Karl Marx: C A P I T A L, vol. I
PART II -- THE TRANSFORMATION OF MONEY INTO CAPITAL
Chapter IV: THE GENERAL FORMULA FOR CAPITAL
The circulation of commodities is the starting-point of capital.
The production of commodities, their circulation, and that more
developed form of their circulation called commerce, these form the
historical ground-work from which it rises. The modern history of
capital dates from the creation in the 16th century of a world-embracing
commerce and a world-embracing market.
If we abstract from the material substance of the circulation of
commodities, that is, from the exchange of the various use-values, and
consider only the economic forms produced by this process of
circulation, we find its final result to be money: this final product of
the circulation of commodities is the first form in which capital
appears.
As a matter of history, capital, as opposed to landed property,
invariably takes the form at first of money; it appears as moneyed
wealth, as the capital of the merchant and of the usurer. [1] But we
have no need to refer to the origin of capital in order to discover that
the first form of appearance of capital is money. We can see it daily
under our own very eyes. All new capital, to commence with, comes on
the stage, that is, on the market, whether of commodities, labor, or
money, even in our days, in the shape of money that by a definite
process has to be transformed into capital.
The first distinction we notice between money that is money only,
and money that is capital, is nothing more than a difference in their
form of circulation.
The simplest form of the circulation of commodities is C-M-C, the
transformation of commodities into money, and the change of the money
back again into commodities; or selling in order to buy. But alongside
of this form we find another specifically different form: M-C-M, the
transformation of money into commodities, and the change of commodities
back again into money; or buying in order to sell. Money that
circulates in the latter manner is thereby transformed into, becomes
capital, and is already potentially capital.
Now let us examine the circuit M-C-M a little closer. It consists,
like the other, of two antithetical phases. In the first phase, M-C, or
the purchase, the money is changed into a commodity. In the second
phase, C-M, or the sale, the commodity is changed back again into money.
The combination of these two phases constitutes the single movement
whereby money is exchanged for a commodity, and the same commodity is
again exchanged for money; whereby a commodity is bought in order to to
be sold, or, neglecting the distinction in form between buying and
selling, whereby a commodity is bought with money, and then money is
bought with a commodity. [2] The result, in which the phases of the
process vanish, is the exchange of money for money, M-M. If I purchase
2,000 lbs of cotton for L100, and resell the 2,000lbs. of cotton for
L110, I have, in fact, exchanged L100 for L110, money for money.
Not it is evident that the circuit M-C-M would be absurd and
without meaning if the intention were to exchange by this means two
equal sums of money, L100 for L100. The miser's plan would be simpler
and surer; he sticks to his L100 instead of exposing it to the dangers
of circulation. And yet, whether the merchant who has paid L100 for his
cotton sells it for L110, or lets it go for L100, or even L50, his money
has, at all events, gone through a characteristic and original movement,
quite different in kind from that which it goes through in the hands of
the peasant who sells corn, and with the money thus set free buys
clothes. We have therefore to examine first, the distinguishing
characteristics of the forms of the circuits M-C-M and C-M-C, and in
doing this the real difference that underlies the mere difference of
form will reveal itself.
Let us see, in the first place, what the two forms have in common.
Both circuits are resolvable into the same two antithetical phases,
C-M, a sale, and M-C, a purchase. In each of these phases the same
material elements - a commodity, and money, and the same economic
dramatis personae, a buyer and a seller - confront one another. Each
circuit is the unity of the same two antithetical phases, and in each
case this unity is brought about by the intervention of three
contracting parties, of whom one only sells, another only buys, while
the third both buys and sells.
What, however, first and foremost distinguishes the circuit C-M-C
from the circuit M-C-M, is the inverted order of succession of the two
phases. The simple circulation of commodities begins with a sale and
ends with a purchase, while the circulation of money as capital begins
with a purchase and ends with a sale. In the one case both the
starting-point and the goal are commodities, in the other they are
money. In the first form the movement is brought about by the
intervention of money, in the second by that of a commodity.
In the circulation C-M-C, the money is in the end converted into a
commodity, that serves as a use-value; it is spent, once and for all.
In the inverted form, M-C-M, on the contrary, the buyer lays out money
in order that, as a seller, he may recover money. By the purchase of
his commodity he throws money into circulation, in order to withdraw it
again by the sale of the same commodity. He lets the money go, but only
with the sly intention of getting it back again. The money, therefore,
is not spent, it is merely advanced.[3]
In the circuit C-M-C, the same piece of money changes its place
twice. The seller gets it from the buyer and pays it away to another
seller. The complete circulation, which begins with the receipt,
concludes with the payment, of money for commodities. It is the very
contrary in the circuit M-C-M. Here it is not the piece of money that
changes its place twice, but the commodity. The buyer takes it from the
hands of the seller and passes it into the hands of another buyer. Just
as in the simple circulation of commodities the double change of place
of the same piece of money effects its passage from one hand into
another, so here the double change of place of the same commodity brings
about the reflux of the money to its point of departure.
Such reflux is not dependent on the commodity being sold for more
than was paid for it. This circumstance influences only the amount of
money that comes back. The reflux itself takes place, so soon as the
purchased commodity is resold, in other words so soon as the circuit
M-C-M is completed. We have here, therefore, a palpable distance
between the circulation of money as capital, and its circulation as mere
money.
The circuit C-M-C come completely to an end, so soon as the money
brought in by the sale of one commodity is anstracted again by the
purchase of another.
If, nevertheless, there follows a reflux of money to its
starting-point, this can only happen through a renewal or repetition of
the operation. If I sell a quarter of corn for L3, and with this L3 buy
clothes, the money, so far as I am concerned, is spent and done with.
It belongs to the clothes merchant. If I now sell a second quarter of
corn, money indeed flows back to me, not however, as a sequel of the
first transaction, but in consequence of its repetition. The money
again leaves me, so soon as I complete this second transaction by a
fresh purchase. Therefore, in the circuit C-M-C, the expenditure of
money has nothing to do with its reflux. On the other hand, in M-C-M,
the reflux of the money is conditioned by the very mode of its
expenditure. Without this reflux, the operation fails, or the process
is interrupted and incomplete, owing to the absence of its complementary
and final phase, the sale.
The circuit C-M-C starts with one commodity, and finishes with
another, which falls out of circulation and into consumption.
Consumption, the satisfaction of wants, in one word, use-value, is its
end and aim. The circuit M-C-M, on the contrary, commences with money
and ends with money. Its leading motive, and the goal that attracts it,
is therefore mere exchange value.
In the simple circulation of commodities, the two extremes of the
circuit have the same economic form. They are both commodities, and
commodities of equal value. But they are also use-values differing in
their qualities, as, for example, corn and clothes. The exchange of
products, of the different materials in which the labour of society is
embodied, forms here the basis of the movement. It is otherwise in the
circulation M-C-M, which at first sight appears purposeless, because
tautological. Both extremes have the same economic form. They are both
money, and therefore are not qualitatively different use-values; for
money is but the converted form of commodities, in which their
particular use-values vanish. To exchange L100 for cotton, and then
this same cotton again for L100, is merely a roundabout way of
exchanging money for money, the same for the same and appears to be an
operation just as purposeless as it is absurd. [4] One sum of money is
distinguishable from another only by its amount. The character and
tendency of the process M-C-M, is therefore not due to any qualitative
difference between its extremes, both being money, but solely to their
quantitative difference. More money is withdrawn from circulation at
the finish than was thrown into it at the start. The cotton that was
bought for for L100 is perhaps resold for L100+l10 or L110. The exact
form of this process is therefore M-C-M', where M'=M=^M=the original sum
advanced, plus an increment. This increment or excess over the original
value I call "surplus-value." The value originally advanced, therefore,
not only remains intact while in circulation, but adds to itself a
surplus value or expands itself. It is this movement that converts it
into capital.
Of course, it is also possible, that in C-M-C, the two extremes
C-C, say corn and clothes, may represent different quantities of value.
The farmer may sell his corn above its value or may buy the clothes at
less than their value. he may, on the other hand, "be done" by the
clothes merchant. Yet, in the form of circulation now under
consideration, such differences in value are purely accidental. The
fact that the corn and the clothes are equivalents, does not deprive the
process of all meaning, as it does in M-C-M. The equivalence of their
values is rather a necessary condition to its normal course.
The repetition or renewal of the act of selling in order tu buy, is
kept within bounds by the very object it aims at, namely, consumption or
the satisfaction of definite wants, an aim that lies altogether outside
the sphere of circulation. But when we buy in order to sell, we, on the
contrary, begin and end with the same thing, money, exchange-value; and
thereby the movement becomes interminable. No doubt, M becomes M+^M,
L100 become L110. But when viewed in their qualitative aspect alone,
L110 are the same as L100, namely money; and considered quantitatively,
L110 is, like L100, a sum of definite and limited value. If now, the
L110 be spent as money, they cease to play their part. They are no
longer capital. Withdrawn from circulation, they become petrified into
a hoard, and though they remain in that state until doomsday, nor a
single farthing would accrue to them. If, then, the expansion of value
is once aimed at, there is just the same inducement to augment the value
of the L110 as that of the L100; bor both are but limited expressions
for exchange value, and therefore both have the same vocation to
approach, by quantitative increase, as near as possible to absolute
wealth. Momentarily, indeed, the value originally advanced, the L100 is
distinguishable from the surplus-value of L10 that is annexed to it
during circulation; but the distinction vanished immediately. At the
end of the process, we do not receive with one hand the original L100,
and with the other, the surplus-value of L10. We simply get a value of
L110, which is in exactly the same condition and fitness for commencing
the expanding process, as the original L100 was. Money ends the
movement only to begin it again.[5] Therefore, the final result of every
separate circuit, in which a purchase and consequent sale are completed,
forms of itself the starting-point of a new circuit. The simple
circulation of commodities -- selling in order to buy -- is a means of
carrying out a purpose unconnected with circulation, namely, the
appropriation of use-values, the satisfaction of wants. The circulation
of money as capital is, on the contrary, an end in itself, for the
expansion of value takes place only within this constantly renewed
movement. The circulation of capital has therefore no limits.[6]
As the conscious representative of this movement, the possessor of
money becomes a capitalist. His person, or rather his pocket, is the
point from which the money starts and to which it returns. The
expansion of value, which is the objective basis or main-spring of the
circulation M-C-M, becomes his subjective aim, and it is only in so far
as the appropriation of ever more and more wealth in the abstract
becomes the sole motive of his operations, that he functions as a
capitalist, that is, as capital personified and endowed with
consciousness and a will. Use-values must therefore never be looked
upon as the real aim of the capitalist; [7] neither must the profits on
any single transaction. The restless never-ending process of
profit-making alone is what he aims at.[8] This boundless greed after
riches, this passionate chase after exchange-value [9], is common to the
capitalist and the miser; but while the miser is merely a capitalist
gone mad, the capitalist is a rational miser. The never-ending
augmentation of exchange-value, which the miser strives after, by
seeking to save [10] his money from circulation, is attained by the more
acute capitalist, by constantly throwing it afresh into circulation.[11]
The independent form, i.e., the money-form, which the value of
commodities assumes in the case of simple circulation, serves only one
purpose, namely, their exchange, and vanishes in the final result of the
movement. On the other hand, in the circulation M-C-M, both the money
and the commodity represent only different modes of existence of value
itself, the money its general mode, and the commodity its particular,
or, so to say, disguised mode.[12] It is constantly changing from one
form to the other without thereby becoming lost, and thus assumes an
automatically active character. if now we take in turn each of the two
different forms which self-expanding value successively assumes in the
course of its life, we then arrive at these two propositions: Capital is
money: Capital is commodities.[13] In truth, however, value is here the
active factor in a process, in which, while constantly assuming the form
in turn of money and commodities, it at the same time changes in
magnitude, differentiates itself by throwing off surplus-value from
itself; the original value, in other words, expands spontaneously. For
the movement, in the course of which it adds surplus-value, is its own
movement, its expansion, therefore, is automatic expansion. Because it
is value, it has acquired the occulat quality of being able to add value
to itself. It brings forth living offspring, or, at the least, lays
golden eggs.
Value, therefore, being the active factor in such a process, and
assuming at one time the form of money, at another that of commodities,
but through all these changes preserving itself and expanding, it
requires some independent form, by means of which its identity may at
any time be established. And this form it possessed only in the shape
of money. It is under the form of money that value begins and ends, and
begins again, every act of its own spontaneous generation. It begun by
being L100, it is now L110, and so on. But the money itself is only one
of the two forms of value. Unless it takes the form of some commodity,
it does not become capital. There is here no antagonism, as in the case
of hoarding, between the money and commodities. The capitalist knows
that all commodities, however scurvy they may look, or however badly
they may smell, are in faith and in truth money, inwardly circumcised
Jews, and what is more, a wonderful means whereby out of money to make
more money.
In simple circulation, C-M-C, the value of commodities attained at
the most a form independent of their use values, i.e., the form of
money; but the same value now in the circulation M-C-M, or the
circulation of capital, suddenly presents itself as an independent
substance, endowed with a motion of its own, passing through a
life-process of its own, in which money and commodities are mere forms
which it assumes and casts off in turn. Nay, more: instead of simply
representing the relations of commodities, it enters now, so to say,
into private relations with itself. It differentiates itself as
original value from itself as surplus-value; as the father
differentiates himself qua the son, yet both are one and of one age: for
only by the surplus-value of L10 does the L100 originally advanced
become capital, and so soon as this takes place, so soon as the son, and
by the son, the father, is begotten, so soon does their difference
vanish, and they again become one, L110.
Value, therefore, now becomes value in process, money in process,
and, as such, capital. It comes out of circulation, enters into it
again, preserves and multiplies itself within its circuit, comes back
out of it with expanded bulk, and begins the same round ever afresh.[14]
M-M', money that begets money, such is the description of Capital from
the mouths of its first interpreters, the mercantilists.
Buying in order to sell, or, more accurately, buying in order to
sell dearer, M-C-M', appears certainly to be a form peculiar to one kind
of capital alone, namely, merchants' capital. But industrial capital
too is money, that is changed into commodities, and by the sale of those
commodities, is re-converted into more money. The events that take
place outside the sphere of circulation, in the interval between the
buying and the selling, do not affect the form of this movement.
lastly, in the case of interest-bearing capital, the circulation M-C-M'
appears abridged. We have its result without the intermediate stage, in
the form M-M', "en style lapidaire" so to say, money that is worth more
money, value that is greater than itself.
M-C-M' is therefore in reality the general formula of capital as it
appears prima facie within the sphere of circulation.
NOTES
[1] The contrast between the power, based on the personal relation of
dominion and servitude, that is conferred by landed property, and
the impersonal power that is given by money, is well expressed by
the two French proverbs, "Nulle terre sans seigneour," and
"L'argent n'a pas de maitre."
[2] "Avec de l'argent on achete des marchandises et avec des
marchandises on achete de l'argent." (Mercier de la Riviere:
"L'ordre naturel et essentiel des societes politiques," p.543.)
[3] "When a thing is bought in order to be sold again, the sum employed
is called money advanced; when it is bought not to be sold, it may
be said to be expended." - (James Steuart: "Works," &c. Edited by
Gen. Sir James Steuart, his son. Lond., 1805, v.I., p.274.)
[4] "On n'echange pas de l'argent contre de l'argent," says mercier de
la Riviere to the mercantilists (l.c., p. 486). In a work, which,
ex-professo, treats of "trade" and "speculation," occure the
following:
"All trade consists in the exchange of things of different
kinds; and the advantage (to the merchant?) "arises out of
this difference. To exchange a pound of bread against a pound
of bread... would be attended with no advantage; ... Hence
trade is advantageously contrasted with gambling, which
consists in a mere exchange of money for money." (Th. Corbet,
"An Inquiry into the Causes and Modes of the Wealth of
Individuals; or the Principles of Trade and Speculation
Explained." London, 1841, p.5.)
Although Corbet does not see that M-M, the exchange of money for
money, is the charactristic form of circulation, not only of
merchant's capital but of all capital, yet at least he acknowledges
that this form is common to gambling and to one species of trade,
viz., speculation: but then comes MacCulloch and makes out, that to
buy in order to sell, is to speculate, and thus the difference
between Speculation and Trade vanishes. "Every transaction in
which the individual buys produce in order to sell it again, is, in
fact, a speculation." (MacCulloch: "A Dictionary Practical, &c., of
Commerce." Lond., 1847, p.1009.) With much more naivete, Pinto, the
Pindar of the Amsterdam Stock Exchange, remarks, "Le commerce est
un jeu: (taken from Locke) et ce n'est pas avec des gueux qu'on
peut gagner. Si l'on gagnait longtemps en tout avec tous, il
faudrait rendre de bon accord les plus grandes parties du profit
pour recommencer le jeu." (Pinto: "Traite de Circulacion et du
Credit." Amsterdam, 1771, p.231.)
[5] "Capital is divisible... into the original capital and the profit,
the increment to capital... although in practice this profit is
immediately turned into capital, and set in motion with the
original." (F. Engels, "Umrisse zu einer Kritik der
Nationalokonomie, in: Deutsch-Fransosische Jahrbucher,
herausgegeben von Arnold Ruge und Karl Marx." Paris, 1844, p.99.)
[6] Aristotle opposes Economic to Crematistic. He starts from the
former. So far as it is the art of gaining a livelihood, it is
limited to procuring those articles that are necessary to
existence, and useful either to a household or the state.
"True wealth [..greek..] consists of such values in use; for
the quantity of possessions of this kind, capable of making
life pleasant, is not unlimited. There is, however, a second
mode of acquiring things, to which we may by preference and
with correctness give the name of Crematistic, and in this
case there appear to be no limits to riches and possessions.
Trade ([..greek..] is literally retail trade, and Aristotle
takes this kind because in it values in use predominate) does
not in its nature belong to Crematistic, for here the exchange
has reference only to what is necessary to themselves (the
buyer or sellor)."
Therefore, as he goes on to show, the original form of trade was
barter, but with the extension of the latter, there arose the
necessity for money. On the discovery of money, barter of
necessity developed into [..greek..], into trading in commodities,
and this again, in opposition to its original tendency, grew into
Crematistic, into the art of making money. Now Crematistic is
distinguishable from Economic in this way, that
"in the case of Crematistic circulation is the source of
riches [..greek..]. And it appears to revolve about money,
for money is the beginning and end of this kind of exchange
[..greek..]. Therefore also riches, such as Crematistic
strives for, are unlimited. Just as every art that is not a
means to an end, but an end in itself, has no limits to its
aims, because it seeks constantly to approach nearer and
nearer to that end, while those arts that pursue means to an
end, are not boundless, since the goal itself imposes a limit
upon them, so with Crematistic, there are no bounds to its
aims, these aims being absolute wealth. Economic not
Crematistic has a limit... the object of the former is
something different from money, of the latter the augmentation
of money... By confusing these two forms, which overlap each
other, some people have been led to look upon the preservation
and increase of money ad infinitum as the end and aim of
Economic." Aristotle, "De Rep." edit. Bekker. lib. I.c. 8, 9.
passim.)
[7] "Commodities (here used in the sense of use-values) are not
terminating object of the trading capitalist, money is his
terminating object." (Th. Chalmers, "On Pol. Econ. &c., "2nd Ed.,
Glasgow, 1832, pp.165, 166.)
[8] "Il mercante non conta quasi per niente il lucro fatto, ma mira
sempre al futuro" (A. Genovesi, Lezioni di Economia Civile (1765),
Custodi's edit. of Italian Economists. Parte Moderna t. viii.
p.139)
[9] "The inextinguishable for passion for gain, the aurisacra fames,
will always lead capitalists." (MacCulloc: "The Principles of
Polit. Econ." London, 1830, p.179.) This view, of course, does not
prevent the same macCulloch and others of his kidney, when in
theoretical difficulties, such, for example, as the question of
over-production, from transforming the same capitalist into a moral
citizen, whose sole concern is for use-values, and who even
develops an isatiable hunger for boots, hats, eggs, calico, and
other extremely familiar sorts of use-values.
[10] [Greek word] is a characteristic greek expression for hoarding. So
in England to same has the same two meanings: sauver and epargner.
[11] "Questo infinito che le cose no hanno in progresso, hanno in giro."
(Galiani)
[12] "Ce n'est pas la matiere qui fait le capital, mais la valeur de ces
matieres" (J. B. Say: "Traite d'Econ. Polit." 3eme ed. Paris,
1817, t.II., p.429)
[13} "Currency (!) employed in producing articles... is capital."
(Macleod: The Theory and Practice of Banking." London, 1855, v.1,
ch.i. p.55) "Capital is commodities." (James Mill: "Elements of
Pol. Econ." Lond., 1821, p.74.)
[14] Capital: "portion fructificante de la richesse accumulee... valeur
permanente, multipliante." (Sismondi: "Nouveaux Principes d'Econ.
Polit.," t.i, p.88, 89)
