 ||X-422| Tableau conomique, according to Quesnay 5,000 millions annual gross product (in pounds of Tours) There are dotted lines from a) to b), from a) to c), from c) to d), from a') to b'), and from a'') to b''). Transcriber To make the Tableau clearer, I have shown what Quesnay regards each time as the starting-point of a circulation, as a, a', a'', the following link in the circulation as b, c, d, and as b', b'' respectively. The point to note in this Tableau, and the point which impressed his contemporaries, is the way in which circulation is shown as determined purely by the circulation and reproduction of commodities, in fact by the process of capital. The farmer first pays 2,000 million francs in money to the landlord, the propri taire. With this, the landlord buys from the farmer, 1,000 millions worth of means of subsistence. 1,000 millions therefore flow back to the farmer in money, while one-fifth of the gross product is disposed of, passing definitively out of circulation into consumption. The landlord next buys, with 1,000 millions in money, manufactured commodities, non-agricultural products, to the value of 1,000 millions. With this purchase, a second one-fifth of the (in this case manufactured) products falls out of circulation into consumption. These 1,000 millions in money are now in the hands of the sterile class, who buys with them from the farmer 1,000 millions worth of means of subsistence. Thus the second 1,000 millions which the farmer has paid to the landlord in the form of rent flow back to the farmer. On the other hand, a further one-fifth of the farmer s product has gone to the sterile class, out of circulation into consumption. At the end of this first movement, therefore, we have the 2,000 millions in money back in the hands of the farmer. This money has carried through four different processes of circulation. First, it served as means of payment for rent. In this function it does not circulate any part of the annual product, but is merely a circulating draft on the part of the gross product which is equal to the rent. Second, the landlord buys means of subsistence from the farmer, using half the 2,000 millions, that is, 1,000 millions, thus realising his 1,000 millions in means of subsistence. In fact, the farmer merely gets back, in the 1,000 millions in money, half of the draft he has given the landlord for two-fifths of his product. In this transaction the 1,000 millions, since they serve as means of purchase, circulate commodities to that amount, which fall into final consumption. The 1,000 millions here serve the landlord only as means of purchase; he reconverts the money into use-value (commodities, which however enter into final consumption, and are bought as use-value). If we consider purely the isolated act, the money in this transaction plays merely the role which, as means of purchase, it always plays for the seller, namely, being the changed form of his commodity. The landlord has his 1,000 millions in corn, the farmer has converted into money corn to the price of 1,000 millions, he has realised its price. But if we consider this act in connection with the preceding act of circulation, the money here does not appear as a mere metamorphosis of the farmer s commodity, as a golden equivalent of his commodity. The 1,000 millions are in fact only half the 2,000 millions, in money, which the farmer has paid to the ||423| landlord in the form of rent. It is true that he gets 1,000 millions in money for 1,000 millions in commodities, but in so doing in fact he only buys back the money with which he paid the landlord the rent; that is to say, the landlord buys, with the 1,000 millions which he has received from the farmer, 1,000 millions worth of commodities from the farmer. He pays the farmer with the money which he has received from the farmer without any equivalent. This flowing back of the money to the farmer, taken in con-junction with the first act, does not at first make it appear to him a mere means of circulation. But then it is different in essence from the flowing back of money to its starting-point when the movement is an expression of a process of reproduction. For example: the capitalist or, to leave the characteristics of capitalist reproduction entirely out of account, a producer lays out 100 for raw material, instruments of labour and means of subsistence for the period of his labour. We will assume that he does not add more labour to the means of production than he had expended on the means of subsistence, the wages that he has paid to himself. If the raw material, etc., equals 80, and the labour added is equal to 20 (the means of subsistence consumed also being equal to 20), then the product is equal to 100. If he now sells it, the 100 flows back to him in money, and so on. This flowing back of the money to its starting-point here expresses nothing but continuous reproduction. The simple metamorphosis in this case is M C M, transformation of money into commodity and retransformation of commodity into money this mere change of form of money and commodity here representing at the same time the process of reproduction. Money is transformed into commodities, means of production and means of subsistence; then these commodities enter as elements into the labour-process and emerge from it as a product. Thus a commodity appears again as a result of the process, that is, when the finished product re-enters the process of circulation, and by so doing again confronts money as a commodity; and finally it is reconverted into money, since the finished commodity can only be exchanged again for its production elements after it has first been transformed into money. The constant flowing back of the money to its starting-point expresses here not only the formal conversion of money into commodity and commodity into money as in the simple process of circulation or the mere exchange of goods but at the same time the continuous reproduction of the commodity by the same producer. Exchange-value (money) is converted into commodities which enter into consumption, and are consumed as use-values; they pass however into reproductive or industrial consumption, therefore reproduce the original value and consequently reappear in the same amount of money (in the above example, in which the producer labours only for his own maintenance), M C M here shows that M is not only formally converted into C, but C is actually consumed as a use-value, falling out of circulation into consumption, but into industrial consumption, so that its value is maintained and reproduced in consumption, and M therefore reappears at the end of the process, being maintained in the movement M C M. In contrast with this, in the case given above, no reproduction process takes place when the money flows back from the landlord to the farmer. It is as if the farmer had given the landlord tokens or tickets for products to the value of 1,000 millions. When the landlord cashes these tokens, they flow back to the farmer and he redeems them. If the landlord had had half the rent paid directly in kind, no circulation of money would have taken place. The whole circulation would have been limited to a simple change of hands, the transfer of the product from the farmer s hand to the landlord s. First the farmer gives the landlord the money instead of the commodity, and then the landlord returns the money to the farmer in order to take the commodity itself. The money serves the farmer as means of payment to the landlord; it serves the landlord as means of purchase in relation to the farmer. In the first function it moves away from the farmer, in the second it comes back to him. This type of return flow of the money to the producer must always take place whenever he pays his creditors, instead of a part of his product, its value in money; and everyone who is a co-proprietor of his surplus is in this respect a creditor. For example: all taxes are paid by the producers in money. In this transaction the money is for them means of payment to the State. With this money the State buys commodities from the producers. In the hands of the State it is a means of purchase, and thus returns to the producers in the same measure as they part with their commodities. This type of return flow this peculiar flowing back of money that is not determined by reproduction must take place in all cases where there is exchange of revenue for capital. What makes the money flow back in such cases is not reproduction but consumption. The revenue is paid in money, but it can only be consumed in commodities. The money which is received from the producers as revenue must therefore be paid back to them in order to obtain the same amount of value in commodities, that is, in order to consume the revenue. The money in which revenue is paid rent for example, or interest or taxes, <the ||424 | industrial capitalist pays his revenue to himself in the product, or from the sale of the product that part of it which forms his revenue> has the general form of means of payment. The person who pays the revenue is supposed to have received from his creditor a part of his own product for example, in the case of the farmer, the two-fifths of the product which according to Quesnay constitute the rent. He is only its nominal or de facto owner. The part of the farmer s product, therefore, which constitutes his rent, requires for its circulation between farmer and landlord only an amount of money equal to the value of the product, although this value circulates twice. First the farmer pays the rent in money; then with the same money the landlord buys the product. The first is a simple transfer of money, since the money functions only as means of payment; the assumption is therefore that the commodity for which it is paid is already in the hands of the payer and does not serve him as a means of purchase; that he receives no equivalent for the money, but on the contrary has this equivalent in advance. In the second transaction, on the other hand, the money functions as means of purchase, means of circulation for commodities. It is as if, with the money in which he pays his rent, the farmer had bought the landlord s share in the product. The landlord, with the same money that he has thus received from the farmer (who however in fact has given it away without any equivalent), buys the product back again from the farmer. The same sum of money, therefore, which is handed over by the producers to the owners of revenue in the form of means of payment, serves the owners of revenue as means of purchase for the producers commodities. This twofold change of place of the money from the hands of the producer into the hands of the owner of revenue, and from the latter s hands back into the hands of the producer thus expresses only a single change of place on the part of the commodity, that is, from the hands of the producer into the hands of the owner of revenue, Since the producer is supposed to owe a part of his product to the owner of revenue, the money-rent that he pays him is in fact only a retrospective payment for the value of the commodity which has already passed into his possession. The commodity is in his hands; but it does not belong to him. With the money that he pays in the form of revenue, he therefore redeems it making it his property. Therefore the commodity does not change hands. When the money changes hands, this represents only a change in the title of ownership of the commodity, which remains in the hands of the producer as before. Hence this twofold change of place of the money with only a single change of hands for the commodity. The money circulates twice, in order to make the commodity circulate once. But it too circulates only once as means of circulation (means of purchase), while the other time it circulates as means of payment; in which type of circulation, as I have shown above, no simultaneous change of place between commodity and money takes place. In fact, if the farmer has no money in addition to his product, he can only pay for his product after he has first sold his commodity, and it has therefore already passed through its first metamorphosis before he can pay it out as money to the landlord. Even taking this into account, there are more changes of place on the part of the money than on the part of the commodity. First C M [is carried through]; two-fifths of the commodity is sold and transformed into money. Here there is the simultaneous exchange of commodity and money. Then however this same money, without being exchanged for a commodity, passes from the hands of the farmer into those of the landlord. Here there is a change of place of the money, but no change of place of the commodity. It is the same as if the farmer had a co-partner. He has received the money, but he must share it with his co-partner. Or rather, for the two-fifths it is more as if a servant of the farmer has received the money. This servant must give it to the farmer, he cannot retain it in his own pocket. In this instance the movement of the money from one hand to the other does not express any kind of metamorphosis of the commodity, but is a mere transfer of the money from the hand of its immediate possessor into the hand of its owner. This can therefore be the case when the man who first receives the money is merely an agent for his employer. Then the money is also not a means of payment there is a simple transfer of it from the hand of the receiver, to whom it does not belong, into the hand of the owner. This kind of change of place of money has absolutely nothing to do with the metamorphosis of the commodity, any more than has the change of place arising from the mere conversion of one kind of money into another kind. With a means of payment, however, it is always implied that the payer has received a commodity for which he subsequently pays. In the case of the farmer, etc., he has not received this commodity; it is in his hands before it is in the landlord s hands, and it is a part of his product. But in law he becomes its owner only by handing over to the landlord the money received for it. His legal title to the commodity changes; the commodity itself is in his hands both before and after. But first it was in his hands as something in his possession but the owner of which was the landlord. It is now in his hands as his own property. The change in the legal form while the commodity remains in the same hands has naturally not caused the commodity itself to change hands. ||425| <This also makes it clear how absurd it is to explain the profit of the capitalist from the fact that he advances money to the labourer before he has converted the commodity into money. First: When I buy a commodity for my own consumption I get no profit because I am the buyer and the owner of the commodity is the seller , because my commodity has the form of money and his must first be transformed into money. The capitalist pays for the labour only after he has consumed it, while other commodities are paid for before they are consumed. This arises from the peculiar nature of the commodity which he buys, and which is in fact only delivered after it is consumed. The money here has the form of means of payment. The capitalist has always appropriated to himself the commodity labour before he pays for it. The fact however that he only buys it in order to make a profit out of the resale of its product is no reason for his making this profit. It is a motive. And it would mean nothing but: he makes a profit by buying wage-labour because he wants to make a profit out of selling it again. Secondly: But he does nevertheless advance to the labourer in the form of money the part of the product which is his share as wages, and thus saves the latter himself the trouble and risk and time involved in converting into money the part of the commodity which is due to him as wages. Is the labourer not to pay him for this trouble, this risk, and this time, and on this account to accept less of the product than he would otherwise get? This would upset the whole relationship between wage-labour and capital, and destroy the economic justification of surplus-value. The result of the process is in fact that the fund from which the capitalist pays the wage-labourer is nothing but the latter s own product, and that therefore capitalist and labourer actually share the product in aliquot parts. But this actual result has absolutely nothing to do with the transaction between capital and wage [-labour](on which rests the economic justification of surplus-value, the justification founded on the laws of commodity exchange itself). What the capitalist buys is the temporary right to dispose of labour-power; he only pays for it when this labour-power has taken effect, materialised itself in a product. Here, as in all cases where money functions as means of payment, purchase and sale precede the real handing over of the money by the buyer. But the labour belongs to the capitalist after that transaction, which has been completed before the actual process of production begins. The commodity which emerges as product from this process belongs entirely to him. He has produced it with means of production belonging to him and with labour which he has bought and which therefore belongs to him, even though it has not yet been paid for. It is the same as if he had not consumed anyone else s labour in the production of the commodity. The profit that the capitalist makes, the surplus-value which he realises, springs precisely from the fact that the labourer has sold to him not labour realised in a commodity, but his labour-power itself as a commodity. If he had confronted the capitalist in the first form, as a possessor of commodities, the capitalist would not have been able to make any profit, to realise any surplus-value, since according to the law of value exchange is between equivalents, an equal quantity of labour for an equal quantity of labour. The capitalist s surplus arises precisely from the fact that he buys from the labourer not a commodity but his labour-power itself, and this has less value than the product of this labour-power, or, what is the same thing, realises itself in more materialised labour than is realised in itself. But now, in order to justify profit, its very source is covered up, and the whole transaction from which it springs is repudiated. Because in fact once the process is continuous the capitalist only pays the labourer out of his own product, the labourer is only paid with a part of his own product, and the advance is therefore a mere pretence, we are now told that the labourer has sold his share in the product to the capitalist, be fore it has been converted into money. (Perhaps before it was capable of being converted into money, for although the workman s labour had materialised itself in a product, it may be that only one part of the vendible commodity has as yet been realised, for example, [only] part of a house.) So the capitalist is no longer owner of the product, and thereby the whole process through which he has appropriated another s labour gratis is invalidated. Now therefore owners of commodities confront each other. The capitalist has money, and the labourer sells him not his labour-power but a commodity, namely, the part of the product in which his own labour is realised. He [the labourer] will now say to the capitalist: Of these 5 lbs. of twist, say three-fifths represent constant capital. They belong to you. Two-fifths, that is, 2 lbs., represent my newly-added labour. Therefore you have to pay me the 2 lbs. So pay me the value of 2 lbs. And thereby he would pocket not only the wages but also the profit, in short, a sum of money equal to the quantity of labour newly added by him and materialised in the form of the 2 lbs. But, says the capitalist, have I not advanced the constant capital? Well, says the labourer, you deduct the 3 lbs. for it, and pay me only 2. But, insists the capitalist, you couldn t materialise your labour, you couldn t spin, without my cotton and my spindles. You must pay extra for that. Well, says the labourer, the cotton would have rotted and the spindles rusted if I hadn t used them for spinning. ||426| The 3 lbs. of yarn which you are deducting do represent, it is true, only the value of your cotton and spindles which were used up, and are therefore contained, in the 5 lbs. of yarn. But it is only my labour that has maintained the value of cotton and spindles unchanged, by using these means of production as means of production. I m not charging you anything for this value-maintaining power of my labour, because it didn t cost me any extra labour-time beyond the spinning itself, for which I get the 2 lbs. It s natural faculty of my labour which costs me nothing, though it maintains the value of the constant capital. As I don t charge you anything for it, you can t charge me for not being able to spin without spindles and cotton. For without spinning, your spindles and cotton wouldn t be worth a brass farthing. Driven into a corner, the capitalist says: The 2 lbs. of yarn are in fact worth 2s. They represent that much labour-time of yours. But am I to pay you for them before I have sold them? Perhaps I may not sell them at all. That is risk No. 1. Secondly, perhaps I may sell them at less than their price. That is risk No. 2. And thirdly, in any case it takes time to sell them. Am I to take on both risks on your behalf without recompense and lose my time into the bargain? You can t expect something for nothing. Wait a bit! replies the labourer, what s the relation between us? We face each other as owners of commodities, you as buyer, we as sellers, for you want to buy our share in the product, the 2 lbs., and it in fact contains nothing but our own materialised labour-time. Now you assert that we must sell you our commodity below its value, so that as a result you would be getting more value in commodity than you now have in money. The value of our commodity is equal to 2s. You want to give only 1s. for it, so that since 1s. contains as much labour-time as 1 lb. of yarn you would get from the exchange twice as much value as you give in return. We on the other hand would get, instead of an equivalent, only half an equivalent, an equivalent f or only 1 lb. of yarn instead of 2 lbs. And on what do you base this demand, which is contrary to the law of value and the exchange of commodities in proportion to their value? On what? On the fact that you are buyer and we are seller, that our value is in the form of yarn, of a commodity, and your value is in the form of money that the same value in the form of yarn confronts the same value in the form of money. But, my good friend, that is in fact a mere change of form, which affects the way in which the value is expressed but leaves the amount of value unaltered. Or do you hold the childish view that every commodity must be sold under its price, that is to say, for less than the sum of money which represents its value, because in the form of money it gets an increased value? But no, good friend, it does not get any increased value; the magnitude of its value does not change, it merely takes the shape of exchange-value in its pure form. Besides, my good friend, think of the troubles you are laying up for yourself by taking this line. For what you assert amounts to this that the seller must always sell his commodity to the buyer below its value. Indeed as far as you are concerned, this was the case earlier when we sold you not a commodity we produced but our labour-power itself. It is true that you bought it at its value, but you bought our actual labour below the value in which it is expressed. However that s an unpleasant memory let s say no more about it. We ve got beyond that, thank goodness, since by your own decision we are no longer to sell you our labour-power as a commodity, but the commodity itself which is the product of our labour. Let s look at the troubles you re laying up for yourself. The new law you have set up that the seller pays for the conversion of his commodity into money not with his commodity, through the exchange of his commodity for money, but that he pays for it by selling the commodity below its price this law by which the buyer always fleeces and defrauds the seller must hold good in like measure for every buyer and seller. Let s suppose that we accept your offer but on the condition that you yourself submit to the law just created by you, namely the law that the seller must surrender to the buyer a part of his commodity for nothing, in return for the buyer changing it into money for him. Then you buy our 2 lbs., which are worth 2s., for 1s. and thus make a profit of 1s. or 100 percent. But now you have 5 lbs. of yarn, of a value of 5s., after you have bought the 2 lbs. belonging to us. Now you think you re going to do a good stroke of business. The 5 lbs. cost you only 4s., and you re going to sell them for 5s. Wait a minute! says the man who buys from you, your 5 lbs. of yarn is a commodity, and you are a seller. I have the same value in money and I am a buyer. Consequently, by the law which you recognise I must make 100 per cent profit out of you. You must therefore sell me the 5 lbs. of yarn at 50 per cent below its value, for 2s. 6d. I ll give you then 2s. 6d. and get in exchange a commodity to the value of 5s., and thus make 100 per cent profit out of you, for what s sauce for the goose is sauce for the gander. So you see, my good friend, [continues the worker] where you get with your new law; you would simply have diddled yourself, since although at one moment you are a buyer, the next you re in turn a seller. In this particular case you would lose more as a seller than you gained as a buyer. And don t forget this too before the 2 lbs. of yarn you want now to buy from us ever existed, didn t you make other purchases in advance, but for which the 5 lbs. of yarn would never have been there at all? ||426a | Didn t you buy cotton and spindles in advance, which are now represented by .3 lbs. of yarn? At that time the cotton jobber in Liverpool and the spindle maker in Oldham faced you as sellers, and you faced them as buyer; they represented commodity, you money exactly the same relationship as we have the honour or the misfortune to stand in to each other at this moment. Wouldn t the sharp cotton jobber and your jovial colleague from Oldham have had a good laugh at you, if you had demanded that they hand over to you for nothing a part of the cotton and spindles, or what is the same thing, sell you these commodities below their price (and their value), on the ground that you were transforming commodities for them into money but they were transforming money into commodities for you, that they were sellers, you buyer? They risked nothing, for they got ready money, exchange-value in the pure, independent form. You, on the other hand, what a risk you were taking! First you had to make spindles and cotton into yarn, run all the risks of the production process, and then finally the risk of reselling the yarn, changing it back again into money! The risk whether it would sell at its value, or over or under its value. The risk of not selling it at all, of not transforming it back into money; and as to its quality as yarn, you didn t care a straw for it. You did not eat yarn, nor drink it, nor have any use whatever for it except selling it! And in any case the loss of time, in transforming the yarn again into money, and that includes therefore the transformation of spindles and yarn into money. Old boy, your colleagues will reply, don t make a fool of yourself. Don t talk nonsense. What the devil do we care what you propose turning our cotton and our spindles to? What use you destine them for! Burn them, hang them, if you like, throw them to the dogs, but pay for them! The idea! We are to make you a present of our goods because you have set up as a cotton spinner, and seem not to feel quite at ease in that line of business, and magnify to yourself its risks and perilous chances! Give up cotton spinning, or don t come into the market with such preposterous ideas! The capitalist, with a supercilious smile, replies to this tirade from the labourers: Evidently you people are a bit out of your depth. You re talking about things you don t understand. Do you imagine I ve paid ready money to the Liverpool ruffian and the chap in Oldham? The devil I did. I ve paid them in bills of exchange, and the Liverpool ruffian s cotton was in point of fact spun and sold before his bill fell due. With you it s another affair altogether. You want to get ready money. Very well, say the labourers, and what did the Liverpool ruffian and the Oldham chap do with your bills? What they were doing therewith? says the capitalist. Stupid question! They lodged them with their bankers and got them there discounted. How much did they pay the banker? Let me see! Money is now very cheap. I think they paid something like 3 per cent discount; that is to say, not 3 per cent on the sum, but they paid so much on the sum for the time the bill was running as would have come up to 3 per cent on the whole matter if the bill had run for a whole year. Still better, say the working men. Pay us 2s., the value of our commodity or say 12s. as we have dealt today per day, but we will deal per week. But take away from that sum 3 per cent per annum for fourteen days. But this bill is too small, says the capitalist, to be discounted by any banker. Well, reply the working men, we are 100 men. Thus you have to pay to us 1,200 shillings. Give us a bill for them. This makes 60 and is not too small a sum to be discounted; but besides, as you discount it yourself, the sum must not be too small for you, since it is the identical sum whence you pretend to derive your profit on us. The amount deducted wouldn t he worth mentioning. And since we would thus get the major part of our product in its entirety, we would soon reach the point when we didn t need you to discount it for us. Naturally we will not give you longer credit than the fourteen days the stock jobber gives you. If turning the actual relationship upside-down wages are to be derived from the discount on the part of the value of the total product that belongs to the workmen that is, from the fact that the capitalist pays them this part in advance in money he would have to give them very short-term bills of exchange, such as for example he pays to the cotton jobber, etc. The workman would get the largest share of his product, and the capitalist would soon cease being a capitalist. From being the owner of the product he would become merely the workmen s banker. Moreover, just as the capitalist takes the risk of selling the commodity below its ||427| value, he equally takes the chance of selling it above its value. The workman will he thrown out onto the street if the product is unsalable; and if it falls for long below the market-price, his wages will be brought down below the average and short time will be worked. It is he, therefore, that runs the greatest risk. Thirdly: It never enters anyone s head to suggest that the farmer, because he has to pay rent in money, or the industrial capitalist, because he has to pay interest in money and therefore in order to pay them must first have converted his product into money is on that account entitled to deduct a part of his rent or his interest.> In that part of the capital which circulates between industrial capitalist and labourer (that is, the part of the circulating capital which is equal to the variable capital), there is also a return flow of the money to its starting-point. The capitalist pays the labourer his wages in money; with this money the labourer buys commodities from the capitalist, and so the money flows back to the capitalist. (In practice, to the capitalist s banker. But the bankers in fact represent, in relation to the individual capitalist, the aggregate capital in so far as it takes the form of money.) This return flow of the money does not in itself indicate any reproduction. The capitalist buys labour from the labourer with money; with the same money, the labourer buys commodities from the capitalist. The same money takes the form first of means of purchase for labour, and later on as means of purchase for commodities. That it comes back to the capitalist is due to the fact that at first he is a buyer, and then in turn, in relation to the same parties, he is a seller. He parts with it as a buyer; it returns to him as a seller. The labourer on the contrary is first seller and then buyer, so first he gets the money and then he pays it out, while in relation to him the capitalist first pays it out and then takes it in. For the capitalist, the movement here is M C M. He buys a commodity (labour-power) with money; with the product of this labour-power (a commodity) he buys money; in other words, he sells this product in turn to his former seller, the labourer. For the labourer, on the other hand, the movement of circulation is C M C. He sells his commodity (labour-power), and with the money he gets for it he buys back a part of his own product (a commodity). It could indeed be said that the labourer sells a commodity (labour-power) for money, spends this money on commodities, and then sells his labour-power again, so that for him too the movement is M C M; and since the money is constantly fluctuating between him and the capitalist, it could equally be said, depending on whether one considers it from the standpoint of the one or of the other, that for him as well as for the capitalist the movement is M C M. The capitalist, however, is the buyer. The renewal of the process starts from him, not from the labourer, while the return flow of the money is compulsory, since the labourer must buy means of subsistence. Here, as in all movements where the form of circulation on one side is M C M and on the other C M C, it is made evident that the aim of the process of exchange on one side is exchange-value, money and therefore its increase and on the other side use-value, consumption. This also is the case when the money flows back as in the example first considered, where on the farmer s side the movement is M C M, C M C on the landlord s side; taking into account the fact that the M with which the landlord buys from the farmer is the money form of the rent, and therefore the result of a movement C M, the changed form of the part of the product that at bottom belongs to the landlord in kind. This M C M, in so far as it merely expresses, as between labourer and capitalist, the return to the latter of the money laid out by him in wages, in itself does not indicate any reproduction process, but only that the two parties are in turn buyer and seller in relation to each other. Nor does it represent money as capital, in such a way as in M C M', where the second M' would be a larger sum of money than the first M, so that M represents value (capital) which increases in value. On the contrary, it merely expresses the formal return of the same amount of money (often even less) to its starting-point. (By capitalist here, of course, is meant the class of capitalists.) I was therefore wrong in saying in the first Part that the form M C M must always be M C M'. It may express merely the formal return of the money, as I indicated there already, by showing that the return circuit of the money to the same starting-point arises from the fact that the buyer in turn becomes seller. It is not this return movement of the money that enriches the capitalist. For example, say that he has paid 10s. for wages. The labourer buys goods from him with this 10s. He has given the labourer goods to the value of 10s. for his labour-power. If he had given him means of subsistence in kind to the price of 10s., there would have been no circulation of money, and therefore no return flow of money. This phenomenon of money returning has therefore nothing to do with the enrichment of the capitalist, which only arises from the fact that in the production process itself the capitalist appropriates more labour than he has expended in wages, and that his product is consequently larger than the costs of producing it; while the money that he pays the labourer can in no case be less than the money with which the labourer buys goods from him. This formal return of the money has nothing to do with making a profit, and therefore M here does not signify capital ||428| any more than an increase or replacement of value takes place when money spent in rent, interest or taxes flows back to the payer of rent, interest and taxes. M G M, in so far as it represents the formal return of money to the capitalist, only means that his promissory note issued in money is realised in his own commodity. As an example of the wrong explanation of this money circuit this return of money to its starting-point see Destutt de Tracy above. As a second example, with special reference to the circulation of money between labourer and capitalist, Bray is to be quoted later. Finally, Proudhon, in regard to the money-lending capitalist. This form of return circuit M C M is found wherever the buyer becomes in turn seller, and therefore in the movement of all commercial capital, where all dealers buy from each other in order to sell, and sell in order to buy. It is possible that the buyer M is unable to sell the commodity, rice for example, at a higher price than he bought it at; he may have to sell it below its price. Thus in such a case a simple return of the money takes place, because the purchase turns into a sale without the M having established itself as value that increases value, that is, as capital. It is the same for example in the exchange of constant capital. The machine builder buys iron from the producer of iron and sells him machines. In this case the money flows back. It was paid out as means of purchase for the iron. It then serves the iron producer as means of purchase for machines, and so flows back to the machine builder. The latter has got iron for the money he paid out; he has delivered machines for the money he received. The same money has circulated twice its value. For example, the machine builder buys iron with 1,000; with the same 1,000 the iron producer buys machinery. The value of the iron and the machinery together is 2,000. In this way, however, 3,000 must be in motion: 1,000 money, 1,000 machinery and 1,000 iron. If the capitalists made an exchange in kind, the commodities would change hands without a farthing circulating. It is the same when they have reciprocal accounting and the money serves them as means of payment. If paper money or credit money (bank-notes) circulate, then there is one difference in the transaction. 1,000 still exist in bank-notes, but they have no intrinsic value. In any case here too there are three [times 1,000]: 1,000 iron, 1,000 machinery, 1,000 in bank-notes. But as in the first case these three only exist because the machine builder has had [ l,000] twice machinery 1,000 and money in gold and silver or bank-notes l,000. In both cases the iron producer returns to him only number two (the money); because the only reason why he received it at all was that the machine builder, as buyer, did not immediately become seller; he did not pay for the first commodity, the iron, in commodities, and so he paid for it in money. When he pays for it in commodities, that is, when he sells commodities to the ironmaster, the latter returns the money to him because payment has not to be made twice, once in money, and the second time in commodities. In both cases the gold or the bank-note represents the changed form of a commodity previously bought by the machine builder or some other person, or perhaps of a commodity that has been converted into money even though it has not yet been bought (as in the case of revenue), such as the landlord (his forebears, etc.) represents. Here the flowing back of the money only indicates that the person who has paid out the money for commodities, the person who has thrown the money into circulation, pulls back the money out of circulation by the sale of another commodity that he throws into circulation. The very same 1,000 we are thinking of could in one day pass through forty or fifty hands, from capitalist to capitalist, and [it would] only transfer capital from one to the other. Machinery [goes] to the iron producer, iron to the peasant, grain to the maker of starch or spirits, and so on. In the end it might again come into the hands of the machine builder, and pass from him to the iron producer, and so on, and thus it might circulate a capital of 40,000 or more and might continually flow back to whoever first paid it out. M. Proudhon concludes from this that that part of the profit made on this 40,000 which consists of interest on money, and is therefore paid out by the different capitalists for example, by the machine builder to the man who lent him 1,000, by the iron producer to the man who lent him 1,000 which he spent long ago for coal, etc., or in wages, etc. that these 1,000 yield the total interest that the 40,000 brings in. So that if the interest was 5 per cent, 2,000 in interest. From which he makes the correct calculation that the 1,000 have brought in 200 per cent. And he is a critic of political economy par excellence!* But although M C M, representing the money circulation between capitalist and labourer, in itself does not imply any act of reproduction, nevertheless this is implied by the continuous repetition of this act, the continuity of the return circuit. There cannot be a buyer continually becoming a seller without the reproduction of the commodity which he sells. In fact, this holds good for everyone except those who live on rent or interest or taxes. But in some cases the return movement M C M always takes place if the transaction is to be completed as in the case of the capitalist in relation to the labourer, or landlord or money-lender (with these latter, there is a simple return of the money). In other cases the act is completed when commodities are bought, when the movement C M C has been concluded, as in the case of the labourer. It is this act which he continually renews. His initiative is always as seller, not as buyer. The same holds good for all money circulation ||429| which is merely expenditure of revenue. The capitalist himself, for example, consumes a certain amount each year. He has converted his commodity into money, in order to pay out this money for commodities which he wants for his final consumption. Here there is C M C, and there is no return of the money to him; but the return is to the seller (the shopkeeper for example), whose capital is replaced by the expenditure of revenue. Now we have seen that an exchange takes place, a circulation of revenue against revenue. The butcher buys bread from the baker; the baker meat from the butcher; both consume their revenue. They do not pay for the meat that the butcher himself eats or the bread that the baker himself eats. Each of them consumes this part of his revenue in kind. It is however possible that the meat bought by the baker from the butcher replaces not the latter s capital but his revenue that part of the meat sold by him which not only represents his profit but the part of his profit which he wants to consume himself, as revenue. The bread that the butcher buys from the baker is also an expenditure of his revenue. If the two run accounts with each other, one or the other of them has only to pay the balance. There is no money circulated in respect of the part of their reciprocal purchases and sales which balances out. Let us however assume that the baker has to pay the balance and that this balance represents revenue for the butcher. Then he spends the money from the baker on other articles of consumption. Assuming that this is 10, which he spends with the tailor. If the 10 represents revenue for the tailor, he spends it in a similar way; in turn, he buys bread with it and so on, In this way the money flows back to the baker, no longer however as a replacement of revenue, but as a replacement of capital. A question that can still be raised is: in M C M, as carried through by the capitalist, when it represents self-expanding value, the capitalist draws more money out of circulation than he threw into it. (This was what the miser actually wanted to do but did not succeed in doing. For he does not draw more value in the form of gold and silver out of circulation than he threw into it in the form of commodities. He possesses more value in the form of money, whereas previously he had more value in the form of commodities.) The total production costs of his commodity are 1,000. He sells it for 1,200, because his commodity now contains 20 per cent or one-fifth unpaid labour labour that he has not paid for but nevertheless sold. How then is it possible for all capitalists, the class of industrial capitalists, continually to draw more money out of circulation than they put into it? First it can be said that on the other hand the capitalist continually puts in more than he draws out. His fixed capital had to be paid for. But he sells it only in the measure that he consumes it, only bit by bit. It always enters only to a much smaller extent into the value of the commodity, while it enters in its entirety into the process of producing the commodity. If its circulation is 10 years, only one-tenth of it enters annually into the commodity, and no money circulates in respect of the other nine-tenths, as this nine-tenths does not in any way come into circulation in the form of a commodity. That is the first point. We will consider this problem later, and meanwhile return to Quesnay. But first one other point. The return of bank-notes to a bank which discounts bills or makes advances in notes is quite a different phenomenon from the return of money which we have been considering up to now. In this case the transformation of the commodity into money is anticipated. It receives the form of money before it is sold, perhaps before it is produced. Or perhaps it has already been sold (for bills of exchange). In any case it has not yet been paid for, not yet reconverted into money. This transformation is therefore in any case anticipated. As soon as it is sold (or deemed to be sold) the money flows back to the bank, either in its own notes, which thus come back out of circulation, or in notes of other banks, which are then exchanged for its own (between the bankers) so that then the notes of both are withdrawn from circulation, return to their starting-point or in gold and silver. If this gold and silver is demanded for banknotes which are in some third person s hands, the notes come back. If the notes are not converted, a similar quantity of gold and silver is taken out of circulation, and now lies in the bank s reserves instead of the notes. In all these cases the process is this: the existence of the money (transformation of the commodity into money) was anticipated. As soon as it is actually transformed into money, the transformation into money takes place a second time. This second existence of it as money, however, returns to the starting-point it cancels out, takes the place of its first existence as money, and comes back out of circulation to the bank. It is perhaps the same identical quantity of notes that expressed its first existence which now expresses its second. The bill of exchange for example has been discounted by a yarn manufacturer. He has received the bill of exchange from the weaver. With the 1,000 he pays for coal, raw cotton, etc. The various hands through which these notes pass in payment for their commodities finally spend them on linen, and so the notes come to the weaver, who on the day the bill matures pays the spinner the identical notes, and the spinner in turn takes them back to the bank. It is by no means necessary that the second (posthumous) transformation of the commodity into money after the transformation in anticipation ||430| should be carried through in different money from the first. And so it seems as if the spinner has in fact got nothing, since he borrowed notes, and the end of the process is that he gets them back again and returns them to the issuer. In fact however these identical notes have served as means of circulation and means of payment during this period, and the spinner has used them in part to pay his debts, and in part to buy goods needed for the reproduction of the yarn, and in this way he has realised a surplus (through the exploitation of his workmen) a part of which he can now pay back to the bank. Likewise in money, since more money has flowed back to him than he had expended, advanced, laid out. How? That again brings us to the question we had meanwhile held over. So back to Quesnay. We come now to the third and fourth acts of circulation. L (the landlord) buys manufactured commodities from S (sterile class, manufacturer) (line a c in the Tableau) for 1 milliard. Here 1 milliard in money, and commodities to the same amount, circulate. <Because what takes place is a single act of exchange. If L bought from S in instalments and similarly received his rent from F (the farmer) in instalments, the 1 milliard of manufactured commodities could be bought say with 100 millions, For L buys manufactured commodities from S for 100 millions; S buys means of subsistence from F for 100 millions; F pays 100 millions of rent to L; and when this had occurred ten times, ten times 100 millions of commodities would have passed from S to L, and from F to S, and ten times 100 millions from F to L. The whole circulation would then have been carried out with 100 millions. If F however pays the rent in a single payment, a part of the 1 milliard which is now in the possession of S and of the 1 milliard which is again in F s possession might lie in their money-boxes, and the other part be in circulation.> Commodities to the value of 1 milliard have now passed from S to L; on the other hand, money to the value of 1 milliard has passed from L to S. This is simple circulation. Money and commodities merely change hands in the reverse direction. But in addition to the 1 milliard of means of subsistence which the farmer has sold to L and which have thus gone into consumption, the 1 milliard of manufactured commodities which S has sold to L have also gone into consumption. It must be noted that these existed before the new harvest. (Otherwise L could not buy them with the product of the new harvest.) S for his part now buys means of subsistence to the value of 1 milliard from F [line c d in the Tableau]. Now a second one-fifth of the gross product has fallen out of circulation and into consumption. As between S and F, the 1 milliard functions as means of circulation. But at the same time two things take place in this transaction which do not take place in the process between S and L. In that process S reconverted into money one part of his product manufactured goods to the amount of 1 milliard. But in the exchange with F he transforms the money again into means of subsistence (which for Quesnay are equivalent to wages), and in this way replaces the capital which he had expended in wages and consumed. This retransformation of the 1 milliard into means of subsistence expresses, in the case of L, mere consumption, but in the case of S it expresses industrial consumption, reproduction; for he retransforms a part of his commodity into one of the elements in its production means of subsistence. The one metamorphosis of the commodity, its retransformation from money into commodity, thus in this case expresses at the same time the beginning of its real, not merely formal, metamorphosis the beginning of its reproduction, the beginning of its retransformation into its own production elements; in this transaction there is at the same time metamorphosis of the capital. But for L. revenue is merely converted from the form of money into the form of commodity. This implies only consumption. In the second place, however, since S buys means of subsistence from F for 1 milliard, the second 1 milliard which F paid as money-rent to L returns to F. But it only returns to him because he draws it back out of circulation, buys it back, with an equivalent 1 milliard in commodities. It is the same as if the landlord had bought from him 1 milliard of means of subsistence (in addition to the first milliard); that is to say, as if the landlord had had the second part of his money-rent delivered by the farmer in commodities, and had then exchanged these commodities for commodities from S. S only lifts for L the second part of the 2 milliards in commodities which F has paid to L in money. If payment had been in kind, F would have given L 2 milliards in means of subsistence; L would have consumed 1 milliard of these himself, and exchanged the other 1 milliard in means of subsistence with S, for the latter s manufactured goods. In this case there would only have been: (1) transfer of the 2 milliards in means of subsistence from F to L; (2) a barter transaction between L and S, in which the former exchanges 1 milliard in means of subsistence against 1 milliard in manufactured goods, and vice versa. But instead of this, four acts have taken place: ||431| (1) transfer of 2 milliards in money from F to L; (2) L buys means of subsistence for 1 milliard from F, the money flows back to F, serving as means of circulation; (3) L buys manufactured goods from S for 1 milliard in money; the money functions as means of circulation; changing hands in the reverse direction to the goods; (4) with the 1 milliard in money, S buys means of subsistence from F; the money functions as means of circulation. For S, it at the same time circulates as capital. It flows back to F because now the second 1 milliard in means of subsistence is lifted for which the landlord held a note of assignment from him. The money however does not come back to him directly from the landlord, but only after it has served as means of circulation between L and S, and in between, before it lifts the 1 milliard of victuals, has on its passage lifted 1 milliard in manufactures, and transferred them from the manufacturer to the landlord. The conversion of his commodity into money (in the exchange with the landlord) as well as the following conversion of money into victuals (in the exchange with the farmer) are, on the part of S, the metamorphosis of his capital, first into the form of money, and secondly into the form of the constitutive elements necessary to the reproduction of the capital. The result of the four acts of circulation up to this point is therefore: the landlord has spent his revenue, half on means of subsistence, half on manufactured goods. By these transactions, the 2 milliards he received as rent in the form of money have been spent. Half of it flows back to the farmer from him direct, and half indirect, via S. S however has parted with one part of his finished goods, and has replaced this part with means of subsistence, that is, with an element needed for reproduction. With these processes completed, the circulation is at an end as far as the landlord comes into it. But the following have passed out of circulation into consumption partly unproductive consumption, partly industrial (the landlord has partially replaced the capital of S by spending his revenue): (1) 1 milliard of means of subsistence (product of the new harvest); (2) 1 milliard of manufactured goods (product of the previous year s harvest); (3) 1 milliard of means of subsistence which enter into reproduction, that is, into the production of the goods which S next year will have to exchange against half the landlord s rent. The 2 milliards in money are now again in the hands of the farmer. He then buys goods for 1 milliard from S to replace his annual and original advances, in so far as these consist partly of tools, etc., and partly of manufactured goods which he consumes during the process of production. This is a simple process of circulation. It puts 1 milliard into the hands of S, while the second part of his product existing in the form of a commodity is converted into money. On both sides there is metamorphosis of capital. The farmer s 1 milliard is reconverted into elements of production needed for reproduction. The finished goods of S are reconverted into money; they pass through the formal metamorphosis from commodity into money, without which the capital cannot be reconverted into its production elements, and therefore also cannot be reproduced. This is the fifth circulation process. One milliard of manufactured goods (product of the previous year s harvest) (a' b') fall out of circulation into reproductive consumption. Finally S reconverts the 1 milliard in money, in which form half of his commodities now exist, into the other half of his conditions of production raw materials, etc. (a'' b''), This is simple circulation. For S, it is at the same time the metamorphosis of his capital into the form suitable for its reproduction; for F, it is the reconversion of his product into money. Now the last one-fifth of the gross product falls out of circulation into consumption. That is to say: one-fifth goes into reproduction for the farmer, and does not come into circulation; the landlord consumes one-fifth (that makes two-fifths); S gets two-fifths; in all, four-fifths. Here there is an obvious gap in the explanation. Quesnay seems to reckon like this: F gives L (line a b) 1 milliard (one-fifth) in means of subsistence. With 1 milliard of his raw materials be replaces S s fund (a b ). And 1 milliard in means of subsistence form wages for S, which he adds as value to the commodities and consumes in food while he is doing it (c d), And 1 milliard remains in reproduction (a'), not entering into circulation. Finally, 1 milliard of the product replaces advances (a' b'). Only he overlooks the fact that S buys for the 1 milliard in manufactured goods, neither means of subsistence nor raw materials from the farmer, but pays back to him his own money. In fact he sets out from the presupposition that the farmer possesses 2 milliards in money in addition to his gross product, and that this money is the total fund from which the money in circulation is provided. He also forgets that in addition to the 5 milliards in gross product, a further 2 milliards of gross product exist in manufactured commodities produced before the new harvest. For the 5 milliards represent only the total annual production, ||432| the total crop produced by the farmers, but not the gross product of manufacture, the reproductive elements for which have to be replaced out of this year s harvest. We thus have: (1) 2 milliards in money in the farmer s hands; (2) 5 milliards in gross product of the land; (3) 2 milliards in manufactured goods. That is, 2 milliards in money, and 7 milliards in product (agricultural and industrial), The circulation process, put briefly, is as follows (F=farmer, L=landlord, S = manufacturer, sterile): F pays L 2 milliards in money for rent; L buys from F means of subsistence for 1 milliard. So one-fifth of the farmer s gross product is disposed of. At the same time, 1 milliard in money flows back to him. L moreover buys goods from S for 1 milliard. By this transaction, one-half of S s gross product is disposed of. In return for it, he has 1 milliard in money. With this money he buys 1 milliard of means of subsistence from F. By this transaction he replaces one-half of the reproductive elements of his capital. This disposes of another one-fifth of the farmer s gross product. At the same time the farmer finds himself again in possession of the 2 milliards in money, the price of the 2 milliards in means of subsistence which he has sold to L and S. F now buys goods from S for 1 milliard, which replace for him half of his advances. So the other half of the manufacturer s gross product is disposed of. Finally, the latter, S, buys raw materials from the farmer for the last 1 milliard in money; thereby a third one-fifth of the farmer s gross product is disposed of, and the second half of the reproductive elements of the capital of S is replaced; but also 1 milliard flows back to the farmer. The latter finds himself therefore again in possession of the 2 milliards, which is in order, since Quesnay thinks of him as the capitalist, in relation to whom L is merely a receiver of revenue and S merely a wage-earner. If he paid L and S directly in his product, he would not part with any money. If he pays out in money, they buy his product with it, and the money flows back to him. This is the formal return circuit of money to the industrial capitalist, who as buyer opens the whole business and brings it to an end. Moreover, one-fifth of the advances belongs to reproduction. One-fifth of the means of subsistence, however, which has not entered into circulation at all, remains to be disposed of. S buys from the farmer means of subsistence for 1 milliard and raw materials for 1 milliard; and on the other hand F buys from him only 1 milliard of commodities to replace his advances. So S has to pay a balance of 1 milliard which in the final instance he pays with the 1 milliard he has received from L. Quesnay seems to confuse this payment of 1 milliard to F with the purchase of F s product to the amount of 1 milliard. Reference must be made to the Abb Baudeau s explanations on this point. In fact (on our calculation) the 2 milliards have only served to: (1) pay rent to the amount of 2 milliards in money; (2) circulate 3 milliards of the farmer s gross product (1 milliard means of subsistence to L, 2 milliards means of subsistence and raw materials to S) and to circulate 2 milliards of the gross product of S (1 milliard of it to L, who consumes it, and 1 milliard to F, who consumes it reproductively). In the last purchase (a'' b'') in which S buys raw materials from F, he pays him back in money. ||433| So once more: S has received from L 1 milliard in money. With this 1 milliard in money he buys means of subsistence from F to that amount. With the same 1 milliard in money F buys commodities from S. With the same 1 milliard in money S buys raw products from F. Or, S buys from F raw materials for 1 milliard in money, and means of subsistence for 1 milliard in money. F buys goods from S for 1 milliard [in money]. In this case 1 milliard flows back to S, but only because it was assumed that in addition to the 1 milliard in money he receives from the landlord, and the 1 milliard in goods that he still has to sell, he had over and above this another 1 milliard in money which he himself had thrown into circulation. Instead of 1 milliard circulating the goods between him and the farmer, on this assumption 2 milliards would have been used for it. Then 1 milliard returns to S. For he makes purchases from the farmer for 2 milliards in money. The latter buys 1 milliard from him, for which he pays him back half the money he had received from him. In the first case S buys in two stages. First he pays out 1 milliard; this flows back to him from F; and then he pays it out once more definitively to F, and so nothing comes back. In the second case, on the other hand, S makes a single purchase for 2 milliards, If then F makes a return purchase for 1 milliard, this remains with S. The circulation would have used 2 milliards instead of 1 milliard, because in the first case the 1 mil1iard, by rotating twice, realised 2 milliards in commodities. In the second case 2 milliards, in one rotation, also [realised] 2 milliards in commodities. If the farmer now pays back 1 milliard to S, S has not got more than in the first case. For he has thrown into circulation, in addition to 1 milliard in commodities, also 1 milliard in money from his own fund which existed prior to the circulation process. He has put it out into circulation, and so it flows back to him. In the first case: S [buys] 1 milliard of commodities from F, for 1 milliard in money; F [buys] 1 milliard in goods from S, [for] 1 milliard in money; S [buys] 1 milliard of commodities from F, [for] 1 milliard in money; so that F keeps 1 milliard. In the second case: S [buys] 2 milliards of commodities from F, for 2 milliards in money; F [buys] 1 milliard of goods from S, for 1 milliard in money. The farmer, as before, keeps the 1 milliard. S however gets back the 1 milliard of capital advanced by him to circulation, it is thrown back to him by circulation. S buys commodities from F for 2 milliards; F buys goods from S for 1 milliard. Therefore in any event S has to pay a balance of 1 milliard, but not more than this. Since, by way of paying this balance, he had paid F 2 milliards as a result of the particular form of circulation, F pays him back this 1 milliard, while in the first case he does not return any money to him. In the first case S makes purchases from F for 2 milliards, and F from S for 1 milliard. So in both cases the balance in F s favour is 1 milliard. But this balance is paid to him in such a way that his own money flows back to him, because S first buys 1 milliard from F, then F 1 milliard from S, and finally S 1 milliard from F. In these transactions 1 milliard has circulated 3 milliards. But in the aggregate the value in circulation (if the money is real money) has been 4 milliards, 3 milliards in commodities and 1 milliard in money. The amount of money originally thrown into circulation (to pay F) and circulating was never more than 1 milliard that is, never more than the balance which S had to pay to F. Because F bought from him to the amount of 1 milliard before he buys from F to the amount of 1 milliard for the second time, S can pay his balance with this 1 milliard. In the second case S throws 2 milliards into circulation. It is true that with it he buys 2 milliards in commodities from F. These 2 milliards are here required as means of circulation, and are paid out against an equivalent in commodities. But F buys back goods for 1 milliard from S. One milliard therefore returns to S, as the balance which he has to pay to F is only 1 milliard and not 2 milliards. He has now replaced for F 1 milliard in commodities, and so F must pay him back the 1 milliard, which now he would have paid him in money for nothing. This case is remarkable enough to spend a moment on it. There are various possible cases of the circulation assumed above of 3 milliards in commodities, of which 2 milliards are means of subsistence and 1 milliard manufactures; we must however note: first that on Quesnay s assumption there is 1 milliard in money in the hands of S and 1 milliard of money in the hands of F at the moment when the circulation between the two of them begins; secondly, we will assume by way of illustrating the point that in addition to the 1 milliard which S receives from L, S has in his till another 1 milliard in money. ||434| I. First: The case as Quesnay puts it. S buys 1 milliard in commodities from F, for 1 milliard in money; with the 1 milliard in money thus received from S, F buys 1 milliard in commodities from S; finally S, with the 1 milliard in money he has got back in this way, buys 1 milliard of commodities from F. F is therefore left with the 1 milliard in money which to him represents capital (in fact, along with the other 1 milliard in money which he has got back from L, it forms the revenue with which again next year he pays the rent in money; that is, 2 milliards in money). 1 milliard in money has here circulated three times from S to F, from F to S, from S to F and each time in exchange for 1 milliard in commodities, that is, for 3 milliards in all. If the money itself has value, values to a total of 4 milliards are in circulation. Money here functions only as means of circulation; but for F, in whose hands it finally remains, it is transformed into money and possibly into capital. II. Secondly: The money functions merely as means of payment. In this case S, who buys 2 milliards in commodities from F, and F, who buys 1 milliard in commodities from S, settle accounts with each other. At the close of the transaction S has to pay a balance of 1 milliard in money. As in the former case, 1 milliard in money comes into F s money-box, but without having served as means of circulation. The money is a transfer of capital for him, as it only replaces his capital of 1 milliard in commodities. As before, values amounting to 4 milliards are in circulation. But instead of three movements of 1 milliard in money, there has only been one, and the money has only paid for an amount of values in commodity form that is equal to itself. In the former case, it paid for three times as much. What would be saved as compared with case I would be the two superfluous movements of circulation. III. Thirdly: To start with F comes forward as the buyer with the 1 milliard in money (which he has had from L), and buys commodities from S for 1 milliard. Instead of lying fallow with him as a hoard for payment of the next rent, now the 1 milliard circulates. S has now 2 milliards in money (1 milliard from L and 1 milliard from F). With these 2 milliards in money he buys commodities to the amount of 2 milliards from F. Now values to the amount of 5 milliards have been in circulation (3 milliards in commodities, 2 milliards in money). There has been a circulation of 1 milliard in money and 1 milliard in commodities, and a circulation of 2 milliards in money and 2 milliards in commodities. Of these 2 milliards in money, the milliard originating with the farmer circulates twice, the milliard originating with 5 only once. Now 2 milliards in money return to F, of which however only 1 milliard settles his balance; the other 1 milliard in money, which he himself had thrown into circulation because he took the initiative as buyer, flows back to him through circulation. IV. Fourthly: S buys at once 2 milliards in commodities from F, with 2 milliards in money (1 milliard from L, and 1 milliard which he puts himself into circulation from his till). F buys back from S 1 milliard in commodities, thus returning to him 1 milliard in money; and F holds, as before, 1 milliard in money to settle the balance between him and S. Values to the amount of 5 milliards have circulated. There are two acts of circulation. Of the 2 milliards in money which S returns to F, 1 milliard represents the money which F himself threw into circulation, and only 1 milliard the money which S threw into circulation. Here 2 milliards in money instead of 1 milliard in money come back to F, but in fact he gets only 1 milliard, as he himself had thrown the other 1 milliard into circulation. That is, in case III. In case IV 1 milliard in money returns to S, but it is the 1 milliard which he got from his money-box, not from selling his commodities to L, and himself threw into circulation. In case I and indeed in case II there is never more than 1 milliard in money circulating; but in case I it circulates three times and in case II it only once changes hands; this is merely due to the fact that in case II a high development of credit, and consequently economy in payments, is assumed; while in case I the movement is rapid; however, each time the money functions as means of circulation, and therefore the value at the two poles must each time appear twice, once in money and once in commodity. In case III and IV 2 milliards circulate, instead of 1 milliard as in I and II. This is because on one occasion in both cases (in case III by S as buyer who closes the circulation process, in case IV by S as buyer who opens the circulation process) commodity values to the amount of 2 milliards are at a single stroke thrown into circulation; that is, 2 milliards of commodities enter into circulation in a single act; it is assumed, moreover, that the commodities have to be paid for on the spot and not after the balance has been struck. The most interesting thing about the movement is however the 1 milliard in money which in case III is left in the hands of the farmer, in case IV in the hands of the manufacturer, although in both cases the balance of 1 milliard is paid to the farmer, and he gets not a farthing more in case III, and not a farthing less in case IV. In these transactions, of course, the exchange is always an exchange of equivalents, and when we speak of a balance we mean only the equivalent value which is paid for in money instead of in commodities. In case III F throws 1 milliard in money into circulation, and gets in exchange for it from S the equivalent in commodities, or 1 milliard in commodities. But then S buys commodities from him for 2 milliards in money. The first 1 milliard in money which he threw in thus comes back to him, because 1 milliard in commodities has been taken from him in exchange. This 1 milliard in commodities is paid for with the money which be had paid out. He gets the second 1 milliard in money in payment for the second 1 milliard in commodities. This balance is owed to him in money, because he had only bought in all 1 milliard of commodities, and commodities to the value of 2 milliards had been bought from him. ||435| In case IV S throws 2 milliards in money into circulation at once, for which he takes from F commodities for 2 milliards. With the money which S himself had paid him, F in turn buys from S commodities for 1 milliard and so the 1 milliard in money returns to S. In case IV: S in fact gives F 1 milliard in commodities (the equivalent for 1 milliard in money) and 2 milliards in money, that is, 3 milliards; but S gets from F only 2 milliards in commodities. F has consequently to return to him 1 milliard in money. In case III: F gives S in commodities the equivalent of 2 milliards in money, and 1 milliard in money. That is, 3 milliards in money. But he gets from S only 1 milliard in commodities, the equivalent of 1 milliard in money. S has consequently to return to him 2 milliards in money; he pays back 1 milliard in the money which F himself threw into circulation, and he himself throws 1 milliard into circulation. He keeps the balance of 1 milliard in money, but cannot keep 2 milliards in money. In both cases S receives 2 milliards in commodities, and F 1 milliard in commodities plus 1 milliard in money, that is to say, the balance in money. In case III, in addition to this, another 1 milliard comes to F, but this is only the excess of the money which he has thrown into circulation over what he has drawn from circulation in commodities. Similarly with S in case IV. In both cases S has to pay a balance of 1 milliard in money, because he takes commodities to the value of 2 milliards out of circulation, and puts into it commodities only to the value of l milliard. In both cases F has to receive a balance of 1 milliard in money, because he has thrown 2 milliards in commodities into circulation and only drawn from it 1 milliard in commodities; the second 1 milliard must therefore be paid in money to him. In both cases, it is only this 1 milliard in money that can finally change hands. Since however 2 milliards are actually in circulation, this must flow back to the person who put it into circulation; and this holds good whether F, in addition to receiving a balance of 1 milliard out of circulation, has thrown into it another 1 milliard in money; or whether S, who has to pay only a balance of 1 milliard in money, has in addition advanced another 1 milliard in money. In case III 1 milliard in money comes into circulation in excess of the quantity of money that would under different circumstances be needed for the circulation of this quantity of commodities, because F comes forward as the first buyer, and must therefore throw money into circulation, whatever his ultimate position may be. In case IV, in the same way, 2 milliards in money come into circulation, instead of only 1 milliard as in II, because first S comes forward as buyer at the outset, and secondly buys 2 milliards all at once. In both cases the money that circulates between these buyers and sellers can finally only be equal to the balance which one of them has to pay. For the money which S or F has expended in excess of this amount is paid back to him. Let us assume that F buys commodities from S to the value of 2 milliards. This case, then, would look like this: F gives S 1 milliard in money for commodities. S buys commodities from F to the value of 2 milliards in money, as a result of which the first 1 milliard returns to F and l milliard into the bargain. F in turn buys commodities from S for 1 milliard in money, which brings this money back to S. At the end of the process F would have commodities to the amount of 2 milliards and the 1 milliard that he had originally, before the circulation process began; and S commodities for 2 milliards and 1 milliard in money which he too originally had. The 1 milliard in money of F, and the 1 milliard in money of S, would have played their role only as means of circulation and then would have flowed back as money or in this case also as capital to both the persons who had advanced them. Had they both used money as means of payment, they would have set off 2 milliards in commodities against 2 milliards in commodities; their accounts would have cancelled out and not a farthing would have circulated between them. Thus the money which circulates as means of circulation between two persons who confront each other mutually as buyers and sellers returns to its source; there are three cases in which it can circulate. [First:] The commodity values supplied balance each other. In this case the money returns to the person who advanced it to irculation and in this way used his capital to meet the costs of circulation. For example, if F and S each buys commodities for 2 milliards from the other, and S opens the dance, he buys commodities from F for 2 milliards in money. F returns to him the 2 milliards in money, buying with it 2 milliards in commodities from him. Thus S has both before and after the transaction 2 milliards in commodities and 2 milliards in money. Or when, as in the case cited previously, both advance the means of circulation to an equal amount, each gets back what he had advanced to circulation as above, 1 milliard in money to F and 1 milliard to S. Secondly: The commodity values exchanged between the two parties do not cancel each other out. There is a balance to be paid in money. If, as above in case I, the circulation of the commodities has taken place in such a way that no more money has entered into circulation than is required for the payment of this balance it being always only this sum that passes to and fro between the two parties then it comes finally into the hands of the last seller, in whose favour the balance is. Thirdly: The commodity values exchanged between the two parties are not equal to each other; there is a balance to be paid; but the circulation of the commodities takes place in such a form that more money circulates than is required to settle the balance; in this case the money in excess of this balance returns to the party who has advanced it. In case III to the man who receives the balance, in case IV to the one who has to pay it. In the second category listed above the money only returns when the receiver of the balance is the first buyer, as for example between worker and capitalist. It changes hands, as [in case] II, when the other party comes forward as the first buyer. ||436| <Of course, all this only takes place on the assumption that the definite quantity of commodities is bought and sold between the same persons, so that each of them is alternately buyer and seller in relation to the other one, On the other hand let us assume that the 3 milliards of commodities are equally distributed among the commodity owners. A, A', A'', the sellers, and they are confronted by the buyers B, B', B''. If the three purchases take place simultaneously, that is to say, alongside each other, 3 thousand in money must circulate, so that each A is in possession of 1 thousand in money and each B is in possession of 1 thousand in commodities. If the purchases follow each other, succeeding each other in time, the circulation of the same 1 thousand in money can only effect these if the metamorphoses of the commodities are interwoven, that is to say, when some persons function as buyers and sellers, even if not [in relation] to the same persons as in the case above, but as buyer in relation to one person, and as seller in relation to the other. Thus for example: (1) A sells to B for 1 thousand in money; (2) A buys with this 1 thousand from B'; (3) B' with the 1 thousand in money buys from A'; (4) A' with the 1 thousand in money from B''; (5) B'' with the 1 thousand in money from A''. The money would have changed hands five times between the six persons; but also commodities to the value of 5 thousand would have circulated. If commodities for 3 thousand are to be circulated, it would be like this: (1) A [buys] from B for 1 thousand in money; (2) B from A' for 1 thousand in money; (3) A' from B' for 1 thousand in money. Three changes of place as between four persons. It is M C.> The cases set out above do not contradict the law explained earlier: that with a given rapidity of circulation of money and a given total sum of prices of commodities the quantity of the circulating medium is determined (I, p. 85). In example 1 above, 1 thousand in money circulates three times, and in fact it circulates commodities to the amount of 3 thousand. The amount of money in circulation is consequently 3,000 (sum of prices)/3 (velocity) or 3,000 (sum of prices)/3 cycles = 1,000 money. In case III or IV the total prices of the commodities in circulation are, it is true, equal to 3,000 in money; but the rapidity of circulation is different. 2,000 in money circulates once, that is, 1,000 in money plus 1,000 in money. Of the 2,000, however, 1,000 circulates once more. 2,000 in money circulates two-thirds of the 3,000 in commodities, and half of it, 1,000 in money, circulates another third; one 1,000 in money circulates twice, but another 1 000 in money circulates only once. The twofold circulation of 1,000 in money realises commodities whose prices are equal to 2,000 in money; and the single circulation of 1,000 in money realises commodities whose prices are equal to 1,000 in money both together, equal to 3,000 in commodities. What then is the rapidity of circulation of the money in relation to the commodities which it circulates in this case? The 2,000 in money makes 1 1/2 cycles (this is the same thing as first the total sum circulates once, and then half of it again completes one cycle), that is, 3/2. And in fact: 3,000 (sum of prices)/3/2 cycles = 2,000 in money. What is it then that determines the different rapidity of circulation of the money in this case? Both in III and IV the difference arises from the fact that, in contrast to I where the total amount of prices of the commodities circulating each time is never greater and never smaller than 1/3 of the total prices of the aggregate quantity of commodities which circulate, commodities only to the amount of 1,000 in money circulate at any time in III and IV, however, commodities for 2,000 circulate once, and commodities for 1,000 circulate once, that is, once two-thirds of the existing quantity of commodities, and once one-third. For the same reason, larger varieties of coin must circulate in wholesale trade than in retail trade. As I have already observed (I, [The] Circulation of Money ), the reflux of the money shows in the first place that the buyer has in turn become seller; and in fact it makes no difference whether in so doing he sells to the same person from whom he has bought, or not. If however the buying and selling is between the same persons, then the phenomena appear which have been the occasion of so many errors (Destutt de Tracy). The buyer becoming seller shows that new commodities are to be sold. Continuity in the circulation of commodities tantamount to its constant renewal (I, p. 78) is, therefore, reproduction. The buyer can become in turn seller as in the case of the manufacturer in relation to the labourer without this denoting an act of reproduction. It is only the continuity, the repetition of this reflux, in relation to which it can be said that it denotes reproduction. The reflux of money, when it represents the reconversion of the capital into its money form, necessarily shows the end of one cycle [i.e., turnover] and the beginning again of new reproduction, if the capital as such continues the process. In this case too he [the capitalist], as in all other cases, was the seller, C M, and then became buyer, M C; but it is only in M that his capital again possesses the form in which it can be exchanged for its reproductive elements, and here the C represents these reproductive elements. M C here represents the transformation of the money-capital into productive or industrial capital. Furthermore, as we have seen, the reflux of the money to its starting-point may show that the money balance in a series of purchases and sales is in favour of the buyer with whom the series of these processes opened. F buys from S for 1,000 in money. S buys from F 2,000 in money. Here the 1,000 in money flows back to F. As for the other 1,000, there is merely a change of place of the money between S and F. ||437| Finally, however, a reflux of the money to its starting-point may take place without indicating payment of a balance, both (1) when the reciprocal payments cancel each other out, and consequently there is no balance to be paid in money; and (2) when the transactions do not cancel out, and therefore a balance has to be paid. See the cases analysed above. In all these cases it makes no difference whether for example the same S confronts F; S representing here in relation to F and F to S the total number of those selling to him and buying from him (exactly as in the example where payment of a balance is indicated by the reflux of the money). In all these cases the money flows back to the person who so to speak has advanced it to circulation. It has done its job in circulation, like bank-notes, and comes back to the person who laid it out. Here it is only means of circulation. The final capitalists settle with each other, and so it comes back to the one who paid it out. We have therefore still to deal later on with the question we have held over; the capitalist draws more money out of circulation than he threw into it. Back to Quesnay: Adam Smith cites with some irony the Marquis de Mirabeau s hyperbolical statement: But in fact it was an attempt to portray the whole production process of capital as a process of reproduction, with circulation merely as the form of this reproductive process; and the circulation of money only as a phase in the circulation of capital; at the same time to include in this reproductive process the origin of revenue, the exchange between capital and revenue, the relation between reproductive consumption and final consumption; and to include in the circulation of capital the circulation between consumers and producers (in fact between capital and revenue); and finally to present the circulation between the two great divisions of productive labour raw material production and manufacture as phases of this reproductive process; and all this depicted in a Tableau which in fact consists of no more than five lines which link together six points of departure or return [and this was] in the second third of the eighteenth century, the period when political economy was in its infancy this was an extremely brilliant conception, incontestably the most brilliant for which political economy had up to then been responsible. As regards the circulation of capital its reproductive process, the various forms which it assumes in this process of reproduction, the connection between the circulation of capital and circulation in general (that is, not only the exchange of capital for capital, but of capital for revenue) Adam Smith in fact only took over the inheritance of the Physiocrats and classified and specified more precisely the separate items in the inventory. But his exposition and interpretation of the movement as a whole was hardly as correct as its presentation in outline in the Tableau conomique, in spite of Quesnay s false assumptions. When moreover Adam Smith says of the Physiocrats: Their works have certainly been of some service to their country ([Wealth of Nations, O.U.P. edition, Vol. II, p. 2991, [Garnier], l.c., p. 538), this is an immoderately moderate statement of the significance for example of Turgot, one of the immediate fathers of the French revolution. |437|| * ||437| The passage from Proudhon referred to earlier runs: The amount of mortgage debts, according to the best-informed writers, is 12 milliards; some put it as high as 16 milliards. The amount of debts on note of hand, at least 6. Limited-liability companies, about 2. The public debt, 8 milliards. Total: 28 milliards. All these debts note this point have their source in money lent, or deemed to be lent, at 4, at 5, at 6, at 8, at 12, and up to 15 per cent. I take 6 per cent as the average interest, as far as concerns the first three categories: that would be, then, on 20 milliards, 1,200 millions. Add the interest on the public debt, about 400 millions: in all, 1,600 millions annual interest, for a capital of 1 milliard (p. 152). That is to say; 160 per cent. For the amount of ready money, I will not say existing, but circulating in France, including the cash balance of the Bank, does not exceed 1 milliard, according to the most usual estimate (p. 151). When the exchange has been completed, the money is once more available, and can therefore give rise to a new loan The money-capital, going from exchange to exchange, always returns to its source, and it follows that it can always be reloaned by the same hand and always profits the same person (pp. 153-54). Gratuit du cr dit. Discussion entre M. Fr. Bastiat et M. Proudhon, Paris, 1850. |437||
Economic Manuscripts: Theories of Surplus-Value, Chapter 6