marx the concept of value is not a technological concept, it is fundamentally a social concept: value expresses the social relation between producers.

Thus, while for Ricardo value expressed the labour of the individual producer, for Marx it expressed the labour of the producer as a member of society.

“It is only the expression of equivalence between different sorts of commodities which brings to view the specific character of value-creating labour, by actually reducing the different kinds of labour embedded in the different kinds of commodity to their common quality of being human labour in general” (p. 142).

These points are very important, because a quite different interpretation of Marx’s theory, that equates it with the Ricardian theory, is very common.

Marx’s theory does not see value as inherent in the commodity, in isolation from the exchange relation – indeed that it is not is the core of Marx’s theory of the form of value.

In a capitalist society prices diverge systematically from values because of the tendency for profits to be equalised between different capitals.

It is not true that all things with an exchange-value are products of labour: virgin land can be bought but is not a product of labour, and nor are all products of labour commodities.

Chapter 2 – The Process of Exchange

Starts with a summary of chapter 1: We cannot understand the commodity without looking at the social relations that lie behind it.

“Commodities are things, and therefore lack the power to resist man” (p. 178)

Commodities can only exchange with one another if their owners relate to one another through the exchange of commodities. Thus exchange presupposes that they “recognise each other as owners of private property”.

The juridical relation ‘mirrors’ the economic relation.

It is only when members of society become independent producers that both commodity exchange and the concept of private property can develop.

Once the process of exchange becomes general commodity owners seek not isolated exchanges, but rather seek to exchange their general product for anything and everything they need.

Exchange becomes a “general social process” (p.180).

Every commodity owners wants his own commodity to be universally acceptable in exchange.

The universal equivalent emerges out of the development of exchange itself, as a particular commodity is fixed upon to serve as universal equivalent.

Money is a commodity which has a value like any other commodity.

It marks the transition from exchange as a discrete relation between private individuals to exchange as an expression of social relations between interdependent individuals.

Thus the fetishism of money corresponds closely to that of commodities.

Chapter 3 – Money, or the Circulation of Commodities

This chapter is concerned primarily with the various functions of money.

Money is the product of exchange, developing in accordance with the needs of exchange.

Measure of value – the commodity in terms of which the value of other commodities is expressed.

Means of circulation – in order to exchange one commodity for another the value of the first commodity has to be realised in the form of money and the money then realised in the use-value of the second commodity.

The circulation of commodities has the form C-M-C.

This is quiet different from the simple exchange of use-values C-C.

The separation of purchase and sale introduces the possibility that the whole system can break down: a commercial crisis, for every sale is conditional on previous purchases since the buyer must have money.

Means of purchase – while commodities enter and leave circulation, money remains within circulation. Thus a given quantity of money is necessary and sufficient to maintain the circulation of commodities.

Many economists (Monetarists) believe that the quantity of money determines the level of prices. Marx argues that with commodity money it is circulation that determines the movement of money and not vice versa, hence it is the level of prices that determines the quantity of money required.

Marx argues that token money can replace commodity money in the function of means of circulation, in which function it represents commodity money symbolically. With token money, if too much money is issued the currency will be devalued and price will rise.

Hoarding increases the quantity of money required.

The separation of sale from payment and the rise of credit money reduce the quantity required.

Part Two: The Transformation of Money into Capital

Chapter 4 – The General Formula for Capital

In this chapter Marx is concerned to distinguish between money and capital, or rather, between money as money and money as capital.

Two forms of circulation:

The circulation of commodities: C-M-C

The circulation of capital: M-C-M

In each case a purchase and a sale are combined, but in the first case to exchange use-values, in the second to change money into (more) money.

The addition to money laid out is called by Marx surplus value.

Marx introduces the term ‘valorisation’. It describes the process by which value laid out returns to the starting point with an increase. It is the motivation of the circulation of capital.

This definition leads straight to the definition of the capitalist: “capital personified and endowed with consciousness and a will” (p. 254)

The aim of the capitalist is the constant accumulation of value, not the pursuit of use-values, thus it is always money that is the end result of his activities.

The circulation of capital represents a constant movement of value from one form to another as capital takes the form now of commodities and now of money.

Value therefore becomes “value in process, money in process, and, as such capital” (p. 256)

Here Marx is concerned with the “general formula of capital”, independent of its particular forms as merchant’s capital, industrial capital or interest-bearing capital.

In its most general form capital is defined as value that expands itself, ‘self-valorising value’.

Chapter 5 – Contradictions in the General Formula

In this chapter Marx investigates the possibility that SV may arise within circulation.

He firstly argues that if commodities exchange at their value, which is the normal form of circulation, no SV can be created. To think otherwise is to confuse value with use-value (Marx finds this confusion to be the source of many errors of previous economists).

He then argues that SV cannot be created if all commodities are sold either above or below their values because gains cancelled by losses.

The conclusion is that SV can be created neither within nor outside circulation.

Chapter 6 – The Sale and Purchase of Labour-Power

The solution to the contradiction is found in identifying a commodity which, when purchased, can be used to create more value than it has itself. Such a commodity is labour power.

Labour power is “the aggregate of those mental and physical capabilities existing in the physical form, the living personality, of a human being, capabilities which he sets in motion whenever he produces a use-value of any kind” (p. 270)

For labour-power to be a commodity certain preconditions are required:

The labourer must be a free individual, owner of his own labour-power, selling it for a limited period (e.g. not a slave or a serf).

Secondly, the labourer must be unable to produce commodities or subsist on the basis of his own labour.

The value of labour-power is “determined by the labour-time necessary for the production, and consequently also the reproduction, of this specific article…the value of labour-power is the value of the means of subsistence necessary for the maintenance of its owner” (p. 274)

An allowance for the production of a new generation and the education and training of the worker.

The value of labour-power depends, therefore, on the quantity of means of subsistence required and on the value of those means of subsistence.

Labour-power is quiet distinct from labour. Labour-power, the commodity sold by the worker, is only the capacity to labour. Thus when the buyer purchases labour-power he does not, unlike other commodities, have in his hands the use-value of the commodity, he still has to realise the labour-power by setting the worker to work in the sphere of production.

Thus the examination of labour-power takes us beyond circulation, to the “hidden abode of production” where SV is created as the labourer is set to labour.

Marx’s analysis shows that economic categories are in fact the economic forms of appearance of particular social relationships, forms of appearance that hide as much as they reveal.

Thus it is only analysis that shows us behind the commodity the labour of interdependent producers, behind money the social character of labour, and behind capital the relationship between capitalist and wage-labourer.

To remain at the level of these economic appearances is to ignore the social foundation of the economy and so to take the social relations on which it rests for granted, to treat them as though they were natural rather than a social and historical phenomena.

Part Three: The Production of Absolute Surplus-Value

Chapter 7 – The Labour Process and the Valorisation Process

This chapter looks at production from two points of view:

The production of use-values, without regard to the social relations within which that production takes place

The production of value

The capitalist labour process is a combination of the production of use-values and of the production of value and surplus-value.

The main point is to show that the source of SV lies in the difference between the value of labour-power and the value created in the course of the working day.

It may only take half a day to produce the worker’s means of subsistence, but he can work for a full day. This is the source of SV.

Thus the ‘contradiction’ is resolved: SV is created without violating the laws of commodity exchange.

The distinction between labour process and valorisation process is a fundamental one.

It is the unity of the two that constitutes the capitalist production process: the production of use-values dominated by the production of SV.

Thus in a capitalist society it is only insofar as the production process produces SV that it will be undertaken by the capitalist: the production of use-values is conditional on the production of SV.

Chapter 8 – Constant Capital and Variable Capital

This chapter introduces the important concepts of constant and variable capital.

Marx argues that the value of the product is made up of the value added by the worker, on the one hand, and the value transferred from the means of production to the product.

This division corresponds to the division between abstract labour (the expenditure of socially necessary labour-time) and concrete labour (the production of a specific product by a specific kind of labour).

Constant capital is “that part of capital…which is turned into means of production (and) does not undergo any quantitative alteration in value in the process of production”

Variable capital is “that part of capital which is turned into labour-power and does undergo an alteration of value in the process of production” (p. 317)

For Marx capital is not simply the means of production.

Capital is a sum of money (value) laid out on means of production and labour power.

Labour-power has the unique property of creating value anew as it is used up.

Chapter 9 – The Rate of Surplus-Value

This chapter introduces the concept of the rate of SV (rate of exploitation).

Although the whole capital advanced appears to increase in the valorisation process, it is in fact only the variable part that increases.

The ratio of SV to total capital advanced is the rate of profit = SV/(VC + CC)

The rate of SV is “the ratio of the SV to the variable capital” (p. 324) = SV/VC

This is the same thing as the ratio of surplus labour (the labour time spent beyond that sufficient to replace the value of the worker’s labour-power) to necessary labour (the labour time spent replacing the value of labour-power, i.e. the number of hours socially necessary to produce the means of subsistence)

Thus SV simply represents a portion of the worker’s labour-time.

Chapter 10 – The Working Day

Marx argues that the length of the working day is set within limits of the necessary labour-time (the minimum) and physiological and social maximum that can be sustained.

The capitalist class demands as much as possible, the worker demands a shorter working day.

Thus between these limits it is a struggle between capital and labour, the capitalist class and the working class, that determines the length of the working day.

Marx argues that it is only when production is for exchange-value that the “boundless thirst for surplus labour arises” because before this the demand for surplus labour is limited by the needs of the exploiting class (p. 345)

Marx points to the tendency for capital to lengthen the working day as much as possible, far beyond the limits of endurance of the worker so that the labour force is debilitated.

He notes that this happens although it might seem to be in the interests of the capitalist to limit the exploitation of labour so as not to undermine the strength and numbers of the labour force in the future, but in fact capital does nothing because of overpopulation, which constantly provides new workers, and because competition between capitalists imposes such practices on every capitalist if he is to compete.

Thus it is the class struggle that determines the length of the working day.

Chapter 11 – The Rate and Mass of Surplus-Value

Marx establishes that the total mass of SV produced is equal to the variable capital advanced multiplied by the rate of SV (p. 418) –

There are limits to the extent to which capital can compensate for a reduction in the VC advanced (by employing fewer workers) by an increase in the rate of exploitation (by the lengthening of the working day) (p. 420)

If the value of labour-power and the rate of exploitation are fixed, then the mass of SV produced is proportional to the VC advanced (p. 421)

“This law clearly contradicts all experience based on immediate appearances” (since in practice capitals receive profit in proportion to the total capital laid out – the rate of profit).

Resolving this apparent contradiction Marx postpones to Volume III.

To be a capitalist it is necessary to have a certain minimum quantity of money that can serve as capital (i.e. enough to bring back sufficient SV to live on the labour of others) (p. 422)

As capital takes command of production, the capitalist directs the labour of the worker, and the capital relation becomes a coercive one.

The machine becomes the master of the worker (p. 425)

Part Four: The Production of Relative Surplus-Value

Chapter 12 – The Concept of Relative Surplus-Value

This chapter introduces the concept of relative SV.

SV can be increased not only by lengthening the working day, but equally, with a given length of working day, by reducing the length of the period of necessary labour.

(Although in practice this is often done by paying labour-power below its value, Marx is assuming that all commodities exchange at their value for now, so this possibility must be left aside).

The necessary labour-time can only be reduced by reducing the value of labour-power, i.e. the amount of labour-time required to produce the worker’s means of subsistence.

This is turn depends on an increase in the productivity of labour.

Capital can no longer take the mode of production as given.

(Note: a fall in the value of labour-power does not mean a fall in the real wage, but rather a reduction in the time required to produce the means of subsistence)

This leads Marx to distinguish absolute SV “which is produced by the lengthening of the working day” from relative SV “which arises from the curtailment of the necessary labour-time” (p. 432)

Relative SV cannot be produced directly by a single capitalist, for it depends on a reduction in the time taken to produce the worker’s means of subsistence, and thus involves a large number of capitalists improving their methods of production.

Thus relative SV is produced by the generalised development of the productivity of labour in those industries that supply the means of subsistence or means of production of means of subsistence.

Hence improvements in the productivity of labour in industries producing ‘luxury’ goods do not affect the rate of surplus value – they simply cheapen capitalists’ consumption goods.

Improvements in productivity do not benefit the capitalist who introduces them as much as they benefit all capitalists taken together. If the productivity of labour in baking is improved so that bread is cheapened and money wages correspondingly reduced, the gains accrue to all capitalists, not only to the bakers.

Why do individual capitalists introduce these improvements in productivity?

It is competition that drives each individual capitalist to increase the productivity of labour.

If a capitalist can improve methods of production and so produce with less than the currently socially necessary labour-time, then he can make extra profits, since the price will still correspond to the old methods of production.

As other capitalists introduce the new methods of production the price will fall and the extra profits will be eroded.

Thus every capitalist will seek to improve the productivity of labour to increase his profits, or to defend his profits from competitive erosion.

In the short-run the extra profits produced will accrue to the capitalist who introduced the new technique. But soon competition will erode this extra profit and the price of the commodity will fall.

If this commodity enters into the production of the workers’ means of consumption, or enters their means of consumption directly, the fall in price will reduce the value of labour-power, and so the necessary labour-time, and so the rate of SV for all capitalists.

If it is a luxury item the cost of living of capitalist will fall, but there will be no increase in SV (pp. 433-7)

It is important to understand that the earning of extra profits by an individual capitalist who introduces an improved method of production is not the same thing as the production of relative SV, which involves the capitalist system as a whole.

In particular, the capitalist who produces luxury goods can earn an extra profit, but make no contribution to increasing relative SV.

Thus the individual capitalist seeks to economise on labour, to reduce the amount of labour needed to make his product. The implication of the constant advance of productivity for the system as a whole, however, is a “cheapening of the worker”, a reduction of the value of labour-power, and so an increase in SV.

Thus SV can be increased not only by extending the working day, but also, as capital transforms methods of production, by increasing the productivity of labour.

Chapter 13 – Co-operation

Chapters 13, 14 and 15 deal with the progressive transformation of the mode of production carried out as capital took hold of production.

It is the progressive transformation of the mode of production that leads to the steady increase in the productivity of labour and so the production of relative SV.

Chapter 13 considers ‘cooperation’ which is the basis of all capitalist production: the bringing together of a large number of workers under the command of a single capitalist.

Initially capital simply increases the scale of handicraft production. This increase in scale has its effects:

  1. the      differences between individual workers are evened out, so that labour      comes to have from the start a socially average character
  2. the      increase in scale “produces a revolution in the objective conditions of      the labour process”, e.g. buildings are transformed and economies of scale      reduce costs of production even before the labour process itself is      affected.

It is only capital that can bring the workers together (in a capitalist society)

The increase in productivity that becomes possible with cooperation appears to be the product of capital itself: the productive power of collective labour appears to be a “productive power inherent in capital” (p. 451)

Chapter 14 – The Division of Labour and Manufacture

This chapter considers the development of manufacture, the form of cooperation based on the division of labour.

Manufacture assembles specialised workers in one place and breaks down the process of production into a series of distinct tasks.

This divides up the skills of handicraft production to give a labour force of workers with very narrow specialisations, on the one hand, and unskilled workers, on the other.

It is only through the exchange of products as commodities that labour of different forms is brought into contact with one another.

Manufacturing not only leads to the extreme specialisation of labour, but also to the extreme specialisation of tools and from this develops the machine.

Machinery makes possible the expansion in the employment of women and children, it imposes a further lengthening of the working day, it leads to intensification of labour, which is the inevitable corollary of the shortening of the working day as capitalists try to pack more labour into the shorter time (so generating renewed pressure for a shorter working day).

Social relations in the factory: the deskilling of labour, the domination of man by machine, the separation of mental from manual labour, the rigid discipline, the use of the machine as a weapon in the struggle of capital against labour and the worker’s illusion that it is the machine, rather than capital, that oppresses him.

Chapter 15 – Machinery and Large-Scale Industry

The impact of machinery on employment: it may throw workers out of work.

Although increased accumulation creates more jobs, even when workers can get new employment their situation becomes unstable: in and out of work.

Cyclical fluctuations become important.

Part Five: The Production of Absolute and Relative Surplus-Value

Chapter 16 – Absolute and Relative Surplus-Value

The definition of the productive labourer is extended to cover all those who, even if not working directly on the product, form part of the collective labourer.

On the other hand, the definition of the productive labourer also becomes more narrow. Since capitalist production is the production of SV, only workers who produce SV, and so contribute to the self-valorisation of capital, are productive.

The production of absolute SV is the extension of the working day beyond the point of necessary labour.

Relative SV production involves shortening the necessary labour time by revolutionising methods of production.

Thus relative SV depends on the development of capitalist methods of production and real subsumption of labour under capital (in which the worker is subordinated by the very methods of production: machinery) that develops out of the formal subsumption of labour (in which capital has taken control of the labour process but not yet transformed it).

While the production of absolute SV is characteristic when labour has been only formally subsumed, it continues with real subsumption and the production of relative SV.

In some respects absolute and relative SV cannot be distinguished: all SV is both absolute and relative.

However, the distinction is meaningful when we consider the need to increase SV: the capitalist then has to choose between lengthening the working day or increasing the productivity or intensity of labour. (Increasing the intensity of labour in some senses falls between increasing productivity (relative SV) and lengthening the working day (absolute SV) because intensified labour counts as a greater quantity of simple labour).

Chapter 17 – Changes of Magnitude in the Price of Labour-Power and in Surplus-Value

Marx makes it clear that he regards it as quite possible for wages to rise if productivity is rising (which gives the lie to the claim that he regarded a progressive decline in living standards as inevitable – the ‘immiseration thesis’).

The point is that as productivity rises the value of labour power falls because the labour-time required to produce the worker’s consumption falls.

The price of labour (the wage) may fall less than this, however, in which case the living standards of the workers will rise at the same time as the rate of SV (in this sense, workers and capitalists ‘share’ in the benefits of the productivity advance).

Chapter 18 – Different Formulae for the Rate of Surplus-Value

Marx contrasts his formula for the rate of SV with that of the classical economists.

They defined it as the share of SV in the product.

This both misrepresents the degree of exploitation of labour, leads to the assumption of a working day of given length and conceals the “specific character of the capital-relation”, instead giving the impression that capitalists and workers share the product.

Part Six: Wages

Chapter 19 – The Transformation of the Value (and Respectively the Price) of Labour-Power into Wages

This chapter examines the wage-form, in which the value of labour-power appears in the form of wages for labour and so makes it appear as though the worker is paid not for his labour-power, but for the labour he has performed.

The form of appearance is fundamental to the ideology of capitalist society…all labour appears as paid labour.

Chapter 20 – Time-Wages

Chapters 20, 21 and 22 look at the variants of the wage-form.

Chapter 21 – Piece-Wages

Chapter 22 – National Differences in Wages

Marx argues that in taking account of different national wage levels we have to take account of the social conditions of labour in different countries – the historically developed level of workers’ needs, the price of necessities, the extent to which the labour of women and children is used, the length of the working day, the productivity and intensity of labour.

Since the productivity and intensity of labour vary from country to country, labour-times cannot be directly compared across national boundaries.

Thus commodities do not have a common international value.

Correspondingly, capitals of countries with high productivity and intensity of labour are able to appropriate super-profits through international trade, by selling their commodities abroad at prices above the national value in the supplying country, but below that in the buying country.

Finally, high wages should not be equated with a lower level of exploitation.

Since higher wages correspond to a higher degree of development of the productive forces, and thus a greater intensity and productivity of labour, higher wages more characteristically correspond to a higher rate of exploitation.

Part Seven: The Process of Accumulation of Capital

So Marx started off by examining the commodity, and the commodity relation as the social relation between commodity owners.

He examined money as a developed form of value, that emerged out of exchange, and then introduced the concept of capital, self-expanding value.

Starting from the relation between capitalist and labourer as an exchange relation between commodity owners, Marx moved behind this relation to the sphere of production in which the capitalist set the labourer to work.

He then analysed in detail the production of SV in the immediate process of production, where the relation between labourer and capitalist is no longer a relation of equality between commodity owners, but an exploitative relation in which capital seeks to maximise the SV it appropriates.

Marx distinguishes the labour process from the valorisation process and argued that capitalist production is a combination of the two in which it is valorisation that is in command.

He then went on to examine absolute SV and the means of producing absolute SV by lengthening the working day.

He then turned to relative SV and the means of producing this by revolutionising the means of production. This led him to examine in great detail the way in which capitalist control of the process of production transforms production as both a social and a technical process in the search for relative SV.

Finally Marx has a digression on wages, arguing wages are the form of appearance of the price of labour power in which it appears that all labour is paid for. It is thus a form of fetishism.

So far the analysis of the production of SV has looked simply at one production period. However, once SV has been produced and incorporated into the original capital, the new enlarged capital is laid out again.

Thus capitalist production has a fundamental dynamic, the dynamic of accumulation, in which the scale of capitalist production constantly expands.

It is the dynamic of accumulation that governs the development of capitalist society, for it is not simply a quantitative expansion. The increasing scale of accumulation also produces qualitative changes.

The concept of capital accumulation is therefore central to Marx’s understanding of historical development, of the ‘laws of motion’ of capitalist society.

Chapter 23 – Simple Reproduction

Marx defines the circulation of capital in which capital passes through its various forms: money is transformed into means of production and labour-power in circulation. Means of production and labour-power are converted into products, that embody the original capital plus the SV, in production. The products are then sold in circulation, with the aim of realising the original capital plus SV in order to throw the augmented capital back into the fray by buying more means of production and labour-power.

For the moment Marx simplifies the analysis of accumulation by making two fundamental assumptions.

Firstly, he abstracts from the sphere of circulation altogether and assumes that all commodities are sold without any difficulty at their value. (It is relaxed in Volume II).

Secondly, Marx assumes that there are only capitalists and workers, ignoring the different forms of capital – ignoring rent, interest, money and the credit system. (This assumption is relaxed in Volume III).

The fact that in the analysis of Volumes I and II Marx does not consider the division of SV between different capitalists, but only considers the division of SV between different capital and labour, is very important.

Marx, for the bulk of his analysis, ignores the fact that there are many capitals, each independent of the others, to conduct the analysis at the level of capital-in-general.

Beware those who try to apply the analysis of Volume I directly to the real world.

If the SV that “acquires the form of a revenue arising out of capital” (p. 712) is consumed by the capitalist, then the capital laid out in the next period will be unchanged. (we are dealing with simple reproduction, where there is no change in scale because SV is consumed rather than invested).

It becomes clear that the worker is paid a portion of his own product, although this transaction “is veiled by the commodity-form of the product and the money-form of the commodity”.

Thus “variable capital is therefore only a particular historical form of appearance of the fund for providing the means of subsistence…”

It is only when the process is seen within the context of reproduction that this becomes clear, and the idea that VC is advanced by the capitalist disappears.

Even if the capitalist advanced the VC in the first place, it is not long before the capitalist has consumed all his original capital, so that all that is left is capitalised SV.

When we look at the reproduction of the system as a whole even the individual consumption of the worker becomes a part of the reproduction of the whole, since it is the reproduction of labour-power.

Since in his consumption the worker consumes his means of subsistence, he has to return again to the labour market as wage labour.

Thus the worker is as much an “appendage of capital” as is the machine, his independence being an independence of any particular capitalist, but not of the capitalist class as a whole.

Marx sums up: “The capitalist process of production, therefore, seen as a total, connected process, i.e. a process of reproduction, produces not only commodities, not only SV, but it also produces and reproduces the capital-relation itself: on the one hand the capitalist, on the other the wage-labourer” (p. 724)

Chapter 24 – The Transformation of Surplus-Value into Capital

Marx now considers reproduction on an increasing scale as SV is converted into capital: “The employment of SV as capital, or its reconversion into capital, is called accumulation of capital” (p. 725)

The accumulation of capital implies that the means of production and means of subsistence that are to be purchased by the reinvested SV have in fact been produced (Marx examines this in more detail through his ‘reproduction schemes’ in volume II).

The working class is employed by capital that is the product of its own surplus labour.

Marx is argues that it is only as a class that the exploitation of labour by capital appears and that classes cannot be conceptualised on the basis of commodity exchange.

The political economists wrongly believed that all SV is converted into labour-power.

Marx explained that the additional capital has to be laid out to buy both labour-power and means of production if it is to enter the accumulation process.

Marx then goes on to look at the development of the concept of capitalists’ saving and consumption.

In the early stages of accumulation the capitalist was compelled to be miserly and abstentious, and political economy contrasted him with the wanton and idle aristocrat who wasted capital in consumption, thus all consumption by the capitalist was seen as a betrayal of his capitalist duty.

Later, as accumulation progresses, it becomes possible and even necessary, for capitalist consumption to increase. As the capitalist came to be confronted, from 1848, by the working class, rather than the landowner, vulgar economics came to replace political economy. Suddenly, instead of accumulation being considered the sacred duty of the capitalist, of abstinence from consumption, so that profit comes to be seen as the reward for his self-denial.

To criticise this view Marx simply points out that reproduction on an increasing scale is characteristic in the economic formations of many kinds of society without those societies having capital: abstinence is a universal feature of expanded reproduction, while capital is a particular economic category and social relation.

Given the rate at which capitalists consume out of SV, the rate of accumulation will depend on the magnitude of SV, and so on the factors that determine that magnitude.

Marx discusses such factors as forcing wages below the value of labour-power, increasing the duration and/or intensity of labour and increasing the productivity of labour.

An increase in the productivity of labour means that the same quantity of goods cost less. Thus the capitalist can maintain the same standard of living while increasing the amount of SV thrown back into production.

In the same way a given magnitude of capital can employ more labourers and more means of production and so both the physical and the value rate of accumulation increases.

Marx then criticises the labour-fund theory, that argued that there was only a fixed fund available to supply the workers, so that the total wage bill was invariable. Hence if one worker had a pay increase, others would either have their pay reduced or lose their jobs. This theory presupposes both that the supply of wage-goods is fixed (and that workers cannot encroach on capitalists’ consumption) and that a given number of workers provide a given amount of labour. It is a theory that persists today.

Chapter 25 – The General Law of Capitalist Accumulation

Marx introduces the concept of the composition of capital.

The value composition of capital is the proportion in which the capital is divided between constant and variable capital.

The technical composition of capital refers to the physical relationship between means of production and labour in the process of production.

The organic composition of capital is defined as “the value composition of capital, insofar as it is determined by its technical composition and mirrors the changes in the latter” (p. 762)

This definition is not altogether clear. It seems that what Marx is saying is that the organic composition is the same thing as the value composition if we abstract from changes in the value of labour power or of means of production: it is the ratio of means of production to labour-power valued at constant prices, and so abstracting from changes in the productivity of labour in the production of means of production or of labour power.

With a given organic composition of capital, accumulation of capital implies an increase in the number of workers. Eventually such an increase may outstrip the supply of labour-power, so that wages rise. If the price of labour rises enough to reduce the rate of accumulation, then the demand for labour falls and the pressure on wages is reduced.

Hence the rate of accumulation is not determined by the supply of labour, rather it is fluctuations in the rate of accumulation that determine the amount of exploitable labour-power.

He argues it is accumulation that determines the growth of employment.

Marx then considers changes in the organic composition of capital.

Accumulation is associated with a steadily increasing productivity of labour, and this in turn implies a steady increase in the technical composition of capital: as a consequence of increasing productivity each worker turns more raw materials into products; while correspondingly the introduction of more massive machinery, etc to assist the worker is a cause of increasing productivity.

Marx then argues that this change in the technical composition of capital is reflected in an increase in the value composition as the proportion of capital laid out as constant capital steadily increases. (Note, this in fact assumes that the prices of means of production do not fall (as a result of increases in productivity) faster than their volume increases).

The process of accumulation is a process of the expansion of capitalist production and an increase in its scale. This involves both the increasing concentration of the means of production in the hands of ever larger capitalists, and the appearance of new capitalists in competition with one another.

Apart from this concentration of capital that is a result of accumulation, there is also a centralisation of capital as more profitable capitals swallow up less profitable ones.

Centralisation is a result of:

  1. the      economies of scale that enable      large capitals to out-compete small ones
  2. the      intense competition between      smaller capitals that drives many to ruin
  3. the      operation of the credit system      (bringing together much larger masses of capital than could be amassed by      concentration alone, e.g. railways)

The rising organic composition of capital means fewer and fewer workers are employed by a given size of capital, and correspondingly the renewal of old capital tends to displace workers.

Marx argues that the rising organic composition of capital means that a larger capital is required to maintain a given level of employment. Thus accumulation must become progressively more rapid to maintain employment. At the same time, though, the rapid accumulation means a more rapid increase in the organic composition. Thus accumulation itself produces a “relatively redundant working population” (i.e. creates unemployment): this is the relative surplus population.

Because of the unevenness of capitalist development this relative surplus population is constantly being created in some branches of production, and is often reabsorbed in others, and this is on an ever-increasing scale.

This surplus population is a “condition for the existence of the capitalist mode of production” as the industrial reserve army that provides a mass of available labour power independent of the natural growth of population, and permits accumulation to proceed unevenly.

The industrial reserve army also, by its competition,, forces the employed workers to submit to intensified labour, so further reducing employment.

Finally, it is the expansion and contraction of the industrial reserve army that “exclusively” regulates the general movement of wages (p. 790).

Thus the supply and demand for labour are not independent of one another, but both are aspects of the accumulation of capital: accumulation both employs workers and throws them onto the labour market and “the mechanism of capitalist production takes care that the absolute increase of capital is not accompanied by a corresponding rise in the general demand of labour” (p.793), (i.e. if accumulation exhausts the reserve army and wages rise, then this gives a stimulus to increasing the organic composition of capital that displaces workers so that wages fall back).

Marx then looks at the relative surplus population in more depth.

There are three basic forms:

  1. Floating – in and out of work,      displaced by cyclical fluctuations, technical advance, etc
  2. Stagnant – very irregular      employment often on very bad terms, causal and seasonal workers
  3. Lumpenproletariat – paupers

Marx sees the constant growth of the reserve army and of pauperism as the counterpart to the process of capital accumulation. “This is the absolute general law of capitalist accumulation” (p. 798), although Marx adds, “Like all other laws, it is modified in its working by many circumstances”.

Under capitalism accumulation is not for the benefit of the worker but is the means by which his or her position is steadily worsened.

The final section illustrates the “general law of capitalist accumulation” by providing a succession of examples of the growth of poverty and unemployment in the midst of rapid accumulation, concentration and centralisation of capital.

Note on p. 822, Marx refers to the best-paid section of the working class as its “aristocracy”.

Part Seven ties together his earlier analysis by relating the parts of the system together into an interdependent and dynamic whole. Thus, for example, the separation of the labourer from the means of production and subsistence, on the one hand, and the confrontation of this labourer with money capital, on the other, were initially seen as being separate preconditions of capitalist production. The analysis of accumulation ties these together and shows how capitalist production creates not only use-values, not only values, but also capitalist social relations: capital and wage labour are both products of accumulation of capital. In the same way the growth of the labour force or of the market are not factors external to capitalist production, but are themselves aspects of the accumulation process.

Part Eight: So-Called Primitive Accumulation

Marx considers the origins of the relations between labour and capital.

The process in which the workers (peasants and artisans) are dispossessed of their means of production and subsistence, the process of “primitive accumulation”.

Chapter 26 – The Secret of Primitive Accumulation

Marx agues the origins cannot be found in a sum of money, perhaps saved by an industrious worker, for money can only be transformed into capital through the purchase of labour power.

Chapter 27 – The Expropriation of the Agricultural Population from the Land

Chapter 28 – Bloody Legislation against the Expropriated since the End of the 15th Century

Chapter 29 – The Genesis of the Capitalist Farmer

Chapter 30 – Impact of the Agricultural Revolution on Industry

Chapter 31 – The Genesis of the Industrial Capitalist

“Force is the midwife of every old society pregnant with a new one. It is itself an economic power” (p. 916)

Chapter 32 – The Historical Tendency of Capitalist Accumulation

Primitive accumulation is the expropriation of petty private property by capital, capitalist accumulation continues this process with the centralisation of capital and the socialisation of labour until they “become incompatible with their capitalist integument. This integument is burst asunder”

Chapter 33 – The Modern Theory of Colonisation

Volume 2 – The Process of Circulation of Capital

Volume 1 started with an examination of the commodity and of the process of exchange, before turning to the study of production as the process of production of SV. In Volume 1, therefore, production and circulation were examined independently of one another, with circulation being treated in parentheses.

In Volume 2 Marx turns to the role of circulation in the capitalist society and examines the relationship between capitalist production and circulation.

Marx’s main concern is to show in a systematic and rigorous way that circulation is subordinate to production: that capitalist social relations are rooted in production rather than in circulation; that the role of circulation is to provide a mechanism that can, through the exchange of products and the operation of the markets, ensure that commodities of particular types (i.e. particular use-values) are produced in the quantities and in the proportions required for the reproduction of the system.

Thus the market serves to co-ordinate the different branches of capitalist production: it regulates the “social division of labour” in a capitalist society as in simple commodity production.

Part One: The Metamorphoses of Capital and their Circuit

Chapter 1 – The Circuit of Money Capital

In the first three chapters Marx looks at the circuit of capital from three different points of view.

The basic circuit under examination is the circuit of industrial capital.

This is composed of the purchase of labour power and means of production, the act of production, and the sale of the commodities produced in a constantly repeated cycle.

If we look at the cycle starting from the sum of money capital we have the circuit of money capital: M – C – L/MP …P…C’ – M’


M = money-capital

C = commodity-capital (composed of labour-power and means of production)

P = productive capital

C’ = commodity-capital (now composed of products)

M’ = money-capital (from the sale of the products)

Thus M, C, C’ M’ are the various forms of capital, appropriate to the various phases in the circuit of industrial capital.

Marx wants to show:

  1. That these different forms of capital are not inherently capital but only become capital because of their roles within the circuit as a whole.
  2. That the circuit as a whole is defined as a circuit of capital because it includes within it the capitalist process of production within which SV is produced. Thus it is through their functional relationship to the production of SV that money and commodities within this circuit function as capital.

The first stage is the purchase of commodities with money: M – C.

What makes this act capitalist is not “the form of the act but its material content” (p.24), the fact that C is made up means of production and labour-power in definite proportions appropriate for capitalist production.

Thus C here takes the form of productive-capital, capital that can produce SV.

In the transformation of money-capital into productive-capital the status of the two purchases M – L and M – MP is different.

MP have to be purchased in order to set the LP to work.

LP is purchased because it is productive of SV.

Thus M – L is the core of the circuit, the characteristic transaction of the capitalist mode of production.

(It is only when the purchase of LP becomes the means of producing SV [when LP appears characteristically as a commodity] that such a purchase converts the money involved in it into money-capital. Thus money does not become money-capital simply by virtue of employing somebody [e.g. a servant]).

M – L requires that the worker has been separated from the MP and subsistence, and “the class relation between capitalist and wage-labourer therefore exists, is presupposed from the moment that the two face each other in the act of M – L” (p. 29)

This is very important: it means that the exchange of money for LP is not a relation between two individual commodity owners; thus it does not have the form of exchange analysed in Volume 1. It is an exchange between individual members of two antagonistic social classes. The capitalist comes to market as a capitalist, not simply as an isolated individual, while the worker comes as a worker.

It is this class relation between capital and labour that is the basis of capitalist production and so makes possible the transformation of money into capital.

Thus the circuit of money-capital, in which money appears to generate SV, on examination presupposes the circuit of productive capital, within which the purchase of LP by money is subordinate to the production of SV (i.e. the role of money is simply to bring together the elements for the production of SV).

The circuit presupposes the development of commodity production on an extensive scale: the capitalist must have money-capital to start with and this must come from the prior sale of commodities.

The workers must be able to buy commodities with their wages if they are to reproduce their LP.

Hence capitalist production is also the generalisation of commodity production.

LP is simply a commodity in the hands of the worker, only becoming capital when bought by the capitalist, while MP only function as capital when combined with LP.

Commodities are capital because of their role in the circuit of capital as the bodily form of valorised capital: capital plus SV.

The sale of the commodities that comprises commodity capital is a realisation of the capital-value and SV embodied in those commodities.

While capital is in the form of commodity-capital, awaiting a seller in the market, it is not creating new value and so is not creating SV.

Thus the amount of SV a capital can ‘produce’ in a certain time depends on the amount of time it is tied up as commodity-capital: the more rapidly a capital can be “turned-over” the more SV it can produce.

This introduces a determinant of the rate of SV other than the rate of exploitation.

The transformation of commodity-capital into money represents the realisation of SV in the form of money.

Thus the final money-capital M’ plays two roles: it restores the original capital to the money-form and it realises the SV.

If the circuit of money-capital is looked at as a whole, it looks as though it is the original capital that has given rise to the SV on its own.

Marx has tried to show that it is only in its relation to the production of SV in the circuit of capital that the original sum of money, the productive capital, the commodity and the final sum of money are all forms of capital.

It is only the process of production that is “a real metamorphosis of capital, as compared with the purely formal metamorphosis of circulation” (p. 47)

Because capital has to pass through all these functional forms (money-capital, productive-capital and commodity-capital) it can be blocked, e.g. in the form of a hoard of money, a stock of unsold commodities, or idle labour and means of production, with the result that the production of SV, and so accumulation of capital, is slowed. (p.48)

This is quite normal with regard to fixed capital: a certain amount of capital is immobilised in the form of machines.

Transport and communications, like gold production, are exceptional in that the product does not take an independent commodity form. (p. 52-5)

Looking at the circuit of industrial capital from the starting point of money-capital imposes a particular perspective on the circuit:

  1. It makes it clear that the purpose of production is exchange-value, and not use-value, so that the process of production appears “merely as an unavoidable intermediate link”
  2. Production itself is seen as merely the means of expanding value in between two phases of circulation
  3. SV is the basis of the circuit
  4. The circuit expresses “simply the process of self-expansion and accumulation” (p. 57)

Chapter 2 – The Circuit of Productive Capital

Within a capitalist society circulation is subordinate to production: it is within the sphere of production that SV is produced.

The circuit of productive-capital complements the circuit of money-capital in drawing attention to the two central features concealed by the latter:

  1. the role of production
  2. the character of the circuit as part of the constant reproduction of capital

Instead of production appearing as an interruption to circulation, circulation now appears simply as a means of reproduction.

If the capitalist consumes the entire SV this leaks out of the circuit and we have simple reproduction.

In this case it may appear that the purpose of production is the production of use-values (since its ‘product’ is capitalist consumption)

Money now appears simply as the converted form of productive capital, thus as a “money-expression of past labour” (p. 70)

In fact credit means that capital may never actually exist in the form of money, and the labourer may be paid not with money representing past labour, but with money representing a draft on future labour.

Money is simply the circulating medium of capital and it becomes clear that it has no power of self-generation – so long as capital remains in the money-form its reproduction and self-expansion is interrupted.

The consumption of commodities at some point is implied by the circuit of capital (e.g. workers must consume), but consumption is not a part of the circuit itself.

The capitalist need only sell the commodities produced, and it makes no difference to him whether they are sold for consumption, or are sold to a merchant to lie in a warehouse.

If, however, production is outrunning consumption a crisis will eventually break out (p. 75-6)

In fact capitalist reproduction takes the form of accumulation, or reproduction on an extended scale, in which the SV is itself, at least in part, converted into capital rather than being consumed by the capitalist.

The increase in magnitude of the productive capital at the end of the circuit in relation to the beginning now expresses not the production of SV (because that was completed in the initial process of production) but its capitalisation (p. 80)

Within the circuit the capitalist may need to hold money in the form of a hoard or in the form of a reserve fund. In both cases the money is functioning within the circuit as money-capital, but only in a potential or latent form.

While the MonetarySchool and the MercantileSchool focused their attention on the circuit of money-capital, Classical Political Economy focused on the circuit of productive capital.

Chapter 3 – The Circuit of Commodity Capital

Unlike the previous two circuits, SV already exists at the beginning of the circuit (p. 87-91)

Reproduction is also implied.

While the circuit of productive-capital implies accumulation and is thus a critique of the circuit of money-capital, it at the same time does not indicate that the object of the whole process is the self-expansion of value (valorisation), which was the advantage of the circuit of money-capital.

Thus classical political economy tended to see the circuit as a circuit whose aim was the production of use-values, and so to ignore the capitalist social form of the process.

They also could not understand money and money-capital because they saw money only in its role as means of circulation.

The circuit of commodity-capital includes both reproduction and the capitalist character of production.

The circuit of commodity-capital, because it starts off with capital plus SV, includes consumption within it.

The circuit of commodity-capital implies at each stage the existence of other commodities outside this individual circuit: e.g. to provide the means of production for the circuit.

For these reasons the circuit of commodity-capital “clamours to be considered not only as the general form of the circuit…but simultaneously also as a form of movement of the sum of the individual capitals” (p. 96)

Thus the circuit of commodity-capital leads us to look at the interconnections between the circuits of individual capitals which form interdependent parts of the total social capital, i.e. to look at the system as a whole in order to bring out the interdependence of individual capitals as buyers and sellers of commodities.

Thus it is only through the circuit of commodity-capital that we can progress from the individual capital to the total social capital.

The starting point of the commodity-capital circuit is a particular bundle of commodities. For the individual capitalist this presumes that there are others who will:

  1. purchase his commodities
  2. sell him the commodities he needs: L and MP

For the total social capital the circuit of capital is only possible if the commodities in the bundles are just those commodities required for production and consumption in the next period, e.g. must comprise foodstuffs, MP, luxury goods in appropriate proportions.

Thus in examining the reproduction of the total social capital this is the appropriate formula to use (as Quesnay did, and Marx will in part III of Volume 2).

Chapter 4 – The Three Figures of the Circuit

Marx now turns to look at the circuit as a whole.

The total circulation process of capital comprises:

  1. the unity of the processes of production and circulation: each is necessary to the other
  2. the unity of the three forms of the circuit (capital does not now take the form of money-capital, now the form of productive-capital and now commodity-capital. The process is continuous, therefore a given capital always exists in all three forms, in definite proportions)

Hence capital can only be understood as motion.

Hence if the process is blocked by a crisis, money and commodities cease to act as capital.

The circuit of the total social capital is made up of the movements of a whole series of interconnected individual capitals.

But the interdependence of the individual capitals within the process means that each individual is subordinate to the process as a whole.

It is possible that the circuit of capital encompasses precapitalist forms of production, e.g. some MP may be produced by peasants or slaves, but this doesn’t affect the form of the circuit because once they enter the circuit they still function as commodities.

On the other hand, by integrating precapitalist modes of production into the circulation of capital, these modes are transformed into forms of commodity production.

Marx argues that production dominates exchange: in a capitalist society exchange is an aspect of circuits of capital, it is inappropriate to characterise societies by their mode of exchange: such a characterisation leads to confusion of commodity production with capitalist production.

Chapter 5 – Circulation Time

While a capital is tied up in circulation it cannot be employed in the production of SV.

Thus capitals seek to reduce the circulation time in order top reduce the period for which capital is unproductive, and thereby increase the rate of profit (since the same capital can now produce more SV).

Thus the amount of SV produced by a given capital no longer simply corresponds to the rate of exploitation.

Chapter 6 – The Costs of Circulation

Transport is a circulation cost, but it also involves a genuine transformation of the product as a use-value and can therefore add value.

Other costs, such as storage, do not change the product as a use-value and so cannot increase value (because a commodity that has been stored is indistinguishable from one which has not).

The labour employed in the sphere of circulation (storekeepers, bookkeepers, shop workers, advertising agents, sales reps, etc) is unproductive labour.

And the outlay on that labour is a drain on capital, reducing rather than creating SV.

Part Two: The Turnover of Capital

Some parts of capital, e.g. machines, are tied up for longer and so circulate more slowly than other parts, e.g. raw materials or labour-power.

Some commodities take much longer to produce than others, while some stay longer in circulation than others.

All these factors affect the turnover time of capital and so the amount of SV a given capital can produce, independently of the rate of exploitation.

Thus the rate of profit depends not only on the rate of exploitation and the organic composition of capital, but also on the turnover time.

Chapter 7 – Turnover Time and Number of Turnovers

Chapter 8 – Fixed Capital and Circulating Capital

Chapter 9 – The overall Turnover of the Capital Advanced. Turnover Cycles

Chapter 10 – Theories of Fixed and Circulating Capital. The Physiocrats

Chapter 11 – Theories of Fixed and Circulating Capital. Ricardo

Chapter 12 – The Working Period

Chapter 13 – Productive Time

Chapter 14 – Circulation Time

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

Chapter 16 – The Turnover of Variable Capital

Chapter 17 – The Circulation of Surplus-Value

Part Three: The Reproduction and Circulation of the Total Social Capital

Marx analyses the circulation of individual capitals as part of the total social capital.

For the individual capital to be able to lay out money as capital not only labour-power, but also specific MP had to be available.

In order for LP to be reproduced, and so available, means of consumption must be available in the market.

For the capitalist to sell his product, to realise his commodity capital in the form of money, there has to be a market for that product.

It is through these purchases and sales of commodities that the interdependence of the various individual capitals as parts of the total social capital is expressed.

They are the material content of the individual exchange relationships between individual capitalists and between capitalist and workers.

Marx analysed these relations of interdependence in terms of the two departments of social production:

  1. i.                    Department I is the production of MP
  2. ii.                  Department II is the production of means of consumption (MC)
    subdivided into:

    1. a.      IIa producing workers’ MC
    2. b.      IIb producing ‘luxuries’ for capitalists’ consumption

Capitals of department I produce MP for departments I and II, capitals of department IIa produce MC for workers of departments I and II, capitals of department IIb produce for the consumption of all capitalists.


C1 + V1 + S1 = MP

C2 + V2 + S2 = MC

(where C = constant capital, V = variable capital and S = SV ???)

In simple reproduction all the SV is simply consumed, thus the system will be in equilibrium when MC (the amount of the MC produced) equals V1 + V2 + S1 + S2 (the amount consumed by capitalists and workers) and when MP (the amount of MP produced) equals C1 + C2 (the amount consumed by both departments).

If this is the case then every individual capitalist will be able to buy what he needs at its value, and will be able to sell his product (and so realise his SV).

In expanded reproduction the capitalist will devote some of S to buying MC for himself, and some to buying MP and LP (and so MC) in order to expand production.

Thus for expanded reproduction the output of departments I and IIa must be increased and that of department IIb reduced.

In the same way, if capitalists are steadily increasing the value composition of capital, then the output of department I will have to increase relative to that of department II.

Marx shows how the market mediates these interrelationships in order to make sure that commodities are in fact produced in the required proportions (that equilibrium is indeed achieved), e.g. if too few MC and too many MP are produced, the price of MP falls below their value and that MC rise above their value. Capital will therefore flow into the production of MC and out of the production of MP so that equilibrium is restored.

Thus the market operates in order to ensure proportionality between departments.

This implies that disproportionality on its own cannot give rise to a crisis, because the market automatically adjusts the proportions between departments.

Hence a crisis cannot arise out of circulation alone.

Even if the crisis breaks out in the sphere of circulation (e.g. capitalists are burdened with unsold commodities), the source of the crisis must be sought in the conditions of production of SV.

That is, some capitalists cannot sell their commodities because others have stopped buying them. Other capitalists have stopped buying them because they have decided to withhold their capital: they are neither buying MC, nor are they buying MP and LP.

But if they are not buying MP and LP it must be because they judge the conditions for the production of SV to be unfavourable (e.g. the rate of profit too low).

Thus a fall in the rate of profit is expressed in the refusal of some capitalists to invest, so that others find themselves with unsold commodities: the crisis first appears in the sphere of circulation but it has its roots in production.

Marx’s reproduction schemes have played an important role in subsequent Marxist debate about the breakdown of capitalism.

Some have argued that for Marx the source of the crisis was disproportionality between departments. This leads to the reformist argument that state intervention can regulate production to solve problems of disproportionality and so resolve capitalist crises.

This argument is simply based on a misreading of Marx, because Marx certainly felt that the market could look after problems of proportionality.

Others have argued that capitalism has an inherent tendency to underconsumption (i.e. to produce more than can be sold – this is a variant of the disproportionality thesis).

The argument is that as more and more SV is produced the problems of ‘spending’ that SV increase: the total that department II can produce is limited by the size of the consumption of workers and capitalists, thus the bulk of the increase in production must take place in department I.

But the argument then goes, why should capitalists go on producing MP without limit, if those MP are not destined to produce more MC in the end?

This leads to the argument therefore, that the survival of capitalism depends on a massive increase in unproductive consumption (i.e. luxuries, weapons, etc) to absorb the ever increasing SV (this is the argument of Baran and Sweezy: Monopoly Capitalism as well as of some theories of the “permanent arms economy”)

The answer to this argument is that capitalists will go on buying more MP not without limit, but so long as it is profitable for them to do so.

If the amount of SV produced cannot be spent on LP and MP in the existing proportions (because there are not enough new workers), then it can be spent by increasing the organic composition of capital (spending more on MP relative to LP), and capitalists will do this so long as it is profitable to do so.

Thus again it is not underconsumption that precipitates a crisis, but the unfavourable conditions for the production of SV.

The classic underconsumptionists interpretation of Marx is Rosa Luxemburg’s The Accumulation of Capital.

Chapter 18 – Introduction

Chapter 19 – Former Presentations of the Subject

Chapter 20 – Simple Reproduction

Chapter 21 – Accumulation and Reproduction on an Expanded Scale

Volume 3 – The Process of Capitalist Production as a Whole

This volume is concerned primarily with the internal differentiation of the capitalist class.

The first three parts are concerned with the division of SV amongst individual capitals, where it takes the form of profit.

The following parts are concerned with merchants’ capital, interest-bearing capital and landed capital.

The last part draws the whole thing together.

The aim of the volume as a whole is to “locate and describe the concrete forms which grow out of the movement of capital as a whole. … The various forms of capital, as evolved in this book, thus approach step by step the form which they assume on the surface of society, in the action of different capitals on one another in competition, and in the ordinary consciousness of the agents of production themselves” (p. 25)

Part One: The Transformation of Surplus-Value into Profit, and of the Rate of Surplus-Value into the Rate of Profit

Chapter 1 – Cost Price and Profit

This chapter introduces the notion of cost price.

The actual production cost of a commodity is c + v + s (the amount of labour time embodied in it)

Where c = constant capital, v = variable capital, s = SV

However the capitalist does not pay for s, thus the cost appears to the capitalist as c + v = k, the cost price, the expenditure of capital

The category of cost price has nothing to do with the formation of value.

Thus an increase in the cost price that arises out of an increase in wages does not have any effect on the value created, but only on the division of that value between capitalist and worker.

However, for the capitalist there is no apparent difference between labour power and means of production as costs.

The capitalist does not distinguish between constant and variable capital.

Thus for the capitalist the SV produced appears to derive not from v but from the whole capital advanced.

As such, the SV appears in the converted form of profit on capital.

Thus the value appears as cost price + profit = k + p

“The profit…is thus the same as SV, only in a mystified form that is nevertheless a necessary outgrowth of the capitalist mode of production…Because at one pole the price of labour power assumes the transmuted form of wages, SV appears at the opposite pole in the transmuted form of profit” (p. 36)

Chapter 2 – The Rate of Profit

This chapter introduces the concept of the rate of profit.

The capitalist relates his profit not to the advanced variable capital, but to the total capital advanced and this measures the extent of his gain.

The rate of profit is therefore different from the rate of exploitation (s/v).

It is s/(c+v)

Thus the profit produced appears not as a form of surplus labour, but as the product of capital itself.

Moreover, because the capitalist can increase his profits by selling his commodity above its value, it appears that the profit derives as much from the ability of the capitalist to exploit market possibilities as on his ability to exploit his workers, whereas in fact, if the capitalist sells his product above its value to another capitalist he is simply diverting SV from the other capitalist to himself.

Thus we have another form of the fetishism in which “the relationships of capital are obscured by the fact that all parts of capital appear equally as the sources of excess value (profit)” (p. 45)

Chapter 3 – The Relationship between Rate of Profit and Rate of SV

The rate of profit is always smaller than the rate of SV.

The extent to which it differs is indicated by the value composition of capital (c/v).

Rate of profit = S/C+V = S/V.V/C+V = S/V.1/(C/V+1)

= rate of exploitation . organic composition of capital

Hence with a given rate of exploitation, the higher the organic composition the lower the rate of profit.


Chapter 4 – The Effect of the Turnover on the Rate of Profit

The more rapidly capital turns over (the shorter the turnover time) the higher the rate of profit.

Marx generally leaves turnover time out of account in this volume.

Chapter 5 – Economy in the Use of Constant Capital

Because the rate of profit depends on the composition of capital as well as the rate of exploitation, it can be increased by economy in the use of constant capital.

Thus capitalists try to save on plant and buildings, to reduce wastage of raw materials and to invent cheaper machinery.

This economy is at the expense of the working conditions of the working class, as they receive inadequate protection from the elements, workplaces are overcrowded and machinery is run at dangerously high rates.

Chapter 6 – The Effect of Changes in Price

The rate of profit can also be increased by cheapening raw materials, especially through foreign trade, by cheapening the workers’ means of consumption and so labour power and by accelerating the depreciation of machinery.

Chapter 7 – Supplementary Remarks

There are many factors that can affect the rate of profit quite independently of the rate of exploitation, through their effect on the value composition of capital or on its turnover time.

None of the factors affect the total profit (i.e. total SV) produced, but they all serve to alter the size of the capital to which it is related.

Part Two: The Transformation of Profit into Average Profit

Chapter 8 – Different Compositions of Capital in Different Branches of Production and the Resulting Variation in Rates of Profit

Marx now applies a simplifying assumption that the rate of exploitation is the same in all departments.

(This is not unrealistic as it depends upon an approximate equalisation of wage levels, intensity of labour and length of the working day between industries).

Given this assumption, the rate of profit on a particular capital, so long as everything exchanges at its value, will depend on the organic composition of capital and the turnover time of that capital.

The higher the organic composition, or the longer the turnover time, the lower will be the rate of profit because the less will be the portion of the capital (i.e. variable capital in the productive phase) that is actually producing SV.

However, “there is no doubt that…differences in the rate of profit in the various branches of industry do not exist in reality, and could not exist without abolishing the entire system of capitalist production. It would seem therefore, that here the theory of value is incompatible with the real phenomena of production and that for this reason any attempt to understand these phenomena should be given up.” (p. 151)

If commodities exchange at their values, then the rate of profit in different industries must be different.

If the rate of profit is to be equalised, as it is in practice in capitalist society, then commodities cannot exchange at their values.

It seems that the labour theory of value, that underlies Marx’s whole account, has come unstuck at last.

To try and reconcile theory with reality Marx returns to the concept of cost price, and argues that we have to understand the equalisation of the rate of profit in terms of the competition between capitals on the basis of cost price.

Chapter 9 – Formation of a General Rate of Profit (Average Rate of Profit) and Transformation of Commodity Values into Prices of Production

The rate of profit on a particular capital depends on the organic composition of that capital, so long as commodities exchange at their values (assuming constant rate of exploitation and turnover time of capital).

If we take all the capitals together we can work out an average rate of profit…

P = S/(C+V)

If each individual capital is to earn the average rate of profit, then prices must diverge from values.

In those branches with an above average organic composition the price will be higher than the value, so raising the rate of profit; in branches with a below organic composition the price will be lower than value, so depressing the rate of profit.

Thus the price of the commodity will be equal to the cost price (C + V) plus an amount of profit calculated on the initial capital at the average rate.

If the constant capital is all used up in one period, then the initial capital is the cost price and the final price, the price of production, is equal to (C+V).(1+r), where r is the rate of profit.

It is the competition between capitals that ensures an equalisation of the rate of profit: capitals will move out of industries with a low rate of profit into industries with a high rate of profit until prices diverge sufficiently from values to equalise the rate of profit.

Marx insists that, although prices diverge from values, the prices can only be calculated on the basis of values. They cannot be directly calculated as cost price plus average profit, so by-passing the labour theory of value, because to perform this calculation it is necessary to know what the average rate of profit is, and this can only be calculated in value terms, as the total SV divided by the total capital.

Thus although prices of production diverge from values, Marx argues that they are transformed forms of value.

All that happens is that the process of competition redistributes SV amongst the capitals.

Capitalists still seek to increase the SV they can produce by all the means at their disposal, even though they will ultimately have to share the increase with others.

Marx assumed that the transformation of values into prices of production did not affect the magnitude of SV, but only its distribution amongst the various capitals.

This is to assume that the transformation does not affect the rate of exploitation.

If, however, the industries producing workers’ means of consumption have a below average organic composition of capital, the price of those means of consumption falls.

This will only leave the rate of exploitation unchanged if wages fall to compensate for this.

Thus the transformation of values into prices also involves the transformation of the wage.

The transformation of values into prices affects not only prices that individual capitalists receive for their commodities, but also the prices they pay for labour power and for the MP.

Thus the total effect of the transformation is very complex.

Working out the precise effect is the so-called “transformation problem”.

Marx did not do this.

However, it can be shown that it is possible to derive a set of prices of production consistent with an equal rate of profit from a set of values.

Marx argues that the effect of the transformation is that a capitalist no longer receives an amount of profit corresponding to the amount of SV he produces.

Thus the capitalist is producing SV not directly for himself, but for all the capitalists.

Thus “the mass of SV produced in a particular sphere of production is then more important for the average profit of social capital, and thus for the capitalist class in general, than for the individual capitalist in any specific branch of production. It is of importance for the latter only in so far as the quantity of SV produced in his branch helps to regulate the average profit. But this is a process which occurs behind his back, one he does not see, nor understand, and indeed which does not interest him. The actual difference of magnitude between profit and SV…now completely conceals the true nature and origin of profit not only from the capitalist…but also from the labourer. (p. 165)

Thus profit appears to derive not from the labour of the worker, but from capital itself.

But value continues to regulate the capitalist mode of production in two senses:

  1. it continues to apply at the level of capital in general: the laws of the general rate of profit
  2. it continues to apply to the individual capitalist to the extent that he is able to retain the advantages he gains by increasing the rate of exploitation (thus in the short-term he can increase his rate of profit by lengthening the working day, increasing productivity, increasing the intensity of labour, economising on the MP and subsistence and reducing the turnover time of his capital), but in the longer term competition will erode his extra profits and so distribute the gains amongst the capitalist class.

Thus the transformation of values into prices affects the distribution of SV among the individual capitalists, but it does not affect the underlying dynamic of capitalist production.

Chapter 10 – The Equalisation of the General Rate of Profit through Competition. Market Prices and Market Values. Surplus Profit.

Marx points out that there is a tendency for all capitals to achieve the average rate of profit.

What is at issue is how this comes about.

It must be something that takes place in exchange.

“The whole difficulty arises from the fact that commodities are not exchanged simply as commodities, but as products of capital” (p. 172)

Thus it involves a modification of the laws of commodity exchange discussed in Volume I, chapter 1, which were only appropriate to simple commodity production.

In simple commodity production, market prices could diverge from the value of the commodity, but the divergences even out.

Competition between capitalists in the same branch of production produces a single social value as a result of the equalisation of the various individual values (i.e. the value is registered by the socially necessary labour time, and not the individual labour time).

The overall effect of competition is to press market prices towards the market value.

But in the capitalist market, we are no longer dealing with the simple purchase and sale of commodities.

It is not simple commodity producers, but capitalists, who meet in the market.

The capitalist is seeking to realise his SV in selling his commodity capital, and it is to realise SV that the capitalist enters the market.

He is not interested in the specific use-values of the product, or the branch of production in which he is engaged, thus he is not concerned with realising the value of a particular commodity, but seeks the max. rate of profit on his capital advanced.

Capital is mobile.

It can move to branches with above average rates of profit.

Thus the social division of labour is regulated in a capitalist society not by the exchange of commodities according to their values, but by the exchange of commodities according their prices of production, i.e. by their exchange at prices corresponding to a uniform rate of profit.

Thus the law of capitalist exchange is a modified form of the law of exchange of simple commodity production.

The effect of exchange according to prices of production is that SV is redistributed among capitals according to the size of the original capital.

Hence capitalists are interdependent in their exploitation of the working class: an increase in SV achieved by one capitalist is shared among all capitalists, and capitalists therefore have a common class interest in the exploitation of labour, i.e. to maximise the amount of SV.

They engage in competition for the division of this SV.

Chapter 11 – The Effects of General Fluctuations in Wages on the Prices of Production

In value terms an increase in wages has no effect on value, it simply reduces the SV accruing to the capitalist.

However, if different branches have different organic compositions of capital (V/C), the rate of profit will be affected differently since the wage increase will alter the organic composition differently.

Thus prices will have to readjust to equalise the rate of profit again.

High organic composition, price of production of commodities falls (low oc prices rise).

Chapter 12 – Supplementary Remarks

The conception that profit derives not from SV but, pro rata, from capital, gives rise to the capitalist expectation that he will earn such profits and so to capitalist forms of calculation.

In these forms of calculation it seems that profit derives from capital itself (from its size and its turnover).

The phenomena revealed by competition “seem to contradict the determination of value by labour-time as much as the nature of SV consisting of unpaid surplus-labour. Thus everything appears reversed in competition. The final pattern of economic relations as seen on the surface, in their real existence and consequently in the conceptions by which the bearers and agents of these relations seek to understand them, is very much different from, and indeed quite the reverse of, their inner but concealed essential pattern and the conception corresponding to it.” (p. 205)

Part Three: The Law of the Tendential Fall in the Rate of Profit

Chapter 13 – The Law Itself

The basic point is very simple. With a given rate of SV, the rate of profit falls as the organic composition of capital rises.

This rising composition of capital is a corollary of the specific methods of increasing the productivity of labour characteristic of a capitalist society.

Thus “The progressive tendency of the general rate of profit to fall, is, therefore, just an expression peculiar to the capitalist mode of production of the progressive development of the social productivity of labour.” (p.209)

The falling rate of profit is not the result of a decline in the productivity of labour, but is an expression of the way in which it is increased in a capitalist society.

The falling rate of profit is quite compatible with an increase in the amount of SV and so profit, indeed it is necessarily associated with such an increase.

Thus the rate of profit falls because a large total SV is spread over a still larger total capital (because of the increasing organic composition).

Marx’s argument here gives rise to two fundamental criticisms:

  1. Although it is quite plausible that      the technical composition of capital should rise steadily under      capitalism, it is not so clear that the value composition will so rise.
    The value composition relates the value laid out in means of production to      the value laid out in labour power and not the physical quantities.
    If the productivity of labour in      producing means of production increases then the value of constant capital      does not increase as rapidly as its quantity (more machines of a new type      might be cheaper than fewer machines of an old type).
    Of course the value of labour power is also declining as the means of      consumption are cheapened.
    But the point is that it is at      least conceivable that if productivity increases in the production of MP      run far ahead of productivity increases in the means of consumption then      the organic composition may not rise at all.
    Marx in fact separates the influence of technical change and the influence      of productivity change on the value composition of capital.
    In this chapter he ignores the effect of productivity change, so using the      concept of organic composition of capital and not the value composition, and      then brings in productivity change in the next chapter under the heading      of the “cheapening of the elements of constant capital” as one of the      counteracting influences on the falling rate of profit.
    Is he legitimate to treat the technical changes as more fundamental than      the value changes (the former being considered in relation to the law as      such, the latter relegated to counteracting tendencies)?
    As the capitalist is not concerned      with increasing the productivity of labour, but with increasing the      profitability of capital, Marx is probably not right.
    He probably makes this separation out of neatness of analysis in      distinguishing between the forces and relations of production.
  2. There is no a priori reason why the      effect on the organic composition should outweigh the effect on the rate      of exploitation.
    (A increasing productivity implies a rising organic composition and a      rising rate of exploitation. While the rising oc reduces the rate of      profit, a rising rate of exploitation increases it).
    It appears that Marx ignores the      effect of the increase in relative SV consequent on increasing      productivity, and this is why he sees a tendency for the rate of profit to      fall as being the fundamental tendency.It the last analysis it is an      empirical question whether productivity will be sufficiently rapid for the      increase in the rate of exploitation to counteract the increase in the oc      so that the rate of profit rises rather than falls.


Finally, some people argue that the rate of profit will never in fact fall because of the rising oc.

The argument is that no capitalist will willingly introduce a method of production that involves a fall in the rate of profit, they would persist with old methods.

The rate of profit will therefore only actually fall if a fall is forced on capitalists, e.g. by rising wages.

Accumulation proceeds at the lower oc until the reserve of labour is absorbed, wages then rise and reduce the rate of profit and capitalists then introduce methods with higher oc in order to economise on labour.

The net result is then a higher oc and a lower rate of profit.

Thus the tendency for the rate of profit to fall does not manifest itself directly.

Chapter 14 – Counteracting Factors

In practice the rate of profit does not necessarily fall, because capitalists take a series of measures to sustain it.

The counteracting tendencies are:

  1. Increasing the intensity of      exploitation
    1. By       lengthening the working day
    2. By       intensifying labour
  2. Reducing wages below the value of      labour power “is one of the most important factors      checking the tendency of the rate of profit to fall”
  3. Cheapening      the elements of constant capital.
    The value composition of capital      may not increase as much as the technical composition because the elements      of constant capital (raw materials and machines) become cheaper.
  4. Relative      over-population.
    Accumulation provides a body of      cheap workers who sustain branches of industry with low oc and high rate      of exploitation.
  5. Foreign trade.
    Increases the rate of profit by cheapening the elements of constant and      variable capital. But also increases the rate of accumulation that in turn      supposedly reduces the rate of profit.
  6. If some industries, e.g. railways,      have a low rate of profit, this increases the rate of profit for other      capitals by providing cheaper inputs.

Chapter 15 – Development of the Law’s Internal Contradictions

The role of crises in capitalism.

The main point Marx makes is that there are no limits to capitalist production of SV beyond the available population and the rate of SV.


But the capitalist then has to realise this SV by selling his commodities.

Thus capital has to constantly expand its market.

However, the more the market expands, the more capitalism develops, this higher mass of SV produced (despite the lower rate of profit), the more intense is the “contradiction between the conditions under which this SV is produced and those under which it is realised”.

Here Marx appears to be offering an underconsumptionist version of the theory of crisis, for he refers particularly to the limited consumer demand in a capitalist society, where consumption of the bulk of society is driven to a minimum, thus he seems to argue that the barrier to accumulation is the limited demand that means that the capitalist cannot sell all his products and so cannot realise his SV.

But Marx doesn’t develop this and the rest of the chapter doesn’t present the crisis in this light.

Thus an alternative interpretation is that a crisis appears as the inability of the capitalist to realise his SV, but that it has its origins elsewhere, in the conditions of production of SV.

The capitalist mode of production tends to develop the forces of production without limit, but this development comes into conflict with the need to produce and realise SV.

The overaccumulation of capital leads to a fall in the rate of profit that is checked by the “periodical depreciation of existing capital”, that itself upsets the circulation process, leading to a crisis and a stoppage of production.

Thus the contradiction between the forces and relations of production gives rise to a crisis that permits a renewed bout of accumulation by restoring the rate of profit, paving the way for another crisis.

Thus “the real barrier of capitalist production is capital itself”.

Not nature as the classics had argued.

The third section discusses the mechanism of the crisis.

The process of concentration of capital and the declining rate of profit reinforce one another: the higher the development of the productivity of labour and the organic composition of capital, the greater the advantages of the large capital. Thus a fall in the rate of profit hits the smaller capitals which are unable to survive. Thus a fall in the rate of profit produces both unemployed capital and unemployed labour.

This “overproduction of capital” (i.e. too much capital to be employed) implies overproduction of commodities (i.e. the redundant capitals cannot sell their commodities to realise their profit), but is essentially the “overaccumulation of capital”.

Marx looks at the case where overproduction is not characteristic of one industry, but of the economy as a whole.

This is the case where no more capital can be profitably employed, i.e. where an addition to capital will cause a sharp fall in the rate of profit.

This is the case when accumulation is checked by a shortage of labour so that wages suddenly increase.

Thus there is a fierce competitive struggle between capitals.

However, this increasing competition is not the cause of the decline in profitability.

Rather a decline in profitability precipitates the struggle.

If the rate of profit is to be restored then some of the capital must be removed.

This happens through the destruction of capital as factories close, the devaluation of credit, the losses made in the market, the depreciation of elements of fixed capital as prices fall.

All this leads to a commercial crisis and the collapse of credit.

On the other hand the crisis creates unemployment and the conditions for a fall in wages and so restoration of profitability, while the competitive struggle drives all capitalists to adopt the most advanced methods of production to economise on labour and to cut costs.

Thus the crisis prepares the way for a resumption of accumulation.

The overproduction of capital that precipitates the crisis is only an overproduction within capitalist social relations; it is overproduction in relation to the possibilities for profit.

Part Four: The Transformation of Commodity Capital and Money Capital into Commercial Capital and Money-Dealing Capital (Merchant’s Capital)

Marx argues that the profit derived by merchants, the interest accruing to money-capitalists and the rent accruing to landowners represent diversions from the SV produced by labour in production, and are therefore developed forms of SV.

Chapter 16 – Commercial Capital

Chapter 17 – Commercial Profit

Chapter 18 – The Turnover of Commercial Capital. Prices

Chapter 19 – Money-Dealing Capital

Chapter 20 – Historical Material on Merchant’s Capital

Part Five: The Division of Profit into Interest and Profit of Enterprise

Marx argues that when interest-bearing capital is separated from productive capital a division is introduced between the share of SV accruing to money-capital, interest and the profits that remain to productive capital after the payment of interest, that appear as the ‘profits of enterprise’.

Thus it comes to appear that capital generates interest, so that profit is completely divorced from production.

Chapter 21 – Interest-Bearing Capital

Chapter 22 – Division of Profit. Rate of Interest. ‘Natural’ Rate of Interest

Chapter 23 – Interest and profit of Enterprise

Chapter 24 – Interest-Bearing Capital as the Superficial Form of the Capital Relation

Chapter 25 – Credit and Fictitious Capital

Chapter 26 – Accumulation of Money Capital and its Influence on the Rate of Interest

Chapter 27 – The Role of Credit in Capitalist Production

Chapter 28 – Means of Circulation and Capital. The Views of Tooke and Fullarton

Chapter 29 – Banking Capital’s Component Parts

Chapter 30 – Money Capital and Real Capital: I

Chapter 31 – Money Capital and Real Capital: II

Chapter 32 – Money Capital and Real Capital: III

Chapter 33 – The Means of Circulation under the Credit System

Chapter 34 – The Currency Principle and the English Bank Legislation of 1844

Chapter 35 – Precious Metal and the Rate of Exchange

Chapter 36 – Pre-Capitalist Relations

Part Six: The Transformation of Surplus Profit into Ground-Rent

Chapter 37 – Introduction

Chapter 38 – Differential Rent in General

Chapter 39 – The First Form of Differential Rent

Chapter 40 – The Second Form of Differential Rent

Chapter 41 – Differential Rent II – First Case: Price of Production Constant

Chapter 42 – Differential Rent II – Second Case: Price of Production Falling

Chapter 43 – Differential Rent – Third Case: Rising Price of Production. Results

Chapter 44 – Differential Rent Even on the Poorest Land

Chapter 45 – Absolute Ground-Rent

Chapter 46 – Rent of Buildings. Rent of Mines. Price of Land

Chapter 47 – The Genesis of Capitalist Ground-Rent

Part Seven: The Revenues and their Sources

Chapter 48 – The Trinity Formula

Class relations appear in the form of the ‘trinity formula’ in which profit (or, more specifically, interest) appears as the reward of capital, wages as the share of labour, rent as the share of land.

Thus it appears that capital produces interest, labour: wages and land: rent.

Revenues thus appear to derive from things.

However, Marx argues that capital is not a thing, but a social relation.

Means of production are not themselves capital, but only become capital when monopolised by a particular social class.

Land, on the other hand, is a thing, but cannot produce SV.

Labour, looked at in isolation from the social relations within which it is performed, simply does not exist.

Thus wage-labour and landed property cannot be seen as things either, but must be seen as “historically determined social forms”, both corresponding to capital and being part of capitalist society.

(Land contributes to the creation of use-values, but not to the creation of value, which is created by labour).

Surplus labour is necessary in all forms of society, to provide insurance against shortfalls and resources for expansion of production.

In capitalist society it assumes an antagonistic form, but does have the advantage of preparing the social and material conditions for a classless society in which the basis of freedom has been created.

Chapter 49 – On the Analysis of the Production Process

Profit and rent correspond to the total SV, wages to the variable capital.


Thus the total annual value created by labour equals the total of profit, wages and rent.

The value of constant capital is not re-created (since it is simply transferred unchanged), but it is a part of the total annual product.

Thus the total product appears to exceed the total revenue by C, thus there appears to be overproduction.

Correspondingly, the total new labour added appears to be consumed by the sum of the revenue, so where is the labour that can produce new means of production?

Marx resolves this by recapitulating his reproduction schemes, which shows that the total product does not simply resolve itself into the three revenues, but also includes a value component corresponding to constant capital used up.

The classics made the mistake of thinking that the value of the commodity resolves itself into the three component parts of profits, wages and rent:

  1. because they could not understand the concept of constant capital
  2. because they argued from the individual capitalist instead of seeing the system as a whole, thus they thought that the constant capital of the individual capitalists comprised the rent, profit and wages of some others

Chapter 50 – The Illusion Created by Competition

The total value produced is made up of constant capital value transferred, the variable capital and the total SV.

VC and SV together constitute the newly created value and take the form of revenues: wages, rent and profit.

Although the newly created value is equal to this sum, it is by no means the case that these three categories are constituent elements of the value: i.e. they refer to the manner in which the value is distributed, not to the manner in which it is produced.

(a rise in wages doesn’t increase the value of the commodity, but represents an erosion of SV).

So the value of the commodity is not to be determined by its ‘cost’ as the sum of wages, profit and rent.

Rather the value is the prior category and rent, profit and wages are portions of the value newly added.

This “adding-up” theory of price involves:

  1. ignoring constant capital altogether: resolving it into rent, wages and profit
  2. abolishing the concept of value and retaining only the concept of price: but this presupposes the concept of money which can only be understood as the form of value. Otherwise the argument is purely circular: prices are explained in terms of other prices in an endless succession.

The illusion that the newly added value splits into three independent revenues is an illusion that arises through competition: it is the form in which the value of labour power and SV appear.

This happens because:

  1. of the relation of revenues to ownership of the factors of production that gives rise to the illusion that it is these factors that create the revenues
  2. prices do in fact vary with fluctuations of wages: the prices of commodities produced by capitals of below average oc rise with a rise in wages and fall with a decline
  3. even if we ignore price fluctuations the illusion persists because the components of value appear to be preconditions of value rather than the other way around: to the capitalist the cost price, the cost of wages and constant capital, is given first, before the commodity and its value have been produced
  4. the regulation of prices ultimately by movements of value is not something that takes place directly and so that is experienced as such by capitalists: he is not concerned with the realisation of value and SV

Chapter 51 – Relations of Distribution and Relations of Production

The apportionment of the produced value to different social categories are the relations or forms of distribution.

These relations appear “as natural relations, as relations arising directly from the nature of all social production, from the laws of human production in general”.

A ‘scientific’ approach reveals that production relations themselves are historically transitory and that relations of distribution are merely the other side of relations of production.

Wages are the revenue of the labourer only because the labourer enters capitalists production relations, because the MP confront the labourer as capital.

Moreover, this system of social relations of production reproduces itself and so the corresponding relations of distribution: the relations of distribution are indeed a moment of the process of reproduction of capitalist production relations.

The view that considers only the relations of distribution to be historically specific, but not the relations of production, rests on a confusion of the labour process and the valorisation process: the social relations of production are seen as purely technical relations.

Chapter 52 – Classes

The three classes are:

  1. owners of labour-power
  2. owners of capital
  3. owners of land

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