Central Indiana Radical Reading Group & Liberation School
Notes for class 2 (ch. 4-9)
Chapter 4: The general formula for capital
Marx shows how money arises from the circulation of commodities, which is really the circulation of congealed labor-power. Now he is going to show how capital arises out of money.
Money is the final result of the process of circulation, and it is the starting point of capitalism. It is “the first form in which capital appears” (145).
Not all capital is money and not all money is capital. The difference between money as money and money as capital is found in the form of their circulation. There are two forms of circulation, the first and simplest is
CMC, selling in order to buy. There is another alongside it, however, M-C-M, or buying in order to sell. Money that circulates in this way “is already potentially capital” (146, emphasis added).
In C-M-C equivalents are exchanged. M-C-M wouldn’t make sense in this way. “The miser’s plan would be far simpler and surer; he sticks to his $100 instead of exposing it to the dangers of circulation” (146).
In C-M-C, the starting point and end point is the commodity and money serves as a mere intervention, a mere means of facilitating the exchange equivalents. The money spent is converted to a UV. C-M-C therefore is driven by UV.
“In the inverted form, M-C-M, on the contrary, the buyer lays out money in order that, as a seller, he may recover money. By the purchase of his commodity he throws money into circulation, in order to withdraw it again by the sale of the same commodity. He lets the money go, but only with the sly intention of getting back again. The money, therefore, is not spent, it is merely advanced” (147).
Here we get to a definition of capitalism: “The circuit C-M-C starts with one commodity, and finishes with another, which falls out of circulation and into consumption. Consumption, the satisfaction of wants, in one word, use-value, is its end and aim. 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” (148). This distinction is critical in determining whether some process is capitalist or not: is it motivated by UV or EV? Is it for, in other words, satisfying needs and desires, or satisfying the quest for EV—money?
C-M-C is motivated by a change in qualities; M-C-M by a change in quantities. We get to the definition of surplus value on p. 149: “The exact form of the process is therefore M-C-M/, where M/ = M+ΔM = 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” (149).
Selling in order to buy (C-M-C) “is kept within bounds by the very object it aims at, namely, consumption or the satisfaction of definite wants, an aim that lies altogether outside the sphere of circulation” (149). Yet when buying in order to sell, the process “becomes interminable.” There is no end to this expansion. Capital can be defined as “value in motion” or the “augmentation of value.”
“The circulation of capital has therefore no limits” (150). This is now the fourth time in the book that the idea of breaking through limits and barriers surfaces.
When you advance M and it comes back as M’, you can’t distinguish it ΔM (150). This is important if we consider the section on the fetishism of the commodity (and its secret!) in chapter 1. Capital appears as money—there is a money fetish. The circulation process (and later the production process) totally disappears from sight and everything takes the phenomenal form of money.
Another idea that resurfaces here (for the third time) is the structural determination of class. Class, in other words, isn’t an identity but a structural position. To be a capitalist is to be “capital personified and endowed with consciousness and a will” (151). The capitalist has no concern for UV, only for EV: “The 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” (151).
If we consider M-C-M, we see that capital is money and capital is commodities. But “value is here the active factor in a process, in which, while constantly assuming the form in turn of money and commodities, it at the same time changes in magnitude, differentiates itself by throwing off surplus-value from itself; the original value, in other words, expands spontaneously” (152). Obviously Marx is tongue-in-cheek referring to how it appears. The “occult quality of being able to add value to itself” is only in the realm of appearances, for he obviously doesn’t believe in the supernatural. In actuality, M needs to take the form of C to become M’; there is nothing occult about it.
We get another definition of capital on the last page (153): “Value, therefore now, becomes value in process, money in process, and, as such, capital.”
M-C-M’ is, as such, the general formula of capital, whether it be merchant, industrial, or finance (interest-bearing) “as it appears prima facie [on its face] within the sphere of circulation” (153).
Chapter 5: Contradictions in the general formula of capital
How is it that C-M-C to M-C-M can be such a radical change? If we are within the sphere of circulation where equivalents are exchanged (our assumption), then how can M’ come about?
When exchanging commodities and money, we do make a gain, but it is a purely qualitative one (I get a UV I didn’t have before, and you get money which enables you to buy another UV (155). In this sense, “there is good ground for saying that ‘exchange is a transaction by which both sides gain’” (155).
There is no increase in EV, however. Only “a metamorphosis, a mere change in the form of the commodity” (156). There is no increase in social labor. Whenever one explains “the cirulcation of commodities as a source of surplus value,” there is a “mixing up of use-value and exchange-value” (157).
What if we assume that non-equivalents are exchanged? (158)
“Suppose… that by some inexplicable privilege, the seller in enabled to sell his commodities above their value, what is worth 100 for 110.” They gain an SV of 10. But then they are a buyer, and the seller they confront now is selling them above their value also. “The net result is, that all owners of commodities sell their goods to one another at 10% above their value, which comes precilsey to the same as if they sold them at their true value” (158). The prices rise but the values remain the same.
Marx then makes the opposite assumption, that we buy C for under their value. In this case, you already lost 10% as a buyer.
SV thus can’t be explained by either assumption. Neither can it be explained by “a class that only buys and does not sell” (159).
Marx then assumes we are dealing with individuals and not “actors as personifications” (160). In this case, one individual gets over on another, but again there is no increase in V.
“Turn and twist then as we may, the fact remains unaltered. If equivalents are exchanged, no surplus-value results, and if non-equivalents are exchanged, still no surplus-value. Circulation… begets no value” (161).
Capital can’t be produced by circulation, but it can’t be apart from it. “It must have its origin both in circulation and yet not in circulation” (163). To solve this contradiction, “Our friend, Moneybags, who has as yet is only an embryo capitalist, must buy his commodities at their value, must sell them at their value, and yet at the end of the process must withdraw more value from circulation that he threw into it at starting” (163).
Chapter 6: The buying and selling of LP
Our friend moneybags has to find some C in circulation whose UV creates V. This is “such a special commodity in capacity for labour or labour-power” (166).
Definition of LP on 164.
In order for LP to be on market, 1) worker must possess their own labor (be “free”), which means that the worker can only sell LP for a definite amount of time; 2 the worker must not be able to sell C in which the LP is embedded and “must be obliged to offer for sale as a commodity that very labour-power, which exists only in his living self” (165).
The worker must be “free in the double sense, that as a free man he can dispose of his labour-power as his own commodity, and that… he has no other commodity for sale” (166). This is freedom under capitalism.
This is not a natural but a historical relation. Capital “can spring into life, only when the owner of the means of production and subsistence meets in the market with the free labourer selling his labour-power. And this one historical condition comprises a world’s history” (167).
How is the V of LP determined? The socially-necessary labor-time required for its production and reproduction. How is this determined? By nature and class struggle (168). Education, training, etc. also goes into this. In general, the value of labor-power is a combination of those commodities necessary for the reproduction of the worker, which is not a fixed price per se.
The minimum limit is determined by the minimum necessary for physical existence. But it can go below this. The state can step in, for example. This is what happens when workers need state benefits.
Another way LP is a peculiar commodity is that the laborer advances their UV to the capitalist (and receives no interest): “the labourer allows the buyer to consume it before he receives payment of the price; he everywhere gives credit to the capitalist” (170).
What does the consumption of LP look like? Like all C this happens outside the sphere of circulation, so we must go with “Mr. Moneybags” and the worker into “the hidden abode of production” (172). Leaving circulation means leaving “freedom, equality, property, and Bentham.” There is no equality between capitalists and workers.
Chapter 7: The labour-process
Marx first looks at labor in general (abstracted from capitalist mode of production). Labor is defined as a process between nature and people, it is “acting on the external world and changing it,” which therefore—and this is important—“changes his own nature” (173). In other words, there is no real dichotomy here between “nature” and “humanity.” It isn’t humans dominating nature, but transforming it. As early as The German Ideology, Marx and Engels acknowledged that there was no longer any such thing as nature that was distinct from people. This is key a foundation for environmental policy under socialism.
All things act on and with nature, but only with human labor do “we get a result that already existed in the imagination of the labourer at its commencement” (174). Note: this actually isn’t true, but it doesn’t matter to the argument.
There are three components of the labor process: 1) labor, 2) the subject (what is being worked on), 3) instruments.
Raw material is that which “has undergone some alteration by means of labor” (174). An instrument of work is something independent of the worker.
“It is not the articles made, but how they are made, and by what instruments, that enables us to distinguish different economic epochs” (175).
We have means of production and LP.
Means of production include instruments, raw materials, auxiliary (or accessory materials). The same object can be different things depending on its use. Marx gives the example of cattle, which can be raw material and means of production. When something enters into the production process, it isn’t a product but a factor in the production process. That things are products of previous labor doesn’t matter.
A machine not being put to use is useless. “Living-labour must seize upon these things and rouse them from their death-sleep change them from mere possible use-values into real and effective ones” (178).
All labor is consumptive, but productive consumption is when consumption enables production; individual consumption is when the material factors of production go into the worker themselves (179).
Now we go back to our embryonic capitalist, Mr. Moneybags. Labor under capitalism looks like this:
1) laborer works under the capitalist’s control; 2) the product is the property of the capitalist.
Now we turn to labor as the production of value (e.g., UV & EV). The capitalist has to buy means of production and labor-power at their value.
“While the labourer is at work, his labour constantly undergoes a transformation: from being in motion, it becomes an object without motion; from being the labourer working it becomes the thing produced” (184). In other words, the UV of the worker is congealing V in the commodity.
At the end of the day, “our capitalist stares in astonishment. The value of the product is exactly equal to the value advanced. The value so advanced has not expanded, no surplus-value has been created, and consequently money has not been converted into capital.” (158).
In “vulgar economy” we can’t understand the production of SV. The differences hinges on this: the difference between the EV and UV of LP: “But the past labour that is fembodied in the labour power, and the living labour that it can call into action; the daily cost of maintaining it, and its daily expenditure in work, are two totally different things. The former determines the exchange-value of the labour-power, the latter is its use-value” (188). This is Marx’s contribution: the theory of surplus-value.
The particular UV of LP is not only to create value, but to create more value than it has. Here, we are still operating with the exchange of equivalents.
“If we now compare the two processes of producing value and of creating surplus-value, we see that the latter is nothing but the continuation of the former beyond a definite point” (189).
Chapter 8: Constant capital and variable capital
In the production process the worker both conserves and adds value. The value conserved is constant capital, the value transformed is variable. These are inseparable, but adding value, the existing value is preserved.
Labor “raises, by mere contact, the means of production from the dead, makes them living factors of the labour-process, and combines with them to form the new product” (194).
The EV of LP is independent of its UV. If the productivity of labor is increased, more V is transferred.
Means of production never transfer more value to the product than they lose. “It helps create use-value without contributing to the formation of exchange-value” (197). Marx uses a straight-line depreciation here. In other words, if I use a $1000 computer to produce articles, and the computer lasts 1000 days, every day $1 of value is transferred. If a faster computer is produced during this time, the depreciation will increase because the new computer will be decreasing socially-necessary labor-time. (203)
Definition of constant and variable capital on p. 202. Variable capital is variable because it “may itself vary, may be more or less according to circumstances.”
Chapter 9: The rate of surplus-value
The capital of C is made up of 2 parts: 1) money spent on MOP and 2) money spent on labor power.
Rate of surplus value: S/V (Surplus/Variable capital) (p. 207). This does not include constant capital. The rate of SV is the workers’ point of view: “
The laborer during one part of the day produces value of LP; in the other portion produces SV. Necessary labour-time: Now it means that portion of the working day where the worker reproduces the value of their labor-power. The second part is surplus labor-time (surplus labor), and here the worker “creates no value for himself” (209).
“The rate of surplus-value is therefore an exact expression for the degree of exploitation of labour-power by capital, or of the labourer by the capitalist” (209).
The rate of profit is different: S/V+C – necessarily lower.
Mr. Senior’s ‘last hour:’ Manchester brought Nassau W. Senior, an English economic “scientist,” who argued against the Factory Act legislation that set legal limits to working day. He tried to show that this would take away the “last hour” in which surplus-value was produced. This is absurd because there is a ratio between necessary and surplus-labor, so decreasing the overall working-day would not impact the ratio.