Volume II Part 2: Chapters 7 - 17

Chapter 9: The Aggregate Turnover of Advanced Capital, Cycles of Turnover

We have seen that the fixed and circulating component parts of productive capital are turned over in various ways and at various periods, also that the different constituents of the fixed capital of a business have different periods of turnover, depending on their different durabilities and therefore on their different times of reproduction. (On the real or apparent difference in the turnover of different constituents of circulating capital in the same business, see the close of this chapter, under 6.)
1) The aggregate turnover of an advanced capital is the average turnover of its various constituent parts; the mode of its calculation is given later. Inasmuch as it is merely a question of different periods of time, nothing is easier than to compute their average. But
2) We have here not alone quantitative but also qualitative difference.
The circulating capital entering into the process of production transfers its entire value to the product and must therefore be continually replaced in kind by the sale of the product, if the process of production is to proceed without interruption. The fixed capital entering into the process of production transfers only a part of its value (the wear and tear) to the product and despite this wear and tear continues functioning in the process of production. Therefore it need not be replaced in kind until the lapse of intervals of various duration, at any rate not as frequently as the circulating capital. This necessity of replacement, the reproduction term, is not only quantitatively different for the various constituent parts of fixed capital, but, as we have seen, a part of the perennial fixed capital, that which lasts longer, may be replaced annually or at shorter intervals and added in kind to the old fixed capital. In the case of fixed capital of different properties the replacement can take place only all at once at the end of its period of durability.
It is therefore necessary to reduce the specific turnovers of the various parts of fixed capital to a homogeneous form of turnover, so that they will remain different only quantitatively, namely, according to duration of turnover.
The qualitative identity does not come about if we take as our starting-point P ... P, the form of the continuous process of production. For definite elements of P must be constantly replaced in kind while others need not. However the form M ... M' undoubtedly yields this identity of turnover. Take for instance a machine worth £10,000, which lasts ten years of which one-tenth, or £1,000, is annually reconverted into money. These £1,000 have been converted in the course of one year from money-capital into productive capital and commodity-capital, and then reconverted from this into money-capital. They have returned to their original form, the money-form, just like the circulating capital, if we study the latter in this form, and it is immaterial whether this moneycapital of £1,000 is once more converted at the end of the year into the bodily form of a machine or not. In calculating the aggregate turnover of the advanced productive capital we therefore fix all its elements in the money-form, so that the return to that form concludes the turnover. We assume that value is always advanced in money, even in the continuous process of production, where this money-form of value is only that of money of account. Thus we can compute the average.
3) It follows that even if by far the greater part of the advanced productive capital consists of fixed capital whose period of reproduction, hence also of turnover, comprises a cycle of many years, the capital-value turned over during the year may, on account of the repeated turnovers of the circulating capital within the same year, be larger than the aggregate value of the advanced capital.
Suppose the fixed capital is £80,000 and its period of reproduction 10 years, so that £8,000 of it annually return to their money-form, or it completes one-tenth of its turnover. Suppose further the circulating capital is £20,000, and its turnover is completed five times per year. The total capital would then be £100,000. The turned-over fixed capital is £8,000, the turned-over circulating capital five times £20,000, or £100,000. Then the capital turned over during one year is £108,000, or £8,000 more than the advanced capital. 1 + 2/25 of the capital have been turned over.
4) Therefore the turnover time of the value of the advanced capital differs from its actual time of reproduction or from the actual time of turnover of its component parts. Take for instance a capital of £4,000 and let it turn over, say, five times a year. The turned-over capital is then five times £4,000, or £20,000. But what returns at the end of each turnover to be advanced anew is the originally advanced capital of £4,000. Its magnitude is not changed by the number of turnover periods, during which it performs anew its functions as capital. (Apart from surplus-value.)
In the illustration under No. 3, then, the sums assumedly returned into the hands of the capitalist at the end of one year are (a) a sum of value amounting to £20,000 which he invests again in the circulating constituents of the capital, and (b) a sum of £8,000 which has been set free by wear and tear from the value of the advanced fixed capital; simultaneously this same fixed capital remains in the process of production, but with the reduced value of £72,000 instead of £80,000. The process of production therefore would have to be continued for nine years more, before the advanced fixed capital outlived its term and ceased to function as a creator of products and values, so that it would have to be replaced. The advanced capital-value, then, has to pass through a cycle of turnovers, in the present case a cycle of ten annual ones, and this cycle is determined by the life, hence the reproduction or turnover time of the applied fixed capital.
As the magnitude of the value and the durability of the applied fixed capital develop with the development of the capitalist mode of production, the lifetime of industry and of industrial capital lengthens in each particular field of investment to a period of many years, say of ten years on an average. Whereas the development of fixed capital extends the length of this life on the one hand it is shortened on the other by the continuous revolution in the means of production, which likewise incessantly gains momentum with the development of the capitalist mode of production. This involves a change in the means of production and the necessity of their constant replacement, on account of moral depreciation, long before they expire physically. One may assume that in the essential branches of modern industry this life-cycle now averages ten years. However we are not concerned here with the exact figure. This much is evident: the cycle of interconnected turnovers embracing a number of years, in which capital is held fast by its fixed constituent part, furnishes a material basis for the periodic crises. During this cycle business undergoes successive periods of depression, medium activity, precipitancy, crisis. True, periods in which capital is invested differ greatly and far from coincide in time. But a crisis always forms the starting-point of large new investments. Therefore, from the point of view of society as a
whole, more or less, a new material basis for the next turnover cycle.1 5) On the way to calculate the turnovers, an American economist states:

―In some trades the whole capital embarked is turned or circulated several times within the year. In others a part is turned oftener than once a year, another part less often. It is the average period which his entire capital takes in passing through his hands, or making one revolution, from which a capitalist must calculate his profits. Suppose for example that a person engaged in a particular business has one half of his capital invested in buildings and machinery; so as to be turned only once in ten years; that one-
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fourth more, the cost of his tools, etc., is turned once in two years; and the remaining fourth, employed in paying wages and purchasing material, is turned twice in one year. Say that his entire capital is $50,000. Then his annual expenditure will be,
$25,000 : 10 = $ 2,500
12,500 : 2 = 6,500
12,500 × 2 = 25,000
———————-
$33,750
... the mean term in which his capital is turned being about sixteen months 2
―... Take another case, ... say that one-fourth of the entire capital circulates in ten years, one-fourth in one year, and one half twice in the year. Then the annual expenditure will be,
$12,500 : 10 = $ 1,250
12,500 = 12,500
25,000 × 2 = 50,000
——————————
Turned over in 1 year $63,750
(Scrope, Pol. Econ., edit. Alonzo Potter, New York, 1841, pp. 142, 143.) 3

6) Real and apparent differences in the turnover of the various parts of capital.
The same Scrope says in the same passage:
―The capital laid out by a manufacturer, farmer, or tradesman in the payment of his labourer‘s wages, circulates most rapidly, being turned perhaps once a week (if his men are paid weekly), by the weekly receipts on his bills or sales. That invested in his materials and stock in hand circulates less quickly, being turned perhaps twice, perhaps four times in the year, according to the time consumed between his purchases of the one and sales of the other, supposing him to buy and sell on equal credits. The capital invested in his implements and machinery circulates still more slowly, being turned, that is, consumed and renewed, on the average, perhaps but once in five or ten years; though there are many tools that are worn out in one set of operations. The capital which is embarked in buildings, as mills, shops, warehouses, barns, in roads, irrigation, etc., may appear scarcely to circulate at all. But, in truth, these things are, to the full, as much as those we have enumerated, consumed in contributing to production, and must be reproduced in order to enable the producer to continue his operations; with this only difference, that they are consumed and reproduced by slower degrees than the rest ... and the capital invested in them may be turned perhaps every twenty of fifty years.‖ [pp. 141-42.]
Scrope confuses here the difference in the flow of certain parts of the circulating capital, brought about for the individual capitalist by terms of payment and conditions of credit, with the difference in the turnovers due to the nature of capital. He says that wages must be paid weekly out of the weekly receipts from paid sales or bills. It must be noted here in the first place that certain differences occur relative to wages themselves, depending on the length of the term of payment, that is, the length of time for which the labourer must give credit to the capitalist, whether wages are payable every week, month, three months, six months, etc. In this case, the law expounded before, holds good, to the effect that ―the quantity of the means of payment required for all periodical payments‖ (hence of the money-capital to be advanced at one time) ―is in inverse4 proportion to the length of their periods.‖ (Buch I, Kap. III, 3b, Seite 124.) 5
In the second place, it is not only the new value added in the process of production by the week‘s labour which enters completely into the weekly product, but also the value of the raw and auxiliary materials consumed by the weekly product. This value circulates with the product containing it. It assumes the form of money through the sale of the product and must be reconverted into the same elements of production. This applies as much to the labour-power as to the raw and auxiliary materials. But we have already seen (Chapter VI, II, 1) that continuity of production requires a supply of means of production different for different branches of industry, and different within one and the same branch of business for different component parts of this element of the circulating capital, for instance, for coal and cotton. Hence, although these materials must be continually replaced in kind, they need not always be bought anew. The frequency of purchases depends on the size of the available stock, on the time it takes to exhaust it. In the case of labour-power there is no such storing of a supply. The reconversion into money of the part of capital laid out in labour-power goes hand in hand with that of the capital invested in raw and auxiliary materials. But the reconversion of the money, on the one hand into labourpower, on the other into raw materials, proceeds separately on account of the special terms of purchase and payment of these two constituents, one of them being bought as a productive supply for long periods, the other, labour-power, for shorter periods, for instance a week. On the other hand the capitalist must keep a stock of finished commodities besides a stock of materials for production. Let us leave sales difficulties aside. A certain quantity of goods must be produced, say, on order. While the last portion of this lot is being produced, the finished products are waiting in the warehouse until the order can be completely filled. Other differences in the turnover of circulating capital arise whenever some of its separate elements must stay in some preliminary stage of the process of production (drying of wood, etc.) longer than others. The credit system, to which Scrope here refers, as well as commercial capital, modifies the turnover for the individual capitalist. On a social scale it modifies the turnover only in so far as it does not accelerate merely production but also consumption.

1 ―Urban production is bound to a cycle of days, rural production on the contrary to one of years.‖ (Adam G. Müller, Die Elemente der Staatskunst, Berlin, 1809, III, p. 178.) this is the naive conception of industry and agriculture held by the romantic school.
2 In the manuscript Marx points out the fallacy of such a method of calculating the period of the turnover of capital. The mean term of turnover (16 months) given in the quotation was calculated with account taken of a profit of 7.5 per cent on the aggregate capital of $50,000. Profit discounting, the turnover of capital is equal to 18 months. — Ed.
3 The book referred to is A. Potter‘s Political Economy, Its Objects, Uses, and Principles, New York, 1840. According to the author‘s ―Advertisement‖, the second part of the book is substantially a reprint (with many alterations made by A. Potter) of G. J. P. Scrope‘s The Principles of Political Economy, London, 1833. — Ed.
4 This is evidently a slip of the pen, the proportion being direct and not inverse. — Ed.
5 English edition: Ch. III, 3b, p. 141. — Ed.

Chapter 11: Theories of Fixed and Circulating Capital. Ricardo

Ricardo introduces the distinction between fixed and circulating capital merely for the purpose of illustrating the exceptions to the rule of value, namely, cases where the rate of wages affects prices. The discussion of this point is reserved for Book III. 1
But the original lack of clarity is apparent at the outset in the following immaterial juxtaposition:
―This difference in the degree of durability of fixed capital, and this variety in the proportions in which the two sorts of capital may be combined.‖[25] And if we ask him which two sorts of capital he is referring to, we are told:
―The proportions, too, in which the capital that is to support labour, and the capital that is invested in tools, machinery, and buildings, may be variously combined.‖[26]
In other words, fixed capital equals instruments of labour and circulating capital equals capital laid out in labour. ―Capital that is to support labour‖ is a senseless term culled from Adam Smith. On the one hand the circulating capital is here lumped together with the variable capital, i.e., with that part of productive capital which is laid out in labour. But on the other hand doubly erroneous definitions arise for the reason that the antithesis is not derived from the process of self-expansion of value — constant and variable capital — but from the process of circulation (Adam Smith‘s old confusion).
First: The differences in the degree of durability of fixed capital and the difference arising from capital being composed of constant and variable capital are conceived as being of equal significance. But the last-named difference determines the difference in the production of surplusvalue; the first named on the other hand, so far as the process of self-expansion is concerned, refers only to the manner in which a particular value is transferred from a means of production to the product; so far as the process of circulation is concerned, this difference refers only to the period of the renewal of the expended capital, or, from another point of view, to the time for which it has been advanced. If instead of seeing through the internal machinery of the capitalist process of production one considers merely the accomplished phenomena, then these distinctions actually coincide. In the distribution of the social surplus-value among the various capitals invested in different branches of industry, the differences in the different periods of time for which capital is advanced (for instance the various degrees of durability of fixed capital) and the different organic compositions of capital (and therefore also the different circulations of constant and variable capital) contribute equally toward an equalisation of the general rate of profit and the conversion of values into prices of production.
Secondly: From the point of view of the process of circulation, we have on one side the instruments of labour — fixed capital, on the other the material of labour and wages — circulating capital. But from the point of view of the process of labour and self-expansion, we have on the one side means of production (instruments of labour and material of labour) — constant capital; on the other, labour-power — variable capital. It is wholly immaterial for the organic composition of capital (Buch I, Kap. XXIII, 2, p. 647) 1a whether a specified quantity of value of constant capital consists of many instruments of labour and little material of labour or of much material of labour and few instruments of labour, while everything depends on the ratio of the capital laid out in means of production to that laid out in labour-power. Vice versa: from the point of view of the process of circulation, of the distinction between fixed and circulating capital, it is just as immaterial in what proportions a particular quantity of value circulating capital divides into material of labour and wages. From one of these points of view the material of labour is classed in the same category with the instruments of labour, as opposed to the capitalvalue laid out in labour-power; from the other view-point the part of capital laid out in labourpower ranges with that laid out in material of labour, as opposed to that laid out in instruments of labour.
For this reason the part of the capital-value laid out in material of labour (raw and auxiliary materials) does not appear on either side in Ricardo. It disappears entirely; for it will not do to class it with fixed capital, because its mode of circulation coincides entirely with that of the part of capital laid out in labour-power. And on the other hand it should not be placed alongside circulating capital, because in that event the identification of the antithesis of fixed and circulating capital with that of constant and variable capital, which had been handed down by Adam Smith and is tacitly retained, would abolish itself. Ricardo has too much logical instinct not to feel this, and for this reason that part of capital vanishes entirely from his sight.
It is to be noted at this point that the capitalist, to use the jargon of Political Economy, advances the capital laid out in wages for various periods of time, according to whether he pays these wages weekly, monthly, or quarterly. But as a matter of fact the reverse takes place. It is the labourer who advances his labour to the capitalist for a week, a month, or three months, according to whether he is paid by the week, by the month, or every three months. If the capitalist bought labour-power instead of paying for it, in other words, if he paid the labourer his wages in advance for a day, a week, a month, or a quarter, he would be justified in claiming that he advanced wages for those periods. But since he pays after the labour has lasted for days, weeks, or months, instead of buying it and paying for the time which it is to last, the whole thing amounts to a capitalist quid pro quo, and the advance which the labour gives to the capitalist in labour is turned into an advance of money given to the labourer by the capitalist. It does not alter the case in the least that the capitalist gets back the product itself or its value (together with the surplus-value embodied in it) from circulation, or realises it, only after a relatively long or short period of time, according to the different periods required for its manufacture or for its circulation. The seller of a commodity does not care a rap what its buyer is going to do with it. The capitalist does not get a machine cheaper because he must advance its entire value at one shot, while this value returns to him only gradually and piecemeal from circulation; nor does he pay more for cotton because its value enters entirely into the value of the product into which it is made and is therefore replaced fully and at one time by the sale of the product.
Let us return to Ricardo.
1. The characteristic feature of variable capital is that a definite, given (and as such constant) part of capital, a given sum of values (assumed to be equal in value to the labour-power, although it does not matter here whether the wages are equal, more or less than the value of the labourpower) is exchanged for a self-expanding, value-creating power, viz., labour-power, which not only reproduces its value, paid by the capitalist, but simultaneously produces a surplus-value, a value not existing previously and not paid for by any equivalent. This characteristic property of the part of capital laid out for wages, which distinguishes it toto coelo as variable capital from constant capital, disappears whenever the part of capital expended on wages is considered solely from the point of view of the process of circulation and thus appears as circulating capital in contradistinction to the fixed capital laid out in instruments of labour. This is apparent if only from the fact that it is then brought under one head — that of circulating capital — together with the component part of the constant capital laid out in material of labour and opposed to the other component of the constant capital — that laid out in instruments of labour. Surplus-value, hence the very circumstance which converts the laid-out sum of value into capital, is entirely ignored thereby. Similarly the fact is ignored that the part of the value added to the product by the capital laid out in wages is newly produced (and therefore really reproduced), while the part of the value which the raw material adds to the product is not newly produced, not really reproduced, but only preserved in the value of the product, conserved, and hence merely reappears as a component part of the value of the product. The distinction, as now seen from the point of view of the contrast between fixed and circulating capital, consists simply in this: The value of the instruments of labour used for the production of a commodity enters only partially into the value of the commodity and is therefore only partially replaced by its sale, hence is replaced altogether only piecemeal and gradually. On the other hand the value of the labour-power and subjects of labour (raw materials, etc.) used for the production of a commodity entirely enters into it and is therefore entirely replaced by its sale. In this respect, as far as the process of circulation is concerned, one part of capital presents itself as fixed, the other as fluent, or circulating. In both cases it is a matter of transferring given, advanced values to the product and of their replacement by the sale of the product. The difference now depends only on whether the transfer of value, and consequently the replacement of the value, takes place piecemeal and gradually, or in bulk. By this means the distinction between the variable and constant capital, which decides everything, is blotted out, hence the whole secret of the production of surplus-value and of capitalist production, the circumstances which transform certain values and the things in which they present themselves into capital, are obliterated. All constituent parts of capital are then distinguished merely by their mode of circulation (and, of course, circulation of commodities concerns itself solely with already existing given values); and the capital laid out in wages shares a peculiar mode of circulation with the part of capital laid out in raw materials, semi-finished products, auxiliary materials, as opposed to the part of capital laid out in instruments of labour.
It is therefore understandable why bourgeois Political Economy instinctively clung to Adam
Smith‘s confusion of the categories ―constant and variable capital‖ with the categories ―fixed and circulating,‖ and repeated it parrotlike, without criticism, from generation to generation for a century. The part of capital laid out for wages is no longer in the least distinguished by bourgeois Political Economy from the part of capital laid out for raw materials, and differs only formally from constant capital — on the point of whether it is circulated piecemeal or in one lump by the product. Thereby the basis for an understanding of the real movement of capitalist production, and hence of capitalist exploitation, is buried at one stroke. It is but a question of the reappearance of advanced values.
In Ricardo the uncritical adoption of the Smithian confusion is more disturbing not only than in the later apologists, in whom the confusion of ideas is rather something not disturbing, but than in Adam Smith himself, because Ricardo, in contrast to the latter, is more consistent and incisive in his analysis of value and surplus-value, and indeed upholds the esoteric Adam Smith against the exoteric Adam Smith.
Among the physiocrats there is no such confusion. The distinction between avances annuelles and avances primitives refers only to the different periods of reproduction of the different component of capital, especially of agricultural capital, while their views on the production of surplus-value form a part of their theory that is independent of these distinctions, a part they hold up as the strong point of the theory. The formation of surplus-value is not explained as originating from capital as such, but is attributed to one particular sphere of the production of capital, agriculture.
Secondly. The essential point in the definition of variable capital — and therefore for the conversion of any sum of values into capital — is that the capitalist exchanges a definite, given (and in this sense constant) magnitude of value for value-creating power, a magnitude of value for the production, self-expansion, of value. Whether the capitalist pays the labourer in money or in means of subsistence does not affect this basic definition. It only alters the mode of existence of the value advanced by the capitalist which in one case exists in the form of money for which the labourer buys himself his means of subsistence in the market, in the other case in the form of means of subsistence which he consumes directly. Developed capitalist production rests indeed on the assumption that the labourer is paid in money, just as in general it presupposes the process of production brought about by the process of circulation, hence presupposes the monetary system. But the creation of surplus-value — and consequently the capitalisation of the advanced sum of values — has its source neither in the money-form of wages nor in the form of wages paid in kind, nor in the capital laid out in the purchase of labour-power. It arises out of the exchange of value for value-creating power, out of the conversion of a constant into a variable magnitude.
The greater or smaller fixity of the instruments of labour depends on their degree of durability, hence on a physical property. Other circumstances being equal, they will wear out sooner or later, will therefore function a longer or a shorter time as fixed capital, according to their durability. But it is by no means solely on account of this physical property of durability that they function as fixed capital. The raw material in metal factories is just as durable as the machines used in manufacturing, and more durable than many component parts of these machines, such as leather and wood. Nevertheless the metal serving as raw materials forms a part of the circulating capital, while the instrument of labour, although probably built of the same metal, is a part of the fixed capital when in use. Consequently it is not because of the material, physical nature, nor the relatively great or small speed with which it wears out that a metal is put now in the category of fixed, now in that of circulating capital. This distinction is rather due to the role played by it in the process of production, being a subject of labour in one case and an instrument of labour in the other.
The function of an instrument of labour in the process of production requires that on the average it should serve for a longer or shorter period in ever renewed labour-processes. Its very function therefore prescribes that the stuff of which it is composed should be more or less durable. But it is not the durability of the material of which it is fabricated that by itself makes it fixed capital. The same stuff, when raw material, becomes circulating capital, and among economists who confuse the distinction between commodity-capital and productive capital with the distinction between circulating and fixed capital, the same stuff, the same machine, is circulating capital as product and fixed capital as instrument of labour.
Although it is not the durability of the material of which it is fabricated that makes an instrument of labour fixed capital, nevertheless its role as such an instrument requires that it should be composed of relatively durable material. The durability of its material is therefore a condition of its function as an instrument of labour, and consequently the material basis of the mode of circulation which renders it fixed capital. Other things being equal, the higher or lower degree of wear and tear of the stuff it is made of impresses upon it in a higher or lower degree the stamp of fixedness, is therefore very closely interwoven with the quality of being fixed capital.
If the part of capital laid out in labour-power is considered exclusively from the point of view of circulating capital, hence in contrast with fixed capital, and if consequently the distinctions between constant and variable capital are lumped with those between fixed and circulating capital, then it is natural — supposing that material reality of the instrument of labour forms an essential basis of its character of fixed capital — to derive its character of circulating capital, in contrast with the fixed capital, from the material reality of the capital invested in labour-power, and then again to determine the circulating capital with the aid of the material reality of the variable capital.
The real substance of the capital laid out in wages is labour itself, active, value-creating labourpower, living labour, which the capitalist exchanges for dead, materialised labour and embodies in his capital, by which means, and by which alone, the value in his hands turns into selfexpanding value. But this power of self-expansion is not sold by the capitalist. It is always only a constituent part of his productive capital, the same as his instruments of labour; it is never a part of his commodity-capital, as for instance the finished product which he sells. In the process of production the instruments of labour, as components of the productive capital, are not opposed to labour-power as fixed capital any more than materials of labour and auxiliary substances are identified with it as circulating capital. Labour-power confronts both of them as a personal factor, while those are objective factors — speaking from the point of view of the labour-process. Both of them stand opposed to labour-power, as constant capital to variable capital — speaking from the point of view of the process of self-expansion of value. Or, if mention is to be made here of a material difference, so far as it affects the process of circulation, it is only this: It follows from the nature of value, which is nothing but materialised labour, and from the nature of active labourpower, which is nothing but labour in process of materialisation, that labour-power continually creates value and surplus-value during the time it functions; that what on the part of labour-power appears as motion, as a creation of value, appears on the part of its product in a state of rest, as created value. If the labour-power has performed its function, capital no longer consists of labourpower on the one side and means of production on the other. The capital-value that was invested in labour-power is now value which ( + surplus-value) was added to the product. In order to repeat the process, the product must be sold and new labour-power constantly bought with the proceeds and incorporated in the productive capital. This then gives to the part of capital invested in labour-power, and to that invested in material of labour, etc., the character of circulating capital as opposed to the capital remaining fixed in the instruments of labour.
But if, on the contrary, the secondary definition of the circulating capital, which it shares with a part of the constant capital (raw and auxiliary materials), is made the essential definition of the part of capital laid out in labour-power, to wit, that the value laid out in it is transferred in full to the product in whose creation it is consumed, and not gradually and piecemeal as in the case of the fixed capital, and that consequently it must be replaced in full by the sale of the product — then the part of the capital laid out in wages must likewise consist, materially, not of active labour-power but of the material elements which the labourer buys with his wages, i.e., it must consist of that part of the social commodity-capital which passes into the consumption of the labourer, viz., of means of subsistence. In that case the fixed capital consists of the more slowly perishable instruments of labour which therefore have to be replaced more slowly, and the capital laid out in labour-power consists of the means of subsistence, which must be replaced more rapidly.
However, the border-line between greater or lesser perishableness is very vague and indistinct.
―The food and clothing consumed by the labourer, the buildings in which he works, the implements with which his labour is assisted, are all of a perishable nature. There is however a vast difference in the time for which these different capitals will endure: a steam-engine will last longer than a ship, a ship than the clothing of the labourer, and the clothing of the labourer
longer than the food which he consumes.‖2
Ricardo forgets to mention the house in which the labourer lives, his furniture, his tools of consumption, such as knives, forks, dishes, etc., all of which have the same quality of durability as the instruments of labour. The same things, the same kinds of things, appear in one place as articles of consumption and in another as instruments of labour.
The difference, as stated by Ricardo, is this:
―According as capital is rapidly perishable and requires to be frequently reproduced, or is of slow consumption, it is classed under the heads of circulating or fixed capital.‖3 And he adds this note:
―A division not essential, and in which the line of demarcation cannot be accurately drawn.‖4
Thus we have once more happily arrived in the camp of the physiocrats, where the distinction between avances annuelles and avances primitives was one referring to the time of consumption, and consequently also to the different times of reproduction of the capital employed. Only, what with them constitutes an important phenomenon of social production and is described in the Tableau Économique in connection with the process of circulation, becomes here a subjective and, in Ricardo‘s own words, superfluous distinction.
Once the part of capital invested in labour differs from that invested in instruments of labour only by its period of reproduction and hence its term of circulation, and once one part consists of means of subsistence and the other of instruments of labour so that those differ from these only in being more rapidly perishable, there being various degrees of durability within the first group itself, all differentia specifica between capital invested in labour-power and capital invested in means of production is naturally obliterated.
This wholly contradicts Ricardo‘s doctrine of value, likewise his theory of profit, which is in fact a theory of surplus-value. In general he considers the distinction between fixed and circulating capital only to the extent that different proportions of both of them in equally large capitals invested in different branches of production influence the law of value, particularly the extent to which an increase or decrease of wages in consequence of these conditions affects prices. But even within this restricted investigation he commits the gravest errors on account of his confusing fixed and circulating with constant and variable capital. Indeed, he starts his analysis on an entirely wrong basis. In the first place, in so far as the part of the capital-value laid out in labourpower has to be classified under the head of circulating capital, the definitions of circulating capital itself are wrongly developed, particularly the circumstances which place the part of capital laid out in labour under this head. In the second place there is a confusion of the definition according to which the part of capital invested in labour is variable capital with the definition according to which it is circulating capital, as opposed to fixed capital.
It is evident at the outset that the definition of capital invested in labour-power as circulating or fluent capital is a secondary one, obliterating its differentia specifica in the process of production. For in this definition, on the one hand, the capitals invested in labour are of the same importance as those invested in raw material, etc. A classification which identifies a part of the constant capital with the variable capital does not deal with the differentia specifica of variable capital in opposition to constant capital. On the other hand the parts of capital laid out in labour are indeed opposed to those invested in instruments of labour, but not in the least with reference to the fact that these parts enter into the production of value in quite different ways, but with reference to the fact that both transfer their value to the product, but in different periods of time.
In all of these cases the point at issue is how a given value, laid out in the process of production of commodities, whether it be wages, the price of raw materials, or that of instruments of labour, is transferred to the product, hence is circulated by the product, and returned to its starting-point by the sale of the product, or is replaced. The only difference lies here in the ―how,‖ in the particular manner of the transfer, and therefore also of the circulation of this value.
Whether the price of labour-power previously stipulated by contract in each individual case is paid in money or means of subsistence does not alter in any way its character of being a fixed price. However it is evident in the case of wages paid in money that the money itself does not pass into the process of production in the way that the value as well as the material of the means of production do. But if on the other hand the means of subsistence which the labourer buys with his wages are directly classed in the same category, alongside raw materials, etc., as the material form of circulating capital and are opposed to the instruments of labour, then the matter assumes a different aspect. If the value of these things, of the means of production, is transferred to the product in the labour-process, the value of those other things, the means of subsistence, reappears in the labour-power that consumes them and is likewise transferred to the product by the functioning of this power. In both these cases it is equally a question of the mere reappearance, in the product, of the values advanced during production. (The physiocrats took this seriously and therefore denied that industrial labour created surplus-value.) Thus the previously quoted5 passage from Wayland.

―The form, however, is of no consequence... The various kinds of food, clothing, and shelter, necessary for the existence and comfort of the human being, are also changed. They are consumed, from time to time, and their
value reappears...‖ (Elements of Pol. Econ., pp. 31, 32.)
The capital-values advanced for production in the form of both means of production and means of subsistence reappear here equally in the value of the product. Thus the transformation of the capitalist process of production into a complete mystery is happily accomplished and the origin of the surplus-value existing in the product is entirely withdrawn from view.
Furthermore this brings to completion the fetishism peculiar to bourgeois Political Economy, the fetishism which metamorphoses the social, economic character impressed on things in the process of social production into a natural character stemming from the material nature of those things. For instance, ―instruments of labour are fixed capital,‖ is a scholastic definition, which leads to contradictions and confusion. Just as was demonstrated in the case of the labour-process (Buch I, Kap. V), 5a that it depends wholly on the role which the material components play in a particular labour-process, on their function — whether they function as instruments of labour, material of labour, or products — so instruments of labour are fixed capital only if the process of production is really a capitalist process of production and the means of production are therefore really capital and possess economic definiteness, the social character of capital. And in the second place, they are fixed capital only if they transfer their value to the product in a particular way. If not, they remain instruments of labour without being fixed capital. In the same way if auxiliary materials like manure give up value in the same peculiar manner as the greater part of the instruments of labour, they become fixed capital although they are not instruments of labour. It is not a question here of definitions, which things must be made to fit. We are dealing here with definite functions which must be expressed in definite categories.
If to be capital laid out in wages is considered one of the qualities of means of subsistence as such under all circumstances, then it will also be a quality of this ―circulating‖ capital ―to support labour.‖ (Ricardo, p. 25.) If the means of subsistence were not ―capital‖ they would not support labour-power; whereas it is precisely their quality of capital that endows them with the faculty of supporting capital by foreign labour.
If means of subsistence as such are circulating capital — after the latter had been converted into wages — it follows further that the magnitude of wages depends on the ratio of the number of labourers to the given amount of circulating capital — a favourite economic proposition — while as a matter of fact the quantity of means of subsistence withdrawn from the market by the labourer, and the quantity of means of subsistence available for the consumption of the capitalist, depend on the ratio of the surplus-value to the price of labour.
Ricardo, like Barton, 6 everywhere confounds the relation of variable to constant capital with that of circulating to fixed capital. We shall see later to what extent this vitiates his investigation of the rate of profit. 7
Ricardo furthermore identifies the differences which arise in the turnover from other causes than the distinction between fixed and circulating capital with this distinction:
―It is also to be observed that the circulating capital may circulate, or be returned to its employer, in very unequal times. The wheat bought by a farmer to sow is comparatively a fixed capital to the wheat purchased by a baker to make into loaves. The one leaves it in the ground, and can obtain no return for a year; the other can get it ground into flour, sell it as bread to his customers, and have his capital free, to renew the same, or commence any other employment in a week.‖8
It is characteristic here that wheat, although not serving as a means of subsistence but as raw material when used for sowing, is in the first place circulating capital, because in itself it is a means of subsistence, and in the second placed fixed capital, because its return takes over a year. However it is not only the more or less slow or rapid return which makes a fixed capital of a means of production, but also the definite manner in which it transfers its value to the product.
The confusion created by Adam Smith has brought about the following results:
1. The distinction between fixed and circulating capital is confused with that between productive capital and commodity-capital. For instance a machine is considered circulating capital when in the market as a commodity, and fixed capital when incorporated in the process of production. Moreover, it is absolutely impossible to ascertain why one kind of capital should be more fixed or circulating than another.
2. All circulating capital is identified with capital laid out or to be laid out in wages. This is so in John Stewart Mill, 9and others.
3. The distinction between variable and constant capital, which was previously mistaken by Barton, Ricardo, and others for that between circulating and fixed capital, is finally wholly reduced to this last-named distinction, for instance in Ramsay, where all means of production, raw materials, etc., as well as instruments of labour are fixed capital, and only capital laid out in wages is circulating capital.10 But because the reduction takes place in this form, the real distinction between constant and variable capital is not understood.
4. The latter-day British, especially Scotch, economists, who look upon all things from the inexpressibly narrow-minded point of view of a bank clerk, such as MacLeod, 11 Patterson, 12and others, transform the distinction between fixed and circulating capital into one between money at call andmoney not at call.

1 Karl Marx, Capital, Vol. III, Ch. XI, pp. 196-200. — Ed.
1a English edition, Volume I, Ch. XXV, 2, pp. 622-23. — Ed.
2 Ricardo, Principles, etc., p. 26.
3 Ibid.
4 Ibid.
5 Karl Marx, Capital, Vol. I, p. 207, Note 3. — Ed.
5a English edition: Ch. VII. — Ed.
6 Observations on the Circumstances Which Influence the Condition of the Labouring Classes of Society, London, 1817. A pertinent passage is quoted in Book I, p. 655, Note 79. [English edition: p.
631, Note 1.]
7 Karl Marx, Capital, Vol. III, Ch. I-III. — Ed.
8 Principles, etc., pp. 26 and 27.
9 J. St. Mill, Essays on Some Unsettled Questions of Political Economy, London, 1844, p. 164. — Ed.
10 G. Ramsay, An Essay on the Distribution of Wealth, Edinburgh, 1833, pp. 21-24. — Ed.
11 H. D. MacLeod, The Elements of Political Economy, London, 1858, pp. 76-80. — Ed.
12 R. H. Patterson, The Science of Finance. A Practical Treatise, Edinburgh and London, 1868, pp. 129-44. — Ed.

Chapter 13: The Time of Production

Working time is always production time, that is to say, time during which capital is held fast in the sphere of production. But vice versa, not all time during which capital is engaged in the process of production is necessarily working time.
It is here not a question of interruptions of the labour-process necessitated by natural limitations of the labour-power itself, although we have seen to what extent the mere circumstance that fixed capital — factory buildings, machinery, etc. — lies idle during pauses in the labour-process1, became one of the motives for an unnatural prolongation of the labour-process and for day-andnight work. We are dealing here rather with interruptions independent of the length of the labourprocess, brought about by the very nature of the product and its fabrication, during which the subject of labour is for a longer or shorter time subjected to natural processes, must undergo physical, chemical and physiological changes, during which the labour-process is entirely or partially suspended.
For instance grape after being pressed must ferment awhile and then rest for some time in order to reach a certain degree of perfection. In many branches of industry the product must pass through a drying process, for instance in pottery, or be exposed to certain conditions in order to change its chemical properties, as for instance in bleaching. Winter grain needs about nine months to mature. Between the time of sowing and harvesting the labour-process is almost entirely suspended. In timber-raising, after the sowing and the incidental preliminary work are completed, the seed requires about 100 years to be transformed into a finished product and during all that time it stands in comparatively very little need of the action of labour.
In all these cases additional labour is drawn on only occasionally during a large portion of the time of production. The condition described in the previous chapter, where additional capital and labour must be supplied to the capital already tied up in the process of production, obtains here only with longer or shorter intervals.
In all these cases therefore the production time of the advanced capital consists of two periods: one period during which the capital is engaged in the labour-process and a second period during which its form of existence — that of an unfinished product — is abandoned to the sway of natural processes, without being at that time in the labour-process. Nor does it matter in the least here and there. The working period and the production period do not coincide in these cases. The production period is longer than the working period. But the product is not finished, not ready, hence not fit to be converted from the form of productive into that of commodity-capital until the production period is completed. Consequently the length of the turnover period increases in proportion to the length of the production time that does not consist of working time. In so far as the production time in excess of the working time is not fixed by natural laws given once and for all, such as govern the maturing of grain, the growth of an oak, etc., the period of turnover can often be more or less shortened by an artificial reduction of the production time. Such instances are the introduction of chemical bleaching instead of bleaching on the green and more efficient drying apparatus. Or, in tanning, where the penetration of the tannic acid into the skins, by the old method, took from six to eighteen months, while the new method, by means of an air-pump, does it in only one and a half to two months. (J. G. Courcelle-Seneuil, Traitè thèorique et pratique des entreprises industrielles, etc., Paris, 1857, 2-me èd.) The most magnificent illustration of an artificial abbreviation of the time of production taken up exclusively with natural processes is furnished by the history of iron manufacture, more especially the conversion of pig iron into steel during the last 100 years, from the puddling process discovered about 1780 to the modern Bessemer process and the latest methods introduced since. The time of production has been brought down tremendously, but the investment of fixed capital has increased in proportion.
A peculiar illustration of the divergence of the production time from the working time is furnished by the American manufacture of shoe-lasts. In this case a considerable portion of the unproductive costs arises from having to hold the timber at least eighteen months before it is dry enough to work, so as to prevent subsequent warping. During this time the wood does not pass through any other labour-process. The period of turnover of the invested capital is therefore not determined solely by the time required for the manufacture of the lasts but also by the time during which it lies unproductive in the shape of drying wood. It stays 18 months in the process of production before it can enter into the labour-process proper. This example shows at the same time that the times of turnover of different parts of the aggregate circulating capital may differ in consequence of conditions which do not arise within the sphere of circulation but owe their origin to the production process.
The difference between production time and working time becomes especially apparent in agriculture. In our moderate climates the land bears grain once a year. Shortening or lengthening the period of production (for winter grain it averages nine months) itself depends on the alternation of good and bad seasons, and for this reason cannot be accurately determined and controlled beforehand as in industry proper. Only such by-products as milk, cheese, etc., can steadily be produced and sold in comparatively short periods. On the other hand, working time data are as follows:
―The number of working-days in the various regions of Germany, with due regard to the climatic and other determining conditions, will for the three main working periods presumably be: For the spring period, from the middle of March or beginning of April to the middle of May, about 50 to 60 working-days; for the summer period, from the beginning of June to the end of August, 65 to 80; and for the autumn period, from the beginning of September to the end of October, or the middle or end of November, 55 to 75 working-days. For the winter, only the jobs market goods, building materials, etc., are to be noted." (F. Kirchhof, Handbuch der landwirthschaftlichen Betriebslehre, Dessau, 1852, S. 160.)
The more unfavourable the climate, the more congested is the working period in agriculture, and hence the shorter is the time in which capital and labour are expended. Take Russia for instance. In some of the northern districts of that country field labour is possible only from 130 to 150 days throughout the year, and it may be imagined what a loss Russia would sustain if 50 out of the 65 millions of her European population remained without work during the six or eight months of the winter, when agricultural labour is at a standstill. Apart from the 200,000 peasants who work in the 10,500 factories of Russia, local domestic industries have everywhere developed in the villages. There are villages in which all the peasants have been for generations weavers, tanners, shoemakers, locksmiths, cutlers, etc. This is particularly the case in the gubernias of Moscow, Vladimir, Kaluga, Kostroma, and Petersburg. By the way, this domestic industry is being pressed more and more into the service of capitalist production. The weavers for instance are supplied with warp and woof directly by merchants or through middlemen. (Abbreviated from the Reports by H. M. Secretaries of Embassy and Legation, on the Manufactures, Commerce, etc., No. 8, 1865, pp. 86 and 87.) We see here that the divergence of the production period from the working period, the latter being but a part of the former, constitutes the natural basis for the combination of agriculture with subsidiary rural industries, and that these subsidiary industries in turn offer points of vantage to the capitalist, who intrudes first in the person of the merchant. When capitalist production later accomplishes the separation of manufacture and agriculture, the rural labourer becomes ever more dependent on merely casual accessory employment and his condition deteriorates thereby. For capital, as will be seen later, all differences in the turnover are evened out. Not so for the labourer.
In most branches of industry proper, of mining, transportation, etc., operations proceed evenly, the working time being the same year in year out and the outlay of capital passing daily into the circulation process being uniformly distributed, apart from such abnormal interruptions as fluctuations of prices, business dislocations, etc. Likewise the return of the circulating capital or its renewal is evenly distributed throughout the year, market conditions otherwise remaining the same. Yet there is in the course of the various periods of the year the greatest inequality in the outlay of circulating capital in such capital investments in which the working time constitutes only a part of the production time, while the return takes place only in bulk at a time fixed by natural conditions. If the scale of business is the same, i.e., if the amount of advanced circulating capital is the same, it must be advanced in larger quantities at a time and for longer periods than in enterprises with continuous working periods. There is also a considerably greater difference here between the life of the fixed capital and the time in which it really functions productively. Due to the difference between working time and production time, the time of employment of the applied fixed capital is of course likewise continually interrupted for a longer or shorter time, for instance in agriculture in the case of working cattle, implements and machines. In so far as this fixed capital consists of draught animals, it requires continually the same, or nearly the same, expenditure for feed, etc., as it does during the time they work. In the case of dead stock non-use also brings on a certain amount of depreciation. Hence the product is in general increasing in price, since the transfer of value to it is not calculated according to the time during which the fixed capital functions but according to the time during which it depreciates in value. In branches of production such as these, the idling of the fixed capital, whether combined with current expenses or not, forms as much a condition of its normal employment as for instance the loss of a certain quantity of cotton in spinning; and in the same way the labour-power expended unproductively but unavoidably in any labour-process under normal technical conditions counts just as well as that expended productively. Every improvement which reduces the unproductive expenditure of instruments of labour, raw material, and labour-power also reduces the value of the product.
In agriculture we have a combination of both the longer working period and the great difference between working time and production time. Hodgskin rightly remarks:
―The difference of time‖ (although he does not differentiate here between working time and production time) ―required to complete the products of agriculture, and of other species of labour,‖ is ―the main cause of the great dependence of the agriculturists. They cannot bring their commodities to market in less time than a year. For that whole period they are obliged to borrow of the shoemaker, the tailor, the smith, the wheelwright, and the various other labourers, whose products they cannot dispense with, but which are completed in a few days or weeks. Owing to this natural circumstance, and owing to the more rapid increase of the wealth produced by other labour than that of agriculture, the monopolisers of all the land, though they have also monopolised legislation, have not been able to save themselves and their servants, the farmers, from becoming the most dependent class of men in the community.‖ (Thomas Hodgskin, Popular Political Economy, London, 1827, p. 147. note.)
All methods by which in agriculture on the one hand the expenditures for wages and instruments of labour are distributed more evenly over the entire year, while on the other the turnover is shortened by raising a greater variety of crops, thus making different harvests possible throughout the year, require an increase of the circulating capital advanced in production, invested in wages, fertilisers, seed, etc. This is the case in the transition from the three-field system with fallow land to the system of crop rotation without fallow. It applies furthermore to the cultures dèrobèes of Flanders.
―The root crops are planted in culture dèrobèe; the same field yields in succession first grain, flax, colza, for the wants of man, and after they are harvested root crops are sown for the maintenance of cattle. This system, which permits the keeping of horned cattle in the stables, yields a considerable amount of manure and thus becomes the pivot of crop rotation. More than a third of the cultivated area in sandy districts is taken up with cultures dèrobèes; it is just as if the cultivated area had been increased by one-third.‖
Apart from root crops, clover and other fodder plants are likewise used for this purpose.
―Agriculture, being thus carried to a point where it turns into horticulture, naturally requires a considerable investment of capital. This capital, estimated in England at 250 francs per hectare, must be almost 500 francs in Flanders, a figure which good farmers will undoubtedly consider far too low, judging by their own lands.‖ (Émile de Laveleye, Essais sur l'èconomie
rurale de la Belgique, Paris, 1863, pp. 45, 46 and 48.) Take finally timber-growing.
―The production of timber differs from most of the other branches of production essentially in that here the forces of nature act independently and do not require the power of man or capital when the increase is natural. Even in places where forests are propagated artificially the expenditure of human and capital energy is inconsiderable compared with the action of the natural forces. Besides, a forest will still thrive in soils and on sites where grain no longer gets along or where its cultivation no longer pays. Furthermore forestry engaged in as a regular economy requires a larger area than grain culture, because small plots do not permit of proper forestry methods, largely prevent the enjoyment of the secondary uses to which the land can be put, make forest protection more difficult, etc. But the productive process extends over such long periods that it exceeds the planning of an individual farm and in certain cases surpasses the entire span of a human life. The capital invested in the purchase of forest land‖
(in the case of communal production this capital becomes unnecessary, the question then being simply what acreage the community can spare from its sowing and grazing area for forestry)
―will not yield substantial returns until after a long period, and even then is turned over only partially. With forests producing certain species of trees the complete turnover takes as much as 150 years. Besides, a properly managed timber-growing establishment itself demands a supply of standing timber which amounts to ten to forty times the annual yield. Unless a man has therefore still other sources of income and owns vast tracts of forest land, he cannot engage in regular forestry.‖ (Kirchhof, p. 58.)
The long production time (which comprises a relatively small period of working time) and the great length of the periods of turnover entailed make forestry an industry of little attraction to private and therefore capitalist enterprise, the latter being essentially private even if the associated capitalist takes the place of the individual capitalist. The development of culture and of industry in general has evinced itself in such energetic destruction of forest that everything done by it conversely for their preservation and restoration appears infinitesimal.
The following passage in the above quotation from Kirchhof in particularly worthy of note: ―Besides, a properly managed timber-growing establishment itself demands a supply of standing timber which amounts to ten to forty times the annual yield.‖
In other words, a turnover occurs once in ten to forty or more years.
The same applies to stock raising. A part of the herd (supply of cattle) remains in the process of production, while another part is sold annually as a product. In this case only a part of the capital is turned over every year, just as in the case of fixed capital: machinery, working cattle, etc. although this capital is a capital fixed in the process of production for a long time, and thus prolongs the turnover of the total capital, it is not a fixed capital in the strict definition of the term.
What is here called a supply — a certain amount of standing timber or livestock — exists relatively in the process of production (simultaneously as instruments of labour and material of labour); in accordance with the natural conditions of its reproduction under proper management, a considerable part of this supply must always be available in this form.
A similar influence on the turnover is exerted by another kind of supply, which is productive capital only potentially, but which owing to the nature of this economy, must be accumulated in more or less considerable quantities and hence advanced for purposes of production for a long term, although it enters into the actual process of production only gradually. In this class belongs for instance manure before it is hauled to the field, furthermore grain, hay, etc., and such supplies of means of subsistence as are employed in the production of cattle.
―A considerable part of the working capital is contained in the farm‘s supplies. But these may lose more or less of their value, if the precautionary measures necessary for their preservation in good condition are not properly observed. Lack of attention may even result in the total loss of a part of the produce supplies for the farm. For this reason, a careful inspection of the barns, feed and grain lofts, and cellars becomes indispensable, the store rooms must always be well closed, kept clean, ventilated, etc. The grain and other crops held in storage must be thoroughly turned over from time to time, potatoes and beets must be protected against frost, rain and rot.‖ (Kirchhof,
p. 292.) ―In calculating one‘s own requirements, especially for the keeping of cattle, the distribution must be made according to the product obtained and its intended use. One must not only consider covering one‘s ordinary needs but also see to it that there is a proportionate reserve for extraordinary cases. If it is then found that the demand cannot be fully met by one‘s own production, it becomes necessary to reflect first whether the deficiency cannot be covered by other products (substitutes), or by the cheaper procurement of such in place of the deficient ones. For instance if there should happen to be a shortage of hay, this might be made good by roots and an admixture of straw. In general, the intrinsic value and market-price of the various crops must always be kept in mind in such cases, and consumption regulated accordingly. If for instance oats are high, while peas and rye are relatively low, it will pay to substitute peas or rye for a part of the oats intended for horses and to sell the oats thus saved.‖ (Ibid., p. 300.)
It was previously stated, when discussing the formation of a supply, 2 that a definite quantity, big or small, of potential productive capital is required, i.e., of means of production intended for use in production, which must be available in bigger or smaller quantities for the purpose of entering by and by into the productive process. The remark was incidentally made that, given a certain business or capitalist enterprise of definite proportions, the magnitude of this productive supply depends on the greater or lesser difficulties of its renewal, the relative nearness of markets of supply, the development of transportation and communication facilities, etc. All these circumstances affect the minimum of capital which must be available in the form of a productive supply, hence affect the length of time for which the capital must be advanced and the amount of capital to be advanced at one time. This amount, which affects also the turnover, is determined by the longer or shorter time during which a circulating capital is tied up in the form of a productive supply as merely potential productive capital. On the other hand, inasmuch as this stagnation depends on the greater or smaller possibility of rapid replacement, on market conditions, etc., it arises itself out of the time of circulation, out of circumstances that belong in the sphere of circulation.
―Furthermore, all such implements and accessories as hand tools, sieves, baskets, ropes, wagon grease, nails, etc., must be the more available for immediate replacement, the less there is opportunity for purchasing them nearby without delay. Finally, the entire supply of implements must be carefully overhauled every winter, and new purchases or repairs found necessary must be provided for at once. Whether or not one is to keep a great or small supply of articles of equipment is to be settled mainly by local conditions. Wherever there are no artisans or stores in the vicinity, it is necessary to keep larger supplies than in places where these are to be had on the spot or nearby. But if the necessary supplies are procured in large quantities at a time, then other circumstances being equal, one generally gets the benefit of cheaper purchases, provided an appropriate time has been chosen to make them. True, the rotating working capital is thereby shorn of a correspondingly larger sum, all at once, which cannot always be well spared in the business.‖ (Kirchhof, p. 301.)
The difference between production time and working time admits of many variations, as we have seen. For the circulating capital it may be production time before it enters into the labour-process proper (production of lasts); or it may be production time after it has passed through the labourprocess proper (wine, seed grain); or the production time is occasionally interrupted by working time (agriculture, timber-growing). A large portion of the product fit for circulation remains incorporated in the active process of production, while a much smaller part enters into annual circulation (timber-growing and cattle raising); the longer or shorter period of time for which a circulating capital must be invested in the form of potential productive capital, hence also the larger or smaller amount of this capital to be advanced at one time, depends partly on the kind of productive process (agriculture), and partly on the proximity of markets, etc., in short, on circumstances pertinent to the sphere of circulation.
We shall see later (Volume III), what senseless theories MacCulloch, James Mill, etc., arrived at as a result of the attempt to identify the production time diverging from working time with the latter, an attempt which in turn is due to a misapplication of the theory of value.

The turnover cycle which we considered above is determined by the durability of the fixed capital advanced for the process of production. Since this cycle extends over a number of years it comprises a series of either annual turnovers of fixed capital or of turnovers repeated during the year.
In agriculture such a cycle of turnovers arises out of the system of crop rotation.
―The duration of the lease must in no case be less than the time of completion of the adopted system of crop rotation. Hence one always calculates 3, 6, 9, etc., in the three-field system. In that system with clean fallow, a field is cultivated only four times in six years, being sown to winter and summer grain in the years of cultivation, and, if the properties of the soil require or permit it, to wheat and rye, barley and oats successively. Every species of grain differs in its yield from the others on the same soil, every one of them has a different value and is sold at a different price. For this reason the yield of a field is different every year it is cultivated, and different in the first half of the rotation (the first three years) from that of the second. Even the average yield of one period of rotation is not equal to that of another, for fertility does not depend solely on the good quality of the soil, but also on the weather each year, just as prices depend on a multitude of changing conditions. If one now calculates the income from a field by taking into account the average fertility and the average prices for the entire sixyear rotation period, one finds the total income of one year in either period of the rotation. But this is not so if the proceeds are calculated only for half of the time rotation, that is to say, for three years; for then the total income figures would not coincide. It follows from the foregoing that a lease of land worked by the three-field system should run for at least six years. It is however always still more desirable for lessor and lessee that the duration of the lease should be multiple of the duration of the lease (sic!); hence that it should be 12, 18, and ever more years instead of 6 years in a system of three fields and 14, 28 years instead of 7 in a system of seven fields.‖ (Kirchhof, pp. 117, 118.)
(At this place the manuscript contains the note: ―The English system of crop rotation. Give a note here.‖)

1 See: Karl Marx, Capital, Vol. I, pp. 256-63. — Ed.
2 See pp. 140-146 of this book. — Ed.

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

In this chapter and in the next, the sixteenth, we shall treat of the influence of the time of turnover on the self-expansion of capital.
Take the commodity-capital which is the product of a working period of, say, nine weeks. Let us, for the time being, leave aside that portion of the value of the product which is added to it by the average wear and tear of the fixed capital, and also the surplus-value added to the product during the process of production. The value of this product is then equal to that of the circulating capital, advanced for its production, i.e., of the wages and the raw and auxiliary materials consumed in its production. Let this value be £900, so that the weekly outlay is £100. The period of production, which here coincides with the working period, is therefore nine weeks. It is immaterial whether it is assumed that this is the working period of a continuous product, or whether it is a continuous working period for a discrete product, so long as the quantity of discrete product brought to market at one time costs nine weeks‘ labour. Let the time of circulation be three weeks. Then the entire period of turnover is twelve weeks. At the end of nine weeks the advanced productive capital is converted into commodity-capital, but now it stays for three weeks in the period of circulation. The new period of production therefore cannot start before the beginning of the thirteenth week, and production would be at a standstill for three weeks, or for a quarter of the entire period of turnover. It again does not make any difference whether it is assumed that it takes so long on an average to sell the product, or that this length of time is bound up with the remoteness of the market or the terms of payment for the goods sold. Production would be standing still for three weeks every three months, making it four times three, or twelve weeks in a year, which means three months, or one-quarter, of the annual period of turnover. Hence, if production is to be continuous and carried along the same scale week after week, there is only this alternative:
Either the scale of production must be reduced, so that the £900 suffice to keep the work going both during the working period and the time of circulation of the first turnover, is then commenced with the tenth week, before the first period of turnover is completed, for the period of turnover is twelve weeks, and the working period nine weeks. A sum of £900 distributed over twelve weeks makes £75 per week. It is evident in the first place that such a reduced scale of business presupposes changed dimensions of the fixed capital and therefore, on the whole, a curtailment of the business. In the second place, it is questionable whether such a reduction can take place at all, for in each business there exists, commensurate with the development of its production, a normal minimum of invested capital essential to maintain its capacity to complete. This normal minimum grows steadily with the advance of capitalist production, and hence it is not fixed. There are numerous intermediate grades between the normal minimum existing at any particular time and the ever increasing normal maximum, a medium which permits of many different scales of capital investment. Within the limits of this medium reductions may take place, their lowest limit being the prevailing normal minimum.
When there is a hitch in production, when the markets are overstocked, and when raw materials rise in price, etc., the normal outlay of circulating capital is restricted — once the pattern of the fixed capital has been set — by cutting down working time to, say, one half. On the other hand, in times of prosperity, the pattern of the fixed capital given, there is an abnormal expansion of the circulating capital, partly through the extension of working time and partly through its intensification. In businesses which have, from the outset, to reckon with such fluctuations, the situation is relieved partly by recourse to the above measures and partly by employing simultaneously a greater number of labourers, in combination with the application of reserve fixed capital, such as reserve locomotives on railways, etc. However, such abnormal fluctuations are not considered here, where we assume normal conditions.
In order to make production continuous, therefore, the expenditure of the same circulating capital is here distributed over a longer period, over twelve weeks instead of nine. In every section of time there consequently functions a reduced productive capital. The circulating portion of the productive capital is reduced from 100 to 75, or one-quarter. The total amount by which the productive capital functioning for a working period of nine weeks is reduced equals 9 times 25, or £225, or one-quarter of £900. But the ratio of the time of circulation to that of turnover is likewise three-twelfths, or one-quarter. It follows therefore: circulation of the productive capital transformed into commodity-capital, if it is rather to be carried on simultaneously and continuously week after week, and if no special circulating capital is available for this purpose, it can be done only by curtailing productive operations, by reducing the circulating component of the functioning productive capital. The portion of circulating capital thus set free for production during the time of circulation is to the total advanced circulating capital as the time of circulation is to the period of turnover. This applies, as has already been stated, only to branches of production in which the labour-process is carried on in the same scale week after week, where therefore no varying amounts of capital are to be invested in different working periods, as for instance in agriculture.
If on the other hand we assume that the nature of the business excludes a reduction of the scale of production, and thus of the circulating capital to be advanced each week, then continuity of production can be secured only by additional circulating capital, in the above-named case of £300. During the twelve-week turnover period, £1,200 are successively invested, and £300 is one-quarter of this sum as three weeks is of twelve. At the end of the working time of nine weeks the capital-value of £900 has been converted from the form of productive into that of commoditycapital. Its working period is concluded, but it cannot be re-opened with the same capital. During the three weeks in which it stays in the sphere of circulation, functioning as commodity-capital, it is in the same state, so far as the process of production is concerned, as if it did not exist at all. We rule out in the present case all credit relations and take for granted that the capitalist operates only with his own money. But during the time the capital advanced for the first working period, having completed its process of production, stays three weeks in the process of circulation, there functions an additional capital investment of £300, so that the continuity of production is not broken.
Now, the following must be noted in this connection:
Firstly: The working period of the capital of £900 first advanced is completed at the close of nine weeks and it does not return until after three weeks are up, that is to say, at the beginning of the thirteenth week. But a new working period is immediately begun with the additional capital of £300. By this means continuity of production is maintained.
Secondly: The functions of the original capital of £900 and of the capital of £300 newly added at the close of the first nine-week working period, inaugurating the second working period after the conclusion of the first without any interruption, are, or at least could be, clearly distinguished in the first period of turnover, while they cross each other each other in the course of the second period of turnover.
Let us make this matter plainer.
First period of turnover of 12 weeks. First working period of 9 weeks; the turnover of the capital advanced for this is completed at the beginning of the 13th week. During the last 3 weeks the additional capital of £300 functions, opening the second working period of 9 weeks.
Second period of turnover. At the beginning of the 13th week, £900 have returned and are able to begin a new turnover. But the second working period has already been opened in the 10th week by the additional £300. At the start of the 13th week, thanks to this, one-third of the working period is already over and £300 has been converted from productive capital into product. Since only 6 weeks more are required for the completion of the second working period, only two-thirds of the returned capital of £900, or only £600, can enter into the productive process of the second working period. £300 of the original £900 are set free to play the same role which the additional capital of £300 played in the first working period. At the close of the 6th week of the second period of turnover the second working period is up. The capital of £900 advanced in it returns after 3 weeks, or at the end of the 9th week of the second, 12-week period of turnover. During the 3 weeks of its period of circulation, the freed capital of £300 comes into action. This begins the third working period of a capital of 900 in the 7th week of the second period of turnover, or the 19th week of the year.
Third period of turnover. At the close of the 9th week of the second period of turnover there is a new reflux of £900. But the third working period has already commenced in the 7th week of the previous period of turnover and 6 weeks have already elapsed. The third working period, then, lasts only another 3 weeks. Hence only £300 of the returned £900 enter into the productive process. The fourth working period fills out the remaining 9 weeks of this period of turnover and thus the 37th week of the year begins simultaneously the fourth period of turnover and the fifth working period.
In order to simplify the calculation in this case let us assume a working period of 5 weeks and a period of circulation of 5 weeks, making a turnover period of 10 weeks. Figure the year as composed of fifty weeks and the capital outlay per week as £100. A working period then requires a circulating capital of £500 and the time of circulation an additional capital of £500. The working periods and times of turnover then are as follows:
1st wrkg. period 1st-5th wk. (£500 in goods) returned end of 10th wk.
2nd wrkg. period 6th-10th wk. (£500 in goods) returned end of 15th wk.
3rd wrkg. period 11th-15th wk. (£500 in goods) returned end of 20th wk.
4th wrkg. period 16th-20th wk. (£500 in goods) returned end of 25th wk.
5th wrkg. period 21st-25th wk. (£500 in goods) returned end of 30th wk.
and so forth.
If the time of circulation is zero, so that the period of turnover is equal to the working period, then the number of turnovers is equal to the number of working periods of the year. In the case of a 5week working period this would make 50/5, or 10, periods of turnover per year, and the value of the capital turned over would be 500 times 10, or 5,000. In our table, in which we have assumed a circulation time of 5 weeks, the total value of the commodities produced per year would also be £5,000, but one-tenth of this, or £500, would always be in the form of commodity-capital, and would not return until after 5 weeks. At the end of the year the product of the tenth working period (the 46th to the 50th working week) would have completed its time of turnover only by half, and its time of circulation would fall within the first five weeks of the next year.
Now let us take a third illustration: Working period 6 weeks time of circulation 3 weeks, weekly advance during labour-process £100.
1st working period: 1st-6th week. At the end of the 6th week a commodity-capital of £600, returned at the end of the 9th week.
2nd working period: 7th-12th week. During the 7th-9th week £300 of additional capital is advanced. At the end of the 9th week, return of £600. Of this, £300 are advanced during the 10th12th week. At the end of the 12th week therefore £300 are free and £600 are in the form of commodity-capital, returnable at the end of the 15th week.
3rd working period: 13th-18th week. During the 13th-15th week, advance of above £300, then reflux of £600, of which 300 are advanced for the 16th-18th week. At the end of the 18th week, £300 are free in money-form, £600 on hand as commodity-capital which returns at the end of the 21st week. (See the more detailed presentation of this case under II, below.)
In other words during 9 working periods (54 weeks) a total of 600 times 9 or £5,400 worth of commodities are produced. At the end of the ninth working period the capitalist has £300 in money and £600 in commodities which have not yet completed their term of circulation.
A comparison of these three illustrations shows, first, that a successive release of capital I of £500 and of additional capital II of likewise £500 takes place only in the second illustration, so that these two portions of capital move separately and apart from each other. But this is so only because we have made the very exceptional assumption that the working period and the time of circulation form two equal halves of the turnover period. In all other cases, whatever the difference between the two constituents of the period of turnover, the movements of the two capitals cross each other, as in illustrations I and III, beginning with the second period of turnover. The additional capital II, with a portion of capital I, then forms the capital functioning in the second turnover period, while the remainder of capital I is set free to perform the original function of capital II. The capital operating during the circulation time of the commodity-capital is not identical, in this case, with the capital II originally advanced for this purpose, but it is of the same value and forms the same aliquot part of the total capital advanced.
Secondly: The capital which functioned during the working period lies idle during the time of circulation. In the second illustration the capital functions during the 5 weeks of the working period and lies idle during the 5 weeks of the circulation period. Therefore the entire time during which capital I lies idle here amounts to one half of the year. It is the additional capital II that appears during this time having, in the case before us, also in its turn lain idle half a year. But the additional capital required to ensure the continuity of production during the time of circulation is not determined by the aggregated amount, or sum total, of the times of circulation during the year, but only by the ratio of the time of circulation to the period of turnover. (We assume, of course, that all the turnovers take place under the same conditions.) For this reason £500 of additional capital, and not £2,500, are required in the second illustration. This is simply due to the fact that the additional capital enters just as well into the turnover as the capital originally advanced, and that it therefore makes up its magnitude just as the other by the number of its turnovers.
Thirdly: The circumstances here considered are not affected by whether the time of production is longer than the working time or not. True, the aggregate of the periods of turnover is prolonged thereby, but this extension does not necessitate any additional capital for the labour-process. The additional capital serves merely the purpose of filling the gaps in the labour-process that arise on account of the time of circulation. Hence it is there simply to protect production against interruptions, originating in the time of circulation. Interruptions arising from the specific conditions of production are to be eliminated in another way, which need not be discussed at this point. There are however establishments in which work is carried on only intermittently, to order, so that there may be intervals between the working periods. In such cases, the need for additional capital is pro tanto eliminated. On the other hand in most cases of seasonal work there is a certain limit for the time of reflux. The same work cannot be renewed next year with the same capital, if the circulation time of this capital has not, in the meantime, run out. On the other hand the time of circulation may also be shorter than the interval between two periods of production. In that event the capital lies fallow, unless it is meanwhile employed otherwise.
Fourthly: The capital advanced for a certain working period — for instance the £600 in the third illustration — is invested partly in raw and auxiliary materials, in a productive supply for the working period, in constant circulating capital, and partly in variable circulating capital, in the payment of labour itself. The portion laid out in constant circulating capital, may not exist for the same length of time in the form of a productive supply; the raw material for instance may not be on hand for the entire working period, coal may be procured only every two weeks. However, as credit is still out of the question here, this portion of capital, in so far as it is not available in the form of a productive supply, must be kept on hand in the form of money so that it can be converted into a productive supply as and when needed. This does not alter the magnitude of the constant circulating capital-value advanced for 6 weeks. On the other hand — regardless of the money-supply for unforeseen expenses, the reserve fund proper for the elimination of disturbances — wages are paid in shorter intervals, mostly weekly. Therefore unless the capitalist compels the labourer to advance his labour for a longer time, the capital required for wages must be on hand in the form of money. During the reflux of the capital a portion must therefore be retained in money-form for the payment of the labour, while the remaining portion may be converted into productive supply.
The additional capital is divided exactly like the original. But it is distinguished from capital I by the fact that (apart from credit relations) in order to be available for its own working period it must advanced during the entire duration of the first working period of capital I, into which it does not enter. During this time it can already be converted, at least in part, into constant circulating capital, having been advanced for the entire period of turnover. To what extent it assumes this form or persists in the form of additional money-capital until this conversion becomes necessary, will depend partly on the special conditions of production of definite lines of business, partly on local conditions, partly on the price fluctuations of raw material, etc. If social capital is viewed in its entirety, a more or less considerable part of this additional capital will always be for a rather long time in the state of money-capital. But as for that portion of capital II which is to be advanced for wages, it is always converted only gradually into labour-power, as small working periods expire and are paid for. This portion of capital II, then, is available in the form of money-capital during the entire working period, until by its conversion into labour-power it take part in the function of productive capital.
Consequently, the accession of the additional capital required for the transformation of the circulation time of capital I into time of production, increases not only the magnitude of the advanced capital and the length of time for which the aggregate capital must necessarily be advanced, but also, and specifically so, that portion of the advanced capital which exists as money-supply, which hence exists in the state of money-capital and has the form of potential money-capital.
The same thing also takes place — as far as it concerns both the advance in the form of a productive supply and in that of a money-supply — when the separation of capital into two parts made necessary by the time of circulation, namely into capital for the first working period and replacement capital for the time of circulation, is not caused by the increase of the capital laid out but by a decrease of the scale of production. The amount of capital tied up in the money-form grows here still more in relation to the scale of production.
What is achieved in general by this separation of capital into an originally productive and an additional capital is a continuous succession of the working periods, the constant function of an equal portion of the advanced capital as productive capital.
Let us look at the second illustration. The capital continuously employed in the process of production amounts to £500. As the working period is 5 weeks it operates ten times during 50 weeks (taken as a year). Hence its product, apart from surplus-value, is 10 times £500, or £5,000. From the standpoint of a capital working directly and uninterruptedly in the process of production — a capital-value of £500 — the time of circulation seems to be brought to nought. The period of turnover coincides with the working period, and the time of circulation is assumed to be equal to zero.
But if the capital of £500 were regularly interrupted in its productive activity by a 5-week circulation time, so that it would again become capable of production only after the close of the entire 10-week turnover period, we should have 5 turnovers of ten weeks each in the 50 weeks of the year. These would comprise five 5-week periods of production, or a sum of 25 productive weeks with a total product worth 5 times £500 or £2,500, and five 5-week periods of circulation, or a total circulation time of likewise 25 weeks. If we say in this case that the capital of £500 has been turned over 5 times in the year, it will be clear and obvious that during half of each period of turnover this capital of £500 did not function at all as a production capital and that, all in all, it performed its functions only during one half of the year, but did not function at all during the other half.
In our illustration the replacement capital of £500 appears on the scene during those five periods of circulation and the turnover is thus expanded from £2,500 to £5,000. But now the advanced capital is £1,000 instead of £500. 5,000 divided by 1,000 is 5. Hence, there are five turnovers instead of ten. And that is just the way people figure. But when it is said that the capital of £1,000 has been turned over five times during the year, the recollection of the time of circulation disappears from the hollow skulls of the capitalists and a confused idea is formed that this capital has served continuously in the production process during the five successive turnovers. But if we say that the capital of £1,000 has been turned over five times this includes both the time of circulation and the time of production. Indeed, if £1,000 had really been continuously active in the process of production, the product would, according to our assumptions, have to be £10,000 instead of £5,000. But in order to have £1,000 continuously in the process of production, £2,000 would have to be advanced. The economists, who as a general rule have nothing clear to say in reference to the mechanism of the turnover, always overlook this main point, to wit, that only a part of the industrial capital can actually be engaged in the process of production if production is to proceed uninterruptedly. While one part is in the period of production, another must always be in the period of circulation. Or in other words, one part can perform the function of productive capital only on condition that another part is withdrawn from production proper in the form of commodity- or money-capital. In overlooking this, the significance and role of money-capital is entirely ignored.
We have now to ascertain what differences in the turnover arise if the two sections of the period of turnover, the working period and the circulation period, are equal, or if the working period is greater or smaller than the circulation period, and, furthermore, what effect this has on the tie-up of capital in the form of money-capital.
We assume the capital advanced weekly to be in all cases £100, and the period of turnover 9 weeks, so that the capital to be advanced in each period of turnover is £900.
I. The Working Period Equal to the Circulation Period
Although this case occurs in reality only as an accidental exception, it must serve as our point of departure in this investigation, because here relations shape themselves in the simplest and most intelligible way.
The two capitals (capital I advanced for the first working period, and supplemental capital II, which functions during the circulation period of capital I) relieve one another in their movements without crossing. With the exception of the first period, either of the two capitals is therefore advanced only for its own period of turnover. Let the period of turnover be 9 weeks, as indicated in the following illustrations, so that the working period and the circulation period are each 4½ weeks. Then we have the following annual diagram.
Table I
CAPITAL I
Periods of Turnover Working Periods Advance Periods of Circulation
I.1st-9th week 1st-4th ½ week £450 4th ½-9th week
II. 10th-18th " 10th-13th ½ " £450 13th ½-18th "
III. 19th-27th " 19th-22nd ½ " £450 22nd ½-27th "
IV. 28th-36th " 28th-31st ½ " £450 31st ½-36th "
V. 37th-45th " 37th-40th ½ " £450 40th ½-45th "
VI. 46th-[54th] 46th-49th ½ " £450 49th ½-[54th] " 1

CAPITAL II
Periods of Turnover Working Periods Advance Periods of Circulation
I. 1st-9th week 4th ½-9th week £450 10th-13th ½ week
II. 10th-18th " 13th ½-18th " £450 19th-22nd ½ "
III. 19th-27th " 22nd ½-27th " £450 28th-31st ½ "
IV. 28th-36th " 31st ½-36th " £450 37th-40th ½ "
V. 37th-45th " 40th ½-45th " £450 46th-49th ½ "
VI. 46th-[54th] " 49th ½-[54th] " £450 [55th-58th ½] "
Within the 51 weeks which here stand for one year, capital I runs through six full working periods, producing 6 times 450, or £2,700 worth of commodities, and capital II producing in five full working periods 5 times £450, or £2,250 worth of commodities. In addition, capital II produced, within the last one and a half weeks of the year (middle of the 50th to the end of the 51st week), an extra £150 worth. The aggregate product in 51 weeks is worth £5,100. So far as the direct production of surplus-value is concerned, which takes place only during the working period, the aggregate capital of £900 would have been turned over 5⅔ times (5⅔ times 900 equals £5,100)). But if we consider the real turnover, capital I has been turned over 5⅔ times, since at the close of the 51st week it still has 3 weeks to go of its sixth period of turnover; 5⅔ times 450 makes £2,550; and capital II turned over 5 1/6 times, since it has completed only 1½ weeks of its sixth period of turnover, so that 7½ weeks of it run into the next year; 5 1/6 times 450 makes £2,325; real aggregate turnover: £4,875.
Let us consider capital I and capital II as two capitals wholly independent of one another. They are entirely independent in their movements; these movements complement one another merely because their working and circulating periods directly relieve one another. They may be regarded as two totally independent capitals belonging to different capitalists.
Capital I has completed five full turnovers and two-thirds of its sixth turnover period. At the end of the year it has the form of commodity-capital, which is three weeks short of its normal realisation. During this time it cannot enter into the process of production. It functions as commodity-capital, it circulates. It has completed only two-thirds of its last period of turnover. This is expressed as follows: It has been turned over only two-thirds of a time, only two-thirds of its total value have performed a complete turnover. We say that £450 complete their turnover in 9 weeks, hence £300 do in 6 weeks. But in this mode of expression the organic relations between the two specifically different components of the turnover time are ignored. The exact meaning of the expression that the advanced capital of £450 has made 5⅔ turnovers is merely that it has accomplished five turnovers fully and only two-thirds of the sixth. On the other hand the expression that the turned-over capital equals 5⅔ times the advanced capital — hence, in the above case, 5⅔ times £450, making £2,550 — is correct, meaning that unless this capital of £450 were complemented by another capital of £450, one portion of it would have to be in the process of production while another in the process of circulation. If the time of turnover is to be expressed in terms of the capital turned over, it can always be expressed only in terms of existing value (in fact, of finished product). The circumstance that the advanced capital is not in a condition in which it may re-open the process of production finds expression in the fact that only a part of it is in a state capable of production or that, in order to be in a state of uninterrupted production, the capital would have to be divided into a portion which would be continually in the period of production and into another which would be continually in the period of circulation, depending upon the relation of these periods to each other. It is the same law which determines the quantity of the constantly functioning productive capital by the ratio of the time of circulation to the time of turnover.
By the end of the 51st week, which we regard here as the end of the year, £150 of capital II have been advanced to the production of an unfinished lot of goods. Another part of it exists in the form of circulating constant capital — raw materials, etc. — i.e., in a form in which it can function as productive capital in the production process. But a third part of it exists in the form of money, at least the amount of the wages for the remainder of the working period (3 weeks), which is not paid, however, until the end of each week. Now, although at the beginning of a new year, hence of a new turnover cycle, this portion of the capital is not in the form of productive capital but in that of money-capital, in which it cannot take part in the process of production, at the opening of the new turnover circulating variable capital, i.e., living labour-power, is nevertheless active in the process of production. This is due to the fact that labour-power is not paid until the end of the week, although bought at the beginning of the working period, say, per week, and so consumed. Money serves here as a means of payment. For this reason it is still as money in the hands of the capitalist, on the one hand, while, on the other hand, labour-power, the commodity into which money is being transformed, is already active in the process of production, so that the same capital-value appears here doubly.
If we look merely at the working periods, capital I produces 6 times 450, or £2,700
capital II produces 5⅓ times 450, or £2,400
————————————————
Hence together 5⅓ times 900, or £5,100.
Hence the total advanced capital of £900 has functioned 5⅔ times throughout the year as productive capital. It is immaterial for the production of the surplus-value whether there are always £450 in the production process and always £450 in the circulation process, or whether £900 function 4½ weeks in the process of production and the following 4½ weeks in the process of circulation.
On the other hand, if we consider the periods of turnover, there has been turned over: capital I, 5⅔ times 450, or £2,550 capital II, 5 1/6 times 450, or £2,325
—————————————————-
Hence the total capital 5 5/12 times 900, or £4,875.
For the number of turnovers of the total capital is equal to the sum of the amounts turned over by I and II, divided by the sum of I and II.
It is to be noted that if capitals I and II were independent of each other they would nevertheless form merely different independent portions of the social capital advanced in the same sphere of production. Hence if the social capital within this sphere of production were composed solely of I and II, the same calculation would apply to the turnover of the social capital in this sphere as applies here to the constituent parts I and II of the same private capital. Going further, every portion of the entire social capital invested in any particular sphere of production may be so calculated. But in the last analysis, the number of turnovers made by the entire social capital is equal to the sum of the capitals turned over in the various spheres of production divided by the sum of the capitals advanced in those spheres.
It must further be noted that just as capitals I and II in the same private business have here strictly speaking different turnover years (the cycle of turnover of capital II beginning 4½ weeks later than that of capital I, so that the year of I ends 4½ weeks earlier than that of II), so the various private capitals in the same sphere of production begin their operations at totally different periods and therefore conclude their turnover years at different times of the year. The same calculation of averages that we employed above for I and II suffices also here to bring down the turnover years of the various independent portions of the social capital to one uniform turnover year.
II. The Working Period Greater than the Period of Circulation
The working and turnover periods of capitals I and II cross one another instead of relieving one another. Simultaneously some capital is set free. This was not so in the previously considered case.
But this does not alter the fact that, as before, 1) the number of working periods of the total capital advanced is equal to the sum of the value of the annual product of both advanced portions of capital divided by the total capital advanced, and 2) the number of turnovers made by the total capital is equal to the sum of the two amounts turned over divided by the sum of the two advanced capitals. Here too we must consider both portions of capital as if they performed turnover movements entirely independent of each other.
Thus, we assume once more, that £100 are to be advanced weekly to the labour-process. Let the working period last 6 weeks, requiring therefore every time an advance of £600 (capital I). Let the time of circulation be 3 weeks, so that the period of turnover is 9 weeks, as before. Let capital II of £300 step in during the three-week circulation period of capital I. Considering both capitals as independent of each other, we find the schedule of the annual turnover to be as follows:
Table II
CAPITAL I, £600
Periods of Turnover Working Periods Advance Periods of Circulation
I. 1st-9th week 1st-6th week £600 7th-9th week
II. 10th-18th " 10th-15th " £600 16th-18th"
III. 19th-27th " 19th-24th " £600 25th-27th "
IV. 28th-36th " 28th-33rd " £600 34th-36th "
V. 37th-45th " 37th-42nd " £600 43rd-45th "
VI. 46th-[54th] " 46th-51st " £600 [52nd-54th] "
ADDITIONAL CAPITAL II, £300
Periods of Turnover Working Periods Advance Periods of Circulation
I. 7th-15th week 7th-9th week £300 10th-15th week
II. 16th-24th " 16th-18th " £300 19th-24th "
III. 25th-33rd " 25th-27th " £300 28th-33rd "
IV. 34th-42nd " 34th-36th " £300 37th-42nd "
V. 43rd-51st " 43rd-45th " £300 46th-51st "
The process of production continues uninterruptedly the whole year round on the same scale. The two capitals I and II remain entirely separate. But in order to represent them as separate, we had to tear apart their real intersections and intertwinings, and thus also to change the number of turnovers. For according to the above table the amounts turned over would be:
by capital I, 5⅔ times 600, or £3,400 and by capital II, 5 times 300, or £1,500
——————————————————
Hence by the total capital 5 4/9 times 900, or £4,900.
But this is not correct, for, as we shall see, the actual periods of production and circulation do not absolutely coincide with those of the above schedule, in which it was mainly a question of presenting capitals I and II as independent of each other.
In reality, capital II has no working and circulating periods separate and distinct from those of capital I. The working period is 6 weeks, the circulation period 3 weeks. Since capital II amounts to only £300, it can suffice only for a part of the working period. This is indeed the case. At the end of the 6th week a product valued at £600 passes into circulation and returns in money-form at the close of the 9th week. Then, at the opening of the 7th week, capital II begins its activity, and covers the requirements of the next working period, the 7th to 9th week. But according to our assumption the working period is only half up at the end of the 9th week. Hence capital I of £600 having just returned, at the beginning of the 10th week, once more enters into operation and with its £300 supplies the advances needed for the 10th to 12th week. This disposes of the second working period. A product value of £600 is in circulation and will return at the close of the 15th week. At the same time, £300, the amount of the original capital II, are set free and are able to function in the first half of the following working period, that is to say, in the 13th to 15th week. After the lapse of these weeks the £600 return; £300 of them suffice for the remainder of the working period, and £300 remain for the following working period.
The thing therefore works as follows:
First period of turnover: 1st-9th week.
1st working period: 1st-6th week. Capital I, £600, performs its function. 1st period of circulation: 7th-9th week. End of 9th week, £600 return.
Second period of turnover: 7th-15th week.
2nd working period: 7th-12th week.
First half: 7th-9th week. Capital II, £300, performs its function.
End of 9th week, £600 return in money-form (capital I).
Second half: 10th-12th week. £300 of capital I perform their function. The other £300 of capital I remain freed.
2nd period of circulation: 13th-15th week.
End of 15th week, £600 (half taken from capital I, half from capital II) return in the form of money.
Third period of turnover; 13-21st week.
3rd working period: 13th-18th week.
First half: 13th-15th week. The freed £300 perform their function. End of 15th week, £600 return in money-form.
Second half: 16th-18th week, £300 of the returned £600 function, the other £300 again remain freed.
3rd period of circulation: 19th-21st week at the close of which £600 again return in money-form. In these £600 capital I and capital II are now indistinguishably fused.
And so there are eight full turnover periods of a capital of £600 (I: 1st-9th week; II: 7th-15th week; III: 13th-21st; IV: 19th-27th; V: 25th-33rd; VI: 31st-39th; VII: 37th-45th; VIII: 43rd-51st week) to the end of the 51st week. But as the 49th-51st weeks fall within the eighth period of circulation, the £300 of freed capital must step in and keep production going. Thus the turnover at the end of the year is as follows: £600 have completed their circuit eight times, making £4,800. In addition we have the product of the last 3 weeks (49th-51st), which, however, has completed only one-third of its circuit of 9 weeks, so that in the sum turned over it counts for only one-third of its amount, £100. If, then, the annual product of 51 weeks is £5,100, the capital turned over is only 4,800 plus 100, or £4,900. The total capital advanced, £900, has therefore been turned over 5 4/9 times, a trifle more than in the first case.
In the present example we assumed a case in which the working time was ⅔ and the circulation time ⅓ of the period of turnover, i.e., the working time was a simple multiple of the circulation time. The question now is whether capital is likewise set free, in the way shown above, when this assumption is not made.
Let us assume a working time of 5 weeks, a circulation time of 4 weeks, and a capital advance of £100 per week.
First period of turnover: 1st-9th week.
1st working period: 1st-5th week. Capital I, or £500, performs its function.
1st circulation period: 6th-9th week. End of 9th week, £500 return in moneyform.
Second period of turnover: 6th-14th week.
2nd working period: 6th-10th week.
First section: 6th-9th week. Capital II, of £400, performs its function. End of 9th week, capital I of £500 returns in money-form.
Second section: 10th week. £100 of the returned £500 perform their function. The remaining £400 are set free for the following working period.
2nd circulation period: 11th-14th week. End of 14th week. £500 return in money-form.
Up to the end of the 14th week (11th-14th), the £400 set free above perform their function; £100 of the £500 then returned fill the requirements of the third working period (11th-15th week) so that £400 are once more released for the fourth working period. The same thing is repeated in every working period; at its beginning £40 are ready at hand, sufficing for the first 4 weeks. End of the 4th week, £500 return in money-form, only £100 of which are needed for the last week, while the other £400 remain free for the next working period.
Let us further assume a working period of 7 weeks, with a capital I of £700; a circulation period of 2 weeks, with a capital II of £200.
In that case the first period of turnover lasts from the 1st to the 9th week; its first working period from the 1st to the 7th week, with an advance of £700, its first circulation period from the 8th to the 9th week. End of the 9th week, £700 flow back in money-form.
The second period of turnover, from the 8th to the 16th week, contains the second working period of the 8th to the 14th week. The requirements of the 8th and 9th weeks of this period are covered by capital II. End of the 9th week, the above £700 return. Up to the close of this working period (10th-14th week), £500 of this sum are used up; £200 remain free for the next working period. The second circulation period lasts from the 15th to the 16th week. End of the 16th week £700 return once more. From now on, the same thing is repeated in every working period. The need for capital during the first two weeks is covered by the £200 set free at the close of the preceding working period; at the close of the second week £700 return; but only 5 weeks remain of the working period, so that it can consume only £500; therefore £200 always remain free for the next working period.
We find, then, that in the given case, where the working period has been assumed to be greater than the circulation period, a money-capital will at all events have been set free at the close of each working period, which is of the same magnitude as capital II advanced for the circulation period. In our three illustrations capital II was £300 in the first, £400 in the second, and £200 in third. Accordingly, the capital set free at the close of each working period was £300, £400 and £200 respectively.
III. The Working Period Smaller than the Circulation Period
We begin by assuming once more a period of turnover of 9 weeks, of which 3 weeks are assigned to the working period with an available capital I of £300. Let the circulation period be 6 weeks. For these 6 weeks, an additional capital of £600 is required, which we may divide in turn into two capitals of £300, each of them meeting the requirements of one working period. We then have three capitals of £300 each, of which £300 are always engaged in production, while £600 circulate.
Table III
CAPITAL I
Periods of Turnover Working Periods of Periods Circulation
I. 1st-9th week 1st-3rd week 4th-9th week
II. 10th-18th " 10th-12th " 13th-18th "
III. 19th-27th " 19th-21st " 22nd-27th "
IV. 28th-36th " 28th-30th " 31st-36th "
V. 37th-45th " 37th-39th " 40th-45th "
VI. 46th-[54th] " 46th-48th " 49th-[54th] "
CAPITAL II
Periods of Turnover Working Periods Periods of Circulation
I. 1st-9th week 4th-6th week 7th-12th week
II. 10th-18th " 13th-15th " 16th-21st "
III. 19th-27th " 22nd-24th " 25th-30th "
IV. 28th-36th " 31st-33rd " 34th-39th "
V. 37th-45th " 40th-42nd " 43rd-48th "
VI. 46th-[54th] "
CAPITAL III 49th-51st " 51st-[57th] "
Periods of Turnover Working Periods Periods of Circulation
I. 7th-15th week 7th-9th week 10th-15th week
II. 16th-24th " 16th-18th " 19th-24th "
III. 25th-33rd " 25th-27th " 28th-33rd "
IV. 34th-42nd " 34th-36th " 37th-42nd "
V. 43rd-51st " 43rd-45th " 46th-51st "
We have here the exact counterpart of Case I, with the only difference that now three capitals relieve one another instead of two. There is no intersection or intertwining of capitals. Each one of them can be traced separately to the end of the year. Just as in Case I, no capital is set free at the close of a working period, Capital I is completely laid out at the end of the 3rd week, returns entirely at the end of the 9th, and resumes its functions at the beginning of the 10th week.
Similarly with capitals II and III. The regular and complete relief excludes any release of capital. The total turnover is as follows:
capital I, £300 times 5⅔, or £1,700 capital II, £300 times 5⅓, or £1,600 capital III, £300 times 5, or £1,500
——————————————
Total capital, £900 times 5⅓, or £4,800
Let us now also take an illustration in which the circulation period is not an exact multiple of the working period. For instance, working period — 4 weeks, circulation period — 5 weeks. The corresponding amounts of capital would then be: capital I — £400; capital II — £400; capital III — £100. We present only the first three turnovers.

Table IV
CAPITAL I
Periods Turnover of Working Periods
Periods Circulation of
I. 1st-9th week 1st-4th week 5th-9th week
II. 9th-17th " 9. 10th-12th " 13th-17th "
III. 18th-25th " 17. 18th-20th " 21st-25th "
CAPITAL II
Periods of Turnover Working Periods of Periods Circulation
I. 5th-13th week 5th-8th week 9th-13th week
II. 13th-21st " 13. 14th-16th " 17th-21st "
III. 21st-29th " 21. 22nd-24th " 25th-29th "
CAPITAL III
Periods of Turnover Working Periods of Periods Circulation
I. 9th-17th week 9th week 10th-17th week
II. 17th-25th " 17th " 18th-25th "
III. 25th-33rd " 25th " 26th-33rd "
There is in this case an intertwining of capitals in so far as the working period of capital II, which has no independent working period, because it suffices for only one week, coincides with the first working week of capital I. On the other hand an amount of £100, equal to capital III, is set free at the close of the working period of both capital I and II. For if capital III fills up the first week of the second and all succeeding working periods of capital I and £400, the entire capital I, return at the close of this first week, then only 3 weeks and a corresponding capital investment of £300 will remain for the rest of the working period of capital I. The £200 thus set free suffice for the first week of the immediately following working period of capital II; at the end of that week the entire capital II of £400 returns. But since the working period already started can absorb only another £300, £100 are once more disengaged at its close. And so forth. We have, then, a release of capital at the close of a working period whenever the circulation period is not a simple multiple of the working period. And this liberated capital is equal to that portion of the capital which has to fill up the excess of the circulation period over the working period or over a multiple of working periods.
In all cases investigated it was assumed that both the working period and the circulation period remain the same throughout the year in any of the businesses here examined. This assumption was necessary if we wished to ascertain the influence of the time of circulation on the turnover and advancement of capital. That in reality this assumption is not so unconditionally valid, and that it frequently is not valid at all does not alter the case in the least.
In this entire section we have discussed only the turnovers of the circulating capital, not those of the fixed, for the simple reason that the question at issue has nothing to do with fixed capital. The instruments of labour, etc., employed in the process of production form only fixed capital, inasmuch as their time of employment exceeds the period of turnover of the circulating capital; inasmuch as the period of time during which these instruments of labour continue to serve in perpetually repeated labour-processes is greater than the period of turnover of the circulating capital, and hence equal to the n periods of turnover of the circulating capital. Regardless of whether the total time represented by these n periods of turnover of the circulating capital is longer or shorter, that portion of the productive capital which was advanced for this time in fixed capital is not advanced anew during its course. It continues its functions in its old use-form. The difference is merely this: In proportion to the varying length of a single working period of each period of turnover of the circulating capital, the fixed capital gives up a greater or smaller part of its original value to the product of that working period, and proportionally to the duration of the circulation time of each period of turnover this value-part of the fixed capital given up to the product returns quicker or slower in money-form. The nature of the subject we are discussing in this section — the turnover of the circulating portion of productive capital — derives from the very nature of this portion. The circulating capital employed in a working period cannot be applied in a new working period until it has completed its turnover, until it has been transformed into commodity-capital, from that into money-capital, and from that back into productive capital. Hence, in order that the first working period may be immediately followed by a second, capital must be advanced anew and converted into the circulating elements of productive capital, and its quantity must be sufficient to fill the void occasioned by the circulation period of the circulating capital advanced or the first working period. This is the source of the influence exerted by the length of the working period of the circulating capital over the scale of the labour-process and the division of the advanced capital or the addition of new portions of capital. This was precisely what we had to examine in this section.
IV. Conclusion
From the preceding investigation it follows that
A. The different portions into which capital must be divided in order that one part of it may be continually in the working period while others are in the period of circulation, relieve one another, like different independent individual capitals, in two cases: (1) when the working period is equal to the period of circulation, so that the period of turnover is divided into two equal sections; (2) when the period of circulation is longer than the working period, but at the same time is a simple multiple of the working period, so that one period of circulation is equal to n working periods, in which case n must be a whole number. In these cases no portion of the successively advanced capital is set free.
B. On the other hand in all cases in which (1) the period of circulation is longer than the working period without being a simple multiple of it, and (2) in which the working period is longer than the circulation period, a portion of the total circulating capital is set free continually and periodically at the close of each working period, beginning with the second turnover. This freed capital is equal to that portion of the total capital which has been advanced for the circulation period, provided the working period is longer than the period of circulation; and equal to that portion of the capital which has to fill up the excess of the circulation period over the working period or over a multiple of working periods, provided the circulation period is longer than the working period.
C. It follows that for the aggregate social capital, so far as its circulating part is concerned, the release of capital must be the rule, while the mere alternation of portions of capital functioning successively in the production process must be the exception. For the equality of the working and circulation periods, or the equality of the period of circulation and a simple multiple of the working period, this regular proportionality of the two components of the period of turnover has absolutely nothing to do with the nature of the case and for this reason it can occur on the whole only as a matter of exception.
A very considerable portion of the social circulating capital, which is turned over several times a year, will therefore periodically exist in the form of released capital during the annual turnover cycle.
It is furthermore evident that, all other circumstances being equal, the magnitude of the released capital grows with the volume of the labour-process or with the scale of production, hence with the development of capitalist production in general. In the case cited under B, (2), because the total advanced capital increases; in B (1), because with the development of capitalist production the length of the period of circulation grows, hence also the period of turnover in those cases where the working period is less than the period of circulation, and there is no regular ratio between the two periods.
In the first case for instance we had to invest £100 per week. This required £600 for a working period of 6 weeks, £300 for a circulation period of 3 weeks, totalling £900. In that case £300 are released continually. On the other hand if £300 are invested weekly, we have £1,800 for the working period and £900 for the circulation period. Hence £900 for the circulation period. Hence £900 instead of £300 are periodically set free.
D. A total capital of, say £900 must be divided into two portions, as above, £600 for the working period and £300 for the period of circulation. That portion which is really invested in the labourprocess is thus reduced by one-third, from £900 to £600; consequently, the scale of production is diminished by one-third. On the other hand the £300 function only to make the working period continuous, in order that £100 may be invested every week of the year in the labour-process.
Abstractly speaking, it is all the same whether £600 work during 6 times 8, or 48, weeks (product £4,800) or whether the total capital of £900 is expended during 6 weeks in the labour-process and then lies idle during the 3-week period of circulation. In the latter case, it would be working, in the course of the 48 weeks, 5⅓ times 6, or 32 weeks (product 5⅓ times 900, or £4,800), and lie idle for 16 weeks. But, apart from the greater spoilage of the fixed capital during the idle 16 weeks and apart from the appreciation of labour, which must be paid during the entire year, even if employed only during a part of it, such a regular interruption of the process of production is altogether irreconcilable with the operations of modern big industry. This continuity is itself a productive power of labour.
Now, if we take a closer look at the released, or rather suspended, capital, we find that a considerable part of it must always be in the form of money-capital. Let us adhere to our illustration: Working period — 6 weeks, period of circulation — 3 weeks, investment per week — £100. In the middle of the second working period, end of the 9th week, £600 return, and only £300 of them must be invested for the remainder of the working period. At the end of the second working period, £300 are therefore released. In what state are these £300? We shall assume that ⅓ is invested for wages and ⅔ are for raw and auxiliary materials. Then £200 of the returned £600 exist in the form of money for wages and £400 in the form of productive supply, in the form of elements of the constant circulating productive capital. But since only one half of this productive supply is required for the second half of the second working period, the other half exists for 3 weeks in the form of a surplus productive supply, i.e., of a supply exceeding the requirements of one working period. But the capitalist knows that he needs only one half, or £200, of this portion (£400) of the returned capital for the current working period. It will therefore depend on market conditions whether he will immediately reconvert these £200, in whole or in part, into a surplus productive supply, or keep them entirely or partially in the form of moneycapital in anticipation of a more favourable market. On the other hand it goes without saying that the portion to be laid out for wages (£200) is retained in the form of money. The capitalist cannot store labour-power in warehouses after he has bought it, as he may do with the raw material. He must incorporate it in the process of production and pay for it at the end of the week. At any rate these £100 of the released capital of £300 will therefore have the form of money-capital set free, i.e., not required for the working period. The capital released in the form of money-capital must therefore be at least equal to the variable portion of capital invested in wages. At a maximum, it may comprise the entire released capital. In reality it fluctuates constantly between this minimum and maximum.
The money-capital thus released by the mere mechanism of the turnover movement (together with that freed by the successive reflux of fixed capital and that required in every labour-process for variable capital) must play an important role as soon as the credit system develops and must at the same time form one of the latter‘s foundations.
Let us assume that the time of circulation in our illustration is shortened from 3 to 2 weeks. This is not to be a normal change, but due, say, to prosperous times, shorter terms of payment, etc. The capital of £600, which is laid out during the working period, returns one week earlier than needed. It is therefore released for this week. Furthermore, in the middle of the working period, as before, £300 are released (a portion of those £600), but for 4 weeks instead of 3. There are then, on the money-market £600 for one week and £300 for 4 instead of 3 weeks. As this concerns not one capitalist alone but many and occurs in various periods in different businesses, more available money-capital makes its appearance in the market. If this condition lasts for some time, production will be expanded wherever feasible. Capitalists operating on borrowed money will exercise less demand on the money-market, which eases it as much as increased supply; or finally the sums which have become superfluous for the mechanism are thrown definitely on the moneymarket.
In consequence of the contraction of the time of circulation from 3 weeks to 2, and consequently of the period of turnover from 9 weeks to 8, one-ninth of the total capital advanced becomes superfluous. The 6-week working period can now be kept going as continuously with £800 as formerly with £900. One portion of the value of the commodity-capital, equal to £100, once it has been reconverted into money, persists therefore in the state of money-capital without performing any more functions as a part of the capital advanced for the process of production. While the scale of production and other conditions, such as prices, etc., remain the same, the sum of value of the advanced capital is reduced from £900 to £800. The remainder of the originally advanced value amounting to £100 is eliminated in the form of money-capital. As such it enters the moneymarket and forms an additional portion of the capitals functioning here.
This shows the way in which a plethora of money-capital may arise — and not only in the sense that the supply of money-capital is greater than the demand; this is always only a relative plethora, which occurs for instance in the ―melancholy period‖ opening a new cycle after the end of a crisis. But also in the sense that a definite portion of the capital-value advanced becomes superfluous for the operation of the entire process of social reproduction which includes the process of circulation and is therefore eliminated in the form of money-capital — a plethora brought about by the mere contraction of the period of turnover, while the scale of production and prices remain the same. The amount of money in circulation, whether great or small, did not influence it in the least.
Let us assume on the contrary that the period of circulation is prolonged from, say, 3 weeks to 5. In that case at the very next turnover the reflux of the advanced capital takes place 2 weeks too late. The last part of the process of production of this working period cannot be carried on further by the mechanism of the turnover of the advanced capital itself. Should this condition last any length of time, a contraction of the process of production, a reduction of its volume, might take place, just as an extension occurred in the previous case. But in order to continue the process on the same scale, the advanced capital would have to be increased by 2/9, or £200, for the entire term of the prolongation of the circulation period. This additional capital can be obtained only from the money-market. If the lengthening of the period of circulation applies to one or several big branches of business, it may exert pressure on the money-market, unless this effect is paralysed by some counter-effect. In this case it is likewise evident and obvious that this pressure, like that plethora before, had nothing whatever to do with a movement either of prices of the commodities or the mass of existing circulating medium. *
V. The Effects of a Change of Prices
We have on the one hand just assumed unaltered prices and an unaltered scale of production, and a contraction or expansion of the time of circulation on the other. Now let us suppose on the contrary an unaltered period of turnover and an unaltered scale of production, and on the other hand price changes, i.e., rise or fall of prices of raw materials, auxiliary substances, and labour, or of the two first-named elements alone. Take it that the price of raw and auxiliary materials, as well as wages, fall by one half. In that case the capital to be advanced in our example would be £50 instead of £100 per week, and that for the 9-week turnover period would be £450 instead of £900. £450 of the advanced capital-value are eliminated first of all in the form of money-capital, but the process of production continues on the same scale, with the same period of turnover, and with the previous division of the latter. The annual output likewise remains the same but its value has been cut in half. This change, which is accompanied by a change in the supply and demand of money-capital, is brought about neither by an acceleration of the circulation, nor by a change in

* The preparation of this chapter for publication presented no small number of difficulties. Firmly grounded as Marx was in algebra, he did not get the knack of handling figures, particularly commercial arithmetic, although there exists a thick batch of copybooks containing numerous examples of all kinds of commercial computations which he had solved himself. But knowledge of the various methods of calculation and exercise in daily practical commercial arithmetic are by no means the same, and consequently Marx got so tangled up in his computations of turnovers that besides places left uncompleted a number of things were incorrect and contradictory. In the tables reproduced above I have preserved only the simplest and arithmetically correct data. My reason for doing so was mainly the following:
The uncertain results of these painstaking calculations led Marx to attach unwarranted importance to a circumstance, which in my opinion, has actually little significance. I refer to what he calls the ―release‖ of money-capital. The actual state of affairs, based on the above assumptions, is this:
No matter what may be the ratio between the working period and circulation time, hence between capital I and capital II, there is returned to the capitalist, in the form of money, after the end of the first turnover and thereafter at regular intervals equal to the duration of one working period, the capital required for one working period, i.e., a sum equal to capital I.
If the working period is 5 weeks, the circulation time 4 weeks, and capital I £500, then a sum of money equal to £500 returns each time at the end of the 9th, 14th, 19th, 24th, 29th week, etc.
If the working period is 6 weeks, the circulation time 3 weeks, and capital I £600, then £600 return at the end of the 9th, 15th, 21st, 27th, 33rd week, etc.
Finally, if the working period is 4 weeks, the circulation time 5 weeks, and capital I £400, then £400 are returned at the end of the 9th, 13th, 17th, 21st, 25th week, etc.
Whether any, and if so how much, of this returned money is superfluous and thus released for the current working period is immaterial. It is assumed that production continues uninterruptedly on the current scale, and in order that this may come about money must be available and must therefore return, whether ―released‖ or not. If production is interrupted, release stops likewise.
In other words: There is indeed a release of money, a formation therefore of latent, merely potential, capital in the form of money. But it takes place under all circumstances and not only under the special conditions set forth in the text; and it comes about on a larger scale than that assumed in the text. So far as circulating capital I is concerned, the industrial capitalist is in the same situation at the end of each turnover as when he established his business: he has all of it in one bulk, while he can convert it back into productive capital only gradually.
The essential point in the text is the proof that on the one hand a considerable portion of the industrial capital must always be available in the form of money and that on the other hand a still more considerable portion must temporarily assume the form of money. The proof is, if anything, rendered stronger by these additional remarks of mine. —F. E.
the quantity of circulating money. On the contrary. A fall by half in the value, or price, of the elements of productive capital would first have the effect of diminishing by half the capital-value to be advanced for the continuation of Business X on the same scale as before, and hence only one half of the money would have to be thrown on the market by Business X, since Business X advances this capital-value first in the form of money, i.e., as money-capital. The amount of money thrown into circulation would decrease because the prices of the elements of production fell. This would be the first effect.
In the second place however one half of the originally advanced capital-value of £900, or £450, which (a) passed successively through the forms of money-capital, productive capital, and commodity-capital, and (b) existed simultaneously and constantly side by side partly in the form of money-capital, partly in that of productive capital, and partly in that of commodity-capital, would be eliminated from the circuit of Business X, and thus come into the money-market as additional money-capital, affecting it as an additional constituent. These released £450 act as money-capital, not because they have become superfluous money for the operation of Business X but because they are a constituent part of the original capital-value, and hence are intended to function further as capital and not to be expended as mere means of circulation. The best method of letting them operate as capital is that of throwing them as money-capital on the money-market. On the other hand the scale of production (apart from fixed capital) might be doubled. In that case a productive process of double the previous volume would be carried on with the same advanced capital of £900.
If on the other hand the prices of the circulation elements of productive capital were to increase by one half, £1500 instead of £100 or £1,350 instead of £900 would be required per week. It would take an additional capital of £450 to carry on the business on the same scale, and this would exert a pro tanto pressure on the money-market, big or small depending on its condition. If all the capital available on this market were then already engaged, there would be increased competition for available capital. If a portion of it were unemployed, it would pro tanto be called into action.
But, in the third place, given a certain scale of production, the turnover velocity and the prices of the elements of the circulating productive capital remaining the same, the price of the products of Business X may rise or fall. If the price of the commodities supplied by Business X falls, the price of its commodity-capital of £600, which it constantly threw into circulation, drops to, say, £500. Hence one-sixth of the value of the advanced capital does not return from the process of circulation. (The surplus-value contained in the commodity-capital is not considered here.) It is lost in that process. But since the value, or price, of the elements of production remains the same, this reflux of £500 suffices only to replace 5/6 of the capital of £600 constantly engaged in the process of production. It would therefore require an additional money-capital of £100 to continue production on the same scale.
Vice versa, if the price of the product of Business X were to rise, then the price of the £600 commodity-capital would be increased, say, to £700. One-seventh of this price, or £100, does not originate in the process of production, is not advanced in this process, but derives from the process of circulation. But only £600 are needed to replace the elements of production. Hence, the release of £100.
It does not fall within the scope of the investigation hitherto made to ascertain why, in the first case, the period of turnover is shortened or lengthened, and why in the second case the prices of raw materials and labour, and in the third, the prices of the products supplied, rise or fall.
But the following does belong in it:
First case: Unchanged Scale of Production, Unchanged
Prices of the Elements of Production and of Products, and a Change in the Period of Circulation and Thus of Turnover.
According to the assumptions of our example, one-ninth less of the total advanced capital is needed as a result of the contraction of the period of circulation, so that the total capital is reduced from £900 to £800 and £100 of money-capital is eliminated.
Business X supplies, just as before, the same six weeks‘ product of the same value of £600, and as work continues year in year out without interruption, it supplies in 51 weeks the same quantity of products, valued at £5,100. There is, then, no change so far as the quantity and price of the product thrown into circulation by this business are concerned, nor in the times when it throws its product on the market. But £100 are eliminated because due to the contraction of the circulation period the requirements of the process are satisfied with only £800 instead of the former £900. The £100 eliminated capital exist in the form of money-capital. But they do not by any means represent that portion of the advanced capital which would have to function constantly in the form of money-capital. Let us assume that 4/5, or £480, of the advanced circulating capital I of £600 are constantly invested in productive materials and 1/5, or £120, in wages. Then the weekly investment in materials of production would be £80 and in wages £20. Capital II, amounting to £300, should then also be divided into 4/5, or £240, for materials of production and 1/5, or £60, for wages. The capital invested in wages must always be advanced in the form of money. As soon as the commodity-product, worth £600, has been reconverted into the money-form, or sold, £480 of it can be transformed into materials of production (productive supply), but £120 retain their money-form in order to serve for the payment of wages for six weeks. These £120 are the minimum of the returning capital of £600 which must always be renewed and replaced in the form of money-capital and therefore must always be kept on hand as that portion of the advanced capital which functions in the form of money.
Now, if £100 of the £300 periodically released for three weeks, and likewise divisible into £240 for productive supply and £60 for wages, is entirely eliminated, completely thrust out of the turnover mechanism, in the form of money-capital by shortening the circulation time, where does the money for this money-capital of £100 come from? Only one-fifth of this amount consists of money-capital periodically set free within the turnovers. But four-fifths, or £80, are already replaced by an additional productive supply of the same value. In what manner is this additional productive supply converted into money, and where does the money for this conversion come from?
If the abridged period of circulation has become a fact, then only £400 of the above £600, instead of £480, are reconverted into productive supply. The remainder, £80, is retained in its moneyform and constitutes, together with the above £20 for wages, the £100 of eliminated capital. Although these £100 come from the sphere of circulation through the sale of the £600 worth of commodity-capital and are now withdrawn from it by not being reinvested in wages and elements of production, it must not be forgotten that, being in the money-form, they are once more in that form in which they were originally thrown into circulation. In the beginning £900 were invested in productive supply and wages. Now only £800 are necessary to carry out the same productive process. The £100 thus released in money now form a new, employment-seeking money-capital, a new constituent part of the money-market. True, they have already previously been periodically in the form of released money-capital and of additional productive capital, but these latent states were themselves the requisites for the execution of the process of production, because they were the requisites for its continuity. Now they are no longer needed for that purpose and for this reason form new money-capital and a constituent part of the money-market, although they by no means form either an additional element of the available social money-supply (for they existed at the beginning of the business and were thrown by it into the circulation), or a newly accumulated hoard.
These £100 are now in actual fact withdrawn from circulation inasmuch as they are a part of the advanced money-capital that is no longer employed in the same business. But this withdrawal is possible only because the conversion of the commodity-capital into money, and of this money into productive capital, C' — M — C, is accelerated by one week, so that the circulation of the money operating in this process is likewise hastened. They have been withdrawn from it because they are no longer needed for the turnover of capital X.
It has been assumed here that the advanced capital belongs to him who employs it. Had he borrowed it nothing would be changed. With the shortening of the time of circulation he would have to borrow only £800 instead of £900. The £100, if returned to the lender, would as before form £100 of new money-capital, only in the hands of Y instead of X. Should capitalist X receive £480 worth of materials of production on credit, so that he has to advance only £210 in money for wages out of his own pocket, he would now have to procure £80 worth of materials less on credit and this sum would constitute superfluous commodity-capital for the capitalist granting the credit, while capitalist X would have eliminated £20 in money.
The additional supply for production is now reduced by one-third. It consisted of £240 constituting four-fifths of £300, the additional capital II, but now it is only £160, i.e., additional supply for 2 instead of 3 weeks. It is now renewed every 2 weeks instead of every 3, but only for 2 instead of 3 weeks. The purchases, for instance in the cotton market, are thus more frequent and smaller. The same amount of cotton is withdrawn from the market, for the quantity of the product remains the same. But the withdrawals are distributed differently in time, extending over a longer period. Supposing that it is a question of 3 months or 2. If the annual consumption of cotton amounts to 1,200 bales, the sales in the first case will be:
January 1, 300 bales, left in storage 900 bales
April 1, 300 " " " " 600 "
July 1, 300 " " " " 300 "
October 1, 300 " " " " 0 " But in the second case:
January 1, sold 200, in storage 1,000 bales
March 1, " 200, " " 800 "
May 1, " 200, " " 600 "
July 1, " 200, " " 400 "
September 1, " 200, " " 200 "
November 1, " 200, " " 0 "
So the money invested in cotton only returns completely one month later, in November instead of October. If therefore one-ninth of the advanced capital, or £100, is eliminated in the form of money-capital by the contraction of the circulation time and thus of the turnover and if these £100 are composed of £20 worth of periodically superfluous money-capital for the payment of weekly wages, and of £80 which existed as periodically superfluous productive supply for one week, then the diminished superfluous productive supply in the hands of the manufacturer corresponds, so far as these £80 are concerned, to an enlarged commodity-supply in the hands of the cotton dealer. The longer this cotton lies in the latter‘s warehouse as a commodity, the less it lies in the storeroom of the manufacturer as a productive supply.
Hitherto we presupposed that the contraction of the time of circulation in Business X was due to the fact that X sold his articles quicker, received his money for them sooner, or, in the event of credit, was given shorter terms of payment. The contraction was therefore attributed to a quicker sale of the commodities, to a quicker transformation of commodity-capital into money-capital, C' — M, the first phase of the process of circulation. But it might also derive from the second phase, M — C, and hence from a simultaneous change, be it in the working period or in the time of circulation of capitals Y, Z, etc., which supply capitalist X with the productive elements of his circulating capital.
For instance if cotton, coal, etc., with the old methods of transport, are three weeks in transit from their place of production or storage to the place of production of capitalist X, then X‘s productive supply must last at least for three weeks, until the arrival of new supplies. So long as cotton and coal are in transit, they cannot serve as means of production. They are then rather a subject of labour for the transport industry and the capital employed in it; they are also commodity-capital in the process of circulation for the producer of coal or the dealer in cotton. Suppose improvements in transport reduce the transit to two weeks. Then the productive supply can be changed from a three-weekly into a fortnightly supply. This releases the additional advanced capital £80 set aside for this purpose and likewise the £20 for wages, because the turned-over capital of £600 returns one week sooner.
On the other hand if for instance the working period of the capital which supplies the raw materials is cut down (examples of which were given in the preceding chapters), so that the possibility arises of renewing the supply of raw materials in less time, then the productive supply may be reduced and the interval between periods of renewal shortened.
If, vice versa, the time of circulation, and thus the period of turnover, are prolonged, then it is necessary to advance additional capital. This must come out of the pocket of the capitalist himself if he has any additional capital. But it will then be invested in some form or other as a part of the money-market. To make it available, it must be pried loose from its old form. For instance stocks must be sold, deposits withdrawn, so that in this case too the money-market is indirectly affected. Or he must borrow it. As for that part of the additional capital which is needed for wages, it must under normal conditions always be advanced in the form of money-capital, and for that purpose the capitalist X exerts his share of direct pressure on the money-market. But this is indispensable for the part which must be invested in materials of production only if he must pay for them in cash. If he can get them on credit, this does not have any direct influence on the money-market, because the additional capital is then advanced directly as a productive supply and not in the first instance as money-capital. But if the lender throws the bill of exchange received from X directly on the market, discounts it, etc., this would influence the money-market indirectly, through someone else. If, however, he uses this note to cover a debt not yet due for instance, this additional advanced capital does not affect the money-market either directly or indirectly.
Second Case. A Change in the Price of Materials of
Production, All Other Circumstances Remaining the Same.
We just assumed that the total capital of £900 was four-fifths invested in materials of production (equalling £720) and one-fifth in wages (equalling £180).
If the materials of production drop to half, they require for the 6-week period only £240 instead of £480, and for the additional capital No. II only £120 instead of £240. Capital I is thus reduced from £600 to £240 plus £120, or £360, and capital II from £300 to £120 plus £60, or £180. The total capital of £900 is therefore reduced to £360 plus £180, or £540. A sum of £360 is therefore released.
This eliminated and now unemployed capital, or money-capital, seeking employment in the money-market, is nothing but a portion of the capital of £900 originally advanced as moneycapital, which, due to the fall in the prices of the materials of production, into which it is periodically reconverted, has become superfluous if the business is not to be expanded but carried on in the same scale. If this fall in prices were not due to accidental circumstances (a particularly rich harvest, over-supply, etc.) but to an increase of productive power in the branch of production which furnishes the raw materials, then this money-capital would be an absolute addition to the money-market, and to the capital available in the form of money-capital in general, because it would no longer constitute an integral part of the capital already invested.
Third Case. A Change in the Market Price of the Product
Itself.
In the case of a fall in prices a portion of the capital is lost, and must consequently be made good by a new advance of money-capital. This loss of the seller may be a gain to the buyer. Directly, if the market price of the product has fallen merely because of an accidental fluctuation, and afterwards rises once more to its normal level. Indirectly, if the change of prices is caused by a change of value reacting on the old product and if this product passes again, as an element of production, into another sphere of production and there releases capital pro tanto. In either case the capital lost by X, and for whose replacement he exerts pressure on the money-market, may be supplied to him by his business friends as new additional capital. All that takes place then is a transfer.
If, on the contrary, the price of the product rises, a portion of the capital which was not advanced is taken out of circulation. This is not an organic part of the capital advanced in the process of production and unless production is expanded therefore constitutes money-capital eliminated. As we have assumed that the prices of the elements of the product were given before it was brought to market as commodity-capital, a real change of value might have caused the rise of prices since it acted retroactively, causing a subsequent rise in the price of, say, raw materials. In that event capitalist X would realise a gain on his product circulating as commodity-capital and on his available productive supply. This gain would give him an additional capital, which would now be needed for the continuation of his business with the new and higher prices of the elements of production.
Or the rise of prices is but temporary. What capitalist X then needs by way of additional capital becomes released capital for the other side, insofar as X‘s product forms an element of production for other branches of business. What the one has lost the other has gained.

1 The weeks falling within the second year of turnover are put in parenthesis.