Capital (Marx) Part 2 Chapter 4 Section 1

GPT Summary

Summary of Marx’s Capital, Chapter 4, Section 1

1. Introduction of Capital

   • Capital emerges from the circulation of commodities
   • Money is capital’s first form of appearance
   • The difference between money as money and money as capital lies in their forms of circulation

2. Forms of Circulation

   • C-M-C (Commodity-Money-Commodity): Selling in order to buy
   • M-C-M (Money-Commodity-Money): Buying in order to sell
   • M-C-M’ where M’ = M + ΔM: Buying in order to sell at a higher price, creating surplus value

3. Characteristics of M-C-M Circulation

   • The same commodity changes hands twice
   • Money flows back to its starting point
   • The circuit is potentially endless
   • The goal is the expansion of value itself

4. The Capitalist

   • Personification of capital
   • Motivated by the ceaseless expansion of value
   • Differs from the money hoarder by constantly putting money back into circulation

5. Value as Self-Valorizing Subject

   • Value becomes the subject of a process
   • Alternates between money-form and commodity-form
   • Maintains and expands itself through this process

6. Capital as Value in Process

   • Money in process
   • Constantly begins the circuit anew
   • Described by Mercantilists as “money which begets money”

7. Forms of Capital

   • Merchant capital: Buying to sell at a higher price
   • Industrial capital: Money transformed into commodity, then back into more money
   • Interest-bearing capital: Abbreviated form M-M’, money that instantly becomes more money

8. Aristotle’s Perspective

   • Contrasts “household management” with “chrematistics”
   • Chrematistics seen as unnatural pursuit of unlimited wealth

9. Conclusion

   • M-C-M’ is the general formula for capital as it appears in the circulation sphere
   • This form of circulation distinguishes capital from simple commodity circulation and money hoarding

Section Text

Capital begins with the circulation of commodities. Commodity production, commodity circulation, and advanced commodity circulation—in other words, trade—are the historical conditions under which capital arises. Its modern biography starts in the sixteenth century, when modern global trade and the world market were created. When we set aside the material content of commodity circulation, namely, the exchange of different use-values, and consider only the economic forms brought forth by this process, we find that ==the process ultimately produces money==. The ultimate product of commodity circulation is ==capital’s first form of appearance==. Historically, when capital emerges opposite landed property, it always takes the form of money—money fortunes, merchant capital, and usury capital.[^1] But we don’t have to go back to capital’s genesis story to see that money is its initial form of appearance. The same story plays out daily before our eyes. Even today, every new mass of capital goes on stage, that is, comes to the market—whether the commodity market, the labor market, or the money market—as ==money that certain processes are to transform into capital==. ==At first, the only difference between money as money and money as capital is that they have different forms of circulation.== The direct form of commodity circulation is C-M-C, where a commodity is transformed into money and reverse-transformed from money into a commodity: ==selling in order to buy==. But alongside this form, we find a second one that is quite different from the first: M-C-M, where money is transformed into a commodity and reverse-transformed from a commodity into money. This is ==buying in order to sell==. Money that moves through the second circuit is transformed into capital, becomes capital, and, in terms of its purpose, already is capital. Let’s take a closer look at the M-C-M circuit. Like simple commodity circulation, it has two opposing phases of movement. In the first phase, M-C or a purchase, money is transformed into a commodity. In the second, C-M or a sale, the commodity is reverse-transformed into money. The unity of the two phases is their total movement; through it, money is exchanged for a commodity, and then the same commodity is exchanged for money: buying a commodity in order to sell it. Or, if one forgets about the formal differences between a purchase and sale, ==buying a commodity with money and buying money with a commodity==.[^2] The outcome, in which the entire process vanishes, is that money is exchanged for money, M-M. If I buy 2,000 pounds of cotton for £100, and sell that 2,000 pounds of cotton for £110, I have exchanged £100 for £110, money for money. Anyone can see that the M-C-M circulation process would be absurd and pointless as a roundabout way to exchange an amount of money value for the same amount: for example, £100 for £100. Much ==simpler and more secure== would be what the person who amasses money does. He doesn’t expose his £100 to the dangers of circulation; he just holds onto his money. On the other hand, whether the merchant sells the cotton he bought with £100 for £110, or has to part with it for £100 or even £50, his money still moves in a characteristic and original way. ==It is thoroughly different from the movement in simple commodity circulation==, where the farmer sells grain and buys clothes with the money his sale has freed up. So our next step will be to examine the formal differences between the M-C-M and C-M-C circuits. This will also reveal the difference in content lurking behind these differences in form. First, let’s look at what the two forms have in common. Both circuits can be broken down into the same two opposing phases: C-M, a sale, and M-C, a purchase. In both phases, the same two thingly elements are positioned opposite each other, a commodity and money, and so are ==two people wearing the same economic actor’s masks: those of a buyer and a seller==. Each circuit is the unity of the same opposing phases, and in both cases, three partners in exchange mediate this unity. One person merely sells; another merely buys; the third alternately buys and sells. The C-M-C and M-C-M circuits differ, above all, in that the same two opposing phases of circulation proceed in inverted order. Simple commodity circulation begins with a sale and ends with a purchase; money’s circulation as capital begins with a purchase and ends with a sale. In the former, a commodity serves as the starting and end points of the movement, in the latter, money does. In the first form, money mediates the total process; in the second, conversely, a commodity mediates it. The C-M-C circuit ends when money is transformed into a commodity that functions as a use-value. The money has thus been spent once and for all. In contrast, the buyer spends money in M-C-M, the reverse form, in order to attract money as a seller. When he buys, he puts money into circulation, only to take it back out when he sells the same commodity he purchased. He lets go of the money but he does so with a calculating attitude, or only in order to have it in his hands again. Here, then, the buyer merely advances the money.[^3] In the C-M-C form, ==the same piece of money changes places twice==. The seller gets the money from the buyer and then uses it to pay another seller. The whole process, which begins when money flows to a seller in exchange for his commodity, ends when money flows away from a buyer in exchange for a different commodity. In the M-C-M form, the process works the other way around. ==The same commodity changes places twice==, not the same piece of money. The buyer purchases a commodity from the seller and puts it into the hands of another buyer. When a piece of money changes places twice in simple commodity circulation, that money is removed, once and for all, from one set of hands and put into a different set. In M-C-M, in contrast, when the same commodity changes places twice, the effect is that ==money flows back to its starting point==. Money flows back to its starting point whether or not a commodity is sold for more than it originally cost. How much money a commodity attracts determines only the magnitude of the sum that flows back to the starting point. The phenomenon itself—money flowing back to its starting point—occurs the moment a commodity that had been bought is sold, thereby completing the M-C-M circuit. We have here a physical and observable difference between how money circulates as capital and how it circulates as mere money. The C-M-C circuit is completed when a second commodity is purchased, and the money that the first commodity attracted when it was sold is drawn away. Money will return to the starting point again only when the whole circuit is restarted or repeated. If I sell eight bushels of grain for £3, and use this £3 to buy clothes, the £3 is out of my hands for good. I no longer have anything to do with it. The £3 now belongs to the clothes retailer. If I sell another eight bushels of grain, then money will flow back to me, but only because I have repeated the first transaction, not as a result of the first transaction. But this money, too, flows away from me when I complete the circuit—when once again I buy something. So in the C-M-C circuit, the way money is spent doesn’t cause it to flow back to the starting point. But in the M-C-M circuit, how money is spent conditions its return there. If money doesn’t flow back to the starting point, the operation fails: the circuit has been interrupted and is unfinished, since its second phase is missing: the sale that complements and completes the purchase. A commodity is the starting point in the C-M-C circuit, whose endpoint is a second commodity. The second commodity falls out of circulation and is consumed. C-M-C’s ultimate purpose is consumption or the satisfaction of wants and needs—in a word, use-value. In contrast, money is both the starting point and endpoint in the M-C-M circuit. The motive that drives this circuit and the goal that defines it is exchange-value. In simple commodity circulation, both the starting point and endpoint have the same economic form. They are both commodities. They also have the same magnitude of value. On the other hand, they are qualitatively different use-values—say, grain and clothes. The content of the movement here is that products are exchanged—i.e., different things in which social labor is represented. Not so in the M-C-M circuit. At first, this circuit seems to be a tautology and therefore to lack content. The starting point and the endpoint have the same economic form: both are money. They aren’t qualitatively different use-values, because money is simply the transformed shape of the commodities whose particular use-values have dis appeared in it. To exchange £100 for cotton, and then the same cotton for £100—or to exchange money for money, a thing for that same thing in a roundabout way—seems to be an exercise that is as unproductive as it is absurd.[^4] Sums of money differ from one another only with respect to their magnitude. A change that would give content to the M-C-M process cannot arise from a qualitative difference between its starting point and endpoint, since they are both money. Rather, such a change has to come from quantitative differences alone, which means that more money is taken out of circulation than was originally put in. Cotton that cost £100 is sold for £100 + £10, for example. The complete form of this process is therefore ==M-C-M′, where M′ = M + ΔM, or M′ equals the sum of the money originally advanced plus a supplement==. I call this supplement—the amount that exceeds the original value—surplus-value. Here the value advanced in the beginning not only remains intact as it circulates, but it also alters its own magnitude. It takes on surplus-value, valorizing itself. This movement transforms the original value into capital. Of course, the starting point and endpoint in C-M-C—C and C, the grain and clothes—can have quantitatively different magnitudes of value. The farmer can sell his grain for more than its value or buy clothes for less than theirs. Or the retailer selling the clothes can fleece the farmer. For this circuit, however, such differences in value remain purely accidental. The circuit doesn’t lose all rhyme and reason, as the M-C-M process does, when the starting point and endpoint—the grain and the clothes—are equivalents. Instead the C-M-C circuit needs an equivalence of value in order to run its normal course. The act of selling in order to buy, i.e., the C-M-C circuit, is restarted and repeated for an ultimate purpose that lies outside the circulation sphere, and this act finds its measure and its meaning in that purpose: consumption—in other words, the satisfaction of particular wants or needs. But when a buyer purchases a commodity in order to sell it, he begins and completes the circuit with the same thing—money or exchange-value—which makes the movement of this circuit endless. M does in fact turn into M + ΔM; £100 turns into £100 + 10. But from a purely qualitative standpoint, £110 is the same as £100, namely, money. And from a quantitative standpoint, £110 is a limited amount of value, as is £100. If the £110 were spent as money, it would abandon its role: it would no longer be capital. If the £110 were taken out of circulation, it would harden into a store of money, and it wouldn’t grow by a single farthing even if it sat around till Judgment Day. When it comes to the valorization of value, £110 has the same need to be valorized as £100, because both sums are limited expressions of exchange-value, and both have the same calling: to go as far as they can in the direction of absolute wealth by increasing their magnitude. The original value of £100 may differ, for a moment, from the surplus-value of £10 that it takes on as it circulates, but this difference quickly falls away. When the process ends, the value that comes out is neither the original £100 nor the £10 of surplus-value. What comes out, rather, is a value of £110, which has exactly the same form as the original £100—the right form to be in to valorize itself again.[^5] Money comes out at the end of the movement ready to begin another circuit. Thus when commodities are bought in order to be sold, the end of every single circuit represents the beginning of a new one. Simple commodity circulation—selling in order to buy—serves as the means for an ultimate end that lies outside circulation: the appropriation of use-values or the satisfaction of wants and needs. But money’s circulation as capital is an end in itself because the valorization of value exists only within this constantly restarted movement. The movement of capital thus has no limit. The money owner becomes a capitalist when he acts as the ==conscious bearer of this movement==. His person, or rather, ==his pocket, is money’s starting point as well as the point it returns to==. The change that gives this form of circulation its objective content—value is valorized—is his subjective goal; and he functions as a capitalist, or as personified capital endowed with consciousness and a will, only insofar as the sole motivation driving his operations is to appropriate more and more abstract wealth.ii Thus we should never regard use-value as the capitalist’s immediate aim.[^7] This also holds for turning a profit in an individual transaction. What the capitalist wants—all he wants—is the movement of ceaseless profitmaking.[^8] The person who amasses stores of money and the capitalist share this absolute drive to increase their wealth, this passionate pursuit of exchange-value.[^9] ==But whereas the money amasser is an insane capitalist, the capitalist is a rational money amasser. When the person who amasses money saves his money by keeping it outside circulation,[^10] he is striving after the ceaseless expansion of exchange-value; the cleverer capitalist actually achieves that goal by always giving his money over to circulation anew.==[^11] In simple circulation, the value of commodities takes on independent forms—money forms, which do nothing more than mediate commodity exchange. These forms disappear in the end result of the C-M-C circuit. In the M-C-M circuit, in contrast, both the commodity and money function only as value’s different modes of existence: money as the general mode and the commodity as the particular or disguised mode, so to speak.[^12] Value continuously passes from the one form into the other without losing itself as it moves back and forth, and in this way, value transforms itself into an automatic subject. If we stop this movement, freezing in place the particular forms of appearance that self-valorizing value alternately takes on during its life cycle, we will see that capital is money, and capital is also a commodity.[^13] But, in fact, what happens here is that value becomes the subject of a process in which it changes its own magnitude as it continuously goes back and forth between the forms “money” and “the commodity.” As surplus-value, value moves beyond itself, the original value, valorizing itself, for the movement within which its value grows is its own movement. And so when value is valorized, it is valorizing itself. It has acquired the occult ability to add value by virtue of being value. It spits out live children, or at least lays golden eggs. Value alternately takes on and sheds the moneyform and the commodity-form, maintaining itself as it goes back and forth between them, and expanding all the while. As the dominant subject of this process, value needs, above all, an independent form that can affirm its self-identity. Money alone gives value such a form. Every circuit in which value is valorized therefore begins and ends with money. A value was £100, now it is £110, and so on. But here money is only one form of value, which has two. In order to become capital, money has to take on the commodity-form. So, here, money doesn’t relate to commodities antagonistically, as it does when it is stored. The capitalist knows that however shabby commodities look, however foul they smell, they are, in their faith and in truth, money; on the inside, commodities are circumcised Jews—and also a wondrous means for turning money into more money.iii In simple circulation, the value of a commodity gains at most a form that is independent of the commodity’s use-value—namely, the form of money. But in the M-C-M circuit, value suddenly presents itself as a substance that is in process and moves on its own, a substance for which the commodity and money are nothing more than forms. And now value doesn’t simply represent the relations among commodities: instead it enters into a private relation with itself, so to speak. As an original value, value is different from itself as surplus-value, just as God the Father is different from Himself as the Son of God, even though they are the same age and are in fact one person. For it is solely the surplus-value of £10 that causes the £100 originally advanced to become capital, and the moment that the £100 becomes capital—the moment that the Son, and through the Son, the Father, are created—the difference between Father and Son vanishes, and they again become One, £110. Thus value becomes value in process, money in process, and, as such, capital. Value emerges from circulation and flows back into it; value maintains itself and multiplies as it circulates, returns from circulation enlarged, and constantly begins the same circuit anew. 14 M-M′, “money which begets money”—that is how capital was described by the Mercantilists, its first interpreters.iv Now, buying in order to sell, or better, buying in order to sell at a higher price, M-C-M′, appears to be just one kind of capital, the form peculiar to merchant capital. But industrial capital, too, is money that turns into a commodity and then, when it is sold, is reverse-transformed into more money. Transactions that take place between purchase and sale—outside the circulation sphere, that is—don’t affect the form of this movement. Lastly, in interest-bearing capital, the M-C-M′ circuit presents itself, in terms of its result, in an abbreviated, unmediated, or, one might say, lapidary form: M-M′, money that instantly becomes more money, value that is greater than itself. M-C- M′ is thus the general formula for capital as it directly appears in the circulation sphere.

1. “No land without its lord,” “Money has no master” (“Nulle terre sans seigneur,” “L’argent n’a pas de maître”). These French sayings clearly express the opposition between the power of landed property, which rests on personal relations of subjugation and domination, and the impersonal power of money.
2. “With money one buys goods, and with goods one buys money” (Mercier de la Rivière: “L’ordre naturel et essential des sociétés politiques,” p. 543).
3. “When a thing is bought, in order to be sold again, the sum employed is called money advanced; when it is bought not to be sold, it may be said to be expended” (James Steuart: Works etc. edited by General Sir James Steuart, his son. Lond. 1805, v. I, p. 274)
4. “One does not exchange money for money,” exclaims Mercier de la Rivière, in speaking to the Mercantilists (op. cit. p. 486). In a work that is ex professo about “trade” and “speculation,” a work that deals with dealing, so to speak, we read: “All trade consists in the exchange of things of different kinds; and the advantage [to the merchant?] arises out of this difference. To exchange a pound of bread against a pound of bread would be attended with no advantage; … Hence trade is advantageously contrasted with gambling, which consists in a mere exchange of money for money” (Th. Corbet: “An Inquiry into the Causes and Modes of the Wealth of Individuals; or the Principles of Trade and Speculation explained. London. 1841,” p. 5). While Corbet doesn’t recognize that M-M, exchanging money for money, is not only the characteristic circulation-form of merchant-capital, but also that of all capital, he at least acknowledges that this form is common to games of chance and one kind of trade—speculation. But then MacCulloch arrives on the scene and claims that to buy in order to sell is to speculate; as a result, the difference between trade and speculation drops out of the picture: “Every transaction in which an individual buys produce in order to sell it again is, in fact, a speculation” (MacCulloch: A Dictionary practical etc. of Commerce. London 1847, p. 1058). With much more naïveté, Pinto, the Pindar of the Amsterdam stockexchange, observes, “Commerce is a game [he borrows this sentence from Locke]; and it is not with beggars that one can win. If one were to win constantly, in everything and with everyone, one would have to give back voluntarily the greater part of the profit to start the game anew” (Pinto: Traité de la Circulation et du Crédit, Amsterdam, 1771, p. 231).
5. “Capital is divided once more into the original capital and profit—the increment of capital … although in practice profit is immediately lumped together with capital and set into motion with it (F. Engels: “Umrisse zu einer Kritik der Nationalökonomie” in Deutsch- Französische Jahrbücher, edited by Arnold Ruge and Karl Marx. Paris 1844, p. 99). [Editor’s note: English translation, Outline of a Critique of Political Economy in Marx-Engels Collected Works, vol. 3 (Moscow: Progress Publishers, 1975), p. 430.]
6. Aristotle counterposes household management and “chrematistics,” using the former as his starting point. Insofar as it is the art of acquisition, it is limited to the procuring of goods that are needed to sustain life and are useful for the household or the state. “True wealth [ὁ ἀληθινός πλοῦτος] seems to consist in such goods. For the amount of this sort of property that one needs for the self-sufficiency that promotes the good life is not unlimited… . But there is another type of property acquisition which is especially called chrematistics, and justifiably so. It is the reason wealth and property are thought to have no limit… . This also makes it clear that commerce [ἡ καπηλική means literally ‘retail trade,’ and Aristotle chooses this form because use-values predominate in it] is not a part of chrematistics by nature: for people needed to engage in exchange only up to the point at which they had enough.” And so, as he goes on to demonstrate, the original form of trade was bartering; however, with the growth of that original form, the need for money emerged. When money was invented, bartering necessarily developed into καπηλική, trading commodities, and, again, now running counter to its original direction, this developed into chrematistics. What distinguishes chrematistics from household management is that “commerce has to do with the production of goods, not in the full sense, but through their exchange [ποιητικὴ χρημάτων … διὰ χρημάτων μεταβολής]. It is held to be concerned with money, on the grounds that money is the unit and limit of exchange [τὸ γὰρ νόμισμα στοιχεῖον καὶ πέρας τῆς ἀλλαγῆς ἐστίν]. The wealth that derives from this kind of wealth acquisition is without limit … each of the crafts aims to achieve its end in an unlimited way, since each tries to achieve it as fully as possible. [But none of the things that promote the end is unlimited, since the end itself constitutes a limit for all crafts.] Similarly, there is no limit to the end of this kind of wealth acquisition, for its end is wealth in that form, that is to say, the possession of money. The kind of wealth acquisition that is a part of household management, on the other hand, does have a limit, since this is not the task of household management… . For one aims to increase it, whereas the other aims at a different end… . Each of the two kinds of wealth acquisition makes use of the same thing, so their uses overlap… . So some people believe that this is the task of household management, and go on thinking that they should maintain their store of money or increase it without limit” (Aristotle: De Rep., ed. Bekker, lib. I, c. 8, 9 passim). [Editor’s note: Marx’s version of these quotations synthesizes a number of sections of Aristotle’s text, interpolating some of his own terminology. The text comes from Aristotle’s Politics, 1256b26–1257b40. The English translation has been modified to reflect Marx’s changes. Aristotle, Politics, trans. C. D. Reeve (Indiana: Hackett, 1998), pp. 14–17.]
7. “Commodities [here in the sense of use-values] are not the terminating object of the trading capi talist … money is his terminating object” (Th. Chalmers: On Politic Econ. etc. 2nd edit. Glasgow 1832, pp. 165, 166).
8. “The merchant counts the profit he has just made almost as nothing; instead he always looks to the future” (A. Genovesi: Lezioni di Economia Civile (1765). In Custodi’s edition of the Italian economists, Parte Moderna, Vol. VIII, p. 139).
9. “The inextinguishable passion for gain, the auri sacra fames, will always induce capitalists” (MacCulloch: The Principles of Polit. Econ. London 1830, p. 179). Naturally, this insight doesn’t stop this same MacCulloch and his circle from getting into theoretical trouble—for example, in dealing with overproduction, they turn the very same capitalist into a solid citizen who only cares about use-value and even develops an all-consuming, werewolf hunger for boots, hats, eggs, calico, and other very common types of use-values. [Editor’s note: “Auri sacra fames” is a line from Virgil’s Aeneid meaning “the accursed hunger for gold.”]
10. “Σώζειν” is one of the Greeks’ characteristic expressions for amassing wealth. Similarly, “to save” in English means both to rescue and put money aside.
11. “The infinitude things do not have in the progression itself occurs in repetition” (Galiani). [Editor’s note: The source here is Galiani op. cit. See Ferdinando Galiani, On Money: A Translation of Della Moneta, trans. Peter Toscano (Chicago: University of Chicago, 1977), p. 75.]
12. “It is not materials that make up capital, but the value of these materials” (J. B. Say: Traité L’Econ. Polit. 3ème éd. Paris, 1817, Vol. 2, p. 429).
13. “Currency [!] employed to productive purposes is capital” (MacLeod: “The Theory and Practice of Banking. London 1855,” v. I, c. I). “Capital is commodities” (James Mill: “Elements of Pol. Econ. Lond. 1821,” p. 74)
14. “Capital … a value that is permanent and multiplying” (Sismondi, Nouveaux Principes d’Econ. Polit. Vol. 1, pp. 88, 89).