The difficulty is solved very easily if we remember that the entire commodity-product I in its bodily form consists of means of production, i.e., of the material elements of the constant capital itself. We meet here the same phenomenon which we witnessed before under II, only in a different aspect. In the case of II the entire commodity-product consisted of articles of consumption. Hence one portion of it, measured by the wages plus surplus-value contained in this product, could be consumed by its own producers. Here, in the case of I, the entire product consists of means of production, of buildings, machinery, vessels, raw and auxiliary materials, etc. One portion of them, namely that replacing the constant capital employed in this sphere, can therefore immediately function anew in its bodily form as a component of the productive capital: So far as it goes into circulation, it circulates within class I. In II a part of the commodity-product is individually consumed in kind by its own producers while in I a portion of the product is productively consumed in kind by its capitalist producers. In the part of the commodity-product I equal to 4,000c the capital-value consumed in this category re-appears, and does so in a bodily form in which it can immediately resume its function of productive constant capital. In II that portion of the commodity-product of 3,000 whose value is equal to the wages plus the surplus-value (equal to 1,000) passes directly into the individual consumption of the capitalists and labourers of II, while on the other hand the constant capital-value of this commodity-product (equal to 2,000) cannot re-enter the productive consumption of the II capitalists but must be replaced by exchange with I. In I, on the contrary, that portion of its commodity-product of 6,000 whose value is equal to the wages plus the surplus-value (equal to 2,000) does not pass into the individual consumption of its producers, and cannot do so on account of its bodily form. It must first be exchanged with II. Contrariwise the constant portion of the value of this product, equal to 4,000, exists in a bodily form in which taking the capitalist class I as a whole it can immediately resume its function of constant capital of that class. In other words, the entire product of department I consists of use-values which, on account of their bodily form, can under a capitalist mode of production serve only as elements of constant capital. Hence one-third (2,000) of this product of 6,000 replaces the constant capital of department II, and the other two thirds the constant capital of department I. The constant capital I consists of a great number of different groups of capital invested in the various branches of production of means of production, so much in iron works, so much in coal-mines, etc. Every one of these groups of capital, or every one of these social group capitals, is in its turn composed of a larger or smaller number of independently functioning individual capitals. In the first place, the capital of society, for instance 7,500 (which may mean millions, etc.) is composed of various groups of capital; the social capital of 7,500 is divided into separate parts, every one of which is invested in a special branch of production; each portion of the social capital-value invested in some particular branch of production consists, so far as its bodily form is concerned, partly of means of production required in that particular sphere of production, partly of the labour-power needed in that business and trained accordingly, variously modified by division of labour, according to the specific kind of labour to be performed in each individual sphere of production. Each portion of social capital invested in any particular branch of production in its turn consists of the sum of the individual capitals invested in it and functioning independently. This patently applies to both departments, I as well as II. As for the constant capital-value re-appearing in I in the form of its commodity-product, it re-enters in part as means of production into the particular sphere of production (or even into the individual business) from which it emerges as product; for instance corn into the production of corn, coal into the production of coal, iron in the form of machines into the production of iron, etc. However since the partial products constituting the constant capital-value I do not return directly to their particular or individual sphere of production, they merely change their place. They pass in their bodily form to some other sphere of production of department I, while the product of other spheres of production of department I replaces them in kind. It is merely a change of place of these products. All of them re-enter as factors replacing constant capital in I, only instead of the same group of I they enter another. Since an exchange takes place here between the individual capitalist of I, it is an exchange of one bodily form of constant capital for another bodily form of constant capital, of one kind of means of production for other kinds of means of production. It is an exchange of the different individual parts of constant capital I among themselves. Products which do not serve directly as means of production in their own sphere are transferred from their place of production to another and thus mutually replace one another. In other words (similarly to what we saw in the case of the surplus-value II), every capitalist I draws from this quantity of commodities, proportionally to his share in the constant capital of 4,000, the means of production required by him. If production were socialised instead of capitalistic, these products of department I would evidently just as regularly be redistributed as means of production to the various branches of this department, for purposes of reproduction, one portion remaining directly in that sphere of production from which it emerged as a product, another passing over to other places of production, thereby giving rise to a constant to-and-fro movement between the various places of production in this department. On the assumption of simple reproduction the total value of the annually produced articles of consumption is therefore equal to the annual value-product, i.e., equal to the total value produced during the year by social labour, and this must be so, because in simple reproduction this entire value is consumed. The total social working-day is divided into two parts: 1) Necessary labour which creates in the course of the year a value of 1,500v; 2) surplus-labour, which creates an additional value, or surplus-value, of 1,500s. The sum of these values, 3,000, is equal to the value of the annually produced articles of consumption 3,000. The total value of the articles of consumption produced during the year is therefore equal to the total value produced by the total social working-day during the year, equal to the value of the social variable capital plus the social surplus-value, equal to the total new product of the year. But we know that although these two magnitudes of value are equal the total value of commodities II, the articles of consumption, is not produced in this department of social production. They are equal because the constant capital-value re-appearing in II is equal to the value newly produced by I (value of variable capital plus surplus-value); therefore I(v + s) can buy the part of the product of II which represents the constant capital-value for its producers (in department II). This shows, then, why the value of the product of capitalists II, from the point of view of society, may be resolved into v + s although for these capitalists it is divided into c + v + s. This is so only because IIc is here equal to I(v + s), and because these two components of the social product interchange their bodily forms by exchange, so that after this transformation II exists once more in means of production and I(v + s) in articles of consumption. And it is this circumstance which induced Adam Smith to maintain that the value of the annual product resolves itself into v + s. This is true 1) only for that part of the annual product which consists of articles of consumption; and 2) it is not true in the sense that this total value is produced in II and that the value of its product is equal to the value of the variable capital advanced in II plus the surplus-value produced in II. It is true only in the sense that II(c + v + s) is equal to II(v + s) + I(v + s), or because II is equal to I(v + s). It follows furthermore: The social working-day (i.e., the labour expended by the entire working-class during the whole year), like every individual working-day, breaks up into only two parts, namely into necessary labour and surplus-labour, and the value produced by this working-day consequently likewise resolves itself into only two parts, namely into the value of the variable capital, or that portion of the value with which the labourer buys the means of his own reproduction, and the surplus-value which the capitalist may spend for his own individual consumption. Nevertheless, from the point of view of society, one part of the social working-day is spent exclusively on the production of new constant capital, namely of products exclusively intended to function as means of production in the labour-process and hence as constant capital in the accompanying process of self-expansion of value. According to our assumption the total social working-day presents itself as a money-value of 3,000, only one-third of which, or 1,000, is produced in department II which manufactures articles of consumption, that is, the commodities in which the entire value of the variable capital and the entire surplus-value of society are ultimately realised. Thus, according to this assumption, two-thirds of the social working-day are employed in the production of new constant capital. Although from the standpoint of the individual capitalists and labourers of department I these two-thirds of the social working-day serve merely for the production of variable capital-value plus surplus-value, the same as the last third of the social working-day in department II, still from the point of view of society and likewise of the use-value of the product, these two-thirds of the social working-day produce only replacement of constant capital in the process of productive consumption or already so consumed. Also when viewed individually these two-thirds of the working-day, while producing a total value equal only to the value of the variable capital plus surplus-value for the producer, nevertheless do not produce any use-values of a kind on which wages or surplus-value could be expended; for their products are means of production. It must be noted in the first place that no portion of the social working-day, whether in I or in II, serves for the production of the value of the constant capital employed and functioning in these two great spheres of production. They produce only additional value, 2,000 I(v + s) + 1,000 II(v + s), in addition to the value of the constant capital equal to 4,000 Ic + 2,000 IIc. The new value produced in the form of means of production is not yet constant capital. It merely is intended to function as such in the future. The entire product of II the articles of consumption viewed concretely as a use-value, in its bodily form, is a product of the one-third of the social working-day spent by II. It is the product of labour in its concrete form such as the labour of weaving, baking, etc., performed in this department the product of this labour, inasmuch as it functions as the subjective element of the labour-process. As to the constant portion of the value of this product II, it re-appears only in a new use-value, in a new bodily form, the form of articles of consumption, while it existed previously in the form of means of production. Its value has been transferred by the labour-process from its old bodily form to its new bodily form. But the value of these two-thirds of the product-value, equal to 2,000, has not been produced in this year s self-expansion process of II. Just as from the point of view of the labour-process, the product of II is the result of newly functioning living labour and of the assumed means of production assigned to it, in which that labour materialises itself as in its objective conditions, so, from the point of view of the process of self-expansion, the value of the product of II, equal to 3,000, is composed of a new value (500v + 500s = 1,000) produced by the newly added one-third of the social working-day and of a constant value in which are embodied two-thirds of a past social working-day that had elapsed before the present process of production of II here under consideration. This portion of the value of the II product finds expression in a portion of the product itself. It exists in a quantity of articles of consumption worth 2,000, or two-thirds of a social working-day. This is the new use-form in which this value-portion re-appears. The exchange of part of the articles of consumption equal to 2,000 IIc for means of production of I equal to I (1,000v + l,000s) thus really represents an exchange of two-thirds of an aggregate working-day which do not constitute any portion of this year s labour, and elapsed before this year for two-thirds of the working-day newly added this year. Two-thirds of this year s social working-day could not be employed in the production of constant capital and at the same time constitute variable capital-value plus surplus-value for their own producers unless they were to be exchanged for a portion of the value of the annually consumed articles of consumption, in which are incorporated two-thirds of a working-day spent and realised before this year. It is an exchange of two-thirds of this year s working-day for two-thirds of a working-day spent before this year, an exchange of this year s labour-time for last year s. This explains the riddle of how the value-product of an entire social working-day can resolve itself into variable capital-value plus surplus-value, although two-thirds of this working-day were not expended in the production of articles in which variable capital or surplus-value can be realised, but rather in the production of means of production for the replacement of the capital consumed during the year. The explanation is simply that two-thirds of the value of the product of II, in which the capitalists and labourers of I realise the variable capital-value plus surplus-value produced by them (and which constitute two-ninths of the value of the entire annual product), are, so far as their value is concerned, the product of two-thirds of a social working-day of a year prior to the current one. The sum of the social product I and II means of production and articles of consumption is indeed, viewed from the standpoint of their use-value, in their concrete, bodily form, the product of this year s labour, but only to the extent that this labour itself is regarded as useful and concrete and not as an expenditure of labour-power, as value-creating labour. And even the first is true only in the sense that the means of production have transformed themselves into new products, into this year s products solely by dint of the living labour added on to them, operating on them. On the contrary, this year s labour could not have transformed itself into products without means of production independent of it, without instruments of labour and materials of production. The entire annual social product here contains three social working-days, each of one year. The value expressed by each one of these working-days is 3,000, so that the value expressed by the total product is equal to 3 3,000, or 9,000. Furthermore the following portions of this working time have elapsed prior to the one-year process of production, the product of which we are now analysing: In department I four-thirds of a working-day (with a product worth 4,000), and in department II two-thirds of a working-day (with a product worth 2,000), making a total of two social working-days with a product worth 6,000. For this reason 4,000 Ic + 2,000 IIc = 6,000c figure as the value of the means of production, or the constant capital-value re-appearing in the total value of the social product. Furthermore one-third of the social working-day of one year newly added in department I is necessary labour, or labour replacing the value of the variable capital of 1,000 I and paying the price of the labour employed by I. In the same way one-sixth of a social working-day in II is necessary labour with a value of 500. Hence 1,000 Iv + 500 IIv = 1,500v, expressing the value of one half of the social working-day, is the value-expression of the first half of the aggregate working-day added this year and consisting of necessary labour. Finally, in department I one-third of the aggregate working-day, with a product worth 1,000, is surplus-labour, and in department II one-sixth of the working-day, with a product worth 500, is surplus-labour. Together they constitute the other half of the added aggregate working-day. Hence the total surplus-value produced is equal to l,000 Is + 500 IIs, or 1,500s. Thus: The constant capital portion of the value of the social product (c): Two working-days expended prior to the process of production; expression of value = 6,000. Necessary labour (v) expended during the year: One half of a working-day expended on the annual production; expression of value 1,500. Surplus-labour (s) expended during the year: One half of a working-day expended on the annual production; expression of value = 1,500. Value produced by annual labour (v + s) = 3,000. Total value of product (c + v + s) = 9,000. The difficulty, then, does not consist in the analysis of the value of the social product itself. It arises in the comparison of the component parts of the value of the social product with its material constituents. The constant, merely re-appearing portion of value is equal to the value of that part of this product which consists of means of production and is incorporated in that part. The new value-product of the year, equal to v + s, is equal to the value of that part of this product which consists of articles of consumption and is incorporated in it. But with exceptions of no consequence here, means of production and articles of consumption are wholly different kinds of commodities, products of entirely different bodily or use-forms, and, therefore, products of wholly different classes of concrete labour. The labour which employs machinery in the production of means of subsistence is vastly different from the labour which makes machinery. The entire aggregate annual working-day, whose value-expression is 3,000, seems spent in the production of articles of consumption equal to 3,000, in which no constant portion of value re-appears, since these 3,000, equal to 1,500v + 1,500s, resolve themselves only into variable capital-value and surplus-value. On the other hand the constant capital-value of 6,000 re-appears in a class of products quite different from articles of consumption, namely in means of production, while as a matter of fact no part of the social working-day seems spent in the production of these new products. It seems rather that the entire working-day consists only of classes of labour which do not result in means of production but in articles of consumption. This mystery has already been cleared up. The value-product of the year s labour is equal to the value of the products of department II, to the total value of the newly produced articles of consumption. But the value of these products is greater by two-thirds than that portion of the annual labour which has been expended in the sphere of production of articles of consumption (department II). Only one-third of the annual labour has been expended in their production. Two-thirds of this annual labour have been expended in the production of means of production, that is to say, in department I. The value-product created during this time in I, equal to the variable capital-value plus surplus-value produced in I, is equal to the constant-capital-value of II re-appearing in articles of consumption of II. Hence they may be mutually exchanged and replaced in kind. The total value of the articles of consumption of II is therefore equal to the sum of the new value-product of I and II, or II(c + v + s) equal to I(v + s) + II(v + s), hence equal to the sum of the new values produced by the year s labour in the form of v plus s. On the other hand the total value of the means of production (I) is equal to the sum of the constant capital-value re-appearing in the form of means of production (I) and in that of articles of consumption (II); in other words, equal to the sum of the constant capital-value re-appearing in the total product of society. This total value is equal in terms of value to four-thirds of a working-day preceding the process of production of I and two-thirds of a working-day preceding the process of production of II, in all equal to two aggregate working-days. The difficulty with the annual social product arises therefore from the fact that the constant portion of value is represented by a wholly different class of products means of production than the new value v + s added to this constant portion of value and represented by articles of consumption. Thus the appearance is created, so far as value is concerned, that two-thirds of the consumed mass of products are found again in a new form as new product, without any labour having been expended by society in their production. This is not so in the case of an individual capital. Every individual capitalist employs some particular concrete kind of labour, which transforms the means of production peculiar to it into a product. Let for instance the capitalist be a machine-builder, the constant capital expended during the year 6,000c, the variable 1,500v, the surplus-value 1,500s, the product 9,000, the product, say, 18 machines of 500 each. The entire product here exists in the same form, that of machines. (If he produces various kinds, each kind is calculated separately.) The entire commodity-product is the result of the labour expended during the year in machine-building; it is a combination of the same concrete kind of labour with the same means of production. The various portions of the value of the product therefore present themselves in the same bodily form: 12 machines embody 6,000c, 3 machines 1,500v, 3 machines 1,500s. In the present case it is evident that the value of the 12 machines is equal to 6,000c, not because there is incorporated in these 12 machines only labour performed previously to the manufacture of these machines and not labour expended on building them. The value of the means of production for 18 machines did not of itself become transformed into 12 machines but the value of these 12 machines (consisting itself of 4,000c + 1,000v + 1,000s) is equal to the total value of the constant capital contained in the 18 machines. The machine-manufacturer must therefore sell 12 of the 18 machines in order to replace his expended constant capital, which he requires for the reproduction of 18 new machines. On the contrary, the thing would be inexplicable if in spite of the fact that the labour expended was employed solely in the manufacture of machines, the result were to be: On the one hand 6 machines equal to 1,500v + 1,500s, on the other iron, copper, screws, belts, etc., of a value amounting to 6,000c, i.e., the means of production of the machines in their bodily form, which, as we know, the individual machine-building capitalist does not produce himself but must replace by way of the process of circulation. And yet it seems at first glance that the reproduction of the annual product of society takes place in this absurd way. The product of an individual capital, i.e., of every fraction of the social capital endowed with a life of its own and functioning independently, has a bodily form of one kind or another. The only condition is that this product must really have a use-form, a use-value, which gives it the imprint of a member of the world of commodities capable of circulation. It is immaterial and accidental whether or not it can re-enter as a means of production into the same process of production from which it emerged as a product; in other words, whether the portion of its value representing the constant part of the capital has a bodily form in which it can actually function again as constant capital. If not, this portion of the value of the product is reconverted into the form of its material elements of production by means of sale and purchase and thus the constant capital is reproduced in the bodily form capable of functioning. It is different with the product of the aggregate social capital. All the material elements of reproduction must in their bodily form constitute parts of this product. The consumed constant part of capital can be replaced by the aggregate production only to the extent that the entire constant part of the capital reappearing in the product re-appears in the bodily form of new means of production which can really function as constant capital. Hence, simple reproduction being assumed, the value of that portion of the product which consists of means of production must be equal to the constant portion of the value of social capital. Furthermore: Considered individually, the capitalist produces in the value of his product by means of the newly added labour only his variable capital plus surplus-value, while the constant part of the value is transferred to the product owing to the concrete character of the newly added labour. Considered socially that portion of the social working-day which produces means of production, hence adding new value to them as well as transferring to them the value of the means of production consumed in their manufacture, creates nothing but new constant capital intended to replace that consumed in the shape of old means of production in both departments I and II. It creates only product intended for productive consumption. The entire value of this product, then, is only value which can function anew as constant capital, which can only buy back constant capital in its bodily form, and which, for this reason, resolves itself, considered socially, neither into variable capital nor surplus-value. On the other hand that part of the social working-day which produces articles of consumption does not create any portion of the social replacement capital. It creates only products intended, in their bodily form, to realise the value of the variable capital and surplus-value of I and II. Speaking of the point of view of society, and therefore considering the aggregate product of society, which comprises both the reproduction of social capital and individual consumption, we must not lapse into the manner copied by Proudhon from bourgeois economy and look upon this matter as though a society with a capitalist mode of production, if viewed en bloc, as a totality, would lose this its specific historical and economic character. No, on the contrary. We have, in that case, to deal with the aggregate capitalist. The aggregate capital appears as the capital stock of all individual capitalists combined. This joint-stock company has in common with many other stock companies that everyone knows what he puts in, but not what he will get out of it. In the second place the constant capital of department I is replaced in kind, partly by exchange among capitalists I, partly by replacement in kind in each individual business. The phrase that the value of the entire annual product must ultimately be paid by the consumer would be correct only if consumer were taken to comprise two vastly different kinds: individual consumers and productive consumers. However that one portion of the product must be consumed productively means nothing but that it must function as capital and not be consumed as revenue. If we divide the value of the aggregate product, equal to 9,000, into 6,000c + l,500v + 1,500s and look upon the 3,000(v + s) only in its quality of revenue, then, on the contrary, the variable capital seems to disappear and capital, socially speaking, to consist only of constant capital. For that which appeared originally as 1,500v has resolved itself into a portion of the social revenue, into wages, the revenue of the working-class, and its character of capital has thus vanished. This conclusion is actually drawn by Ramsay. According to him, capital, socially considered, consists only of fixed capital, but by fixed capital be means the constant capital, that quantity of values which consists of means of production, whether these means of production are instruments or materials of labour, such as raw materials, semi-finished products, auxiliary materials, etc. He calls the variable capital circulating capital: Ramsay defines fixed capital, by which he means constant capital, more closely in the following words: Here we see once more the calamity Adam Smith brings on by submerging the distinction between constant and variable capital in that between fixed capital and circulating capital. Ramsay s constant capital consists of instruments of labour, his circulating capital of means of subsistence. Both of them are commodities of a given value. The one can no more create surplus-value than the other. Take our scheme. We have, after the exchange of the elements hitherto considered between I and II, and within II. 1) 4,000c + 1,000v + 1,000s (the latter 2,000 realised in articles of consumption of IIc) = 6,000. II) 2,000c (reproduced by exchange with I(v + s) + 500v + 500s = 3,000. Sum of values = 9,000. Value newly produced during the year is contained only in v and s. The sum of the value-product of this year is therefore equal to the sum of v + s, or 2,000 I(v + s) + 1,000 II(v + s) = 3,000. All remaining value-parts of the product of this year are merely value transferred from the value of earlier means of production consumed in the annual production. The current annual labour has not produced any value other than that of 3,000. That represents its entire annual value-product. Now, as we have seen, the 2,000 I(v + s) replace for class II its 2,000 IIc in the bodily form of means of production. Two-thirds of the annual labour, then, expended in category I, have newly produced constant capital II, both its entire value and its bodily form. From the standpoint of society, two-thirds of the labour expended during the year have created new constant capital-value realised in the bodily form appropriate for department II. Thus the greater portion of the annual labour of society has been spent in the production of new constant capital (capital-value existing in the form of means of production) in order to replace the value of the constant capital expended in the production of articles of consumption. What distinguishes capitalist society in this case from the savage is not, as Senior thinks, the privilege and peculiarity of the savage to expend his labour at times in a way that does not procure him any products resolvable (exchangeable) into revenue, i.e., into articles of consumption. No, the distinction consists in the following. a) Capitalist society employs more of its available annual labour in the production of means of production (ergo, of constant capital) which are not resolvable into revenue in the form of wages or surplus-value, but can function only as capital. b) When a savage makes bows, arrows, stone hammers, axes, baskets, etc., he knows very well that he did not spend the time so employed in the production of articles of consumption, but that he has thus stocked up the means of production he needs, and nothing else. Furthermore, a savage commits a grave economic sin by his utter indifference to waste of time, and, as Tylor  tells us, takes sometimes a whole month to make one arrow. The current conception whereby some political economists seek to extricate themselves from the theoretical difficulty, i.e., the understanding of the real interconnections that what is capital to one is revenue to another, and vice versa is only partially correct and becomes utterly wrong (harbours therefore a complete misunderstanding of the entire process of exchange taking place in annual reproduction, hence also a misunderstanding of the actual basis of the partially correct) as soon as the character of universality is attributed to it. We now summarise the actual relations on which the partial correctness of this conception rests, and in doing so the wrong conception of these relations will come to the surface. The variable capital exists at first in the hands of the capitalist as money-capital; and it performs the function of money-capital, by his buying labour-power with it. So long as it persists in his hands in the form of money, it is nothing but a given value existing in the form of money; hence a constant and not a variable magnitude. It is a variable capital only potentially, owing to its convertibility into labour-power. It becomes real variable capital only after divesting itself of its money-form, after being converted into labour-power functioning as a component part of productive capital in the capitalist process. Money, which first functioned as the money-form of the variable capital for the capitalist, now functions in the hands of the labourer as the money-form of his wages, which he exchanges for means of subsistence; i.e., as the money-form of revenue derived from the constantly repeated sale of his labour-power. We have here but the simple fact that the money of the buyer, in this case the capitalist, passes from his hands into those of the seller, in this case the seller of labour-power, the labourer. It is not a case of the variable capital functioning in a dual capacity, as capital for the capitalist and as revenue for the labourer. It is the same money which exists first in the hands of the capitalist as the money-form of his variable capital, hence as potential variable capital, and which serves in the hands of the labourer as an equivalent for sold labour-power as soon as the capitalist converts it into labour-power. But the fact that the same money serves another useful purpose in the hands of the seller than in those of the buyer is a phenomenon peculiar to the purchase and sale of all commodities. Apologetic economists present the matter in a wrong light, as is best seen if we keep our eyes fixed exclusively, without taking for the time being any notice of what follows, on the act of circulation M L (equal to M C), the conversion of money into labour-power on the part of the capitalist buyer, which is L M (equal to C M), the conversion of the commodity labour-power into money on the part of the seller, the labourer. They say: Here the same money realises two capitals; the buyer the capitalist converts his money-capital into living labour-power, which he incorporates in his productive capital; on the other hand the seller, the labourer, converts his commodity, labour-power, into money, which he spends as revenue, and this enables him to keep on reselling his labour-power and thereby to maintain it. His labour-power, then, represents his capital in commodity-form, which yields him a continuous revenue. Labour-power is indeed his property (ever self-renewing, reproductive), not his capital. It is the only commodity which he can and must sell continually in order to live, and which acts as capital (variable) only in the hands of the buyer, the capitalist. The fact that a man is continually compelled to sell his labour-power, i.e., himself, to another man proves, according to those economists, that he is a capitalist, because he constantly has commodities (himself) for sale. In that sense a slave is also a capitalist, although he is sold by another once and for all as a commodity; for it is in the nature of this commodity, a labouring slave, that its buyer does not only make it work anew every day, but also provides it with the means of subsistence that enable it to work ever anew. (Compare on this point Sismondi and Say in the letters to Malthus.  ) Let us first look at the exchange of Iv for IIc, beginning with the point of view of the labourer. The collective labourer of I has sold his labour-power to the collective capitalist of I for 1,000; he receives this value in money, paid in the form of wages. With this money he buys from II articles of consumption for the same amount of value. Capitalist II confronts him only as a seller of commodities, and nothing else, even if the labourer buys from his own capitalist, as he does for instance in the exchange of 500 IIv, as we have seen above (Part IV, present chapter). The form of circulation through which his commodity, labour-power, passes, is that of the simple circulation of commodities for the mere satisfaction of needs, for the purpose of consumption: C (labour-power) M C (articles of consumption, commodities II). The result of this act of circulation is that the labourer maintains himself as labour-power for capitalist I, and in order to continue maintaining himself as such he must continually renew the process L(C) M C. His wages are realised in articles of consumption, they are spent as revenue, and, taking the working-class as a whole, are spent again and again as revenue. Now let us look at the same exchange of Iv for IIc, from the point of view of the capitalist. The entire commodity-product of II consists of articles of consumption, hence of things intended to enter into annual consumption, hence to serve in the realisation of revenue for someone, in the present case for the collective labourer I. But for the collective capitalist II one portion of his commodity-product, equal to 2,000, is now the form of the constant capital-value of his productive capital converted into commodities. This productive capital must be reconverted from this commodity-form into its bodily form, in which it may act again as the constant portion of a productive capital. What capitalist II has accomplished so far is that he has reconverted by means of sales to labourers I one half (equal to 1,000) of his constant capital-value, which had been reproduced in the shape of commodities (articles of consumption), into the form of money. Hence it is not the variable capital Iv, which has been converted into this first half of the constant capital-value IIc, but simply the money which functioned for I as money-capital in the exchange for labour-power and thus came into the possession of the seller of labour-power, to whom it does not represent capital but revenue in the form of money, i.e., it is spent as a means of purchase of articles of consumption. Meanwhile, the money amounting to 1,000, which has come into the hands of the II capitalists from labourers of I, cannot function as the constant element of productive capital II. It is only as yet the money-form of his commodity-capital to be commuted into fixed or circulating constituents of constant capital. So II buys with the money received from the labourers of I, the buyers of its commodities, means of production from I to the amount of 1,000. In this way the constant capital-value II is renewed to the extent of one half of its total amount in its bodily form, in which it can function once more as an element of productive capital II. The circulation in this instance took the course C M C: articles of consumption worth 1,000 money to the amount of 1,000 means of production worth 1,000. But C M C represents here the movement of capital. C, when sold to the labourers, is converted into M, and this M is converted into means of production. It is the reconversion of commodities into the material elements of which this commodity is made. On the other hand just as capitalist II acts vis- -vis I only as a buyer of commodities, so capitalist I acts only as a seller of commodities vis- -vis II. I originally bought labour-power worth 1,000 with 1,000 in money intended to function as variable capital. It has therefore received an equivalent for the 1,000v which it expended in money-form. This money now belongs to the labourer who spends it in purchases from II. I cannot get back this money, which thus found its way into the II treasury unless it fishes its way out of it again by the sale of commodities of the same value. I first had a definite sum of money amounting to 1,000 destined to function as variable capital. The money functions as such by its conversion into labour-power of the same value. But the labourer supplied it as a result of the process of production with a quantity of commodities (means of production) worth 6,000, of which one-sixth, or 1,000, are equivalent to the variable portion of capital advanced in money. The variable capital-value functions no more as variable capital now in its commodity-form than it did before in its form of money. It can do so only after its conversion into living labour-power, and only so long as this labour-power functions in the process of production. As money the variable capital-value was only potential variable capital. But it had a form in which it was directly convertible into labour-power. As a commodity the same variable capital-value is still potential money-value, it is restored to its original money-form only by the sale of the commodities, and therefore by II buying for 1,000 commodities from I. The movement of the circulation is here as follows: 1,000v (money) labour-power worth 1,000 1,000 in commodities (equivalent of the variable capital) 1,000v (money); hence M C... C M (equal to M L ... C M). The process of production intervening between C ... C does not itself belong in the sphere of circulation. It does not figure in the mutual exchange of the various elements of the annual reproduction, although this exchange includes the reproduction of all the elements of productive capital, the constant elements as well as the variable element (labour-power). All the participants in this exchange appear either as buyers or sellers or both. The labourers appear only as buyers of commodities, the capitalists alternately as buyers and sellers, and within certain limits either only as buyers of commodities or only as sellers of commodities. Result: I possesses once more the variable value-constituent of its capital in the form of money, from which alone it is directly convertible into labour-power, i.e., it once more possesses the variable capital-value in the sole form in which it can really be advanced as a variable element of its productive capital. On the other hand the labourer must again act as a seller of commodities, of his labour-power, before he can act again as a buyer of commodities. So far as the variable capital of category II (500 IIv) is concerned, the process of circulation between the capitalists and labourers of the same class of production takes place directly, since we look upon it as taking place between the collective capitalist II and the collective labourer II. The collective capitalist II advances 500v for the purchase of labour-power of the same value. In this case the collective capitalist is a buyer, the collective labourer a seller. Thereupon the labourer appears with the proceeds of the sale of his labour-power to act as a buyer of a part of the commodities produced by himself. Here the capitalist is therefore a seller. The labourer has replaced to the capitalist the money paid in the purchase of his labour-power by means of a portion of commodity-capital II produced, namely 500v in commodities. The capitalist now holds in the form of commodities the same v which he had in the form of money before its conversion into labour-power, while the labourer on the other hand has realised the value of his labour-power in money and now, in his turn, realises this money by spending it as his revenue to defray his consumption in the purchase of part of the articles of consumption produced by himself. It is an exchange of the revenue of the labourer in money for a portion of commodities he has himself reproduced, namely 500v of the capitalist. In this way this money returns to capitalist II as the money-form of his variable capital. An equivalent value of revenue in the form of money here replaces variable capital-value in the form of commodities. The capitalist does not increase his wealth by taking away again the money paid by him to the labourer in the purchase of labour-power when he sells him an equivalent quantity of commodities. He would indeed be paying the labourer twice if he were to pay him first 500 in the purchase of his labour-power, and then in addition give him gratis a quantity of commodities worth 500, which the labourers produced for him. Vice versa, if the labourer were to produce for him nothing but an equivalent in commodities worth 500 for the price of his labour-power of 500, the capitalist would be no better off after the transaction than before. But the labourer has reproduced a product of 3,000. He has preserved the constant portion of the value of the product, i.e., the value of the means of production used up in it to the amount of 2,000 by converting them into a new product. He has furthermore added to this given value a value of 1,000(v + s). (The idea that the capitalist grows richer in the sense that he wins a surplus-value by the reflux of the 500 in money is developed by Destutt de Tracy, as shown in detail in section XIII of this chapter.) Through the purchase of 500 worth of articles of consumption by labourer II, capitalist II recovers the value of 500 IIv which he just possessed in commodities in money, the form in which he advanced it originally. The immediate result of this transaction, as of any other sale of commodities, is the conversion of a given value from the form of commodities into that of money. Nor is there anything special in the reflux thus effected of the money to its point of departure. If capitalist II had bought, with 500 in money, commodities from capitalist I, and then in turn sold to capitalist I commodities to the amount of 500, 500 would have likewise returned to him in money. This sum of 500 in money would merely have served for the circulation of a quantity of commodities (1,000), and according to the general law previously expounded, the money would have returned to the one who put it into circulation for the purpose of exchanging this quantity of commodities. But the 500 in money which flowed back to capitalist II are at one and the same time renewed potential variable capital in money-form. Why is this so? Money, and therefore money-capital, is potential variable capital only because and to the extent that it is convertible into labour-power. The return of 500 in money to capitalist II is accompanied by the return of labour-power II to the market. The return of both of these at opposite poles hence also the re-appearance of 500 in money not only as money but also as variable capital in the form of money is conditional on one and the same process. The money equal to 500 returns to capitalist II because he sold to labourers II articles of consumption amounting to 500, i.e., because the labourer spends his wages to maintain himself and his family and thus his labour-power. In order to be able to live on and act again as a buyer of commodities he must again sell his labour-power. The return of 500 in money to capitalist II is therefore at the same time a return, or an abiding, of the labour-power in the capacity of a commodity purchasable with 500 in money, and thereby a return of 500 in money as potential variable capital. As for category IIb, which produces articles of luxury, the case with v (IIb)v is the same as with Iv. The money, which renews for capitalists IIb their variable capital in the form of money, flows back to them in a round-about way through capitalists IIa. But it nevertheless makes a difference whether the labourers buy their means of subsistence directly from the capitalist producers to whom they sell their labour-power or whether they buy them from capitalists of another category, through whose agency the money returns to the former only by a circuitous route. Since the working-class lives from hand to mouth, it buys as long as it has the means to buy. It is different with the capitalists, as for instance in the exchange of 1,000 IIc for 1,000 Iv. The capitalist does not live from hand to mouth. His compelling motive is the utmost self-expansion of his capital. Now, if circumstances of any description seem to promise greater advantages to capitalist II in case he holds on to his money, or to part of it at least, for a while, instead of immediately renewing his constant capital, then the return of 1,000 IIc (in money) to I is delayed; and so is the restoration of 1,000v to the form of money, and capitalist I can continue his business on the same scale only if he disposes of reserve money; and, generally speaking, reserve capital in the form of money is necessary to be able to work without interruption, regardless of the rapid or slow reflux of the variable capital-value in money. If the exchange of the various elements of the current annual reproduction is to be investigated, so are the results of the labour of the preceding year, of the labour of the year that has already come to a close. The process of production which resulted in this yearly product lies behind us; it is a thing of the past, incorporated in its product, and so much the more is this the case with the process of circulation, which precedes the process of production or runs parallel with it, the conversion of potential into real variable capital, i.e., the sale and purchase of labour-power. The labour-market is no longer a part of the commodity-market, such as we have here before us. The labourer has here not only already sold his labour-power, but besides the surplus-value also supplied an equivalent of the price of his labour-power in the shape of commodities. He has furthermore pocketed his wages and figures during the exchange only as a buyer of commodities (articles of consumption). On the other hand the annual product must contain all the elements of reproduction, restore all the elements of productive capital, above all its most important element, the variable capital. And we have seen indeed that the result of the exchange in regard to the variable capital is this: By spending his wages and consuming the purchased commodities, the labourer as a buyer of commodities maintains and reproduces his labour-power, this being the only commodity which he has to sell. Just as the money advanced by the capitalist in the purchase of his labour-power returns to him, so labour-power returns to the labour-market in its capacity of a commodity exchangeable for money. The result in the special case of 1,000 Iv is that the capitalists of I hold 1,000v in money and the labourers of I offer them 1,000 in labour-power, so that the entire process of reproduction of I can be renewed. This is one result of the process of exchange. On the other hand the expenditure of the wages of the labourers of I relieved II of articles of consumption to the amount of 1,000c, thus transforming them from the commodity-form into the money-form. Department II reconverted them into the bodily form of its constant capital by purchasing from I commodities equal to 1,000v and thus restoring to I in money-form the value of its variable capital. The variable capital of I passes through three metamorphoses, which do not appear at all in the exchange of the annual product or do so only suggestively. During all these transformations capitalist I continually holds the variable capital in his hands; 1) to start with as money-capital; 2) then as an element of his productive capital; 3) still later as a portion of the value of his commodity-capital, hence in the form of commodity-value; 4) finally once more in money which is again confronted by the labour-power for which it can be exchanged. During the labour-process the capitalist is in possession of the variable capital as active value-creating labour-power, but not as a value of a given magnitude. But since he never pays the labourer until his power has acted for a certain length of time, he already has in hand the value created by that power to replace itself plus the surplus-value before he pays him. As the variable capital always stays in the hands of the capitalist in some form or other, it cannot be claimed in any way that it converts itself into revenue for anyone. On the contrary, 1,000 Iv in commodities converts itself into money by its sale to II half of whose constant capital it replaces in kind. What resolves itself into revenue is not variable capital I, or 1,000v in money. This money has ceased to function as the money-form of variable capital I as soon as it is converted into labour-power, just as the money of any other buyer of commodities has ceased to represent anything belonging to him as soon as he has exchanged it for commodities of still other sellers. The conversions which the money received in wages goes through in the hands of the working-class are not conversions of variable capital, but of the value of their labour-power converted into money; just as the conversion of the value (2,000 I(v + s)) created by the labourer is only the conversion of a commodity belonging to the capitalist, which does not concern the labourer. However, the capitalist, and still more his theoretical interpreter, the political economist, can rid himself only with the greatest difficulty of the idea that the money paid to the labourer is still his, the capitalist s. If the capitalist is a producer of gold, then the variable portion of value i.e., the equivalent in commodities which replaces for him the purchasing price of the labour appears itself directly in the form of money and can therefore function anew as variable money-capital without the circuitous route of a reflux. But so far as labourer II is concerned aside from the labourer who produces articles of luxury 500 v exists in commodities intended for the consumption of the labourer which he, considered as the collective labourer, buys directly again from the same collective capitalist to whom he sold his labour-power. The variable portion of capital-value II, so far as its bodily form is concerned, consists of articles of consumption intended mostly for consumption by the working-class. But it is not the variable capital which is spent in this form by the labourer, it is the wages, the money of the labourer, which precisely by its realisation in these articles of consumption restores to the capitalist the variable capital 500 IIv in its money-form. The variable capital IIv is reproduced in articles of consumption, the same as the constant capital 2,000 IIc. The one resolves itself no more into revenue than the other does. In either case it is the wages which resolve themselves into revenue. However it is a momentous fact in the exchange of the annual product that by the expenditure of the wages as revenue there is restored to the form of money-capital in the one case 1,000 IIc, likewise, by this circuitous route, 1,000 Iv and ditto 500 IIv, hence constant and variable capital. (In the case of the variable capital partly by means of a direct and partly by means of an indirect reflux.)
Economic Manuscripts: Capital: Volume Two