Part 2: The Transformation of Money into Capital

Chapter Four: The General Formula for Capital

The circulation of commodities is the starting point of capital. The production of commodities, their circulation, and that more developed form of their circulation called commerce, these form the historical groundwork from which it rises. The modern history of capital dates from the creation in the 16th century of a world-embracing commerce and a world- embracing market.

All new capital, to commence with, comes on the stage that is, on the market, whether of commodities, labour, or money, even in our days, in the shape of money that by a definite process has to be transformed into capital.

The first distinction we notice between money that is money only, and money that is capital, is nothing more than a difference in their form of circulation. The simplest form of the circulation of commodities is C-M-C, the transformation of commodities into money, and the change of the money back again into commodities; or selling in order to buy. But alongside of this form we find another specifically different form: M-C-M, the transformation of money into commodities, and the change of commodities back again into money; buying in order to sell. Money that circulates in the latter manner is thereby transformed into, becomes capital and is already potentially capital.

In the first phase, M-C, or the purchase, the money changed into a commodity. In the second phase, C-M or the sale, the commodity is changed back again into money. The result, in which the phases of the process vanish, is the exchange of money for money, M-M.

The circuit M-C-M would be absurd and without meaning if the intention were to exchange by this means two equal sums of money.

In the circulation C-M-C, the money is in the end converted into a commodity, that serves as a use-value; it is spent once for all. The circuit M-C-M, on the contrary, commences with money and ends with money. Its leading motive, and the goal that attracts it, is therefore mere exchange value. One sum of money is distinguishable from another only by its amount., The character and tendency of the process M-C-M, is therefore not due to any qualitative difference: between its extremes, but solely to their quantitative difference. The exact form of this process is therefore M-C- M', where M' = M + �M = the original sum advanced, plus an increment. This increment or excess over the original value I call "surplus-value". The value originally advanced, therefore, not only remains intact while in circulation, but adds to itself a surplus-value or expands itself. It is this movement that converts it into capital.

The simple circulation of commodities - selling in order to buy - is a means of carrying out a purpose unconnected with circulation, namely, the satisfaction of wants. The circulation of money as capital is, on the contrary, an end in itself, for the expansion of value takes place only within this constantly renewed movement. The circulation of capital has therefore no limits. Thus the conscious representative of this movement the possessor of money becomes a capitalist. His person, or rather his pocket, is the point from which the money starts and to which it returns. The expansion of value, which is the objective basis or main-spring of the circulation, becomes his subjective aim. It functions as capital personified and endowed with consciousness and a will. The restless never-ending process of profit-making alone is what he aims at.

This boundless greed after riches, this passionate chase after exchange-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 never ending augmentation of exchange-value, which the miser strives after, by seeking to save his money from ..circulation, is attained by the more acute capitalist, by constantly throwing it afresh into circulation.

Value therefore now becomes value in process, money in process, and, as such, capital. It comes out of circulation, enters into it again, preserves and multiplies itself within its circuit, comes back out of it with expanded bulk, and begins the same round ever afresh. M-M', money which begets money, such is the description of Capital from the mouths of its first interpreters, the Mercantilists.

The change of value that occurs in the case of money intended to be converted into capital, cannot take place in the money itself, since in its function of means of purchase and of payment, it does no more than realise the price of the commodity it buys or pays for; and, as hard cash, it is value petrified, never varying. Just as little can it originate in the re-sale of the commodity, which does no more than transform the article from its bodily form back again into its money-form. The change originates in the use-value of the commodity.

In order to be able to extract value from the consumption of a commodity, our friend, Moneybags, must be so lucky as to find, in the market, a commodity, whose use-value possesses the peculiar property of being a source of value, whose actual consumption, therefore, is itself an embodiment of labour, and, consequently, a creation of value.

The possessor of money does find on the market such a special commodity in capacity for labour or labour power. By it is to be understood the aggregate of those mental and physical capabilities existing in a human being, which he exercises whenever he produces a use-value of any description.

He and the owner of money meet in the market, and deal with each other as on the basis of equal rights, with this difference alone, that one is buyer, the other seller; both, therefore, equal in the eyes of the law. The continuance of this relation demands that the owner of the labour-power should sell it only for a definite period, for if he were to sell it rump and stump, once for all, he would be selling himself, converting himself from a free man into a slave, from an owner of a commodity into a commodity. He must constantly look upon his labour-power as his own property, his own commodity, and this he can only do by placing it at the disposal of the buyer temporarily, for a definite period of time. By this means alone can he avoid renouncing his rights of ownership over it.

This peculiar commodity, labour-power, like all others, has a value. How is that value determined? The value of labour-power is determined, as in the case of every other commodity, by the labour-time necessary for the production, and consequently also the reproduction, of this special article. Labour-power exists only as a capacity, or power of the living individual. Its production consequently presupposes his existence. Given the individual, the production of labour-power consists in his reproduction of himself or his maintenance. For his maintenance he requires a given quantity of the means of subsistence. Therefore the labour-time requisite for the production of labour-power reduces itself to that necessary for the production of those means of subsistence; in other words, the value of labour-power is the value of the means of subsistence necessary for the maintenance of the labourer. His means of subsistence must therefore be sufficient to maintain him in his normal state as a labouring individual.

His natural wants, such as food, clothing, fuel, and housing, vary according to the climatic and other physical conditions of his country. On the other hand, the number and extent of his so-called necessary wants, as also the modes of satisfying them, are themselves the product of historical development, and depend therefore to a great extent on the degree of civilisation of a country.

Nevertheless, in a given country, at a given period, the average quantity of the means of subsistence necessary for the labourer is practically known.

One consequence of the peculiar nature of labour power as a commodity is, that its use-value does not, on the conclusion of this contract between the buyer and seller, immediately pass into the hands of the former. Its use-value consists in the subsequent exercise of its force, in the consumption of the labour-power. In every country in which the capitalist mode of production reigns, it is the custom not to pay for labour-power before it has been exercised for the period fixed by the contract. In all cases, therefore, the use-value of the labour- power is advanced to the capitalist; he everywhere gives credit to the capitalist.

The consumption of labour-power is at one and the same time the production of commodities and of surplus value. The consumption of labour-power is completed, as in the case of every other commodity, outside the limits of the market or of the sphere of circulation, within the hidden abode of production.

Part 3: The Production of Absolute Surplus-Value

Chapter Five: The Labour-Process and the Process Of Producing Surplus-Value

The capitalist buys labour-power in order to use it; and labour-power in use is labour itself. The purchaser of labour-power consumes it by setting the seller of it to work.

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. We presuppose labour in a form that stamps it as exclusively human. A spider conducts operations that resemble those of a weaver, and a bee puts to shame many an architect in the construction of her cells. But what distinguishes the worst architect from the best of bees is this, that the architect raises his structure in imagination before he erects it in reality. At the end of every labour-process, we get a result that already existed in the imagination of the labourer at its commencement. He not only effects a change of form in the material on which he works, but he also realises a purpose of his own that gives the law to his modus operandi, and to which he must subordinate his will.

The elementary factors of the labour-process are 1, the personal activity of man, i.e., work itself, 2, the subject of that work, and 3, its instruments.

All raw material is the subject of labour, but not every subject of labour is raw material; it can only become so, after it has undergone some alteration by means of labour. With the exception of the extractive industries, in which the material for labour is provided immediately by Nature, such as mining, hunting, fishing, and so on, all branches of industry manipulate raw material, objects already filtered through labour, already products of labour.

An instrument of labour is a thing, or a complex of things, which the labourer interposes between himself and the subject of his labour, and which serves as the conductor of his activity. He makes use of the mechanical, physical, and chemical properties of some substances in order to make other substances subservient to his aims. No sooner does labour undergo the least development, than it requires specially prepared instruments.

In the labour-process, therefore, man's activity, with help of the instruments of labour, effects an alteration, designed from the commencement, in the material worked upon. The process disappears in the product; the latter is a use-value. Labour has incorporated itself with its subject: the former is materialised, the latter transformed. The blacksmith forges and the product is a forging. If we examine the whole process from the point of view of its result, the product, it is plain that both the instruments and the subject of labour, are means of production, and that the labour itself is productive labour.

Whether a use-value is to be regarded as raw material, as instrument of labour, or as product, this is determined entirely by its function in the labour process, by the position it there occupies.

The capitalist purchases, in the open market, all the necessary factors of the labour-process; its objective factors, the means of production, as well as its subjective factor, labour-power. He then proceeds to consume the commodity, the labour-power that he has just bought, by causing the labourer, the impersonation of that labour-power, to consume the means of production by his labour.

The labour-process, the process by which the capitalist consumes labour-power, exhibits two characteristic phenomena: first, the labourer works under the control of the capitalist to whom his labour belongs; secondly, the product is the property of the capitalist and not that of the labourer, its immediate producer. By the purchase of labour-power, the capitalist incorporates labour, as a living ferment, with the lifeless constituents of the product. From his point of view, the labour process is nothing more than the consumption of the commodity purchased, i.e., of labour-power; but this consumption cannot be effected except by supplying the labour-power with the means of production.

The aim of the capitalist is to produce not only a use-value, but a commodity also; not only use-value, but value; not only value, but at the same time surplus value.

Just as commodities are, at the same time, use-values and values, so the process of producing them must be a labour-process, and at the same time, a process of creating value.

If the process of producing value be not carried beyond the point where the value paid by the capitalist for the labour-power is replaced by an exact equivalent, it is simply a process of producing value; if it be continued beyond that point, it becomes a process of creating surplus-value.

The value of a day's labour-power amounts to 3 shillings, because the means of subsistence that are daily required of the production of labour-power, cost half a day's labour. The value of labour-power, cost half a day's labour. The value of labour-power and the value which that labour power creates in the labour process, are two entirely different magnitudes; and this difference of the two values what the capitalist had in view, when he was purchasing the labour power. The useful qualities that labour-power possesses, and by virtue of which it makes yarn or boots, where to him nothing more than a conditio sine qua non; for in order to create value, labour must be expended in a useful manner. What really influenced him was the specific use-value which this commodity possesses of being a source not only of value, but of more value than it has itself. This is the special service that the capitalist expects from labour-power, and in this transaction he acts in accordance with the "eternal laws" of the exchange of commodities. The seller of labour-power, like the seller of any other commodity, realises its exchange value, and parts with its use-value. He cannot take the one without given the other.

The use-value of labour-power, or in other words, labour, belongs just as little to its seller, as the use-value of oil after it has been sold belongs to the dealer who has sold it. The owner of the money has paid the value of a day's labour power; his, therefore, is the use of it for a day; a day's labour belongs to him. The circumstance, that on the one hand the daily sustenance of labour power costs only half a day's labour, while on the other hand the very same labour-power can work during a whole day, that consequently the value which its use during one day creates, is double what he pays for that use, this circumstance is, without doubt, a piece of good luck for the buyer, but by no means an injury to the seller.

The labourer therefore finds, in the workshop, the means of production necessary for working, not only during six, but during twelve hours. The capitalist, as buyer, paid for each commodity, for the cotton, the spindle and the labour-power, its full value. Equivalent was exchanged for equivalent. He then did what is done by every purchaser of commodities; he consumed their use-value. The consumption of the labour-power, which was also the process of producing commodities. He withdraws 3 shillings more from the circulation than he originally threw into it. This metamorphosis, this conversion of money into capital, takes place both within the sphere of circulation and also outside it; within the circulation, because conditioned by the purchase of the labour-power in the market; outside the circulation, because what is done within it is only a stepping-stone to the production of surplus-value, a process which is entirely confined to the sphere of production. By turning his money into commodities that serve as the material elements of a new product, and as factors in the labour-process, by incorporating living labour with their dead substance, the capitalists at the same time converts value, i.e., past, materialised, and dead labour into capital, into value big with value.

Viewed as a value-creating process, the same labour-process presents itself under its quantitative aspect alone. Here it is a question merely of the time occupied by the labourer in doing the work; of the period during with the labour power is usefully expended. That labour, whether previously embodied in the means of production, or incorporated in them for the first time during the process by the action of labour-power, counts in either case only according to its duration.

Moreover, only so much of the time spent in the production of any article is counted, as, under the given social conditions, is necessary. The consequences of this are various. In the first place, it becomes necessary that the labour should be carried on under normal conditions. If a self-acting mule is the implement in general use for spinning, it would be absurd to supply the spinner with a distaff and spinning wheel. The cotton too must not be such rubbish as to cause extra waste in being worked, but must be of suitable equality. Whether the material factors of the process are of normal quality or not, depends entirely upon the capitalist. Then again, the labour-power itself must be of average efficacy. In the trade in which it is being employed, it must possess the average skill, handiness and quickness prevalent in that trade, and must be applied with the average amount of exertion and with the usual degree of intensity; the capitalist is careful to see that this is done. He has bought the use of the labour-power for a definite period, and he insists upon his rights. He has no intention of being robbed. Lastly, all wasteful consumption of raw material or instruments of labour is strictly forbidden.

The process of production, considered the one hand as the unity of the labour-process and the process of creating value, is production of commodities; considered on the other hand as the unity of the labour process and the process of producing surplus-value, it is the capitalist process of production, or capitalist production of commodities.

In the creation of surplus-value it does not in the least matter, whether the labour appropriated by the capitalist be simple unskilled labour or average quality or more complicated skilled labour. All labour of a higher or more complicated character than average labour is expenditure of labour-power of a more costly kind, labour-power whose production has cost more time and labour, and which therefore has a higher value, than unskilled or simple labour-power. Its consumption is labour of a higher class, labour that creates in equal times proportionally higher values than unskilled labour does. The surplus-value results only from a quantitative excess of labour, from a lengthening-out of one and the same labour-process.