CHAPTER FOURSOME DEFINITIONS AND RELATIONS

ECONOMIC CATEGORIES

“Economic categories are only theoretical expressions, the abstractions of social relations of production, corresponding to a particular stage of development of material production,” wrote Marx on 24 January 1865 “On Proudhon” letter to J. B. Schweitzer.1

In addition, Engels pointed out, “the most essential historical activity of men, the one which has raised themfrom the animal to the human state and which forms the material foundation of all their other activities, namelythe production of their requirements of life, i.e., in our day social production.”2a

Further: “The most that the animal can achieve is to collect; man produces, he prepares the means of life in the widest sense of the word, which without him nature would never have produced.”2b

Production: Nature + LabourAnatomy of a Product

Objects of Labour (OL = RM + AM) Instrumentsof Labour

(IL)

Subjectof Labour

Raw Material(RM)

AuxiliaryMaterial (AM)

Material of Labour (ML = RM + AM)

Means of Production (MP = ML + IL) LivingLabour(L)

Production Process (P)

PRODUCTION consists of – (i) man’s species life itself and (ii) the needs and the things for the satisfaction ofthose needs, whereby man and nature interact to create wealth. Creation of wealth is all about creation of utility and man is the utility-creator animal. Production, no matter what its form and condition, is always social – always a relation among humans, just as the work and labour are always the activity of a social individual. Production of the needs and the things for the satisfaction of those needs is a process taking place between man and nature in the courseof which man transforms natural substance into a product useful for human life.

Three basic elements constitute production – (i) human labour / work, i.e. subject of labour or living labour, (ii) objects of labour and (iii) instruments of labour.

WORK AND LABOUR: “The labour which creates use value, andcounts qualitatively, is Work, as distinguished from Labour; that which creates Value and counts quantitatively is Labour as distinguished from Work.”3 Work is life, so to say; work is the basis of human life, its natural and eternal condition. Work is a process of conscious, a purposeful human activity.

“Labour is, in the first place, a process in which both man and Nature participate, and in which man of his own accord starts, regulates, and controls the material re-actions between himself and Nature.”4

Human activity differs from animal activity in that the former is conscious and instrumental whereas the latter is instinctive and spontaneous. As Marx pointed out, whatdistinguishes the worst architect from the best of bees is this, that the architect raises his structure in imagination before he creates it in reality.5 To take another example, the worst weaver differs from the best of spiders in that the weaver lays out his design in imagination before he weaves his fabric in reality.

OBJECTS OF LABOUR (OL = RM + AM) comprises the natural substances upon which men act in the process of labour. Those are (i) materials as received from nature, and (ii)

the materials already subjected to the impact of human labour, i.e. raw materials (RM). Land with its waters, forests, mineral deposits and all that environs it is theuniversal objects of labour, which also includes auxiliary material (AM) such as energy etc.

INSTRUMENTS OF LABOUR (IL) consists of (i) implements of labour or tools, machinery, equipment, engines etc., (ii)agricultural and industrial work premises, (iii) transport and communication and (iv) reservoirs and storages – the whole of production apparatus of the economy including land. Tool-making is the distinctive feature of human labour. Human labour begins precisely with the making of primitive tools. That process involveda perfection of the organs of the human body, primarily the hand. In fact, the hand is a product as well as an organ of labour.

MEANS OF PRODUCTION (MP = OL + IL): Objects of labour andinstruments of labour constitute the means of production.

Production is only possible as the result of an organic conjunction of past labour, as embodied in the objects and instruments of labour, and living labour (L).

WEALTH: Wealth is the embodied utility in a thing. The seventeenth-century English economist William Petty calls“labour the father and earth the mother of wealth.”6

“The first spontaneously evolved form of wealth consists of an overplus or excess of products, i.e. of the portionof products which are not directly required as use-values, or else of the possession of products whose use-value lies outside the range of mere necessity.”7

Wealth, always in all societies, consists of use values produced by labour using nature.8

However, the wealth of those societies in which capitalist mode of production prevails, presents itself as “an immense accumulation of commodities”9

COMMODITY PRODUCTION

SIMPLE COMMODITY AND COMMODITY

A product becomes a commodity when it is both useful and exchangeable i.e., it has use value as well as exchange value.Social division of labour among the producers coupled with the institution of private property in the means of production and distribution gave rise to exchange on a market that transformed products of wealth into commodities – two historical forms of which are: pre-capitalist simple commodity production and capitalist commodity production. In theformer case the aim of production was satisfaction of needs, whereas, in the latter case the aim of production is profit.

SIMILARITY:Simple commodity production and commodity production are similar in that both are based on exchange and private property, which are spontaneous and haphazard.

DISTINCTION:“In its simple forms it exists only on the outskirts of non-commodity producing societies where wealth is produced directly for use, either by the producers for themselves or by a subject class for their masters.”In its capitalist form it exists globally everywhere produced not for direct use but for sale on the market with a view to profit.Let us use C for Commodity, M for a sum of Money; and C1 =10 kilograms of wheat and C2 = 1 square metre of a given quality of cloth – both embodying equal amounts of sociallabour. Then, in the case of simple commodity production,the form of circulation is C1 – M – C2 [in terms of value,i.e., congealed social labour, C1 = C2] – exploitation takes place in the sphere of production, and realization of the surplus labour occurs outside the sphere of circulation in the form of direct surplus labour and/or product. In the case of capitalist commodity production,

the form of circulation is M – C1 – Mَ and M – C2 – Mَ, [Mَ isan increment of M or (M + m), thus Mَ > Mَ] – exploitation takes place within the spheres of production and

realization in the process of circulation in the form of profit.

UTILITY / USE VALUE / EXCHANGE VALUE – subjectively ascertained via direct personal relation between the product and its consumer. Utility is a quality that makesit a use value. On the other hand, exchange value is a quantitative relation that is realized through exchange. Exchange value is the form of value, whereas value – the socially necessary labour-time (under average working conditions, e.g., average productivity, average intensityof labour – social average brought out by the market and continually changing) congealed at the heart of a commodity – is the content (substance) of exchange-value. Exchange-value is the form wherein the content – the value lies. The money form of exchange-value is a form ofvalue common to all commodities.

EXCHANGEABILITY – objectively determined – whereby labour(used up human energy) becomes value – not something to befound in the physical or chemical properties of a commodity – a social property – a social relation which asserts itself as a social average only in exchange from “behind the backs of the producers”10, “in a roundabout way”11, “in an indirect fashion”12

PRECAPITALIST EXCHANGE

Different

BARTER

MARKET

EXCHANGE

Things

C1 M C2 [Where ‘C’ represents commodity and ‘M’money;

This Fig. by Ben Fine, Marx’s Capital]SameValue

CAPITALIST EXCHANGE: MONEY CAPITAL

Same Things

M C M´ [Where M´ > M; This Fig. by Ben Fine, Marx’s Capital]

DifferentValue

THE CIRCUIT OF CAPITAL AS A WHOLE

[This Fig. is from Marx’s Capital by Ben Fine.

For details with Marx’s formulations see below]

C’C’

PP

MM

m

CLP

MP

Value is the socially necessary labour congealed at the heart of a commodity. Value of a commodity expresses itself not absolutely, but relatively through exchange in terms of another commodity, which we call exchange value. Eventually,there arises a money commodity, and finally paper currency. Thus, value is the first state of existence of money and money is the ultimate form of expression of value. Price is the money name of value. With constant revolutionizing ofinstruments of production and technology socially necessary labour, i.e. value constantly decreases. On the other hand,prices of commodities as expressed in terms of money change with every disproportionate change of the amount of money in relation to the amount of commodities exchanged. Detonate the core i.e. value and the integument, which comprises exchange value, commodity, money and price,

MONEY&

PRICE

COMMODITY

EXCHANGE VALUE

VALUE

will burst asunder.

LAW OF VALUE

The law of value is the law of motion of society based on commodity production. Motion is the process of existence of matter; existence of matter is the expression of motion. Value is the motion of commodity; commodity is the expression of value. As motion cannot be separated from matter, so value cannot be separated from commodity. As the motion of a matter is determined relatively by time, so the value of a commodity is determined relatively by labour-time turning individual labour into social labour through exchange. “The “exchange of labour for labour on the principle of equal valuation” … that is to say , the mutual exchangeability of products of equal social labour, hencethe law of value, is the fundamental law of precisely commodity production, hence also of its highest form, capitalist production. It asserts itself in present-day society in the only way in which economic laws can assertthemselves in a society of private producers; as a blindly operating law of nature inherent in things and relations, and independent of the will or actions of the producers.”13

THE ESSENCE OF BOURGEOIS SOCIETY

“The essence of bourgeois society consists precisely in this, that a priori there is no conscious regulation of production. The rational and the naturally necessary asserts itself only as a blindly working average.”14

“Active social forces work exactly like natural forces, blindly, forcibly, destructively”; in spite of us in opposition to us, they master us “so long as we do not understand, and reckon with them.”15

CAPITALISM

Capitalism is a stage in the development of human societycharacterized by a class monopoly of the means of production and subsistence with commodity production and

exploitation based on wage slavery caused by alienation of the immediate producer (i.e., worker) from the means of production and subsistence and the labour-power or the ability to work form the worker.

ALIENATION: FREE WORKER

“For the transformation of money into capital, therefore,the owner of money must find the free worker available onthe commodity-market; and this worker must be free in thedouble sense that as free individual he can dispose of his labour-power as his own commodity, and that, on the other hand, he has no other commodity for sale, i.e. he is rid of them, he is free of all the objects needed for the realization [Verwirklichung] of his labour-power.”16

“A division between the product of labour and labour itself, between the objective conditions of labour and subjective labour-power, was therefore the real foundation and the starting point of the process of capitalist production. … Since, before entering the process, his own labour has already been alienated [entfremdet] from him, appropriated by the capitalist, and incorporated with capital, it now, in the course of the process, constantly objectifies itself so that it becomesa product alien to him [fremder Produkt].”17

“Free workers, in the double sense that they neither formpart of the means of production themselves, as would be the case with slaves, serfs, etc., nor do they own the means of production, as would be the case with self-employed peasant proprietors. The free workers are therefore free from, unencumbered by, any means of production of their own. With the polarization of the commodity-market into these two classes, the fundamental conditions of capitalist production are present.”18

Capitalism is commodity production per excellence and thecharacteristics of a commodity are basically explained bythe labour theory of value.

WHAT KIND OF SCIENCE THE MARXIAN ECONOMICS IS

“Every beginning is difficult, holds in all sciences. To understand the first chapter, especially the section thatcontains the analysis of commodities, will, therefore, present the greatest difficulty. That which concerns moreespecially the analysis of the substance of value and themagnitude of value, I have, as much as it was possible, popularised. The value-form, whose fully developed shape is the money-form, is very elementary and simple. Nevertheless, the human mind has for more than 2,000 years sought in vain to get to the bottom of it all, whilst on the other hand, to the successful analysis of much more composite and complex forms, there has been at least an approximation. Why? Because the body, as an organic whole, is more easy of study than are the cells of that body. In the analysis of economic forms, moreover, neither microscopes nor chemical reagents are of use. The force of abstraction must replace both. But in bourgeois society, the commodity-form of the product of labour — or value-form of the commodity — is the economic cell-form. To the superficial observer, the analysis of these forms seems to turn upon minutiae. It does in fact deal with minutiae, but they are of the sameorder as those dealt with in microscopic anatomy. … it isthe ultimate aim of this work, to lay bare the economic law of motion of modern society – it can neither clear bybold leaps, nor remove by legal enactments, the obstaclesoffered by the successive phases of its normal development. But it can shorten and lessen the birth-pangs. … In the domain of Political Economy, free scientific inquiry meets not merely the same enemies as in all other domains. The peculiar nature the materials it deals with, summons as foes into the field of battle the most violent, mean and malignant passions of the human breast, the Furies of private interest. ”19

Our abstractions are for a scientific analysis to find the underlying cause of economic principles and relations. The social relations of production, change, are transformed, with the change and development of the material means of production, the productive forces. The relations of production in their totality constitute what we call the social relations, society, and, specifically, a society at a definite stage of historical evolution, a society

with a peculiar, distinctive character, e.g., primitive society, ancient slave-holding society, serfdom and feudal society and capitalist society. These relations ofproduction and their resultant distribution are spontaneoushaving their own objective laws of motion, in accordance with which members of these societies have to act but about which they need not be aware.

Capitalism’s basic economic law: the law of surplus value:“Production of surplus value is the absolute law of this mode of production.”20

The general law of accumulation: Competition and Anarchy.

THE TRANSFORMATION OF VALUES INTO PRICES

THE CONCEPTS AND DEFINITIONS

PRICE OF PRODUCTION

“The price of a commodity, which is equal to its cost-price plus the share of the annual average profit on the total capital invested (not merely consumed) in its production that falls to it in accordance with the conditions of turnover, is called its price of production. Take, for example, a capital of 500, of which100 is fixed capital, and let 10% of this wear out during oneturnover of the circulating capital of 400. Let the average profit for the period of turnover be 10%. In that case the cost-price of the product created during this turnover will be 10c for wear plus 400(c + v) circulatingcapital = 410, and its price of production will be 410 cost-price plus (10% profit on 500) 50 = 460.”21

1. Constant Capital (c) consists of the Means of Production (MP). MP = Instruments of Labour (IL) + Material of Labour (ML), i.e. Fixed Capital which enters into value piecemeal and gradually plus Material of Labour (both raw and auxiliary materials) comprising

only that part of Circulating Capital which enters intovalue once for all and adds no more than its own value.

2. Variable Capital (v) is expended on Labour Power (LP)– this distinction defines the labour process in courseof the self-expansion of value.

3. Fixed Capital comprises “the fixed part of constant capital” i.e., the Instruments of labour (IL)

4. Circulating Capital = Material of Labour (ML: raw and auxiliary, i.e., one part of Constant Capital) + Variable Capital (i.e., capital laid out in wages)

Marx pointed out that “the mixing up of the categories ‘fixed’ and ‘circulating capital’ with the categories ‘constant’ and ‘variable capital’” was “the fundamental mistake” of the Classical Political Economists who preceded him. The distinction of Fixed Capital and Circulating Capital relates to the mode of circulation ofthe components of productive capital, whereas the distinction as Constant Capital and Variable Capital relates to the labour-process and self-expansion of valuethat is to say the creation of surplus value.

“A portion of the constant capital retains that definite use-form in which it enters into the process of production. Hence it performs the same functions for a longer or shorter period, in ever-repeated labour-processes. This applies for instance to industrial buildings, machinery, etc. – in short to all things, which we comprise under the name of instruments of labour. Thispart of constant capital yields up value to the product in proportion as it loses its own exchange-value togetherwith its own use-value. … the instruments of labour neverleave the sphere of production, once they have entered it. There function holds them there. A portion of the advanced capital-value becomes fixed in this form determined by the function of the instruments of labour in the process. In the performance of this function, and thus by the wear and tear of the instruments of labour, apart of their value passes on to the product, while the other remains fixed in the instruments of labour and thus

in the process of production. The value fixed in this waydecreases steadily, until the instrument of labour is worn out, its value having been distributed during a shorter or a longer period over a mass of products originating from a series of constantly repeated labour-processes. … in general … all capital-value is constantlyin circulation, and in this sense all capital is circulating capital. But the circulation of the portion of capital which we are now studying is peculiar. In the first place it does not circulate in its use-form, but itis merely its value that circulates, and this takes placegradually, piecemeal, in proportion as it passes from it to the product, which circulates as a commodity. During the entire period of its functioning, a part of its valuealways remains fixed in it, independently of the commodities which it helps to produce. It is this peculiarity, which gives this portion of constant capitalthe form of fixed capital. All other material parts of the capital advanced in the process of production form by wayof contrast the circulating, or fluid, capital.”22

And, the “capital laid out in wages belongs in the circulating part of productive capital.”23

“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 ofvalue for value-creating power, a magnitude of value for the production, self-expansion, of value.”24

“It is evident at the outset that the definition of capital invested in labour-power as circulating or fluentcapital 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 capitalin opposition to constant capital.”25

“The means of production … are divided into instruments

of labour and subjects of labour. But both of them becomecapital only under the capitalist mode of production, when they become ‘productive capital,’ … Thus the distinction between instruments of labour and subject of labour, which is grounded on the nature of the labour-process, is reflected in a new form; the distinction between fixed capital and circulating capital.”26

“The fact that capital laid out in wages belongs in the circulating part of productive capital and, unlike the fixed component of productive capital, shares the qualityof fluency with a part of the objective product creators,the raw material, etc., has nothing whatever to do with the role played in the process of self-expansion by this variable part, as distinct from the constant part of capital. This refers only to how this part of the advanced capital-value is to be replaced, renewed, hence reproduced out of the value of the product by means of the circulation. The purchase and repurchase of labour-power belong in the process of circulation. But it is only in the process of production that the value laid outin labour-power is converted (not for the labourer but for the capitalist) from a definite, constant magnitude into a variable one, and only thus the advanced value is converted altogether into capital-value, into capital, into self-expanding value.”27

TABLE IValue calculation with same Organic Compositionof Capital in all Departments (or Industries)

Constant

Capital

Variable

Capital

Surplus

Value

Value

Rate of

Surplus

Value

Organic

Compositi

on of

Rate of

Profit

Dept c v s c + v+ s

s/v c/(c +

v)s/(c+ v)

I 200 100 100 400100٪ 66⅔٪ 33⅓٪

II 80 40 40 160100٪ 66⅔٪ 33⅓٪

III 120 60 60 240100٪ 66⅔٪ 33⅓٪

TotalALL

400 200 200 800100٪ 66⅔٪ 33⅓٪

TABLE IIValue calculation with different Organic

Composition of Capital in all Departments (orIndustries)

Constant

Capital

Variable

Capital

Surplus

Value

Value

Rate of

Surplus

Value

Organic

Compositio

n

Rate of

profit

Dept c v s c + v+ s

s/v c/(c+ v)

s/(c+ v)

I 250 75 75 400100٪ 77٪ 23٪

II 50 75 75 200100٪ 40٪ 60٪

III 100 50 50 200100٪ 66⅔٪ 33⅓٪

TotalALL

400 200 200 800100٪ 66⅔٪ 33⅓٪

Capitalists share off the pool of total surplus value according to the sizes of their individual total capitalsinstead of their individual variable capitals. The pricesof commodities (what Marx calls “prices of production”) will now be made up of the capital expended on productionplus a profit calculated as a certain percentage of the capital outlay. This percentage is nothing but the average rate of profit and is found by dividing total surplus value bytotal social capital.

TABLE IIIValue transformed into Price

I c1 + v1 + s1 = V1 c1 + v1 + p (c1 +

v1) = P1

II c2 + v2 + s2 = V2 c2 + v2 + p (c2 +

v2) = P2

III c3 + v3 + s3 = V3 c3 + v3 + p (c3 +

v3) = P3

c + v + s = V TOTAL c + v + Þ(c + v) =

P

The average rate of profit, say Þ, is total surplus value, s, over total capital, c + v; or, Þ = s/(c + v). Therefore, s = Þ(c + v) i.e., total social profit. In TABLE II, Þ is calculated as 200/(400 + 200) or, 33⅓

٪.Note: (i) total social value, V is equal to total social price, P and, (ii) total surplus value, s is equal to total social profit, Þ(c + v).

TABLE IVMarx’s price calculation

Constan

t

Variabl

e

Surplus

Value

Value

Profit

Price

Deviati

on

Dt c v s c + v+ s

Þ(c +

v)c + v + Þ(c

+ v)I 250 75 75 400 108⅓ 433⅓ +

33⅓II 50 75 75 200 41⅔ 166⅔ -

33⅓III

100 50 50 200 50 200 0

Note: Prices deviate due to differences in the Organic Composition of Capitals in the Departments. Price in I,

433⅓ is higher than Value, 400 because of its higher OCCthan the average as of III, and, Price in II, 166⅔ is lower than Value, 200 because of its lower OCC than the average as of III wherein Price does not deviate from Value.

We know that the capital advanced can be divided into constant and variable and that it is only the variable capital that increases to create the surplus value. The ratio c/v, and also c/(c + v), Marx calls the organic composition of capital. Given the same rate of exploitation s/vin all industries, if all commodities sold at their values this would mean the highest rate of profit would be made in the technically backward, labour-intensive industries. But is this so? Not at all, the tendency of capital is rather for capital to get more or less the same rate of profit wherever it is invested.

How to reconcile the labour theory of value with the averaging of profit was a problem that baffled Adam Smith and DavidRicardo. However, Marx solved the only way: by abandoningthe assumption that all commodities sell at their values.Critics have called this the “great contradiction” in Marx’s work, but it is nothing of the sort. As we know capitalist process of production and circulation is a social process: each individual capitalist does not exploit only his own employees but the whole capitalist class exploits the whole working class globally. Each capitalist employs so many workers who produce so much surplus value. Instead of going to the individual capitalist this surplus value goes. As it were, into a pool from which it is shared along with the rest of surplus value amongst all capitalists in accordance with how much capital they have invested. (This explains why, incidentally, a fully automated factory will still make aprofit.)

Consider the consequences of this on prices. Say s/v is 100 per cent and there are three sectors with different organic compositions:

TABLE V

c v s value rate of profit

A 80 20 20 12020٪

B 40 60 60 16060٪

C 60 40 40 14040٪

With no averaging of profits, B is the most profitable sector, but with an averaging, we get:

TABLE VI

c v s profit

value

price

deviation

A 80

20

20 40 120 140 above value

B 40

60

60 40 160 140 below value

C 60

40

40 40 140 140 at value

Marx called this selling price, which made up of cost plus average rate of profit, the price of production. This, in fact, is how businesses do operate and is regarded by academic economics (which, as Marx pointed out, take a businessperson’s view of economic events) as enough. However, it is not. It is all very well talking airily about price being set at cost plus “normal profit”. But what is normal profit? Something fixed by custom! This is only what it appears to be. Only the labour theory of value, with its concept of value and surplus value, based on labour, can adequately explain why the normal rate of profit is, say, 10 per cent ratherthan 15 per cent.28

THE TENDENCY OF CAPITALIST ACCUMULATION The very process that gave rise to value and exchange

value asserts itself via alienation and competition. The law of competition for accumulation leads to a progressively higher organic composition of capital, i.e. c/v, ora constant increase in its constant constituent ‘c’ at the expense of the variable ‘v’, or reversely, a constantrelative decrease in its variable vis-à-vis constant, or to put it in a different way, a progressively higher technical composition of capital, i.e. c/(c + v), or a constant increase in its constant constituent ‘c’ at the expense of the total social capital, constantly raising the social productivity of labour. “The immediate result of this is that the rate of surplus value [s/v], at the same, or even a rising, degree of labour exploitation, isrepresented by a constantly falling general rate of profit [s/(c + v)].”29

Marx also wrote, “The rate of profit declines . . . This is in every respect the most important law of modern political economy and the most essential for understanding the most difficult relations.”30

However, one has to understand this law very critically as a tendency within intricate dialectical processes comprising countervailing measures. Marx pointed out, (1) lengthening of the working say (which however has its physical and human limit), (2) unceasing development of technology, help reverse the tendency. Instead of lookingfor the cause of periodic cycles of crises involving boomsand slumps in the inherent anarchy of capitalist system, the so-called ‘Marxists’ and all anti-Marxists misread Marx for the cause in the effects. Some (including most Leninist pedigree, Henryk Grossman, Paul Mattick and mostprofessional and academic economists) show ‘the falling rate of profit’, some ‘overproduction’ (Rosa Luxemburg and her followers), some again ‘under-consumption’ (TuganBaranowsky), and such likes. Actually, the cause lies in the anarchy of production.

By “the most difficult relations” Marx actually meant theintricate counteracting forces over sharing out the totaloutput or the total value (minus constant capital) between wages vis-à-vis profits, or, in other words, unceasing conflicts over necessary labour (wages) and

surplus labour (profits) involving the working day and intensity of labour. Periodic booms make workers a littlebetter off by way of increased rates and improved terms. Whereas slumps return offensive in the hands of the employers. These cycles give rise to all dehumanizing intricate antagonistic relations that are “most difficult” to understand, of course. Marx’s emphasis on “the falling rate of profit” as “the most important law of modern political economy” does not necessarily equate it with “the cause”. Already, he had repeatedly pointed out that the cause rests rooted in capital’s intrinsic anarchy that gives rise to this “most important law” whereby one can understand “the most difficult relations”between capital and labour, not as the cause, but as the effect or problem capital has to overcome to survive. This forces it to constantly look for and take recourse to allavailable measures at hand to raise the rate of exploitation to counter the tendency to fall.

However, those measures only generalize the contradictoryprocess in vicious cycles via rising organic and technical compositions of capital leading to the falling rate of profit calling forth the counter measures over and over again throughout the global economy over time, until the day when the working class will have become class conscious enough to change the existing relations of production.

THE METAMORPHOSES OF CAPITAL AND THEIR CIRCUITS

SUMMARY NOTES FROM VOLUME II OF CAPITAL

“Capital as self-expanding value embraces not only classrelations, a society of a definite character resting onthe existence of labour in the form of wage-labour. It isa movement; a circuit-describing process going throughvarious stages, which itself comprises three differentforms of the circuit-describing process. Therefore it canbe understood only as motion, not as a thing at rest.”(Marx, Capital, Vol. II, Moscow, 1974, p.108)

We use the following notations to describe various forms below:

M = Money (initial investment), C = Commodities (inputs –factors of production), L = Labour power, MP = Means of

Production, P = Production, Cَ = Commodities (output – finished products), c = commodities (increment in terms

value), M َ = Money (realized after sales), m = money (increment), “―” signifies continuity of exchange, “···” signifies discontinuity of exchange.

(I) The Circuit Of Money Capital:

M ― C ··· P ··· Cَ ―Mَ (“the total movement”) [Ibid. p.49]

L

Or, M ― C ··· P ··· Cَ (C + c) ― Mَ (M + m) (“expanded form”)

MP

(II) The Circuit Of Productive Capital: The general formula:

P ··· C َ ―Mَ ―C ··· P The expanded form:

L

C ― M ― C ··· P

P … C َ (+) (+) MP

c ― m ― c

[p.76]

The general formula for the circuit of productive capital that combines simple reproduction and reproduction on a progressively increasing scale:

1 2L

P ··· C َ ―Mَ . M ― C ··· P (Pَ )MP

If P equals P, then M in 2 equals M َ minus m; if Pequals P َ, M in 2 is greater than M َ minus m; that isto say m has been completely or partiallytransformed into money-capital.

[p.88]

(III) The Circuit Of Commodity Capital:The general formula:

Cَ ―Mَ ―C ··· P ··· C َ [p.89]

L

C ― M ― C ··· P

··· C َ Or, Cَ {― M َ { MP

c ― m ― c

[p.98]

“In Form I, or M ··· M َ, the process of productionintervenes midway between the two complementary andmutually opposite phases of circulation of capital. …Itis a full and complete business cycle that results inmoney, something every one can use for everything. A new

start is therefore only a possibility. M ··· P ··· M َ maybe either the last circuit that concludes the functioningof some individual capital being withdrawn from business,or the first circuit of some new capital entering upon

its function. The general movement is here M ··· M َ, frommoney to more money.”

[p.94]

“In Form II, P ··· C َ ― Mَ ― C ··· P(P َ ), the entirecirculation process follows after the first P andproceeds the second P; but it takes place in the oppositeorder from that of Form I. The first P is the productivecapital, and its function is the productive process, theprerequisite of the succeeding circulation process. Theconcluding P on the other hand is not the productiveprocess; it is only the renewed existence of theindustrial capital in its form of productive capital. …The general form of the movement P ··· P is the form of

reproduction and, unlike M ··· M َ, does not include theself-expansion of value as the object of the process.”[Pp.94-95]

“In Form III, Cَ ― Mَ ― C ··· P ··· C َ, the two phases of thecirculation process open the circuit, and do so in thesame order which obtains in Form II, P ··· P; nextfollows P, with its function, the productive process, thesame as in Form I; the circuit closes with the result of

the process of production, C َ. … Both forms of the circuitare incomplete because they do not close with M َ, thecapital value retransformed into money and self-expanded.Both must therefore be continued and consequently include

the reproduction. The total circuit in Form III is C َ ···Cَ. ”

[p.95]

The three formulas may be set down in the following manner, using Tc for “total circulation process”:

I M ― C ··· P ··· Cَ ―M َII P ··· Tc ··· P

III Tc ··· P (Cَ )

“If we combine all three forms, all premises of theprocess appear as its result, as a premise producedby it itself. Every element appears as a point ofdeparture, of transit, and of return. The totalprocess represents as the unity of the processes ofproduction and circulation. The process ofproduction becomes the mediator of the process ofcirculation and vice versa.“All three circuits have the following in common: Theself-expansion of value as the determining purpose,as the compelling motive.”

[p.103]

In the production of gold … the formula would be: L

M ― C ··· P ··· Mَ (M + m)MP

Since Marx assumes that gold is money, here Mfigures as the commodity product. [Ibid.p.49]

The formula for the transport industry:L

M ― C ··· P ― MَMP

Here the process of production is paid for and consumed instantly. [Ibid. p.54]

MARX AND ENGELS ON CAPITAL AND ITS PERSONIFICATIONS

“… capital is not a thing, but a social relation between persons, established by the instrumentality of things.”31

“Capital, also, is a social relation of production. It is a bourgeois production relation, a production relation of bourgeois society.”32

“The articles which are the material conditions of labour, i.e. the means of production, and the articles which are the precondition for the survival of the worker himself, i.e.the means of subsistence, both become capital only because of the phenomenon of wage-labour. Capital is not a thing, any more than money is a thing. In capital, as in money, certain specific social relations of production between people appear as relations of things to people, or else certain social relations appear as natural properties of things in society. Without a class dependent on wages, the moment individuals confront as free persons, there can be no production of surplus-value; without the production of surplus-value there can be no capitalist production, and hence no capital and no capitalist. Capital and wage-labour (it is thus we designate the labour of the worker who sells his own labour-power) onlyexpress two aspects of the self-same relationship. …If capital in its material aspect, i.e. in the use-values inwhich it has its being, must depend for its existence on the material conditions of labour, these material conditions must equally, on the formal side, confront labour as alien, autonomous powers, as value – objectified labour – which treats living labour as a meremeans whereby to maintain and increase itself. … sale andpurchase of labour-power, presupposes that the means of production and subsistence have become autonomous objectsconfronting the worker, i.e. it presupposes the personification of the means of production and subsistence which, as purchasers, negotiates a contract with the workers as vendors. … the capitalist devours thelabour-power of the worker, or appropriates his living labour as the life-blood of capitalism.”33

“To be a capitalist, is to have not only a purely personal, but a social status in production. Capital is acollective product, and by the united action of many members, nay, in the last resort, only by the united action of all members of society, can it be set in motion. Capital is, therefore, not a personal, it is a social power. When, therefore, capital is converted into common property, into property of all members of society,personal is not thereby transformed into social property.It is only the social character of the property that is

changed. It loses its class character.”34

“As conscious bearer [Träger] of this movement, the possessor of money becomes a capitalist. His person, or rather his pocket, is the point from which the money starts, and to which it returns, The objective content ofthe circulation … the valorization of value – is the subjective purpose, and it is only in so far as the appropriation of ever more wealth in the abstract is the sole driving force behind his operations that he functions as a capitalist, i.e. as capital personified and endowed with consciousness and a will.. Use-values must therefore never be treated as the immediate aim of the capitalist; nor must the profit on any single transaction. His aim is rather the unceasing movement of profit making. This boundless drive for enrichment, his passionate after value, is common to the capitalist and the miser; but while the miser is merely a capitalist gone mad, the capitalist is a rational miser. The ceaseless augmentation of value, which the miser seeks toattain by saving his money from circulation, is achieved by the more acute capitalist by means of throwing his money again and again into circulation.”35

“As capitalist, he is only capital personified. His soul is the soul of capital. But capital has one single life impulse, the tendency to create value and surplus-value, to make its constant factor, the means of production, absorb the greatest possible amount of surplus labour.”36

“Personified capital, the capitalist … this complete inversion of the relation between dead and living labour,between value and force that creates value, mirrors itself in the consciousness of capitalists.”37

“The directing motive, the end and aim of capitalist production, is to extract the greatest possible amount ofsurplus-value, and consequently to exploit labour-power to the greatest possible extent … the unavoidable antagonism between the exploiter and the living and laboring raw material he exploits … the control of the capitalist is in substance two-fold by reason of the two-fold nature of the process of production itself, which,

on the one hand, is a social process for producing use-values, on the other, a process for creating surplus-value – the form of control is despotic. As co-operation extends its scale, this despotism takes forms peculiar toitself. Just as at first the capitalist is relieved from actual labour as soon as his capital has reached that minimum amount with which capitalist production, as such,begins, so now, he hands over the work of direct and constant supervision of the individual workmen, and groups of workmen, to a special kind of wage-labourer. Anindustrial army of workmen, under the command of a capitalist, requires, like real army, officers (managers), and sergeants (foremen, over-lookers), who, while the work is being done, command in the name of the capitalist. The work of supervision becomes their established function. … It is not because he is a leader of industry that a man is a capitalist; on the contrary, he is a leader of industry because he is a capitalist. The leadership of industry is an attribute of capital; just as in feudal times the functions of general and judge, were attributes of landed property. … Asiatics, Egyptians, Etruscans, &c. … these Oriental States…. the palaces and temples, the pyramids, and the armies of gigantic statues of which the remains astonish and perplex us. … The power of Asiatic and Egyptian kings, Etruscan theocrats, &c, has in modern society been transferred to the capitalist whether he be an isolated, or as in joint-stock companies, a collective capitalist.”38

“ . . . the social capital is equal to the sum of the individual capitals (including the joint-stock capital orthe state capital, so far as governments employ productive wage-labour in mines, railways, etc., perform the function of individual capitalists) . . . ”39

“The transformation, either into joint-stock companies [and trusts], or into state ownership, does not do away with the capitalistic nature of the productive forces. … The modern state, no matter what its form, is essentiallya capitalistic machine, the state of the capitalists, theideal personification of the total national capital. The more proceeds to the taking over of the productive

forces, the more does it actually become the national capitalist, the more citizen does it exploit. The workersremain wage-workers – proletarians. The capitalist relation is not done away with.”40

Notes 1 Marx Engels, Selected Works, Vol. 2, Moscow, 1969,

p.26 2 a. Engels, Introduction to Dialectics of Nature, written in the

main from 1873 to 1882, Marx Engels, Collected Works, Vol. 25, Moscow, 1987, p.331 b. Engels, Dialectics of Nature, Marx Engels, Collected Works,Vol. 25, Moscow, 1987, p. 584 Also available at: http://www.marxists.org/archive/marx/works/1883/don/ch01.htm

3 Frederick Engels, footnote to section 3 of Capital, Vol. I,Moscow, 1974, p.54

4 Marx, Capital, Vol. I, Progress Publishers, Moscow, 1974, p.173

5 Ibid. p.174 6 Quoted by Marx, A Contribution to the Critique of Political Economy,

Progress, 1978, p.35 7 Ibid. pp.126-7 8 “Among the ancients, we discover no single enquiry as to which form

of landed property, etc., is the most productive, which creates maximum wealth. Wealth does not appear as the aim of production, although Cato may well investigate the most profitable cultivation of fields, or Brutus may even lend money at the most favorable rate of interest. The enquiry is always about what kind of property creates the best citizens. Wealth as an end in itself appears only among a few trading peoples — monopolists of the carrying trade — who live in the pores of the ancient world like the Jews in medievalsociety. Wealth is, on the one hand, a thing, realized in things, inmaterial products as against man as a subject. On the other hand, inits capacity as value, it is the mere right to command other people’s labor, not for the purpose of dominion, but of private enjoyment, etc. In all its forms, it appears in the form of objects,whether of things or of relationships by means of things, which lie outside of, and as it were accidentally beside, the individual.Thus the ancient conception, in which man always appears (in however narrowly national, religious, or political a definition) asthe aim of production, seems very much more exalted than the modernworld, in which production is the aim of man and wealth the aim of production. In fact, however, when the narrow bourgeois form has

been peeled away, what is wealth, if not the universality of needs,capacities, enjoyments, productive powers etc., of individuals, produced in universal exchange? What, if not the full development of human control over the forces of nature — those of his own nature as well as those of so-called “nature"? What, if not the absolute elaboration of his creative dispositions, without any preconditions other than antecedent historical evolution which makethe totality of this evolution — i.e., the evolution of all human powers as such, unmeasured by any previously established yardstick — an end in itself? What is this, if not a situation where man does not reproduce in any determined form, but produces his totality? Where he does not seek to remain something formed by the past, but is in the absolute movement of becoming? In bourgeois political economy —and in the epoch of production to which it corresponds — this complete elaboration of what lies within man, appears as the total alienation, and the destruction of all fixed, one-sided purposes asthe sacrifice of the end in itself to a wholly external compulsion.Hence in one way the childlike world of the ancients appears to be superior; and this is so, insofar as we seek for closed shape, formand established limitation. The ancients provide a narrow satisfaction, whereas the modern world leaves us unsatisfied, or, where it appears to be satisfied, with itself, is vulgar and mean [gemein].” (Marx, Pre-Capitalist Economic Formations, First UnitedStates Edition, International Publishers, 1965, New York, pp..84-85). Also see: http://www.marxists.org/archive/marx/works/1857/precapitalist/ch01.htm

9 Marx, Capital, Vol. I, Moscow, 1974, p.43 – emphasis added)10 Ibid. p.51-52 11 Engels, Anti-Dühring, Progress Publishers, 1969, pp.365 &

367 12 Marx, Critique of the Gotha Programme, Peking, 1976, p.15 13 Engels, Anti-Dühring, Progress, 1969, p.370, emphasis added 14 Marx’s letter to l. Kugelman, July, 1868, SW, 2, p.419 15 Engels, Anti-Dühring, Moscow, 1878, p.331 16 Marx, Capital, I, Vintage Books Edition, 1977, New York,

pp.272-317 Ibid. p.716 18 op. cit., p.874 19 Marx, Capital, Vol. I, Progress, 1974, pp.18-21 20 Ibid. p.580, emphasis added 21 Marx, Capital, Vol. III, Moscow, 1974, p.15822 Marx, Capital, Vol. II, Moscow, 1974, pp.160-6123 Ibid. p.217 24 Ibid. p.223 25 Ibid. pp.227-228

26 Ibid. p.164 27 Ibid. p.217 28 Note: Tables ‘V’ and ‘VI’ and their explanations have

been taken from the pamphlet: Some Aspects of Marxian Economics, published in 1978 by the Socialist Party of Great Britain.

29 Marx, Capital, Vol. III, Moscow, 1974, pp. 212-13 30 Marx, Grundrisse, Pelican, 1981, p.748 31 Marx, Capital, Vol. I, Moscow, 1974, p.717 32 Marx, Wage Labour and Capital, for details see III, pp.27-32 33 Marx, Capital, Vol. I, Vintage Books Edition, New York,

1977, Appendix, Results of the Immediate Process of Production, pp.1005-7

34 Marx & Engels, Manifesto of the Communist Party, Moscow, 1977, p.51

35 Marx, Capital, Vol. I, Vintage Books Edition, 1977, New York, pp.254-5

36 Ibid. p.224 37 Ibid. p.293- 294 38 Marx, Capital, Vol. I, Moscow, 1974, pp.313-316 39 Marx, Capital Vol. II, Moscow, 1974, p.100 40 Engels, Anti-Dühring, 1878, Moscow, 1969, pp. 330-31