by Karl Marx, Ben Fowkes (Translator), Ernest Mandel (Introduction)

Troy Shu
Troy Shu
Updated at: May 15, 2024

Dive into the complex dynamics of capital flow and accumulation with this comprehensive book summary. Uncover insights on surplus-value, fixed vs. circulating capital, and economic reproduction. Actionable questions help you apply these learnings.

What are the big ideas?

Circuit of Capital Dynamics

This book delves into the complex flow of capital through different stages, highlighting the transitions from money to commodities, through the production process, and back into money. This continuous transformation reveals deep insights into the valorization of capital and the inherent complexities of capitalist production.

Interconnectedness of Capital Forms

The text uniquely highlights how various forms of capital—money, productive, and commodity—are interconnected and transform into one another, emphasizing the systemic nature of capital movements and their susceptibility to disruptions in any phase.

Significance of Surplus-Value

Surplus-value, as a pivotal economic theory, is thoroughly analyzed. The book explains how it is generated through the capitalist's use of labor and production resources, clarifying its role in the accumulation and expansion of capital.

Role of Circulation Time

The impact of circulation time on capital turnover is a critical theme, discussing how longer circulation times can constrict the productive use of capital and affect overall economic efficiency.

Fixed and Circulating Capital Distinction

An in-depth discussion is provided on the differences between fixed and circulating capital, focusing on how each impacts the turnover process and the overall health of capitalist systems.

Reproduction and Accumulation on Expanded Scales

The book dissects the process of capital accumulation and reproduction, particularly on an expanded scale, showcasing how different sectors interplay to perpetuate economic growth or contribute to financial crises.

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Circuit of Capital Dynamics

The circuit of capital is a continuous flow of value through different stages. It begins with money capital that is transformed into commodities, which then pass through the production process to emerge as new, more valuable commodities. These are then sold, converting them back into an increased amount of money capital.

This cyclical process reveals the fundamental purpose of capitalist production - the valorization of value. The capitalist's driving motive is to grow their initial capital investment, not simply to produce useful goods. The production process is merely a means to this end, an "unavoidable middle term" in the pursuit of profit.

The circuit's three distinct stages - purchasing inputs, production, and selling outputs - are interdependent and must be continuously repeated for capital accumulation to occur. Any interruption in this flow disrupts the entire process. Yet the circuit also demonstrates the inherent tensions and contradictions within capitalism, as the drive for profit can conflict with the actual consumption of goods.

Overall, the circuit of capital lays bare the essential dynamics of the capitalist system - the ceaseless transformation of value, the centrality of money, and the primacy of profit-making over all other economic considerations. Understanding this circuit is crucial to grasping the underlying logic and contradictions of the capitalist mode of production.

Here are the key insights from the context information, supported by examples:

  • The circuit of capital comprises three stages: M-C (money to commodities), P (production), and C'-M' (commodities back to money). This continuous transformation reveals the valorization of capital as the driving motive of capitalist production.

Example: The formula M-C...P...C'-M' expresses how a sum of money (M) is transformed into commodities (C), goes through the production process (P), and is then transformed back into a larger sum of money (M').

  • The first stage, M-C, involves the capitalist purchasing labor-power (L) and means of production (mp) on the commodity and labor markets. This division of the money capital into L and mp reflects the quantitative ratio between the surplus labor the workers must provide and the means of production needed to employ them.

Example: If the weekly wages of 50 workers is £50, then £372 must be spent on means of production to transform 3,000 man-hours, including 1,500 hours of surplus labor, into yarn.

  • The second stage, P, represents the interruption of the circulation process as the capital value takes on a form (productive capital) in which it cannot circulate further, but must be consumed productively in the labor process.

Example: The capitalist cannot sell the worker again as a commodity, but must use the worker's labor-power to make use of the means of production and fashion new commodities.

  • The continuous rotation of the three circuit forms (M-C...P...C'-M', P...C'-M'-C, and C'-M'-C...P) reveals that the distinction between them is merely formal, as each individual capital is simultaneously involved in all three forms.

Example: While one part of the capital functions as commodity capital, another part is transformed into money capital, while a third part passes from production into circulation as new commodity capital.

Interconnectedness of Capital Forms

The text reveals the interconnected nature of capital forms - money, productive, and commodity - and how they transform into one another as part of the broader capital circulation process. This systemic perspective highlights how disruptions in any phase of the circuit can impede the overall functioning of capital.

The different forms of capital - money, productive, and commodity - are not independent varieties, but rather specific functional forms that industrial capital assumes during its circuit. As capital moves through these forms, it maintains and grows its value, ultimately returning to the original money form to begin the cycle anew.

However, this circular flow of capital is vulnerable. If capital becomes stuck in one form, such as being unable to sell commodity capital, it can disrupt the entire reproduction process. The text emphasizes how the continuous transformation between these capital forms is essential for the normal course of the circuit and the valorization of capital.

By highlighting this systemic interconnectedness, the text cautions that the capitalist production process is not a self-contained, isolated system. Disruptions can arise from the diverse origins of the commodities and money that enter the circuit, as capital interacts with various modes of production beyond the capitalist sphere.

Here are some key examples from the context that illustrate the interconnectedness of the different forms of capital:

  • The text states that "the three circuits, the forms of reproduction of the three varieties of capital, are continuously executed alongside one another." This shows how the money, productive, and commodity forms of capital are constantly transforming into each other as part of the overall capital circuit.

  • It explains that "one part of the capital value, for example, which for the moment functions as commodity capital, is transformed into money capital, while at the same time another part passes out of the production process into circulation as new commodity capital." This demonstrates how the different forms of capital coexist and transition between each other.

  • The context highlights how a disruption in any stage of the circuit can impact the overall flow of capital: "If capital comes to a standstill in the first phase, M–C, money capital forms into a hoard; if this happens in the production phase, the means of production cease to function, and labour-power remains unoccupied; if in the last phase, C′–M′, unsaleable stocks of commodities obstruct the flow of circulation." This shows the systemic nature of the capital circuit.

  • It notes that "the entire circuit is the real unity of its three forms" - money, productive, and commodity capital - emphasizing their interconnectedness as part of the overall capital movement.

Key terms:

  • Money capital: The capital value in the form of money
  • Productive capital: The capital value in the form of means of production and labor-power
  • Commodity capital: The capital value in the form of commodities

The text highlights how these three forms of capital are in constant transformation, with disruptions in any stage impacting the entire circuit. This demonstrates the systemic and interconnected nature of the different forms of capital.

Significance of Surplus-Value

The surplus-value is the core driver of capitalist production. It represents the value that the capitalist extracts from the labor of workers, over and above the cost of their wages. This surplus-value is the source of the capitalist's profits and the means by which they can accumulate and expand their capital.

The book explains how the capitalist transforms this surplus-value into new capital, through a process of reproduction on an expanded scale. This can happen in various ways - by investing in new factories, improving productivity, or speculating on raw materials. Regardless of the specific method, the key is that the capitalist is able to grow their capital by capitalizing on the surplus-value generated through production.

Importantly, the book distinguishes between the realization of surplus-value, where it is converted into money, and its capitalization, where it is reinvested to expand production. This highlights how surplus-value is not just about profits, but is the fundamental mechanism by which the capitalist system perpetuates and grows itself.

Overall, the analysis of surplus-value is central to understanding the dynamics of capitalist accumulation and the driving forces behind the expansion of capital. It reveals how the exploitation of labor is the wellspring from which the capitalist system derives its power and capacity for growth.

Here are the key insights on the significance of surplus-value from the provided context:

  • Surplus-value is the core driver of capitalist production - "The whole character of capitalist production is determined by the valorization of the capital value advanced, thus in the first instance by the production of the greatest possible amount of surplus-value."

  • Surplus-value is what allows for the accumulation and expansion of capital - "Accumulation, or production on an expanded scale, which first appears as a means towards the constantly extended production of surplus-value, hence the enrichment of the capitalist, as the personal end of the latter, and is part of the general tendency of capitalist production."

  • The capitalization of surplus-value is what allows for the reproduction of capital on an expanded scale - "In P...P', P' does not express the fact that surplus-value is produced, but rather that the produced surplus-value is capitalized, i.e. that capital has been accumulated, and hence P', as opposed to P, consists of the original capital value plus the value of the capital accumulated through its movement."

  • The existence of surplus-value is taken as a given in bourgeois economics, but the key question is where the money comes from to realize this surplus-value - "The sum of value invested would not be capital if it did not enrich itself with a surplus-value. Hence surplus-value is assumed from the outset. Its existence is a matter of course. Thus the question is not: where does surplus-value come from? But rather: where does the money come from which it is turned into?"

Role of Circulation Time

The circulation time of capital is a crucial factor in determining the efficiency of capital utilization. Longer circulation times mean that capital is tied up for longer periods, reducing the amount of capital available for productive use. This can significantly constrain the scale of production and limit overall economic output.

When the circulation period is equal to the production period, capital can flow smoothly between the two phases without interruption. However, if the circulation period is longer, it creates a gap where production must halt until the capital returns from circulation. This forces the capitalist to either reduce the scale of production or seek additional capital from the money market to maintain continuous operations.

The impact of circulation time is not just about the total turnover period, but also the relative durations of production and circulation. Even if the total turnover is the same, a longer circulation period means less capital is actively engaged in production at any given time. This reduces the overall productivity of the capital invested.

Recognizing the importance of circulation time is essential for understanding the dynamics of the capitalist economy. Economists who overlook this factor miss a crucial aspect of how capital functions and the constraints it faces. Properly accounting for circulation time sheds light on the need for money capital and the challenges of maintaining uninterrupted production.

Here are the key insights on the role of circulation time based on the provided context:

  • Longer circulation times can lead to production being at a standstill for part of the total turnover period. For example, if the production period is 9 weeks and the circulation time is 3 weeks, then production is halted for 3 weeks out of the 12-week total turnover period.

  • To maintain continuous production, the capitalist has two options:

    • Reduce the scale of production so that the same capital can cover both the production and circulation periods. This may not always be feasible as there are minimum capital requirements for competitiveness.
    • Distribute the same circulating capital over a longer period, extending it from 9 weeks to 12 weeks in the example. This may require additional capital for storage costs.
  • The circulation time can vary for different capitalists even in the same industry, due to factors like distance to market. Improvements in transportation can shorten absolute circulation times but may not eliminate relative differences between capitalists.

  • The development of transportation and communication networks can displace relative differences in circulation times, leading to the decline of some production centers and the rise of others.

  • Increased frequency of transportation services can distribute the reflux of capital over shorter successive periods, shortening the overall circulation time and turnover.

Fixed and Circulating Capital Distinction

The distinction between fixed capital and circulating capital is crucial for understanding the dynamics of capitalist production. Fixed capital refers to the means of production, such as machinery and equipment, that retain their form and gradually transfer their value to the final product over multiple production cycles. Circulating capital, on the other hand, encompasses the materials and labor that are fully consumed in each production cycle, with their full value transferred to the product.

The key difference lies in how these two forms of capital participate in the value-formation and value-transfer processes. Fixed capital circulates its value gradually, while circulating capital is fully absorbed into the product and must be continuously replenished. This distinction shapes the turnover of capital, with fixed capital requiring longer periods to be fully replaced compared to the faster turnover of circulating capital.

Importantly, the fixed-circulating capital distinction is not the same as the constant capital-variable capital distinction, which is based on the role of these components in the valorization process and the production of surplus-value. While the two distinctions may overlap, they are fundamentally different and should not be conflated.

Understanding the nuances of fixed and circulating capital is crucial for analyzing the reproduction and circulation of capital, as well as the equalization of profit rates across different industries. Failure to grasp these concepts can lead to significant theoretical and practical shortcomings in the study of capitalist economies.

Here are key examples from the context that support the insight on the differences between fixed and circulating capital:

  • The distinction between fixed and circulating capital arises from the "different ways in which the various components of the productive capital participate in the process of value-formation and transfer their value to the product." Fixed capital circulates its value "bit by bit" over a longer period, while circulating capital is fully transferred to the product.

  • Adam Smith incorrectly used the example of "merchant's capital" to illustrate the fixed vs. circulating capital distinction, when merchant's capital "does not belong to the production process at all, but exclusively inhabits the circulation sphere." This demonstrates the confusion between capital in the production process vs. the circulation process.

  • Smith also contradicts himself by first stating fixed and circulating capital are "different modes of employment of distinct and independent capitals," but then says they are "different portions of the same productive capital" in different industries.

  • The context provides the example of a copper mine, where there is no raw material that "enters the product bodily" - only the value of labor, machinery, etc. is transferred. By Smith's own definition, the entire capital in a copper mine would be "fixed capital," contradicting his earlier statements.

  • The key distinction is that fixed capital transfers its value gradually over multiple turnover periods of the product, while circulating capital fully transfers its value in a single turnover. This difference in turnover impacts the overall circulation and reproduction of capital.

Reproduction and Accumulation on Expanded Scales

The text examines the intricate mechanisms of capital accumulation and expanded reproduction within the capitalist system. It reveals how different economic sectors interact to drive continuous economic growth, but also how this process can contribute to financial crises.

The core dynamic is the transformation of surplus value into additional capital, allowing for the expansion of production on a larger scale. This can happen through various means, such as investing in new facilities, improving productivity, or extending the working day. Importantly, this accumulation process is not just an individual capitalist's choice, but becomes a necessity for their survival in the competitive market.

Alongside this real accumulation, the text also examines the parallel process of money hoarding - the setting aside of surplus value as latent money capital, waiting to be deployed later. This money capital, though not directly participating in the production process, can still exert a powerful influence on the course of capitalist development through the credit system.

The interplay between these different forms of accumulation - real expansion of production and financial hoarding - is crucial to understanding the inherent tendencies and contradictions within the capitalist mode of production. This complex dynamic can both fuel economic growth and sow the seeds of future crises.

Here are the key insights from the context information on reproduction and accumulation on expanded scales:

  • The expansion of production can occur through small incremental increases, such as by applying surplus-value to improvements that raise productivity or allow more intensive exploitation of labor.

  • Alternatively, when the working day is not legally restricted, additional circulating capital (materials and wages) can expand production without increasing fixed capital, by simply prolonging the use of existing fixed capital.

  • However, there are limits to how much production can be expanded through these methods alone. At a certain point, a larger-scale expansion of the entire plant, buildings, and labor force is required, which can only be achieved through accumulating surplus-value over several years.

  • Alongside this "real accumulation" of capital, there is also an "accumulation of money" - the setting aside of a portion of surplus-value as latent money capital, which can later be deployed as additional active capital when it reaches a sufficient volume.

  • This latent money capital can take various forms - hoarded gold/silver, withdrawn domestic currency, value tokens, or financial claims. Regardless of the form, it represents legal titles to future social production that capitalists hold in reserve.

  • The development of the credit system allows this latent money capital to be employed by others, who pay interest to the original capitalist. This money capital functions as a distinct form of capital alongside productive capital.

  • The expansion of production and the more frequent realization of surplus-value leads to a growth in the proportion of new money capital placed on the money market, much of which is then absorbed back into expanding production.

Key terms and concepts:

  • Real accumulation: The transformation of surplus-value into productive capital, enabling expanded reproduction.
  • Latent money capital: Surplus-value set aside as potential additional capital, in the form of hoards, withdrawn currency, financial claims, etc.
  • Credit system: Allows latent money capital to be employed productively by others, while still functioning as capital for the original owner.


Let's take a look at some key quotes from "Capital" that resonated with readers.

There is no royal road to science, and only those who do not dread the fatiguing climb of its steep paths have a chance of gaining its luminous summits.

To achieve true understanding and mastery, one must be willing to put in the effort and persevere through challenging obstacles. There are no shortcuts or easy ways to gain profound knowledge, only dedication and hard work can lead to success. The path to discovery is often long and arduous, but those who are passionate and committed will ultimately reach their goals.

Money is the alienated essence of man's labor and life; and this alien essence dominates him as he worships it.

Human labor and life are converted into a distant, unrecognizable form that has a life of its own. This transformed essence then exerts control over humans, who revere it as a supreme authority. As a result, people become enslaved by the very thing they created, losing touch with their true nature and purpose.

within the capitalist system all methods for raising the social productiveness of labour are brought about at the cost of the individual labourer; all means for the development of production transform themselves into means of domination over, and exploitation of, the producers; they mutilate the labourer into a fragment of a man, degrade him to the level of an appendage of a machine, destroy every remnant of charm in his work and turn it into a hated toil; they estrange from him the intellectual potentialities of the labour process in the same proportion as science is incorporated in it as an independent power; they distort the conditions under which he works, subject him during the labour process to a despotism the more hateful for its meanness; they transform his life-time into working-time, and drag his wife and child beneath the wheels of the Juggernaut of capital. But all methods for the production of surplus-value are at the same time methods of accumulation; and every extension of accumulation becomes again a means for the development of those methods. It follows therefore that in proportion as capital accumulates, the lot of the labourer, be his payment high or low, must grow worse. The law, finally, that always equilibrates the relative surplus population, or industrial reserve army, to the extent and energy of accumulation, this law rivets the labourer to capital more firmly than the wedges of Vulcan did Prometheus to the rock. It establishes an accumulation of misery, corresponding with accumulation of capital. Accumulation of wealth at one pole is, therefore, at the same time accumulation of misery, agony of toil slavery, ignorance, brutality, mental degradation, at the opposite pole, i.e., on the side of the class that produces its own product in the form of capital.

The relentless pursuit of profit in the capitalist system comes at a devastating cost to workers. As production methods improve and wealth accumulates, workers are increasingly exploited, forced to toil longer hours for minimal gains, and stripped of their dignity and autonomy. This results in a corresponding accumulation of misery, marked by poverty, ignorance, and brutal treatment, which binds workers to the whims of capital. Ultimately, the growth of wealth for the few is built on the suffering of the many.

Comprehension Questions

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How well do you understand the key insights in "Capital"? Find out by answering the questions below. Try to answer the question yourself before revealing the answer! Mark the questions as done once you've answered them.

1. What begins the circuit of capital and into what is it first transformed?
2. What is the primary goal of transforming money into commodities and then through production?
3. What are the three distinct stages of the circuit of capital?
4. How does an interruption affect the circuit of capital?
5. What tension does the circuit of capital demonstrate within the capitalist system?
6. What are the three forms that capital assumes during its circulation process?
7. How does a disruption in any form of capital affect the overall capital circulation?
8. Why is the continuous transformation between different capital forms important for the valorization of capital?
9. What happens if capital becomes stuck in one form during its cycle?
10. What is the primary role of surplus-value in capitalist production?
11. How does the capitalist use surplus-value to expand their capital?
12. What is the difference between the realization of surplus-value and its capitalization?
13. Why is surplus-value considered fundamental to the growth of the capitalist system?
14. What happens to production when capital circulation time exceeds the production period?
15. How does the relative duration of circulation compared to production impact capital productivity?
16. What are two possible actions a capitalist might take if the circulation of capital is prolonged?
17. How can developments in transportation affect circulation time?
18. What is the effect of increased transportation frequency on capital turnover?
19. What is the main difference in value-transfer between fixed capital and circulating capital?
20. How does the distinction between fixed and circulating capital affect their turnover rates?
21. Why is it important not to conflate the distinctions between fixed-circulating capital and constant-variable capital?
22. How does the turnover difference between fixed and circulating capital influence the circulation and reproduction of capital?
23. What is the core dynamic in the transformation of surplus value within the capitalist system?
24. How do investments in new facilities or improvements in productivity contribute to the capitalist system?
25. What role does money hoarding play in the capitalist development process?
26. What are the implications of the interplay between real expansion of production and financial hoarding in capitalist economies?
27. Why does the credit system play a crucial role in the functioning of latent money capital?

Action Questions

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"Knowledge without application is useless," Bruce Lee said. Answer the questions below to practice applying the key insights from "Capital". Mark the questions as done once you've answered them.

1. How can you analyze your own financial investments or business operations to identify stages of the capital circuit and optimize the flow for enhanced profit?
2. What steps can a business take to manage and optimize the flow between the forms of capital to enhance its economic efficiency and resilience?
3. How can you identify instances of surplus-value creation in your workplace and advocate for fairer wage practices?
4. How can you analyze and optimize the allocation of your personal or business assets to minimize the idle periods and maximize productive use?
5. How can businesses optimize their investment strategies by analyzing the proportions of fixed and circulating capital?
6. How can individuals or businesses leverage the concepts of capital accumulation and expanded reproduction to enhance their financial growth or stability?
7. What strategies can be adopted to effectively manage and utilize latent money capital to safeguard against economic downturns?

Chapter Notes

Chapter 1 : The Circuit of Money Capital

Here are the key takeaways from the chapter:

  • The Circuit of Money Capital: The circuit of capital comprises three stages: (1) M–C, where the capitalist appears on the commodity and labour markets as a buyer, transforming money into commodities; (2) P, the productive consumption by the capitalist of the commodities purchased, where capital passes through the production process and results in commodities of greater value; and (3) C′–M′, where the capitalist returns to the market as a seller, transforming the commodities into money.

  • M–C: The Transformation of Money Capital into Productive Capital: In the first stage, M–C, the money capital is transformed into productive capital, where the capitalist purchases labour-power (L) and means of production (mp). This stage represents the capitalist's connection between the objective and personal factors of production, as the means of production must be present before labour-power can be applied.

  • P: The Function of Productive Capital: The second stage, P, represents the interruption of the circulation process, as the commodities purchased in M–C are consumed in the production process, resulting in a new commodity product, C′, which is materially and value-wise different from the original C.

  • C′–M′: The Realization of Commodity Capital: In the third stage, C′–M′, the capitalist sells the commodity product, transforming it back into the money form, M′, which is now a valorized capital value, consisting of the original capital (M) plus the surplus-value (m) created in the production process.

  • The Circuit as a Whole: The complete circuit of capital, M–C…P…C′–M′, represents the continuous transformation of capital through its various forms (money capital, productive capital, commodity capital) and the valorization of the capital value through the production of surplus-value.

  • Characteristics of the Circuit of Money Capital: The circuit of money capital is the most one-sided and characteristic form of the circuit of industrial capital, as it most clearly expresses the driving motive of capitalist production - the valorization of value and money-making. It also formally and explicitly presents the production process as a mere means for the valorization of the capital value advanced.

  • Relationship to Other Circuits: The circuit of money capital is inextricably linked with the general circulation of commodities, but also forms an independent movement peculiar to the capital value. It is the general form of the circuit of industrial capital, as it always includes the valorization of the value advanced, while the other forms (P…P and C′…C′) only express this valorization in a more implicit manner.

Chapter 2: The Circuit of Productive Capital

Here are the key takeaways from the chapter:

  • The Circuit of Productive Capital: The circuit of productive capital has the general formula P...C'-M'-C...P, which signifies the periodically repeated function of the productive capital and the reproduction process with respect to valorization.

  • Simple Reproduction: In simple reproduction, the entire surplus-value goes into the personal consumption of the capitalist, and the capital value continues the circuit as the money form of the commodity product, while the surplus-value makes its exit from this circulation and describes a separate path within the general circulation of commodities.

  • Separation of Capital Value and Surplus-Value: After the transformation of the commodity capital C' into money M', the movement of the capital value and the surplus-value becomes divisible, as they now possess independent forms as sums of money.

  • Circulation of Revenue: The circulation of the capitalist's revenue, c-m-c, enters into the capital circulation only in so far as c is a value portion of C', capital in its functional form as commodity capital.

  • Relation to General Circulation: The relation between the circuit of capital as it forms part of general circulation, and as it provides the links in an independent circuit, is displayed in the circulation of M'=M+m, where M continues the circuit of capital, while m, spent as revenue, goes into the general circulation.

  • Accumulation and Expanded Reproduction: In accumulation or reproduction on an expanded scale, a part of the surplus-value is capitalized, and the circuit begins anew with an augmented productive capital P'.

  • Accumulation of Money: The accumulation of money, the formation of a hoard, appears as a process that temporarily accompanies the extension of the scale on which industrial capital operates, as the surplus-value in money form must reach a certain minimum size before it can function as additional capital.

  • The Reserve Fund: The money accumulation fund can also serve as a reserve fund to cope with disturbances in the circuit, distinct from the fund for purchase and payment that is a component part of the functioning capital.

Chapter 3: The Circuit of Commodity Capital

Here are the key takeaways from the chapter:

  • The Circuit of Commodity Capital (C'–M'–C...P...C'): This circuit begins and ends with commodity capital (C'), which includes both the capital value (c+v) and the surplus-value (s) produced. The circuit encompasses the entire circulation process (C'–M'–C) and the production process (P).

  • Differences from Previous Circuits: Unlike the circuits M...M' and P...P, the C'...C' circuit includes both the capital value and surplus-value from the start, and the starting point C' must be designated as such even when the circuit is repeated on the same scale.

  • Separability of Capital Value and Surplus-Value: Within the C'...C' circuit, the capital value (c+v) can be separated from the surplus-value (s) during the C'–M' phase, allowing the capitalist to first replace the capital value before realizing the surplus-value.

  • Divisibility of the Commodity Product: If the total commodity product is divisible into independent and homogeneous partial products, the capitalist can sell the capital value portion first before selling the surplus product.

  • Relationship to Individual and Social Capital: The C'...C' circuit not only represents the circuit of an individual industrial capital, but also the circuit of the total social capital, revealing how the movements of individual capitals are intertwined and conditioned by each other.

  • Inclusion of Consumption: The C'...C' circuit includes both productive consumption (by the capitalist) and individual consumption (by the workers and capitalists), as the commodity product can be destined for either purpose.

  • Expanded Reproduction: In the C'...C' circuit, expanded reproduction is possible if the surplus product contains the material elements necessary for additional capital, without requiring an increase in the value of capital.

  • Relationship to Quesnay's Tableau Économique: The C'...C' circuit forms the basis of Quesnay's Tableau Économique, which represents the circulation of the total social product.

Chapter 4: The Three Figures of the Circuit

Here are the key takeaways from the chapter:

  • The Three Circuits of Capital: The chapter outlines three main circuits of capital: (I) M–C…P…C′–M′, (II) P…Tc…P, and (III) Tc…P (C′). These circuits represent the different forms that capital can take (money capital, productive capital, and commodity capital) and the continuous movement between these forms.

  • Continuity of the Reproduction Process: The chapter emphasizes that the reproduction process of capital is continuous, with different parts of the capital simultaneously in different stages of the circuit. This continuity is necessary for the functioning of capitalist production.

  • Impact of Changes in Value: The chapter discusses how changes in the value of the elements of production (e.g., raw materials, labor-power) can impact the different circuits of capital in different ways. For example, a fall in the value of raw materials affects the M–C circuit differently than the P…P and C′–C′ circuits.

  • Relationship to Non-Capitalist Production: The circulation process of industrial capital intersects with commodity production from various non-capitalist modes of production (e.g., slavery, peasant production). This highlights how capitalist production is conditioned by these external modes of production.

  • Distinction between Commodity Circulation and Capital Circulation: While the circulation of capital involves the general metamorphosis of commodities, the chapter emphasizes that the circulation of capital cannot be fully explained by the laws of general commodity circulation. The circuits of individual capitals are interconnected in ways that go beyond simple commodity exchange.

  • Autonomization of Value: The chapter discusses how capital, as self-valorizing value, represents an "autonomization of value" that depends on the existence of wage-labor. This autonomization of value is manifested in the movement of capital through its different circuits.

  • Comparison of Supply and Demand: The chapter analyzes how the capitalist's demand (for means of production and labor-power) is always smaller than their supply of commodities, as the goal of capitalist production is to maximize the excess of supply over demand, i.e., surplus-value.

Chapter 5: Circulation Time

Here are the key takeaways from the chapter:

  • Production Time vs. Functioning Time: The production time of capital includes not only the time during which the means of production are actively functioning in the production process, but also the time during which they are held in reserve as conditions of the process, and the time during which the production process is interrupted.

  • Working Time vs. Production Time: The production time may be greater than the working time, as the production process can involve interruptions where the object of labor undergoes physical processes without the addition of human labor. This excess of production time over working time does not contribute to the formation of value or surplus-value.

  • Valorization during Production Time: As long as the capital is in the part of its production time that exceeds the working time, it does not absorb labor and therefore does not undergo valorization, even though this excess time may be inseparable from the valorization process.

  • Circulation Time and Production Time: Circulation time and production time are mutually exclusive. During its circulation time, capital does not function as productive capital and therefore produces neither commodities nor surplus-value. The longer the capital remains in the circulation sphere, the smaller the part that functions in the production sphere at any given time.

  • Circulation Time as a Negative Limit: The expansion and contraction of the circulation time acts as a negative limit on the contraction or expansion of the production time, or of the scale on which a capital of a given magnitude can function.

  • Circulation Agents vs. Production Agents: The agents of circulation (buyers and sellers) are distinct from the agents of production, and their functions should not be confused, even though the circulation agents must be paid by the production agents.

  • Realization of Surplus-Value in C'-M': The sale C'-M' is more important than the purchase M-C, as the former is the realization of the surplus-value contained in the commodity capital, while the latter is merely a necessary act for the valorization of the value expressed in M, not a realization of surplus-value.

  • Limits Imposed by the Commodity Form: The existence of commodities as use-values sets certain limits to the circulation of commodity capital C'-M'. If they do not enter into productive or individual consumption within a certain interval of time, they get spoiled and lose their exchange-value, which imposes an absolute limit on their circulation time.

Chapter 6: The Costs of Circulation

Here are the key takeaways from the chapter:

  • Buying and Selling Time: The time spent by capitalists on buying and selling their commodities is a necessary part of the reproduction process, but it does not create any value. It is a "work of combustion" that facilitates the change in form of value from commodity to money and back, but does not add to the magnitude of value.

  • Book-keeping: The labor and means of labor (e.g. pens, paper, desks) spent on book-keeping and price calculation are also necessary costs of circulation, but do not create value. They are a "symbolic reflection" of the movement of capital.

  • Money: The use of gold and silver as money represents a cost of circulation for society, as a portion of social wealth is confined to this unproductive form. The wear and tear of money also requires its steady replacement.

  • Stock Formation: The existence of capital in the form of commodity capital, i.e. the commodity stock, requires costs for storage, maintenance, and protection from decay. These costs enter into the value of the commodities, unlike the costs of buying/selling and book-keeping.

  • Voluntary vs. Involuntary Stock Formation: Voluntary stock formation arises from the need to have a certain volume of commodities on hand to satisfy demand, while involuntary stock formation is a consequence of the stagnation of circulation and unsaleability of commodities.

  • Transport Costs: The transport industry adds value to commodities through the value transferred from the means of transport and the value created by the labor of transport. The magnitude of this added value is inversely proportional to the productivity of the transport industry.

Chapter 8: Fixed Capital and Circulating Capital

Here are the key takeaways from the chapter:

  • Distinction between Fixed and Circulating Capital: Fixed capital refers to the part of the constant capital that maintains its specific use-form in the production process, such as factory buildings, machines, etc. Circulating or fluid capital refers to the other parts of the constant capital, such as raw materials and ancillaries, as well as the variable capital spent on labor-power. The distinction arises from the different ways in which these components of capital transfer their value to the product.

  • Turnover of Fixed and Circulating Capital: The fixed capital transfers its value to the product gradually, over a longer period, while the circulating capital transfers its entire value to the product in a single production cycle. The turnover time of the fixed capital encompasses several turnovers of the circulating capital.

  • Depreciation and Replacement of Fixed Capital: The fixed capital gradually loses value through wear and tear, and this depreciation is accounted for by adding a portion of the fixed capital's value to the price of the product. When the fixed capital is completely worn out, it must be replaced, either partially or entirely, through the accumulated depreciation fund.

  • Repair and Maintenance of Fixed Capital: In addition to depreciation, the fixed capital also requires regular repair and maintenance work, which involves additional capital outlay. This repair work is accounted for by adding an average annual repair cost to the price of the product.

  • Uneven Distribution of Repair Costs: The actual repair costs are unevenly distributed across the lifespan of the fixed capital, with more repairs needed as the capital ages. However, the average repair cost is added to the product price, leading to some capitalists receiving more and others less than their actual repair costs.

  • Distinction between Repairs and Replacement: The boundary between what constitutes repairs and what constitutes replacement of the fixed capital is often blurred, leading to disputes between capitalists and regulators over how to account for these expenses.

  • Partial and Gradual Reproduction of Fixed Capital: Within an entire industry or the economy as a whole, the fixed capital undergoes a process of partial and gradual reproduction, with components being replaced at different intervals, rather than the entire fixed capital being replaced at once.

Chapter 9: The Overall Turnover of the Capital Advanced. Turnover Cycles

  • Overall Turnover of Capital: The overall turnover of the capital advanced is the average turnover of its different component parts, which can be calculated by taking the average of the different turnover periods.

  • Qualitative Differences in Turnover: There are not only quantitative distinctions in the turnover of different components of capital, but also qualitative ones. Fluid capital transfers its entire value to the product and must be constantly replaced, while fixed capital transfers only a portion of its value and needs to be replaced at longer intervals.

  • Reducing Turnover to a Homogeneous Form: It is necessary to reduce the separate turnovers of the various parts of the fixed capital to a similar form of turnover, so that they differ only quantitatively in the duration of their turnover.

  • Turnover Exceeding Capital Advanced: Even if the greater part of the productive capital advanced consists of fixed capital with a long reproduction time, the capital value turned over during the year by way of repeated turnovers of the fluid capital may be greater than the total value of the capital advanced.

  • Turnover Cycle and Business Cycles: The cycle of related turnovers, extending over a number of years, within which the capital is confined by its fixed component, is one of the material foundations for the periodic cycle in which business passes through successive periods of stagnation, moderate activity, over-excitement, and crisis.

  • Actual and Apparent Variations in Turnover: Differences in the flow of particular parts of the fluid capital, brought about by payment periods and credit conditions, should be distinguished from turnovers arising from the nature of the capital. The credit system and commercial capital can modify the turnover of the individual capitalist, but at the level of society, they only modify it in so far as they speed up both consumption and production.

Chapter 10: Theories of Fixed and Circulating Capital. The Physiocrats and Adam Smith

Here are the key takeaways from the chapter:

  • Distinction between Fixed and Circulating Capital: The Physiocrats introduced the distinction between "avances primitives" (fixed capital) and "avances annuelles" (circulating capital), which was based on the different ways these elements of productive capital participate in the process of value-formation and transfer their value to the product.

  • Generalization of the Categories by Adam Smith: Adam Smith generalized the Physiocratic categories, applying them to all forms of productive capital, not just the farmer's capital. This led to the distinction between turnovers of varying times, where fixed capital has a longer turnover than circulating capital.

  • Confusion between Productive Capital and Capital in Circulation: Adam Smith confused the distinction between fixed and circulating capital, which arises from the different ways the elements of productive capital participate in the production process, with the distinctions of form that capital undergoes in its circuit through the production and circulation spheres (commodity capital and money capital).

  • Erroneous Examples and Definitions: Adam Smith's examples and definitions of fixed and circulating capital were flawed, as he included merchant's capital, which is not part of the production process, and failed to properly distinguish between the alterations suffered by elements of production in the labor process and the change of form pertaining to commodity circulation.

  • Omission of Labor-Power as a Component of Circulating Capital: Adam Smith incorrectly omitted labor-power from his list of components of circulating capital, instead including the worker's means of subsistence. This prevented him from fully grasping the distinction between variable and constant capital.

  • Physiocratic Influence on Smith's Conception: Adam Smith's conception of the part of capital advanced in wages as circulating capital was influenced by the Physiocratic doctrine, which saw the worker's means of subsistence, rather than labor-power itself, as the source of surplus-value.

  • Burial of the Distinction between Variable and Constant Capital: By defining the part of capital advanced in wages as circulating capital based on the turnover characteristic, rather than its role in the valorization process, Adam Smith made it difficult for his successors to perceive the distinction between variable and constant capital.

Chapter 11: Theories of Fixed and Circulating Capital. Ricardo

Here are the key takeaways from the chapter:

  • Distinction between Fixed and Circulating Capital: Ricardo introduces this distinction only to present the exceptions to the law of value, i.e., cases where the rate of wages affects prices. However, this distinction is confused with the distinction between constant and variable capital.

  • Conflation of Fixed/Circulating and Constant/Variable Capital: The differences in the degree of durability of fixed capital and the variations in the composition of capital in terms of constant and variable capital are taken as equivalent. This conflation obscures the real movement of capitalist production and the basis for understanding capitalist exploitation.

  • Disappearance of Capital Laid on Material of Labour: In Ricardo's analysis, the part of capital value laid out on material of labour (raw materials and ancillaries) completely vanishes, as it does not fit on the side of fixed capital or circulating capital.

  • Characteristic of Variable Capital: The characteristic feature of variable capital, that it valorizes itself and creates surplus-value, disappears when the portion of capital laid out on wages is considered solely from the standpoint of the circulation process and appears as circulating capital.

  • Durability of Means of Labour: The durability of the material from which the means of labour is made does not make it fixed capital in and of itself. The role it plays in the production process, as a means of labour, is what determines its character as fixed capital.

  • Derivation of Circulating Capital from Material Reality: If the portion of capital laid out on labour-power is considered exclusively from the standpoint of circulating capital, it is natural to derive the character of circulating capital from the material reality of variable capital, i.e., the means of subsistence.

  • Blurring of Boundaries: The boundary between quicker and slower perishability of capital components tends to get blurred, as the same things and classes of things can appear now as means of consumption, now as means of labour.

  • Contradictions in Ricardo's Analysis: Ricardo's confusion of fixed and circulating capital with constant and variable capital leads to errors in his investigation of how different proportions of the two influence the law of value and the degree to which a rise or fall in wages affects prices.

  • Fetishism in Bourgeois Economics: Bourgeois economics transforms the social, economic character that things are stamped with in the process of social production into a natural character arising from the material nature of these things.

  • Reduction of Distinctions: The distinction between variable and constant capital is eventually reduced completely to the distinction between fixed and circulating capital, leading to a failure to grasp the real distinction between constant and variable capital.

Chapter 12: The Working Period

Here are the key takeaways from the chapter:

  • Differences in the Duration of the Act of Production: The chapter discusses the differences in the duration of the act of production between different lines of business and even within the same branch of production. This difference is not related to the distinction between fixed and circulating capital.

  • Impact on the Speed of Turnover: The differing duration of the act of production leads to differences in the speed of turnover, even when the capital outlays are equal. In the case of a shorter production period, the capital can be reused more quickly, while in the case of a longer production period, the capital must be advanced for a longer time before it can be reused.

  • Working Day vs. Working Period: The chapter introduces the distinction between the working day, which refers to the length of time the worker must work, and the working period, which refers to the number of interconnected working days required to complete a finished product.

  • Impact of Interruptions: Interruptions and disturbances in the production process have a different impact on products that are discrete in nature (e.g., yarn) versus those that require a longer connected period of production (e.g., ships, buildings, railways). In the latter case, the means of production and labor already consumed may be wasted if the production is not carried further.

  • Differences in the Turnover of Fixed and Circulating Capital: The chapter explains how the fixed capital surrenders its value to the product in layers over the duration of the working period, while the circulating capital must be continuously renewed in the form of wages, raw materials, and ancillaries.

  • Suitability of Long-Term Projects for Capitalist Production: Large-scale projects with particularly long working periods are more suitable for capitalist production when capital is highly concentrated, and the credit system allows the capitalist to use other people's capital instead of their own.

  • Factors that Shorten the Working Period: Factors that can shorten the working period, such as cooperation, division of labor, and the application of machinery, are often associated with an increased outlay of fixed capital.

  • Limitations in Shortening the Working Period: In some branches of production, the working period is prescribed by specific natural conditions, and no shortening is possible through the means described above.

  • Impact of Delayed Reflux on Fixed and Circulating Capital: The delayed reflux of value has a different effect on fixed and circulating capital. While it does not necessitate a renewed outlay of fixed capital, it can render the circulating capital unable to function if it is tied up in unsold or unfinished products and there is no additional capital to renew it.

  • Replacement of Labor vs. Means of Production: The chapter provides examples from India illustrating that in some cases, it is more important to preserve the means of production (e.g., cattle) than to replace human labor, as the former is crucial for future cultivation and wealth.

Chapter 13: Production Time

Here are the key takeaways from the chapter:

  • Distinction between Production Time and Working Time: Production time refers to the entire duration for which capital is engaged in the production process, while working time refers only to the period during which active labor is being performed. The two do not always coincide.

  • Interruptions in the Production Process: In certain industries, the production process is interrupted by natural processes that require the product to undergo physical, chemical, or physiological changes without active labor being applied. Examples include wine fermentation, drying of pottery, and growth of crops.

  • Uneven Outlay of Circulating Capital: In industries with a divergence between production time and working time, the outlay of circulating capital is uneven over the course of the year, as the reflux or renewal of capital only occurs at specific intervals dictated by natural conditions.

  • Impact on Fixed Capital Utilization: The difference between production time and working time means that fixed capital, such as machinery and draft animals, may lie idle for extended periods, leading to a higher transfer of value to the product than if it were utilized continuously.

  • Importance in Agriculture: The distinction between production time and working time is particularly significant in agriculture, where the growing season is often much shorter than the full production period. This leads to uneven capital outlays and the need for supplementary cottage industries.

  • Timber Production and Cattle Raising: These industries require the maintenance of a reserve stock of growing timber or cattle that is only partially turned over each year, leading to extended turnover periods that make them unsuitable for private/capitalist production.

  • Productive Stocks: Certain industries require the accumulation of productive stocks, such as manure, feed, and tools, which represent potential productive capital that must be advanced for extended periods before entering the active production process.

  • Theories of Value: Attempts by economists like McCulloch and James Mill to reconcile production time diverging from working time with the labor theory of value are deemed "nonsensical" by Marx.

Chapter 14: Circulation Time

Here are the key takeaways from the chapter:

  • Circulation Time Impacts Turnover Period: The turnover time of capital is the sum of its production time and its circulation or rotation time. Differences in circulation times lead to differences in turnover periods for capital invested in different branches of industry.

  • Selling Time as a Key Component of Circulation Time: The selling time, or the period in which capital exists in the state of commodity capital, is a key component of the circulation time. Variations in selling time can arise from individual differences between capitalists in the same industry or from general market conditions.

  • Distance to Market as a Cause of Circulation Time Differences: The distance of the market where commodities are sold from their place of production is a permanently effective cause of differentiation in the selling time, and hence in the turnover time in general. Improvements in transportation can shorten the absolute circulation time but may not eliminate the relative differences.

  • Frequency of Transportation as a Circulation Time Determinant: The frequency with which means of transport function, such as the number of trains on a railway, can distribute the reflux of capital over shorter successive periods, thereby shortening the total circulation time and turnover.

  • Orientation to Local Markets and Circulation Time: Branches of production oriented to local outlets, such as breweries, develop most in major centers of population where the rapid turnover of capital can balance out increased costs.

  • Longer Circulation Times and Increased Risk: With longer circulation times, the risk of a change in price on the selling market rises due to the lengthening of the period in which this price change can occur.

  • Delivery Contracts and Turnover Time: Differences in turnover time can arise from the size of delivery contracts, which grow with the volume and scale of capitalist production. These differences arise from the circulation sphere but react directly back on the production sphere.

  • Money Capital Requirement and Circulation Time: A definite portion of the capital advanced must always exist in the form of money capital, continuously being transformed into productive capital and replenished from the realized commodity capital. The time required for this transformation is affected by the distance of the market.

  • Raw Material Purchase Periods and Circulation Time: The shorter or longer periods for which large quantities of raw materials are thrown onto the market affect the need to buy and hold these materials, increasing the mass of capital that must be advanced at one stroke and the time for which it must be advanced.

  • Speculative Holding of Products and Circulation Time: Speculative withholding of products from the market for longer or shorter periods in the form of potential commodity capital can also affect circulation time and turnover.

Chapter 15: Effect of Circulation Time on the Magnitude of the Capital Advanced

Here are the key takeaways from the chapter:

  • Continuous Production Requires Additional Capital: If production is to be continuous and uninterrupted, the capital advanced must be divided into two parts - one part for the working period and another part for the circulation period. This additional capital is needed to fill the gaps in the labor process caused by the circulation time.

  • Equality of Working and Circulation Periods: When the working period and circulation period are equal, or the circulation period is a simple multiple of the working period, the two capital portions (capital I and capital II) can relieve each other without intersecting, like independent private capitals.

  • Setting Free of Capital: When the working period is longer than the circulation period, or the circulation period is longer than the working period but not a simple multiple, a portion of the total capital is periodically set free at the end of each working period. This set-free capital is equal to the portion advanced for the circulation period or the excess of the circulation period over the working period.

  • Significance of Set-Free Capital: The setting-free of capital is the rule rather than the exception, as the equality of working and circulation periods is unlikely. This set-free capital, which exists in the form of money capital, plays a significant role in the credit system.

  • Effect of Changes in Circulation Time: A reduction in the circulation time leads to a portion of the capital being precipitated out in the form of money capital, which then enters the money market as additional capital. An extension of the circulation time requires additional capital to be obtained from the money market.

  • Effect of Changes in Prices: Changes in the prices of the elements of production or the product itself can also lead to the setting-free or precipitation of capital in the form of money capital, which then enters the money market.

  • Relationship between Set-Free Capital and Money Capital: The money capital that is set free is not necessarily the same part of the capital that always had to function in the money form. It can include both the variable capital needed for wages and a portion of the constant circulating capital.

Chapter 16: The Turnover of Variable Capital

Here are the key takeaways from the chapter:

  • Annual Rate of Surplus-Value: The annual rate of surplus-value is equal to the real rate of surplus-value (the ratio of surplus-value produced in a turnover period to the variable capital applied in that period) multiplied by the number of turnovers of the variable capital during the year. This annual rate will only be equal to the real rate if the variable capital turns over only once in the year.

  • Turnover of Individual Variable Capital: The variable capital advanced in each turnover period is not the same capital, but rather a newly produced replacement for the capital spent in the previous period. The difference between capital A (which turns over 10 times) and capital B (which turns over once) is that for A, the replacement value exists in the money form and can be re-applied as variable capital, while for B, the replacement value does not exist in the money form and additional capital must be advanced.

  • Social Perspective on Turnover: From the social perspective, the turnover of variable capital affects the money market and the availability of productive capital. Faster turnover allows the same amount of labor to be set in motion with less advanced money capital, increasing the annual rate of surplus-value. Slower turnover requires larger advances of money capital and can lead to disturbances in the money market and imbalances between supply and demand.

  • Determinants of Turnover Period: The length of the turnover period depends on the working period (determined by material conditions of production), the scale of production (a conventional factor), and the circulation period (affected by market conditions and the distance to markets). Variations in these factors lead to differences in the required advances of money capital and the annual rate of surplus-value.

Chapter 17: The Circulation of Surplus-Value

Here are the key takeaways from the chapter:

  • Variation in Turnover Period Affects Annual Rate of Surplus-Value: The variation in the turnover period of capital produces a variation in the annual rate of surplus-value, even with the mass of surplus-value annually produced remaining the same.

  • Capitalization of Surplus-Value: There is a necessary variation in the capitalization of surplus-value, in accumulation, and in the mass of surplus-value produced during the year, even with the rate of surplus-value remaining the same.

  • Steady Periodic Revenue vs. Anticipated Surplus-Value: Capitalist A has a steady periodic revenue and meets his own consumption during the year out of his production of surplus-value, while Capitalist B produces the same amount of surplus-value but it is not realized and must be anticipated.

  • Capitalized Surplus-Value as Part of Original Capital: A part of the capital needed for repairs and maintenance of fixed capital can be capitalized surplus-value, rather than part of the original capital advanced, for Capitalist A but not for Capitalist B.

  • Credit Complicates the Relationship between Original and Capitalized Capital: With the development of credit, the relationship between the capital originally advanced and the capitalized surplus-value becomes more intricate, as the capitalist may borrow part of the productive capital from a banker.

  • Accumulation as Expanded Reproduction: Accumulation is the transformation of surplus-value into capital, which results in the reproduction process on an expanded scale, either extensively or intensively.

  • Limits to Expanding Production: There are limits to how quickly the scale of production can be expanded, as certain improvements or extensions require a volume of additional capital that can only be supplied by several years' accumulation of surplus-value.

  • Accumulation of Money Capital: Besides real accumulation, there is also the accumulation of money, where a part of the surplus-value is set aside as latent money capital to be used as additional active capital later on.

  • Sources of Additional Money for Circulation: The additional money required for the circulation of an increased commodity mass with a greater total value can come from more economic use of the existing money in circulation, the transformation of money from hoard form into circulating form, or additional production of gold.

  • Storing Up of Money Capital: The storing up of money capital as a reserve fund represents a transformation of circulating money into latent money capital, not the addition of new money to the economy.

Chapter 19: Former Presentations of the Subject

Here are the key takeaways from the chapter:

  • Quesnay's Tableau économique: This shows how the annual result of national production, defined in terms of value, is distributed by circulation in such a way that simple reproduction can take place. It includes a constant capital part of the annual product that does not circulate but remains with the producers.

  • The Physiocratic system: This is the first systematic conception of capitalist production, with the capitalist farmer as the representative of industrial capital leading the economic movement. Agriculture is pursued on a capitalist footing, with wage-labourers as the immediate tillers of the soil.

  • Adam Smith's retrogression: While Smith elaborated on Quesnay's analyses, he also fell back into the errors of the Physiocrats, such as claiming that the farmer produces greater value than any other capitalist because nature labours along with man in agriculture.

  • Smith's resolution of exchange-value into v+s: Smith's dogma that the price or exchange-value of every commodity can be resolved into wages, profit, and rent can be reduced to the thesis that commodity value = v+s, i.e., the value of the variable capital advanced, plus the surplus-value.

  • Smith's treatment of constant capital: Smith fails to account for the constant capital component of commodity value, instead trying to conjure it out of commodity value by claiming that the price of commodities can be resolved into the three revenues of wages, profit, and rent.

  • Smith's confusion of revenue and capital: Smith identifies commodity production in general with capitalist commodity production, leading him to transform the various factors of the labour process into the "component parts" of commodity value, which are then seen as the "sources of all value."

  • Later writers' acceptance of Smith's theory: Subsequent economists like Ricardo, Say, and Mill largely accepted Smith's theory of the resolution of commodity price into wages and surplus-value, with some minor modifications, leading to the persistence of Smith's confusion in political economy.

Chapter 20: Simple Reproduction

Here are the key takeaways from the chapter:

  • Reproduction of the Social Capital: The chapter analyzes the reproduction of the social capital, which is the total capital of which individual capitals are only fractions. This involves understanding the characteristics that distinguish the reproduction process of the social capital from that of an individual capital.

  • Two Departments of Social Production: The society's total product is divided into two great departments: I. Means of production and II. Means of consumption. Each department has its own variable capital (v) and surplus-value (s) components.

  • Exchange between the Two Departments: Department I(v+s) exchanges with Department IIc, where the variable capital and surplus-value of I are exchanged for the constant capital of II. This exchange is mediated by monetary circulation.

  • Exchange within Department II: Department II is further divided into IIa (necessary means of consumption) and IIb (luxury items). The variable capital and surplus-value of IIb are realized through an indirect exchange with the surplus-value of IIa.

  • Role of Money in the Exchanges: Money plays a crucial role in mediating the exchanges between the two departments and within Department II. The reflux of money to its starting point is an important aspect of these exchanges.

  • Replacement of the Fixed Capital: The replacement of the fixed capital component of the constant capital in Department II is a key issue. This involves the gradual accumulation of money to replace the worn-out fixed capital in kind.

  • Reproduction of the Money Material: The annual reproduction of gold, the money material, is an important factor that affects the overall reproduction process. New gold production adds to the money in circulation.

  • Critique of Destutt de Tracy's Theory: The chapter provides a detailed critique of Destutt de Tracy's flawed theory of how capitalists get rich, which is based on the idea of selling commodities above their value.

Key terms and concepts:

  • Social capital: The total capital of which individual capitals are fractions.
  • Constant capital (c): The value of the means of production used in production.
  • Variable capital (v): The value of the labor-power purchased by the capitalist.
  • Surplus-value (s): The value created by the workers beyond what they are paid.
  • Fixed capital: The means of production that transfer their value to the product gradually over multiple production cycles.
  • Circulating capital: The means of production that are fully consumed in a single production cycle.
  • Money material: The commodity, in this case gold, that serves as money.

Chapter 21: Accumulation and Reproduction on an Expanded Scale

Here are the key takeaways from the chapter:

  • Hoard Formation: The capitalist accumulates surplus-value in the form of money, withdrawing it from circulation and storing it up as a hoard. This hoard formation is not an element of real reproduction, but rather a precondition for the expansion of production.

  • Accumulation in Department I: Capitalists in Department I (producers of means of production) sell their surplus product to other capitalists in Department I, who then use this to expand their constant capital. This expansion of constant capital in Department I is financed by the hoard formation of the selling capitalists.

  • Additional Constant Capital: The surplus product of Department I, which represents the surplus-value of that department, is transformed into additional constant capital for Department I. This expansion of constant capital in Department I is facilitated by the hoard formation of the selling capitalists.

  • Additional Variable Capital: The expansion of production in Department I also requires an increase in variable capital to employ more workers. This additional variable capital is obtained from the surplus product of Department II (producers of means of consumption), which the workers in Department I use to purchase means of subsistence.

  • Accumulation in Department II: Department II must also accumulate, both to expand its own constant capital and to provide the additional means of subsistence required by the expanding variable capital in Department I. This accumulation in Department II is financed by the sale of its surplus product to Department I.

  • Unbalanced Accumulation: The rate of accumulation in the two departments need not be equal. If Department I accumulates at a faster rate, it may not be able to fully realize its surplus product in Department II, leading to relative overproduction. Conversely, if Department II accumulates too slowly, it may not be able to fully replace its constant capital from Department I, disrupting the reproduction process.

  • Role of Money: Money plays a crucial role in the process of accumulation, both as a means of circulation and as potential money capital that can be hoarded and then used to finance the expansion of production. The quantity of money in the economy must be sufficient to facilitate both the active circulation of commodities and the formation of hoards.

  • Contradictions and Crises: The process of accumulation contains inherent contradictions that can lead to crises, such as the unbalanced growth of the two departments, the formation of hoards, and the artificial nature of the credit system. These contradictions make the normal course of reproduction an "accident" rather than a necessary outcome.


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