Money into Capital


Part Two: The Transformation of Money into Capital

Chapter 4 – The General Formula for Capital

In this chapter Marx is concerned to distinguish between money and capital, or rather, between money as money and money as capital.

Two forms of circulation:

The circulation of commodities: C-M-C

The circulation of capital: M-C-M

In each case a purchase and a sale are combined, but in the first case to exchange use-values, in the second to change money into (more) money.

The addition to money laid out is called surplus value.

Marx introduces the term ‘valorisation’. It describes the process by which value laid out returns to the starting point with an increase. It is the motivation of the circulation of capital.

This definition leads straight to the definition of the capitalist: “capital personified and endowed with consciousness and a will” (p. 254)

The aim of the capitalist is the constant accumulation of value, not the pursuit of use-values, thus it is always money that is the end result of his activities.

The circulation of capital represents a constant movement of value from one form to another as capital takes the form now of commodities and now of money.

Value therefore becomes “value in process, money in process, and, as such capital” (p. 256)
Capital is value in motion.

Here Marx is concerned with the “general formula of capital”, independent of its particular forms as merchant’s capital, industrial capital or interest-bearing capital.

In its most general form capital is defined as value that expands itself, ‘self-valorising value’.


Chapter 5 – Contradictions in the General Formula

In this chapter Marx investigates the possibility that SV may arise within circulation.

He firstly argues that if commodities exchange at their value, which is the normal form of circulation, no SV can be created. To think otherwise is to confuse value with use-value (Marx finds this confusion to be the source of many errors of previous economists).

“In its pure form, the exchange of commodities is an exchange of equivalents, & thus it is not a method of increasing value.” (p. 260-1)

He then argues that SV cannot be created if all commodities are sold either above or below their values because gains cancelled by losses.

Rosa Luxemburg argued that imperialism directed against non-capitalist societies provided a partial answer to the effective demand problem, & so a source of additional value. But once capitalism has taken over the world that is no longer an option.
Marx is not interested in the problems of realising values in Volume I.

The conclusion is that SV can be created neither within nor outside circulation.


Chapter 6 – The Sale and Purchase of Labour-Power

The solution to the contradiction is found in identifying a commodity which, when purchased, can be used to create more value than it has itself. Such a commodity is labour power.

“In order to extract value out of the consumption of a commodity, our friend the money-owner must be lucky enough to find within the sphere of circulation, on the market, a commodity whose use-value possesses the peculiar property of being a source of value, whose actual consumption is therefore itself an objectification…of labour, hence a creation of value. The possessor of money does find such a special commodity on the market: the capacity for labour…in other words labour power.”
Labour power is “the aggregate of those mental and physical capabilities existing in the physical form, the living personality, of a human being, capabilities which he sets in motion whenever he produces a use-value of any kind” (p. 270)

For labour-power to be a commodity certain preconditions are required:

The labourer must be a free individual, owner of his own labour-power, selling it for a limited period (e.g. not a slave or a serf).

Secondly, the labourer must be unable to produce commodities or subsist on the basis of his own labour.

The value of labour-power is “determined by the labour-time necessary for the production, and consequently also the reproduction, of this specific article…the value of labour-power is the value of the means of subsistence necessary for the maintenance of its owner” (p. 274)

An allowance for the production of a new generation and the education and training of the worker.

The value of labour-power depends, therefore, on the quantity of means of subsistence required and on the value of those means of subsistence.

Labour-power is quiet distinct from labour. Labour-power, the commodity sold by the worker, is only the capacity to labour. Thus when the buyer purchases labour-power he does not, unlike other commodities, have in his hands the use-value of the commodity, he still has to realise the labour-power by setting the worker to work in the sphere of production.

Thus the examination of labour-power takes us beyond circulation, to the “hidden abode of production” where SV is created as the labourer is set to labour.

Note that labour-power has a C-M-C circuit, whilst the capitalist operates in a M-C-M’ circuit.

Marx’s analysis shows that economic categories are in fact the economic forms of appearance of particular social relationships, forms of appearance that hide as much as they reveal.

Thus it is only analysis that shows us behind the commodity the labour of interdependent producers, behind money the social character of labour, and behind capital the relationship between capitalist and wage-labourer.

To remain at the level of these economic appearances is to ignore the social foundation of the economy and so to take the social relations on which it rests for granted, to treat them as though they were natural rather than a social and historical phenomena.

“Nature does not produce on the one hand  owners of money or commodities, & on the other hand men possessing nothing but their own labour-power. This relation has no basis in natural history, nor does it have a social basis common to all periods of human history. It is clearly the result of a past historical development, the product of many economic revolutions, of the extinction of a whole series of older formations of social production.” (p. 273)


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