Part One: The Metamorphoses of Capital and Their Circuits (Chapters 1–6)

Engels' Preface

To prepare the second book of "Capital" for the press, in such a way that it should appear as a connected and as far as possible complete work, and as the exclusive work of the author, not of the editor, was no easy task. There were only manuscripts, written at different times, some fragmentary, some in rough drafts full of abbreviations, in a handwriting which at times only the author could read, and sometimes not even he. I have limited myself to arranging them, choosing between variants, and filling gaps where necessary with words of my own, always in his sense.

Some have accused Marx of plagiarising the theory of surplus-value from Rodbertus. The existence of that part of the product's value which we now call surplus-value was known long before Marx; so was, more or less clearly, what it consists of — the product of labour for which its appropriator has paid no equivalent. But no one went further. Marx's position towards his predecessors is like that of Lavoisier towards Priestley and Scheele. Priestley and Scheele had produced oxygen without knowing what they had in their hands; they remained prisoners of the old phlogiston theory. Lavoisier saw that this new gas was a new chemical element, and he was the first to put the whole of chemistry, which in its phlogistic form had stood on its head, on its feet. What the economists took for a solution, Marx saw as a problem; and from it he examined the whole of political economy anew.

Chapter 1. The Circuit of Money Capital

The circuit of capital proceeds in three stages. In the first, the capitalist appears as a buyer on the market for commodities and the market for labour: his money is turned into commodities, M–C. In the second, the commodities bought are consumed productively; the capitalist acts as a capitalist producer of commodities; his capital passes through the process of production, and the result is a commodity of greater value than its elements of production. In the third, the capitalist returns to the market as a seller; his commodities are turned into money, C′–M′. The formula for the circuit of money capital is therefore M–C … P … C′–M′, where the dots show that the process of circulation is interrupted, and C′ and M′ stand for C and M increased by surplus-value.

The first act, M–C, falls into two: the purchase of means of production, and the purchase of labour-power. That money can buy labour-power at all presupposes that the means of production have been separated from the worker; it presupposes the class relation between capitalist and wage-labourer. It is not money that by its nature creates this relation; it is the existence of this relation that turns a mere money function into a function of capital.

In the second stage, the means of production and labour-power, both now the property of the capitalist, are combined; and only in this union do they become productive capital. Whatever the social form of production, the workers and the means of production are always its factors; but under the capitalist form, their union is brought about by the purchase of labour-power by the owner of the means of production, and the worker works under his command. The result is a commodity whose value contains, beside the capital-value consumed, a surplus-value.

In the third stage, C′–M′, the commodity, pregnant with surplus-value, must be sold. Here the capital-value and the surplus-value, which until now existed together in the body of the yarn or the cloth, are realised in money; and the capital-value returns to its original form, ready to begin the circuit anew, while the surplus-value may be spent by the capitalist or added to his capital. If the sale fails, if the commodity cannot be turned into money, the whole movement comes to a halt; and the circuit shows that the capitalist depends not only on the factory, but on the market.

In the circuit of money capital, money is the starting point and the end; and so the circuit shows, in its most palpable form, the motive force of capitalist production: money-making. The process of production appears merely as an unavoidable intermediate link, as a necessary evil for the sake of money-making. All nations with a capitalist mode of production are therefore seized periodically by a feverish attempt to make money without the intervention of the process of production.

Chapters 2 to 4. The Circuit of Productive Capital; the Circuit of Commodity Capital; the Three Figures of the Circuit

The same movement can be seen from another point of departure: as the circuit of productive capital, P … C′–M′–C … P, in which the whole circulation appears only as the mediation of the renewal of production — the form in which the classical economists liked to see it, since it hides the money motive; and as the circuit of commodity capital, C′–M′–C … P … C′, which begins with the commodity already loaded with surplus-value, and which therefore shows from the start that it is a circuit not of the individual capital only, but of the mass of commodities of the whole society — the form that Quesnay took as the basis of his Tableau économique.

In reality, every industrial capital that is in motion is all three at once. A part of it is in the form of money, a part in production, a part in the form of finished commodities waiting to be sold; and each part passes, one after another, through all three forms. The circuit of capital is a constant interruption: one stage is left, the next entered; one form discarded, another taken on. Capital is a movement, a circuit through different stages, which itself again includes three different forms of the circuit. It can therefore be understood only as a movement, and not as a thing at rest. Those who regard the independent existence of value as a mere abstraction forget that the movement of industrial capital is this abstraction in action.

The continuity of production requires that these forms exist side by side: while one part of the capital is being sold, another is in the factory, a third is being laid out on new raw materials. Any stoppage in one form stops the others. And every revolution in values — a sudden rise in the price of cotton, a fall in the price of yarn — disturbs the circuit, and the more so the larger the capital. The individual capitalist can meet such disturbances only if he has reserves of money; and the more developed the capitalist mode of production, the more it depends on the money market and on credit to bridge these gaps.

Chapter 5. The Time of Circulation

The movement of capital through the sphere of production and through the two phases of the sphere of circulation takes place in a succession of time. The time during which capital is in the sphere of production is its production time; its stay in the sphere of circulation is its time of circulation. The total time during which it describes its circuit is therefore the sum of the two.

Production time includes more than the working period: the seed in the ground, the wine in the cellar, the grain on the threshing floor waiting to be dried. During its time of circulation, capital does not function as productive capital, and therefore produces neither commodities nor surplus-value. The more the circulation of capital is only ideal, that is, the closer its time of circulation is to zero, the more productive it is, and the greater its self-valorisation. Hence the constant drive of capital to shorten its circulation time — and hence the time of circulation is a barrier to its production.

Chapter 6. The Costs of Circulation

The changes of form of capital from commodity into money and from money into commodity are at the same time transactions of the capitalist, acts of buying and selling. The time they take, and the labour they require, create no value. The labour of buying and selling is a necessary function of capitalist production, but it does not add to the value of the commodity; its cost is a deduction from the surplus-value. The same holds for bookkeeping, which grows more necessary the more production takes place on a social scale and loses its purely individual character; and for the money itself, which must be produced as gold and silver, a part of social wealth sacrificed to the process of circulation.

Suppose a capitalist hires a buying and selling agent, who does nothing else but buy and sell for him. He works as hard as any worker, and perhaps more; he is paid his wage; and he even performs unpaid labour, since he works longer than the time needed to earn his wage. But his labour, however necessary, creates neither value nor product; it only shortens, for the capitalist, the time he would himself have to spend on these transactions. He costs the capitalist money, which is a deduction from the surplus-value; his unpaid labour only reduces that deduction.

The keeping of stocks is of the same kind. Every society must keep some supply on hand — of raw materials, of means of consumption — to ensure the continuity of production and consumption; and the cost of preserving such a supply is part of the social cost of production. But when goods pile up in the warehouses because they cannot be sold, that is not a supply: it is a stagnation of circulation, and its cost adds nothing to value; it is a loss.

But not everything in the sphere of circulation is unproductive. The storage of goods, so far as it is necessary for the continuity of production, adds value; and transport above all: the quantity of products is not increased by transport, but their use-value is realised only by their consumption, and this may require a change of place. The transport industry is therefore a branch of production in its own right, which adds value to the goods it carries.