Capital, Volume II
Chapter 5: The Time of Circulation [8]
We have seen that the movement of capital through the sphere of production and the two phases of the sphere of circulation takes place in a series of periods of time. The duration of its sojourn in the sphere of production is its time of production, that of its stay in the sphere of circulation its time of circulation. The total time during which it describes its circuit is therefore equal to the sum of its time of production and its time of circulation.
The time of production naturally comprises the period of the labour-process, but is not comprised in it. It will be remembered first of all that a part of the constant capital exists in the form of instruments of labour, such as machinery, buildings, etc., which serve the same constantly repeated labour-processes until they are worn out. Periodical interruptions of the labour-process, by night for instance, interrupt the functioning of these instruments of labour, but not their stay at the place of production. They belong to this place when they are in function as well as when they are not. On the other hand the capitalist must have a definite supply of raw material and auxiliary material in readiness, in order that the process of production may take place for a longer or shorter time on a previously determined scale, without being dependent on the accidents of daily supply from the market. This supply of raw material, etc., is productively consumed only by degrees. There is, therefore, a difference between its time of production [9] and its time of functioning. The time of production of the means of production in general comprises, therefore, 1) the time during which they function as means of production, hence serve in the productive process; 2) the stops during which the process of production, and thus the functioning of the means of production embodied in it, are interrupted; 3) the time during which they are held in readiness as prerequisites of that process, hence already represent productive capital but have not yet entered into the process of production.
The difference so far considered has in each case been the difference between the time which the productive capital stays in the sphere of production and that it stays in the process of production. But the process of production may itself be responsible for interruptions of the labour-process, and hence of the labour-time — intervals during which the subject of labour is exposed to the action of physical processes without the further intervention of human labour. The process of production, and thus the functioning of the means of production, continue in this case, although the labour-process, and thus the functioning of the means of production as instruments of labour, have been interrupted. This applies, for instance, to the grain, after it has been sown, the wine fermenting in the cellar, the labour-material of many factories, such as tanneries, where the material is exposed to the action of chemical processes. The time of production is here longer than the labour-time. The difference between the two consists in an excess of the production time over the labour-time. This excess always arises from the latent existence of productive capital in the sphere of production without functioning in the process of production itself or from its functioning in the productive process without taking part in the labour-process.
That part of the latent productive capital is held in readiness only as a requisite for the productive process, such as cotton, coal, etc., in a spinning-mill, acts as a creator of neither products nor value. It is fallow capital, although its fallowness is essential for the uninterrupted flow of the process of production. The buildings, apparatus, etc., necessary for the storage of the productive supply (latent capital) are conditions of the productive process and therefore constitute component parts of the advanced productive capital. They perform their function as conservators of the productive components in the preliminary stage. Inasmuch as labour-processes are necessary in this stage, they add to the cost of raw material, etc., but are productive labour and productive surplus-value, because a part of this labour, like of all other wage-labour, is not paid for. The normal interruptions of the entire process of production, the intermissions during which the productive capital does not function, create neither value nor surplus-value. Hence the desire to the work going at night, too. (Buch I, Kap. VIII, 4.) [English edition: Ch. X, 4. — Ed .]
The intervals in the labour-time which the subject of labour must endure in the process of production itself create neither value nor surplus-value. But they advance the product, form a part of its life, a process through which it must pass. The value of the apparatus, etc., is transferred to the product in proportion to the entire time during which they perform their function; the product is brought to this stage by labour itself, and the employment of these apparatus is as much a condition of production as is the reduction to dust of a part of the cotton which does not enter into the product but nevertheless transfers its value to the product. The other part of the latent capital, such as buildings, machinery, etc., the instruments of labour whose functioning is interrupted only by the regular pauses of the productive process — irregular interruptions caused by the restriction of production, crises, etc., are total losses — adds value without entering into the creation of the product. The total value which this part of capital adds to the product is determined by its average durability; it loses value, because it loses its use-value, both during the time that it performs its functions as well as during that in which it does not.
Finally the value of the constant part of capital, which continues in the productive process although the labour-process is interrupted, re-appears in the result of the productive process. Labour itself has here placed the means of production in conditions under which they pass of themselves through certain natural processes, the result of which is a definite useful effect or a change in the form of their use-value. Labour always transfers the value of the means of production to the product, in so far as it really consumes them in a suitable manner, as means of production. And it does not change the matter whether labour has to bear continually on its subject by means of the instruments of labour in order to produce this effect or whether it merely needs to give the first impulse by providing the means of production with conditions under which they undergo the intended alteration of themselves, in consequence of natural processes, without the further assistance of labour.
Whatever may be the reason for the excess of production time over the labour-time — whether the circumstance that means of production constitute only latent productive capital and hence are still in a stage preliminary to the actual productive process or that their own functioning is interrupted within the process of production by its pauses or finally that the process of production itself necessitates interruptions of the labour-process — in none of these cases do the means of production function as absorbers of labour. And if they do not absorb labour, they do not absorb surplus-labour, either. Hence there is no expansion of the value of productive capital so long as it stays in that part of its production time which exceeds the labour-time, no matter how inseparable from these pauses the carrying on of the process of self-expansion may be. It is plain that the more the production time and labour-time cover each other the greater is the productivity and self-expansion of a given productive capital in a given space of time. Hence the tendency of the capitalist production to reduce the excess of the production time over the labour-time as much as possible. But while the time of production of a certain capital may differ from its labour-time, it always comprises the latter, and this excess is itself a condition of the process of production. The time of production, then, is always that time in which a capital produces use-values and expands, hence functions as productive capital, although it includes time in which it is either latent or produces without expanding its value.
Within the sphere of circulation, capital abides as commodity-capital and money-capital. Its two processes of circulation consist in its transformation from the commodity-form into that of money and from the money-form into that of commodities. The circumstance that the transformation of commodities into money is here at the same time a realisation of the surplus-value embodied in the commodities, and that the transformation of money into commodities is at the same time a conversion or reconversion of capital-value into the form of its elements of production does not in the least alter the fact that these processes, as processes of circulation, are processes of the simple metamorphosis of commodities.
Time of circulation and time of production mutually exclude each other. During its time of circulation capital does not perform the functions of productive capital and therefore produces neither commodities nor surplus-value. If we study the circuit in its simplest form, as when the entire capital-value passes in one bulk from one phase into another, it becomes palpably evident that the process of production and therefore also the self-expansion of capital-value are interrupted so long as its time of circulation lasts, and that the renewal of the process of production will proceed at a faster or a slower pace depending on the length of the circulation time. But if on the contrary the various parts of capital pass through the circuit one after another, so that the circuit of the entire capital-value is accomplished successively in the circuits of its various component parts, then it is evident that the longer its aliquot parts stay in the sphere of circulation the smaller must be the part functioning in the sphere of production. The expansion and contraction of the time of circulation operate therefore as negative limits to the contraction or expansion of the time of production or of the extent to which a capital of a given size functions as productive capital. The more the metamorphoses of circulation of a certain capital are only ideal, i.e., the more the time of circulation is equal to zero, or approaches zero, the more does capital function, the more does its productivity and the self-expansion of its value increase. For instance, if a capitalist executes an order by the terms of which he receives payment on delivery of the product, and if this payment is made in his own means of production, the time of circulation approaches zero.
A capital’s time of circulation therefore limits, generally speaking, its time of production and hence its process of generating surplus-value. And it limits this process in proportion to its own duration. This duration may considerably increase or decrease and hence may restrict capital’s time of production in a widely varying degree. But Political Economy sees only what is apparent, namely the effect of the time of circulation on capital’s process of the creation of surplus-value in general. It takes this negative effect for a positive one, because its consequences are positive. It clings the more tightly to this appearance since it seems to furnish proof that capital possesses a mystic source of self-expansion independent of its process of production and hence of the exploitation of labour, a spring which flows to it from the sphere of circulation. We shall see later that even scientific Political Economy has been deceived by this appearance of things. Various phenomena, it will turn out, give color to this semblance: 1) The capitalist method of calculating profit, in which the negative cause figures a positive one, since with capitals in different spheres of investment, where only the time of circulation are different, a longer time of circulation tends to bring about an increase in prices, in short, serves as one of the causes of equalising profits. 2) The time of circulation is but a phase of the time of turnover; the latter however includes the time of production or reproduction. What is really due to the latter seems to be due to the time of circulation. 3) The conversion of commodities into variable capital (wages) is necessitated by their previous conversion into money. In the accumulation of capital, the conversion into additional variable capital therefore takes place in the sphere of circulation, or during the time of circulation. Consequently it seems that the accumulation thus achieved is owed to the latter.
Within the sphere of circulation capital passes through the two antithetical phases C — M and M — C; it is immaterial in what order. Hence its time of circulation is likewise divided into two parts, viz.: the time it requires for its conversion from commodities into money, and that which it requires for its conversion from money into commodities. We have already learned from the analysis of simple circulation of commodities (Buch I, Kap. III) [English edition: Ch. III. — Ed .] that C — M, the sale, is the most difficult part of its metamorphosis and that therefore under ordinary conditions it takes up the greater part of its time of circulation. As money, value exists in its always convertible form. As a commodity it must first be transformed into money before it can assume this form of direct convertibility and hence of constant readiness for action. However, in capital’s process of circulation, its phase M — C has to do with its transformation into commodities which constitute definite elements of productive capital in a given enterprise. The means of production may not be available in the market and must first be produced or they must be procured from distant markets or their ordinary supply has become irregular or prices have changed, etc., in short there are a multitude of circumstances which are not noticeable in the simple change of form M — C, but which nevertheless requires now more, now less time also for this part of the circulation phase. C — M and M — C may be separate not only in time but also in space; the market for buying and the market for selling may be located apart. In the case of factories for instance buyer and seller are frequently different persons. In the production of commodities, circulation is as necessary as production itself, so that circulation agents are just as much needed as production agents. The process of reproduction includes both functions of capital, therefore it includes the necessity of having representatives of these functions, either in the person of the capitalist himself or of wage-labourers, his agents. But this furnishes no ground for confusing the agents of circulation with those of production, any more than it furnishes ground for confusing the functions of commodity-capital and money-capital with those of productive capital. The agents of circulation must be paid by the agents of production. But the capitalists, who sell to and buy from one another, create neither values nor products by these acts, this state of affairs is not changed if they are enabled or compelled by the volume of their business to shift this function on to others. In some businesses the buyers and sellers get paid in the form of percentages on the profits. All talk about their being paid by the consumer does not help matters. The consumers can pay only in so far as they, as agents of production, produce an equivalent in commodities for themselves or appropriate it from production agents either on the basis of some legal title (as their co-partners, etc.) or by personal services.
There is a difference between C — M and M — C which has nothing to do with the difference in forms of commodities and money but arises from the capitalist character of production. Intrinsically both C — M and M — C are mere conversions of given values from one form into another. But C' — M' is at the same time a realisation of the surplus-value contained in C'. M — C however is not. Hence selling is more important than buying. Under normal conditions M — C is an act necessary for the self-expansion of the value expressed in M, but it is not a realisation of surplus-value; it is the introduction to its production, not an afterword.
The form in which a commodity exists, its existence as a use-value, sets definite limits to the circulation of commodity capital C' — M'. Use-values are perishable by nature. Hence if they are not productively or individually consumed within a certain time, depending on what they are intended for, in other words, if they are not sold within a certain period, they spoil and lose with their use-value the property of being vehicles of exchange-value. The capital-value contained in them, hence also the surplus-value accrued in it, gets lost. The use-values do not remain the carriers of perennial self-expanding capital-value unless they are constantly renewed and reproduced, are replaced by new use-values of the same or of some other order. The sale of the use-values in the form of commodities, hence their entry into productive or individual consumption effected through this sale is however the ever recurring condition of their reproduction. They must change their old use-form within a definite time in order to continue their existence in a new form. Exchange-value maintains itself only by means of this constant renewal of its body. The use-values of various commodities spoil sooner or later; the interval between their production and consumption may therefore be comparatively long or short; hence they can persist without spoiling in the circulation phase C — M for a shorter or longer term in the form of commodity-capital, can endure a shorter or a longer time of circulation as commodities. The limit of the circulation time of a commodity-capital imposed by the spoiling of the body of the commodity is the absolute limit of this part of the time of circulation, or of the time of circulation of commodity-capital as such. The more perishable a commodity and the sooner after its production it must therefore be consumed and hence sold, the more restricted is its capacity for removal from its place of production, the narrower therefore is the spatial sphere of its circulation, the more localised are the markets where it can be sold. For this reason the more perishable a commodity is and the greater the absolute restriction of its time of circulation as commodity on account of its physical properties, the less is it suited to be an object of capitalist production. Such a commodity can come within its grasp only in thickly populated districts or to the extent that improved transportation eliminate distance. But the concentration of the production of any article in the hands of a few and in a populous district may create a relatively large market even for such articles as are the products of large breweries, dairies, etc.
8 Beginning of Manuscript IV. — F.E.
9 Time of production is here used in the active sense: The time of production of the means of production does not mean in this case the time required for their production, but the time during which they take part in the process of production of a certain commodity. — F.E.
Chapter 4 | Table of Contents | Chapter 6
Chapter 6: The Costs of Circulation
I. Genuine Costs of Circulation
(a) The Time of Purchase and Sale
The transformations of the forms of capital from commodities into money and from money into commodities are at the same time transactions of the capitalist, acts of purchase and sale. The time in which these transformations of forms take place constitutes subjectively, from the standpoint of the capitalist, the time of purchase and sale; it is the time during which he performs the functions of a seller and buyer in the market. Just as the time of circulation of capital is a necessary segment of its time of reproduction, so the time in which the capitalist buys and sells and scours the market is a necessary part of the time in which he functions as a capitalist, i.e., as personified capital. It is a part of his business hours.
[ Since we have assumed that commodities are bought and sold at their values, these acts constitute merely the conversion of a certain value from one form into another, from the commodity-form into the money-form or from the money-form into the commodity-form — a change in the state of being. If commodities are sold at their values, then the magnitudes of value in the hands of the buyer and seller remain unchanged. Only the form of existence of value is changed. If the commodities are not sold at their values, then the sum of the converted values remains unchanged; the plus on one side is a minus on the other.
The metamorphoses C — M and M — C are transactions between buyers and sellers; they require time to conclude bargains, the more so as the struggle goes on in which each seeks to get the best of the other, and it is businessmen who face one another here; and “ when Greek meets Greek then comes the tug of war .“ [A paraphrase of words from the 17th century tragedy The Rival Queens, or the Death of Alexander the Great by Nathaniel Lee . — Ed .] To effect a change in the state of being costs of time and labour-power, not for the purpose of creating value, however, but in order to accomplish the conversion of value from one form into another. The mutual attempt to appropriate an extra slice of this value on this occasion changes nothing. This labour, increased by the evil designs on either side, creates no value, any more than the work performed in a judicial proceeding increases the value of the subject matter of the suit. Matters stand with this labour — which is a necessary element in the capitalist process of production as a whole, including circulation or included by it — as they stand, say, with the work of combustion of some substance used for the generation of heat. This work of combustion does not generate any heat, although it is a necessary element in the process of combustion. In order, e.g., to consume coal as fuel, I must combine it with oxygen, and for this purpose must transform it from the solid into the gaseous state (for in the carbonic acid gas, the result of the combustion, coal is in the gaseous state); consequently, I must bring about a physical change in the form of its existence or in its state of being. The separation of carbon molecules, which are united into a solid mass, and the splitting up of these molecules into their separate atoms must precede the new combination, and this requires a certain expenditure of energy which thus is not transformed into heat but taken from it. Therefore, if the owners of the commodities are not capitalists but independent direct producers, the time employed in buying and selling is a diminution of their labour-time, and for this reason such transactions used to be deferred (in ancient and medieval times) to holidays.
Of course the dimensions assumed by the conversion of commodities in the hands of the capitalists cannot transform this labour — which does not create any value — into labour productive of value. Nor can the miracle of this transubstantiation be accomplished by a transposition, i.e., by the industrial capitalist making this "work of combustion" the exclusive business of third persons, who are paid by them, instead of performing it themselves. This third persons will of course not tender their labour-power to the capitalist out of sheer love for them. It is a matter of indifference to the rent collector of a real-estate owner or the messenger of a bank that their labour does not add one iota or tittle to the value of either the rent or the gold pieces carried to another bank by the bagful. ] [10]
To the capitalist who has others working for him, buying and selling becomes a primary function. Since he appropriates the product of many on a large social scale, he must sell it on the same scale and then reconvert it from money into elements of production. Now as before neither the time of purchase nor of sale creates any value. The function of merchant’s capital gives rise to an illusion. But without going into this at length here this much is plain from the start: If by a division of labour a function, unproductive in itself although a necessary element of reproduction, is transformed from an incidental occupation of many into an exclusive occupation of a few, into their special business, the nature of this function itself is not changed. One merchant (here considered a mere agent attending to the change of form of commodities, a mere buyer and seller) may by his operations shorten the time of purchase and sale for many producers. In such case he should be regarded as a machine which reduces useless expenditure of energy or helps to set production time free. [11]
In order to simplify the matter (since we shall not discuss the merchant as a capitalist and merchant’s capital until later) we shall assume that this buying and selling agent is a man who sells his labour. He expends his labour-power and labour-time in the operations C — M and M — C. And he makes his living that way, just as another does by spinning or making pills. He performs a necessary function, because the process of reproduction itself includes unproductive functions. He works as well as the next man, but intrinsically his labour creates neither value nor product. He belongs himself to the faux frais of production. His usefulness does not consist in transforming an unproductive function into a productive one, nor unproductive into productive labour. It would be a miracle if such transformation could be accomplished by the mere transfer of a function. His usefulness consists rather in the fact that a smaller part of society’s labour-power and labour-time is tied up in this unproductive function. More. We shall assume that he is a mere wage-labourer, even one of the better paid, for all the difference it makes. Whatever his pay, as a wage-labourer he works part of his time for nothing. He may receive daily the value of the product of eight working-hours, yet functions ten. But the two hours of surplus-labour he performs do not produce value anymore than his eight hours of necessary labour, although by means of the latter a part of the social product is transferred to him. In the first place, looking at it from the standpoint of society, labour-power is used up now as before for ten hours in a mere function of circulation. It cannot be used for anything else, not for productive labour. In the second place however society does not pay for those two hours of surplus-labour, although they are spent by the individual who performs this labour. Society does not appropriate any extra product or value thereby. But the costs of circulation, which he represents, are reduced by one-fifth, from ten hours to eight. Society does not pay any equivalent for one-fifth of this active time of circulation, of which he is the agent. But if this man is employed by a capitalist, then the non-payment of these two hours reduces the cost of circulation of his capital, which constitutes a deduction from his income. For the capitalist this is a positive gain, because the negative limit for the self-expansion of his capital-value is thereby reduced. So long as small independent producers of commodities spend a part of their own time in buying and selling, this represents nothing but time spent during the intervals between their productive function or diminution of their time of production.
At all events the time consumed for this purpose constitutes one of the costs of circulation which adds nothing to the converted values. It is the cost of converting them from the commodity-form into the money-form. The capitalist producer of commodities acting as an agent of circulation differs from the direct producer of commodities only in the fact that he buys and sells on a larger scale and therefore his function as such agent assumes greater dimensions. And if the volume of his business compels or enables him to buy (hire) circulation agents of his own to serve as wage-labourers, the nature of the case is not changed thereby. A certain amount of labour-power and labour-time must be expended in the process of circulation (so far as it is merely a change of form). But this now appears as an additional investment of capital. A part of the variable capital must be laid out in the purchase of this labour-power functioning only in circulation. This advance capital creates neither product nor value. It reduces pro tanto the dimensions in which the advanced capital functions productively. It is as though one part of the product were transformed into a machine which buys and sells the rest of the product. This machine brings about a reduction of the product. It does not participate in the productive process, although it can diminish the labour-power, etc., spent on circulation. It constitutes merely a part of the costs of circulation.
(b) Book-keeping
Apart from the actual buying and selling, labour-time is expended on book-keeping, which besides absorbs materialised labour such as pens, ink, paper, desks, office paraphernalia. This function, therefore, exacts the expenditure on the one hand of labour-power and on the other of instruments of labour. It is the same condition of things as obtained in the case of the time of purchase and sale.
As unity within its circuits, as value in motion, whether in the sphere of production or in either phase of the sphere of circulation, capital exists ideally only in the form of money of account, primarily in the mind of the producer of commodities, the capitalist producer of commodities. This movement is fixed and controlled by book-keeping, which includes the determination of prices, or the calculation of the prices of commodities. The movement of production, especially of the production of surplus-value — in which the commodities figure only as depositories of value, as the names of things whose ideal existence as values is crystallised in money of account — thus is symbolically reflected in imagination. So long as the individual producer of commodities keeps account only in his head (for instance, a peasant; the book-keeping tenant-farmer was not produced until the rise of capitalist agriculture), or books his expenditures, receipts, due dates of payments, etc., only incidentally, outside of his production time, it is palpably clear that this function and the instruments of labour consumed by it, such as paper, etc., represent additional consumption of labour-time and instruments which are necessary, but constitute a deduction from the time available for productive consumption as well as from the instruments of labour which functions in the real process of production, enter into the creation of products and value. [12] The nature of the function is not changed — neither by the dimensions which it assumes on account of its concentration in the hands of the capitalist producer of commodities and the fact that instead of appearing as the function of many small commodity-producers it appears as the function of one capitalist, as a function within a process of large-scale production; nor is it altered by its divorcement from those productive functions of which it formed an appendage, nor by its conversion into an independent function of special agents exclusively entrusted with it.
Division of labour and assumption of independence do not make a function one that creates products and value if it was not so intrinsically, hence before it became independent. If a capitalist invests his capital anew, he must invest a part of it in hiring a book-keeper, etc., and in the wherewithal of book-keeping. If his capital is already functioning, is engaged in the process of its own constant reproduction, he must continually reconvert a part of his product into a book-keeper, clerks, and the like, by transforming that part into money. That part of his capital is withdrawn from the process of production and belongs in the costs of circulation, deductions from the total yield (including the labour-power itself that is expended exclusively for this function).
But there is a certain difference between the costs incidental to book-keeping, or the unproductive expenditure of labour-time on the one hand and those of mere buying and selling time on the other. The latter arise only from the definite social form of the process of production, from the fact that it is the process of production of commodities. Book-keeping, as the control and ideal synthesis of the process, becomes the more necessary the more the process assumes a social scale and loses its purely individual character. It is therefore more necessary in capitalist production than in the scattered production of handicraft and peasant economy, more necessary in collective production than in capitalist production. But the costs of book-keeping drop as production becomes concentrated and book-keeping becomes social.
We are concerned here only with the general character of the costs of circulation, which arise out of the metamorphosis of forms alone. It is superfluous to discuss here all their forms in detail. But how forms which belong in the sphere of pure changes of the form of value and hence originate from the particular social form of the process of production, forms which in the case of the individual commodity-producer are only transient, barely perceptible elements, run alongside his productive functions or become intertwined with them — how these can strike the eye as the huge costs of circulation can be seen from just the money taken in and paid out when these operations have become independent and concentrated on a large scale as the exclusive function of banks, etc., or of cashiers in individual businesses. But it must be firmly borne in mind that these costs of circulation are not changed in character by their change in appearance.
(c) Money
Whether a product is fabricated as a commodity or not, it is always a material form of wealth, a use-value intended for individual or productive consumption. Its value as a commodity is ideally expressed in its price, which does not change its actual use-form in the least. But the fact that certain commodities like gold and silver function as money and as such reside exclusively in the process of circulation (even in the form of hoards, reserve funds, etc., they remain in the sphere of circulation, although latently) is a pure product of the particular social form of the process of production, the process of production of commodities. Since under capitalist production products assume the general form of commodities, and the overwhelming mass of products is created as commodities and must therefore assume the form of money, and since the vast bulk of commodities, the part of social wealth functioning as commodities, grows continually, it follows that the quantity of gold and silver functioning as means of circulation, paying medium, reserve fund, etc., likewise increases. These commodities performing the function of money enter into neither individual nor productive consumption. They represent social labour in a fixed form in which it serves as a mere circulation machine. Besides the fact that a part of social wealth has been condemned to assume this unproductive form, the wearing down of the money demands its constant replacement, or the conversion of more social labour, in the form of products, into more gold and silver. These replacement costs are considerable in capitalistically developed nations, because in general the portion of wealth tied up in the form of money is tremendous. Gold and silver as money-commodities mean circulation costs to society which arise solely out of the social form of production. They are faux frais of commodity production in general, and they increase with the development of this production, especially of capitalist production. They represent a part of the social wealth that must be sacrificed to the process of circulation. [13]
II. Costs of Storage
Costs of circulation, which originate in a mere change of form of value, in circulation, ideally considered, do not enter into the value of commodities. The parts of capital expended as such costs are merely deductions from the productively expended capital so far as the capitalist is concerned. The costs of circulation which we shall consider now are of a different nature. They may arise from processes of production which are only continued in circulation, the productive character of which is hence merely concealed by the circulation form. On the other hand they may be, from the standpoint of society, mere costs, unproductive expenditure of living or materialised labour, but for that very reason they become productive of value for the individual capitalist, may constitute an addition to the selling price of his commodities. This already follows from the fact that these costs are different in different spheres of production, and here and there even for different individual capitals in one and the same sphere of production. By being added to the prices of commodities they are distributed in proportion to the amount to be borne by each individual capitalist. But all labour which adds value can also add surplus-value, and will always add surplus-value under capitalist production, as the value created by labour depends on the amount of the labour itself, whereas the surplus-value created by it depends on the extent to which the capitalist pays for it. Consequently costs which enhance the price of a commodity without adding to its use-value, which therefore are to be classed as unproductive expenses so far as society is concerned, may be a source of enrichment to the individual capitalist. On the other hand, as this addition to the price of the commodity merely distributes these costs of circulation equally, they do not thereby cease to be unproductive in character. For instance insurance companies divide the losses of individual capitalists among the capitalist class. But this does not prevent these equalised losses from remaining losses so far as the aggregate social capital is concerned.
(a) Formation of Supply in General
During its existence as commodity-capital or its stay in the market, in other words, during the interval between the process of production, from which it emerges, and the process of consumption, into which it enters, the product constitutes a commodity supply. As a commodity in the market, and therefore in the shape of a supply, commodity-capital figures in a dual capacity in each circuit: one time as the commodity-product of that capital in process whose circuit is being examined; the other time however as the commodity-product of another capital, which must be available in the market to be bought and converted into productive capital. It is, indeed, possible that this last-named commodity-capital is not produced until ordered. In that event an interruption occurs until it has been produced. But the flow of the process of production and reproduction requires that a certain mass of commodities (means of production) should always be in the market, should therefore form a supply. Productive capital likewise comprises the purchase of labour-power, and the money-form is here only the value-form of the means of subsistence, the greater part of which the labourer must find at hand in the market. We shall discuss this more in detail further on in this paragraph. But at this point the following is already clear: As far as concerns capital-value in process which has been transformed into a commodity and must now be sold or reconverted into money, which therefore functions for the moment as commodity-capital in the market, the condition in which it constitutes a supply is to be described as an inexpedient, involuntary stay there. The quicker the sale is effected the more smoothly runs the process of reproduction. Delay in the form of conversion of C' — M' impedes the real exchange of matter which must take place in the circuit of capital, as well as its further functioning as productive capital. On the other hand, so far as M — C is concerned, the constant presence of commodities in the market, commodity-supply, appears as a condition of the flow of the process of reproduction and of the investment of new or additional capital.
The abidance of the commodity-capital as a commodity-supply in the market requires buildings, stores, storage places, warehouses, in other words, an expenditure of constant capital; furthermore the payment of labour-power for placing the commodities in storage. Besides, commodities spoil and are exposed to the injurious influences of the elements. Additional capital must be invested, partly in instruments of labour, in material form, and partly in labour-power to protect the commodities against the above. [14]
Thus the existence of capital in its form of commodity-capital and hence of commodity-supply gives rise to costs which must be classed as costs of circulation, since they do not come within the sphere of production. These costs of circulation differ from those mentioned under I by the fact that they enter to a certain extent into the value of the commodities, i.e., they increase the prices of commodities. At all events the capital and labour-power which serve the need of preserving and storing the commodity-supply are withdrawn from the direct process of production. On the other hand the capitals thus employed, including labour-power as a constituent of capital, must be replaced out of the social product. Their expenditure has therefore the effect of diminishing the productive power of labour, so that a greater amount of capital and labour is required to obtain a particular useful effect. They are unproductive costs .
As the costs of circulation necessitated by the formation of a commodity-supply are due merely to the time required for the conversion of existing values from the commodity-form into the money-form, hence merely to the particular social form of the production process (i.e., are due only to the fact that the product is brought forth as a commodity and must therefore undergo the transformation into money), these costs completely share the character of the circulation costs enumerated under I. On the other hand the value of the commodities is here preserved or increased only because the use-value, the product itself, is placed in definite material conditions which cost capital outlay and is subjected to operations which bring additional labour to bear on the use-values. However the computation of the values of commodities, the book-keeping incidental to this process, the transactions of purchase and sale, do not affect the use-value in which the commodity-value exists. They have to do only with the form of the commodity-value. Although in the case submitted [i.e., Corbet’s calculations given in Footnote 14. — Ed. ] the costs of forming a supply (which is here done involuntarily) arise only from a delay in the change of form and from its necessity, still these costs differ from those mentioned under I, in that their purpose is not a change in the form of the value, but the preservation of the value existing in the commodity as a product, a utility, and which cannot be preserved in any other way than by preserving the product, the use-value, itself. The use-value is neither raised nor increased here; on the contrary, it diminishes. But its diminution is restricted and it is preserved. Neither is the advanced value contained in the commodity increased here; but new labour, materialised and living, is added.
We have now to investigate furthermore to what extent these costs arise from the peculiar nature of commodity production in general and from commodity production in its general, absolute form, i.e., capitalist commodity production; and to what extent on the other hand they are common to all social production and merely assume a special shape, a special form of appearance, in capitalist production.
Adam Smith entertained the splendid notion that the formation of a supply was a phenomenon peculiar to capitalist production. [15] More recent economists, for instance Lalor, insist on the contrary that it declines with the development of capitalist production. [See: J. Lalor, Money and Morals: A Book for the Times, London, 1852, pp. 43-44. — Ed .] Sismondi even regards it as one of the drawbacks of the latter. [See: J.C.L. Sismonde de Sismondi, Etudes sur l’èconomie politique , Tome I. Bruxelles, 1837, p. 49, etc. — Ed .]
As a matter of fact, supplies exist in three forms: in the form of productive capital, in the form a fund for individual consumption, and in the form of a commodity-supply or commodity-capital. The supply in one form decreases relatively when it increases in another, although its quantity may increase absolutely in all three forms simultaneously.
It is plain from the outset that wherever production is carried on for the direct satisfaction of the needs of the producer and only to a minor extent for exchange or sale, hence where the social product does not assume the form of commodities at all or only to a rather small degree, the supply in the form of commodities, or commodity-supply, forms only a small and insignificant part of wealth. But here the consumption-fund is relatively large, especially that of the means of subsistence proper. One need but take a look at old-fashioned peasant economy. There the overwhelming part of the product is transformed directly into supplies of means of production or means of subsistence, without becoming supplies of commodities, for the very reason that it remains in the hands of its owner. It does not assume the form of a commodity-supply and for this reason Adam Smith declares that there is no supply in societies based on this mode of production. He confuses the form of the supply with the supply itself and believes that society hitherto lived from hand to mouth or trusted to the hap of the morrow. [16] This is a naive misunderstanding.
A supply in the form of productive capital exists in the shape of means of production, which already are in the process of production or at least in the hands of the producer, hence latently already in the process of production. It was seen previously that with the development of the productivity of labour and therefore also with the development of the capitalist mode of production — there is a steady increase in the mass of means of production (buildings, machinery, etc.) which are embodied once and for all in the process in the form of instruments of labour, and perform with steady repetition their function in it for a longer or shorter time. It was also observed that this increase is at the same time the premise and consequence of the development of the social productive power of labour. The growth, not only absolute but relative, of wealth in this form (cf. Buch I, Kap XXIII, 2) [English edition: Ch. XXV, 2. — Ed. ] is characteristic above all of the capitalist mode of production. The material forms of existence of constant capital, the means of production, do not however consist only of such instruments of labour but also of materials of labour in various stages of processing, and of auxiliary materials. With the enlargement of the scale of production and the increase in the productive power of labour through co-operation, division of labour, machinery, etc., grows the quantity of raw materials, auxiliary materials, etc., entering into the daily process of reproduction. These elements must be ready at hand in the place of production. The volume of this supply existing in the form of productive capital increases therefore absolutely, in order that the process may keep going — apart from the fact whether this supply can be renewed daily or only at fixed intervals — there must always be a greater accumulation of ready raw material, etc., at the place of production than is used up, say, daily or weekly. The continuity of the process requires that the presence of its conditions should not be jeopardised by possible interruptions when making purchases daily, nor depend on whether the product is sold daily or weekly, and hence is reconvertible into its elements of production only irregularly. But it is evident that productive capital may be latent or form a supply in quite different proportions. There is for instance a great difference whether the spinning-mill owner must have on hand a supply of cotton or coal for three months or for one. Patently this supply, while increasing absolutely, may decrease relatively.
This depends on various conditions, all of which practically amount to a demand for greater rapidity, regularity, and reliability in furnishing the necessary amount of raw material, so that no interruption will ever occur. The less these conditions are complied with, hence the less rapid, regular and reliable the supplies, the greater must be the latent part of the productive capital, that is to say, the supply of raw material, etc., in the hands of the producer waiting to be worked up. These conditions are inversely proportional to the degree of development of capitalist production, and hence of the productive power of social labour. The same applies therefore to the supply in this form.
However that which appears here as a decrease of the supply (for instance, in Lalor) is in part merely a decrease of the supply in the form of commodity-capital, or of the commodity-supply proper; it is consequently only a change of form of the same supply. If for instance the quantity of coal daily produced in a certain country, and therefore the scale and energy of operation of the coal industry, are great, the spinner does not need a large store of coal in order to ensure the continuity of his production. The steady and certain renewal of his coal supply makes this unnecessary. In the second place the rapidity with which the product of one process may be transferred as means of production to another process depends on the development of the transport and communication facilities. The cheapness of transportation is of great importance in this question. The continually renewed transport of coal from the mine to the spinning-mill for instance would be more expensive than the storing up of a larger supply of coal for a longer time when the price of transportation is relatively cheaper. These two circumstances examined so far arise from the process of production itself. In the third place the development of the credit-system also exerts an influence. The less the spinner is dependent on the direct sale of his yarn for the renewal of his supply of cotton, coal, etc. — and this direct dependence will be the smaller, the more developed the credit-system is — the smaller relatively these supplies can be and yet ensure a continuous production of yarn on a given scale, a production independent of the hazards of the sale of yarn. In the fourth place, however, many raw materials, semi-finished goods, etc., require long periods of time for their production. This applies especially to all raw materials furnished by agriculture. If no interruption of the process of production is to take place, a certain amount of raw materials must be on hand for the entire period in which no new products can take the place of the old. If this supply decreases in the hands of the industrial capitalist, it proves merely that it increases in the hands of the merchant in the form of commodity-supply. The development of transportation for instance makes it possible rapidly to ship the cotton lying, say, in Liverpool’s import warehouses to Manchester, so that the manufacturer can renew his supply in comparatively small portions, as and when needed. But in that case the cotton remains in so much larger quantities as commodity-supply in the hands of the Liverpool merchants. It is therefore merely a change in the form of the supply, and this Lalor and others overlooked. And if you consider the social capital, the same quantity of products exists in either case in the form of supply. The quantity required for a single country during the period of, say, one year decreases as transportation improves. If a large number of sailing vessels and steamers ply between America and England, England’s opportunities to renew its cotton supply are increased while the average quantity to be held in storage in England decreases. The same effect is produced by the development of the world market and the consequent multiplication of the sources of supply of the same merchandise. The article is supplied piecemeal from various countries and at various intervals.
(b) The Commodity-Supply Proper
We have already seen that under capitalist production the product assumes the general form of a commodity, and the more so the more that production grows in size and depth. Consequently, even if production retains the same volume, the far greater part of the products exists in the shape of commodities, compared with either the former modes of production or the capitalist mode of production at a less developed stage. And every commodity — therefore, also every commodity-capital, which is only commodities, but commodities serving as the form of existence of capital-value — constitutes an element of the commodity-supply, unless it passes immediately from its sphere of production into productive or individual consumption, that is, does not lie in the market in the interval. If the volume of production remains the same, the commodity-supply (i.e., this isolation and fixation of the commodity-form of the product) grows therefore of itself concomitantly with capitalist production. We have seen above that this is merely a change of form of the supply, that is to say, the supply in the form of commodities increases on the one hand because on the other the supply in the form intended directly for production or consumption decreases. It is merely a changed social form of the supply. If at the same time it is not only the relative magnitude of the commodity-supply compared with the aggregate social product that increases but also its absolute magnitude, that is so because the mass of the aggregate product grows with the growth of capitalist production.
With the development of capitalist production, the scale of production is determined less and less by the direct demand for the product and more and more by the amount of capital available in the hands of the individual capitalist, by the urge of self-expansion inherent in his capital and by the need of continuity and expansion of the process of production. Thus in each particular branch of production there is a necessary increase in the mass of products available in the market in the shape of commodities, i.e., in search of buyers. The amount of capital fixed for a shorter or longer period in the form of commodity-capital grows. Hence the commodity-supply also grows.
Finally the majority of the members of society are transformed into wage-labourers, into people who live from hand to mouth, who receive their wages weekly and spend them daily, who therefore must have their means of subsistence made available to them in the shape of a supply. Although the separate elements of this supply may be in continuous flow, a part of them must always stagnate in order that the supply as a whole may remain in a state of flux.
All these characteristics have their origin in the form of production and in the incident change of form which the product must undergo in the process of circulation.
Whatever may be the social form of the products-supply, its preservation requires outlays for buildings, vessels, etc., which are facilities for storing the product; also for means of production and labour, more or less of which must be expended, according to the nature of the product, in order to combat injurious influences. The more concentrated socially the supply is, the smaller relatively are the costs. These outlays always constitute a part of the social labour, in either materialised or living form — hence in the capitalist form outlays of capital — which do not enter into the formation of the product itself and thus are deductions from the product. They are necessary, these unproductive expenses of social wealth. They are the costs of preserving the social product regardless of whether its existence as an element of the commodity-supply stems merely from the social form of production, hence from the commodity-form and its necessary change of form, or whether we regard the commodity-supply merely as a special form of the supply of products, which is common to all societies, although not in the form of a commodity -supply that form of products-supply belonging in the process of circulation.
It may now be asked to what extent these costs enhance the value of commodities.
If the capitalist has converted the capital advanced by him in the form of means of production and labour-power into a product, into a definite quantity of commodities ready for sale, and these commodities remain in stock unsold, then we have a case of not only the stagnation of the process of self-expansion of his capital-value during this period. The costs of preserving this supply in buildings, of additional labour, etc., mean a positive loss. The buyer he would ultimately find would laugh in his face if he were to say to him: “I could not sell my goods for six months, and their preservation during that period did not only keep so and so much of my capital idle, but also cost me so and so much extra expense.“ “Tant pis pour vous!“ the buyer would say. “Right here alongside of you is another seller whose wares were completed only the day before yesterday. Your articles are shop-worn and probably more or less damaged by the ravages of time. Therefore you will have to sell cheaper than your competitor.“
The conditions under which a commodity exists are not in the least affected by whether its producer is the real producer or a capitalist producer, hence actually only a representative of the real producer. He has to turn his product into money. The expenses incurred by him because of the fixation of the product in the form of commodities are a part of his individual speculations with which the buyer of the commodities has no concern. The latter does not pay him for the time of circulation of his commodities. Even when the capitalist keeps his goods intentionally off the market, in times of an actual or anticipated revolution of values, it depends on the advent of this revolution of values, on the correctness or incorrectness of his speculation, whether he will recover his additional costs or not. But the revolution in values does not ensue in consequence of his additional costs. Hence in so far as the formation of a supply entails a stagnation of circulation, the expense incurred thereby does not add to the value of the commodities. On the other hand there cannot be any supply without a stay in the sphere of circulation, without capital staying for a longer or shorter time in its commodity-form; hence no supply without stagnation of circulation, just as no money can circulate without the formation of a money-reserve. Hence no commodity circulation without commodity-supply. If the capitalist does not come face to face with this necessity in C' — M', he will encounter it in M — C; if not with regard to his own commodity-capital, then with regard to that of other capitalists, who produce means of production for him and means of subsistence for his labourers.
Whether the formation of a supply is voluntary or involuntary, that is to say, whether the commodity-producer keeps a supply intentionally or whether his products form a supply in consequence of the sales resistance offered by the conditions of the process of circulation itself cannot effect the matter essentially, it would seem. But for the solution of this problem it is useful to know what distinguishes voluntary from involuntary supply formation. Involuntary formation arises from, or is identical with, a stagnation of the circulation which is independent of the knowledge of the commodity-producer and thwarts his will. And what characterises the voluntary formation of a supply? In both instances the seller seeks to get rid of his commodity as fast as ever. He always offers his product for sale as a commodity. If he were to withdraw it from sale, it would be only a potential (ἐνεργείᾳ), not an actual (ένέγεία) element of the commodity-supply. To him the commodity as such is as much a depository of exchange-value as ever and as such can act only by and after stripping off its commodity-form and assuming the money-form.
The commodity-supply must be of a certain volume in order to satisfy the demand during a given period. A continual extension of the circle of buyers is counted upon. For instance, in order to last for one day, a part of the commodities in the market must constantly remain in the commodity-form while the remainder is fluent, turns into money. True, the part which stagnates while the rest is fluent decreases steadily, just as the size of the supply itself decreases until it is all sold. The stagnation of commodities thus counts as a requisite condition of their sale. The volume must furthermore be larger than the average sale or the average demand. Otherwise the excess over these averages could not be satisfied. On the other hand the supply must constantly be renewed, because it is constantly being drawn on. This renewal cannot come from anywhere in the last instance except from production, from a supply of commodities. It is immaterial whether this comes from abroad or not. The renewal depends on the periods required by the commodities for their reproduction. The commodity-supply must last the whole time. The fact that it does not remain in the hands of the original producer but passes through various reservoirs, from the wholesaler to the retailer, changes merely the appearance and not the nature of the thing. From the point of view of society, a part of the capital retains in both instances the form of a commodity-supply until the commodities enter productive or individual consumption. The producer tries to keep a stock corresponding to his average demand in order not to depend directly on production and to ensure for himself a steady clientele. Purchase periods corresponding to the periods of production are formed and the commodities constitute supplies for longer or shorter time, until they can be replaced by new commodities of the same kind. Constancy and continuity of the process of circulation, and therefore of the process of reproduction, which includes the process of circulation, are safeguarded only by the formation of such supplies.
It must be remembered that C' — M' may have been transacted for the producer of C, even if C is still in the market. If the producer were to keep his own commodities in stock until they are sold to the ultimate consumer, he would have to set two capitals in motion, one as the producer of the commodities and one as a merchant. As far as the commodity itself is concerned, whether we look upon it as an individual commodity or as a component part of social capital, it is immaterial whether the costs of forming the supply must be borne by its producer or by a series of merchants from A to Z.
Since the commodity-supply is nothing but the commodity-form of the product which at a particular level of social production would exist either as a productive supply (latent production fund) or as a consumption-fund (reserve of means of consumption) if it did not exist as a commodity-supply, the expenses required for its preservation, that is, the costs of supply formation — i.e., materialised or living labour spent for this purpose — are merely expenses incurred for maintaining either the social fund for production or the social fund for consumption. The increase in the value of commodities caused by them distributes these costs simply pro rata over the different commodities, since the costs differ with different kinds of commodities. And the costs of supply formation are as much as ever deductions from the social wealth, although they constitute one of the conditions of its existence.
Only to the extent that the commodity-supply is a premise of commodity circulation and is itself a form necessarily arising in commodity circulation, only in so far as this apparent stagnation is therefore a form of the movement itself, just as the formation of a money-reserve is a premise of money circulation — only to that extent is such stagnation normal. But as soon as the commodities lying in the reservoirs of circulation do not make room for the swiftly succeeding wave of production, so that the reservoirs become over-stocked, the commodity-supply expands in consequence of the stagnation in circulation just as the hoards increase when money-circulation is clogged. It does not make any difference whether this jam occurs in the warehouses of the industrial capitalist or in the storerooms of the merchant. The commodity-supply is in that case not a prerequisite of uninterrupted sale, but a consequence of the impossibility of selling the goods. The costs are the same, but since they now arise purely out of the form, that is to say, out of the necessity of transforming the commodities into money and out of the difficulty of going through this metamorphosis, they do not enter into the values of the commodities but constitute deductions, losses of value in the realisation of the value. Since the normal and abnormal forms of the supply do not differ in form and both clog circulation, these phenomena may be confused and deceive the agent of production himself so much the more since for the producer the process of circulation of his capital may continue while that of his commodities which have changed hands and now belong to merchants may be arrested. If production and consumption swell, other things being equal, then the commodity-supply swells likewise. It is renewed and absorbed just as fast, but its size is greater. Hence the bulging size of the commodity-supply, for which stagnant circulation is responsible, may be mistaken for a symptom of the expansion of the process of reproduction, especially when the development of the credit-system makes it possible to wrap the real movement in mystery.
The costs of supply formation consist: 1) of a quantitative diminution of the mass of the products (for instance in the case of a flour supply; 2) of a deterioration of quality; 3) of the materialised and living labour required for the preservation of the supply.