Take the commodity-capital which is the product of a working period of, say, nine weeks. Let us, for the time being, leave aside that portion of the value of the product which is added to it by the average wear and tear of the fixed capital, and also the surplus-value added to the product during the process of production. The value of this product is then equal to that of the circulating capital, advanced for its production, i.e., of the wages and the raw and auxiliary materials consumed in its production. Let this value be 900, so that the weekly outlay is 100. The period of production, which here coincides with the working period, is therefore nine weeks. It is immaterial whether it is assumed that this is the working period of a continuous product, or whether it is a continuous working period for a discrete product, so long as the quantity of discrete product brought to market at one time costs nine weeks labour. Let the time of circulation be three weeks. Then the entire period of turnover is twelve weeks. At the end of nine weeks the advanced productive capital is converted into commodity-capital, but now it stays for three weeks in the period of circulation. The new period of production therefore cannot start before the beginning of the thirteenth week, and production would be at a standstill for three weeks, or for a quarter of the entire period of turnover. It again does not make any difference whether it is assumed that it takes so long on an average to sell the product, or that this length of time is bound up with the remoteness of the market or the terms of payment for the goods sold. Production would be standing still for three weeks every three months, making it four times three, or twelve weeks in a year, which means three months, or one-quarter, of the annual period of turnover. Hence, if production is to be continuous and carried along the same scale week after week, there is only this alternative: Either the scale of production must be reduced, so that the 900 suffice to keep the work going both during the working period and the time of circulation of the first turnover, is then commenced with the tenth week, before the first period of turnover is completed, for the period of turnover is twelve weeks, and the working period nine weeks. A sum of 900 distributed over twelve weeks makes 75 per week. It is evident in the first place that such a reduced scale of business presupposes changed dimensions of the fixed capital and therefore, on the whole, a curtailment of the business. In the second place, it is questionable whether such a reduction can take place at all, for in each business there exists, commensurate with the development of its production, a normal minimum of invested capital essential to maintain its capacity to complete. This normal minimum grows steadily with the advance of capitalist production, and hence it is not fixed. There are numerous intermediate grades between the normal minimum existing at any particular time and the ever increasing normal maximum, a medium which permits of many different scales of capital investment. Within the limits of this medium reductions may take place, their lowest limit being the prevailing normal minimum. When there is a hitch in production, when the markets are overstocked, and when raw materials rise in price, etc., the normal outlay of circulating capital is restricted once the pattern of the fixed capital has been set by cutting down working time to, say, one half. On the other hand, in times of prosperity, the pattern of the fixed capital given, there is an abnormal expansion of the circulating capital, partly through the extension of working time and partly through its intensification. In businesses which have, from the outset, to reckon with such fluctuations, the situation is relieved partly by recourse to the above measures and partly by employing simultaneously a greater number of labourers, in combination with the application of reserve fixed capital, such as reserve locomotives on railways, etc. However, such abnormal fluctuations are not considered here, where we assume normal conditions. In order to make production continuous, therefore, the expenditure of the same circulating capital is here distributed over a longer period, over twelve weeks instead of nine. In every section of time there consequently functions a reduced productive capital. The circulating portion of the productive capital is reduced from 100 to 75, or one-quarter. The total amount by which the productive capital functioning for a working period of nine weeks is reduced equals 9 times 25, or 225, or one-quarter of 900. But the ratio of the time of circulation to that of turnover is likewise three-twelfths, or one-quarter. It follows therefore: circulation of the productive capital transformed into commodity-capital, if it is rather to be carried on simultaneously and continuously week after week, and if no special circulating capital is available for this purpose, it can be done only by curtailing productive operations, by reducing the circulating component of the functioning productive capital. The portion of circulating capital thus set free for production during the time of circulation is to the total advanced circulating capital as the time of circulation is to the period of turnover. This applies, as has already been stated, only to branches of production in which the labour-process is carried on in the same scale week after week, where therefore no varying amounts of capital are to be invested in different working periods, as for instance in agriculture. If on the other hand we assume that the nature of the business excludes a reduction of the scale of production, and thus of the circulating capital to be advanced each week, then continuity of production can be secured only by additional circulating capital, in the above-named case of 300. During the twelve-week turnover period, 1,200 are successively invested, and 300 is one-quarter of this sum as three weeks is of twelve. At the end of the working time of nine weeks the capital-value of 900 has been converted from the form of productive into that of commodity-capital. Its working period is concluded, but it cannot be re-opened with the same capital. During the three weeks in which it stays in the sphere of circulation, functioning as commodity-capital, it is in the same state, so far as the process of production is concerned, as if it did not exist at all. We rule out in the present case all credit relations and take for granted that the capitalist operates only with his own money. But during the time the capital advanced for the first working period, having completed its process of production, stays three weeks in the process of circulation, there functions an additional capital investment of 300, so that the continuity of production is not broken. Now, the following must be noted in this connection: Firstly: The working period of the capital of 900 first advanced is completed at the close of nine weeks and it does not return until after three weeks are up, that is to say, at the beginning of the thirteenth week. But a new working period is immediately begun with the additional capital of 300. By this means continuity of production is maintained. Secondly: The functions of the original capital of 900 and of the capital of 300 newly added at the close of the first nine-week working period, inaugurating the second working period after the conclusion of the first without any interruption, are, or at least could be, clearly distinguished in the first period of turnover, while they cross each other each other in the course of the second period of turnover. Let us make this matter plainer. First period of turnover of 12 weeks. First working period of 9 weeks; the turnover of the capital advanced for this is completed at the beginning of the 13th week. During the last 3 weeks the additional capital of 300 functions, opening the second working period of 9 weeks. Second period of turnover. At the beginning of the 13th week, 900 have returned and are able to begin a new turnover. But the second working period has already been opened in the 10th week by the additional 300. At the start of the 13th week, thanks to this, one-third of the working period is already over and 300 has been converted from productive capital into product. Since only 6 weeks more are required for the completion of the second working period, only two-thirds of the returned capital of 900, or only 600, can enter into the productive process of the second working period. 300 of the original 900 are set free to play the same role which the additional capital of 300 played in the first working period. At the close of the 6th week of the second period of turnover the second working period is up. The capital of 900 advanced in it returns after 3 weeks, or at the end of the 9th week of the second, 12-week period of turnover. During the 3 weeks of its period of circulation, the freed capital of 300 comes into action. This begins the third working period of a capital of 900 in the 7th week of the second period of turnover, or the 19th week of the year. Third period of turnover. At the close of the 9th week of the second period of turnover there is a new reflux of 900. But the third working period has already commenced in the 7th week of the previous period of turnover and 6 weeks have already elapsed. The third working period, then, lasts only another 3 weeks. Hence only 300 of the returned 900 enter into the productive process. The fourth working period fills out the remaining 9 weeks of this period of turnover and thus the 37th week of the year begins simultaneously the fourth period of turnover and the fifth working period. In order to simplify the calculation in this case let us assume a working period of 5 weeks and a period of circulation of 5 weeks, making a turnover period of 10 weeks. Figure the year as composed of fifty weeks and the capital outlay per week as 100. A working period then requires a circulating capital of 500 and the time of circulation an additional capital of 500. The working periods and times of turnover then are as follows: Now let us take a third illustration: Working period 6 weeks time of circulation 3 weeks, weekly advance during labour-process 100. 1st working period: 1st-6th week. At the end of the 6th week a commodity-capital of 600, returned at the end of the 9th week. 2nd working period: 7th-12th week. During the 7th-9th week 300 of additional capital is advanced. At the end of the 9th week, return of 600. Of this, 300 are advanced during the 10th-12th week. At the end of the 12th week therefore 300 are free and 600 are in the form of commodity-capital, returnable at the end of the 15th week. 3rd working period: 13th-18th week. During the 13th-15th week, advance of above 300, then reflux of 600, of which 300 are advanced for the 16th-18th week. At the end of the 18th week, 300 are free in money-form, 600 on hand as commodity-capital which returns at the end of the 21st week. (See the more detailed presentation of this case under II, below.) A comparison of these three illustrations shows, first, that a successive release of capital I of 500 and of additional capital II of likewise 500 takes place only in the second illustration, so that these two portions of capital move separately and apart from each other. But this is so only because we have made the very exceptional assumption that the working period and the time of circulation form two equal halves of the turnover period. In all other cases, whatever the difference between the two constituents of the period of turnover, the movements of the two capitals cross each other, as in illustrations I and III, beginning with the second period of turnover. The additional capital II, with a portion of capital I, then forms the capital functioning in the second turnover period, while the remainder of capital I is set free to perform the original function of capital II. The capital operating during the circulation time of the commodity-capital is not identical, in this case, with the capital II originally advanced for this purpose, but it is of the same value and forms the same aliquot part of the total capital advanced. Secondly: The capital which functioned during the working period lies idle during the time of circulation. In the second illustration the capital functions during the 5 weeks of the working period and lies idle during the 5 weeks of the circulation period. Therefore the entire time during which capital I lies idle here amounts to one half of the year. It is the additional capital II that appears during this time having, in the case before us, also in its turn lain idle half a year. But the additional capital required to ensure the continuity of production during the time of circulation is not determined by the aggregated amount, or sum total, of the times of circulation during the year, but only by the ratio of the time of circulation to the period of turnover. (We assume, of course, that all the turnovers take place under the same conditions.) For this reason 500 of additional capital, and not 2,500, are required in the second illustration. This is simply due to the fact that the additional capital enters just as well into the turnover as the capital originally advanced, and that it therefore makes up its magnitude just as the other by the number of its turnovers. Thirdly: The circumstances here considered are not affected by whether the time of production is longer than the working time or not. True, the aggregate of the periods of turnover is prolonged thereby, but this extension does not necessitate any additional capital for the labour-process. The additional capital serves merely the purpose of filling the gaps in the labour-process that arise on account of the time of circulation. Hence it is there simply to protect production against interruptions, originating in the time of circulation. Interruptions arising from the specific conditions of production are to be eliminated in another way, which need not be discussed at this point. There are however establishments in which work is carried on only intermittently, to order, so that there may be intervals between the working periods. In such cases, the need for additional capital is pro tanto eliminated. On the other hand in most cases of seasonal work there is a certain limit for the time of reflux. The same work cannot be renewed next year with the same capital, if the circulation time of this capital has not, in the meantime, run out. On the other hand the time of circulation may also be shorter than the interval between two periods of production. In that event the capital lies fallow, unless it is meanwhile employed otherwise. Fourthly: The capital advanced for a certain working period for instance the 600 in the third illustration is invested partly in raw and auxiliary materials, in a productive supply for the working period, in constant circulating capital, and partly in variable circulating capital, in the payment of labour itself. The portion laid out in constant circulating capital, may not exist for the same length of time in the form of a productive supply; the raw material for instance may not be on hand for the entire working period, coal may be procured only every two weeks. However, as credit is still out of the question here, this portion of capital, in so far as it is not available in the form of a productive supply, must be kept on hand in the form of money so that it can be converted into a productive supply as and when needed. This does not alter the magnitude of the constant circulating capital-value advanced for 6 weeks. On the other hand regardless of the money-supply for unforeseen expenses, the reserve fund proper for the elimination of disturbances wages are paid in shorter intervals, mostly weekly. Therefore unless the capitalist compels the labourer to advance his labour for a longer time, the capital required for wages must be on hand in the form of money. During the reflux of the capital a portion must therefore be retained in money-form for the payment of the labour, while the remaining portion may be converted into productive supply. The additional capital is divided exactly like the original. But it is distinguished from capital I by the fact that (apart from credit relations) in order to be available for its own working period it must advanced during the entire duration of the first working period of capital I, into which it does not enter. During this time it can already be converted, at least in part, into constant circulating capital, having been advanced for the entire period of turnover. To what extent it assumes this form or persists in the form of additional money-capital until this conversion becomes necessary, will depend partly on the special conditions of production of definite lines of business, partly on local conditions, partly on the price fluctuations of raw material, etc. If social capital is viewed in its entirety, a more or less considerable part of this additional capital will always be for a rather long time in the state of money-capital. But as for that portion of capital II which is to be advanced for wages, it is always converted only gradually into labour-power, as small working periods expire and are paid for. This portion of capital II, then, is available in the form of money-capital during the entire working period, until by its conversion into labour-power it take part in the function of productive capital. Consequently, the accession of the additional capital required for the transformation of the circulation time of capital I into time of production, increases not only the magnitude of the advanced capital and the length of time for which the aggregate capital must necessarily be advanced, but also, and specifically so, that portion of the advanced capital which exists as money-supply, which hence exists in the state of money-capital and has the form of potential money-capital. The same thing also takes place as far as it concerns both the advance in the form of a productive supply and in that of a money-supply when the separation of capital into two parts made necessary by the time of circulation, namely into capital for the first working period and replacement capital for the time of circulation, is not caused by the increase of the capital laid out but by a decrease of the scale of production. The amount of capital tied up in the money-form grows here still more in relation to the scale of production. What is achieved in general by this separation of capital into an originally productive and an additional capital is a continuous succession of the working periods, the constant function of an equal portion of the advanced capital as productive capital. Let us look at the second illustration. The capital continuously employed in the process of production amounts to 500. As the working period is 5 weeks it operates ten times during 50 weeks (taken as a year). Hence its product, apart from surplus-value, is 10 times 500, or 5,000. From the standpoint of a capital working directly and uninterruptedly in the process of production a capital-value of 500 the time of circulation seems to be brought to nought. The period of turnover coincides with the working period, and the time of circulation is assumed to be equal to zero. But if the capital of 500 were regularly interrupted in its productive activity by a 5-week circulation time, so that it would again become capable of production only after the close of the entire 10-week turnover period, we should have 5 turnovers of ten weeks each in the 50 weeks of the year. These would comprise five 5-week periods of production, or a sum of 25 productive weeks with a total product worth 5 times 500 or 2,500, and five 5-week periods of circulation, or a total circulation time of likewise 25 weeks. If we say in this case that the capital of 500 has been turned over 5 times in the year, it will be clear and obvious that during half of each period of turnover this capital of 500 did not function at all as a production capital and that, all in all, it performed its functions only during one half of the year, but did not function at all during the other half. In our illustration the replacement capital of 500 appears on the scene during those five periods of circulation and the turnover is thus expanded from 2,500 to 5,000. But now the advanced capital is 1,000 instead of 500. 5,000 divided by 1,000 is 5. Hence, there are five turnovers instead of ten. And that is just the way people figure. But when it is said that the capital of 1,000 has been turned over five times during the year, the recollection of the time of circulation disappears from the hollow skulls of the capitalists and a confused idea is formed that this capital has served continuously in the production process during the five successive turnovers. But if we say that the capital of 1,000 has been turned over five times this includes both the time of circulation and the time of production. Indeed, if 1,000 had really been continuously active in the process of production, the product would, according to our assumptions, have to be 10,000 instead of 5,000. But in order to have 1,000 continuously in the process of production, 2,000 would have to be advanced. The economists, who as a general rule have nothing clear to say in reference to the mechanism of the turnover, always overlook this main point, to wit, that only a part of the industrial capital can actually be engaged in the process of production if production is to proceed uninterruptedly. While one part is in the period of production, another must always be in the period of circulation. Or in other words, one part can perform the function of productive capital only on condition that another part is withdrawn from production proper in the form of commodity- or money-capital. In overlooking this, the significance and role of money-capital is entirely ignored. We have now to ascertain what differences in the turnover arise if the two sections of the period of turnover, the working period and the circulation period, are equal, or if the working period is greater or smaller than the circulation period, and, furthermore, what effect this has on the tie-up of capital in the form of money-capital. We assume the capital advanced weekly to be in all cases 100, and the period of turnover 9 weeks, so that the capital to be advanced in each period of turnover is 900. The two capitals (capital I advanced for the first working period, and supplemental capital II, which functions during the circulation period of capital I) relieve one another in their movements without crossing. With the exception of the first period, either of the two capitals is therefore advanced only for its own period of turnover. Let the period of turnover be 9 weeks, as indicated in the following illustrations, so that the working period and the circulation period are each 4 weeks. Then we have the following annual diagram. Let us consider capital I and capital II as two capitals wholly independent of one another. They are entirely independent in their movements; these movements complement one another merely because their working and circulating periods directly relieve one another. They may be regarded as two totally independent capitals belonging to different capitalists. Capital I has completed five full turnovers and two-thirds of its sixth turnover period. At the end of the year it has the form of commodity-capital, which is three weeks short of its normal realisation. During this time it cannot enter into the process of production. It functions as commodity-capital, it circulates. It has completed only two-thirds of its last period of turnover. This is expressed as follows: It has been turned over only two-thirds of a time, only two-thirds of its total value have performed a complete turnover. We say that 450 complete their turnover in 9 weeks, hence 300 do in 6 weeks. But in this mode of expression the organic relations between the two specifically different components of the turnover time are ignored. The exact meaning of the expression that the advanced capital of 450 has made 5 turnovers is merely that it has accomplished five turnovers fully and only two-thirds of the sixth. On the other hand the expression that the turned-over capital equals 5 times the advanced capital hence, in the above case, 5 times 450, making 2,550 is correct, meaning that unless this capital of 450 were complemented by another capital of 450, one portion of it would have to be in the process of production while another in the process of circulation. If the time of turnover is to be expressed in terms of the capital turned over, it can always be expressed only in terms of existing value (in fact, of finished product). The circumstance that the advanced capital is not in a condition in which it may re-open the process of production finds expression in the fact that only a part of it is in a state capable of production or that, in order to be in a state of uninterrupted production, the capital would have to be divided into a portion which would be continually in the period of production and into another which would be continually in the period of circulation, depending upon the relation of these periods to each other. It is the same law which determines the quantity of the constantly functioning productive capital by the ratio of the time of circulation to the time of turnover. By the end of the 51st week, which we regard here as the end of the year, 150 of capital II have been advanced to the production of an unfinished lot of goods. Another part of it exists in the form of circulating constant capital raw materials, etc. i.e., in a form in which it can function as productive capital in the production process. But a third part of it exists in the form of money, at least the amount of the wages for the remainder of the working period (3 weeks), which is not paid, however, until the end of each week. Now, although at the beginning of a new year, hence of a new turnover cycle, this portion of the capital is not in the form of productive capital but in that of money-capital, in which it cannot take part in the process of production, at the opening of the new turnover circulating variable capital, i.e., living labour-power, is nevertheless active in the process of production. This is due to the fact that labour-power is not paid until the end of the week, although bought at the beginning of the working period, say, per week, and so consumed. Money serves here as a means of payment. For this reason it is still as money in the hands of the capitalist, on the one hand, while, on the other hand, labour-power, the commodity into which money is being transformed, is already active in the process of production, so that the same capital-value appears here doubly. If we look merely at the working periods, On the other hand, if we consider the periods of turnover, there has been turned over: It is to be noted that if capitals I and II were independent of each other they would nevertheless form merely different independent portions of the social capital advanced in the same sphere of production. Hence if the social capital within this sphere of production were composed solely of I and II, the same calculation would apply to the turnover of the social capital in this sphere as applies here to the constituent parts I and II of the same private capital. Going further, every portion of the entire social capital invested in any particular sphere of production may be so calculated. But in the last analysis, the number of turnovers made by the entire social capital is equal to the sum of the capitals turned over in the various spheres of production divided by the sum of the capitals advanced in those spheres. It must further be noted that just as capitals I and II in the same private business have here strictly speaking different turnover years (the cycle of turnover of capital II beginning 4 weeks later than that of capital I, so that the year of I ends 4 weeks earlier than that of II), so the various private capitals in the same sphere of production begin their operations at totally different periods and therefore conclude their turnover years at different times of the year. The same calculation of averages that we employed above for I and II suffices also here to bring down the turnover years of the various independent portions of the social capital to one uniform turnover year. But this does not alter the fact that, as before, 1) the number of working periods of the total capital advanced is equal to the sum of the value of the annual product of both advanced portions of capital divided by the total capital advanced, and 2) the number of turnovers made by the total capital is equal to the sum of the two amounts turned over divided by the sum of the two advanced capitals. Here too we must consider both portions of capital as if they performed turnover movements entirely independent of each other. Thus, we assume once more, that 100 are to be advanced weekly to the labour-process. Let the working period last 6 weeks, requiring therefore every time an advance of 600 (capital I). Let the time of circulation be 3 weeks, so that the period of turnover is 9 weeks, as before. Let capital II of 300 step in during the three-week circulation period of capital I. Considering both capitals as independent of each other, we find the schedule of the annual turnover to be as follows: In reality, capital II has no working and circulating periods separate and distinct from those of capital I. The working period is 6 weeks, the circulation period 3 weeks. Since capital II amounts to only 300, it can suffice only for a part of the working period. This is indeed the case. At the end of the 6th week a product valued at 600 passes into circulation and returns in money-form at the close of the 9th week. Then, at the opening of the 7th week, capital II begins its activity, and covers the requirements of the next working period, the 7th to 9th week. But according to our assumption the working period is only half up at the end of the 9th week. Hence capital I of 600 having just returned, at the beginning of the 10th week, once more enters into operation and with its 300 supplies the advances needed for the 10th to 12th week. This disposes of the second working period. A product value of 600 is in circulation and will return at the close of the 15th week. At the same time, 300, the amount of the original capital II, are set free and are able to function in the first half of the following working period, that is to say, in the 13th to 15th week. After the lapse of these weeks the 600 return; 300 of them suffice for the remainder of the working period, and 300 remain for the following working period. The thing therefore works as follows: In the present example we assumed a case in which the working time was and the circulation time of the period of turnover, i.e., the working time was a simple multiple of the circulation time. The question now is whether capital is likewise set free, in the way shown above, when this assumption is not made. Let us assume a working time of 5 weeks, a circulation time of 4 weeks, and a capital advance of 100 per week. Let us further assume a working period of 7 weeks, with a capital I of 700; a circulation period of 2 weeks, with a capital II of 200. In that case the first period of turnover lasts from the 1st to the 9th week; its first working period from the 1st to the 7th week, with an advance of 700, its first circulation period from the 8th to the 9th week. End of the 9th week, 700 flow back in money-form. The second period of turnover, from the 8th to the 16th week, contains the second working period of the 8th to the 14th week. The requirements of the 8th and 9th weeks of this period are covered by capital II. End of the 9th week, the above 700 return. Up to the close of this working period (10th-14th week), 500 of this sum are used up; 200 remain free for the next working period. The second circulation period lasts from the 15th to the 16th week. End of the 16th week 700 return once more. From now on, the same thing is repeated in every working period. The need for capital during the first two weeks is covered by the 200 set free at the close of the preceding working period; at the close of the second week 700 return; but only 5 weeks remain of the working period, so that it can consume only 500; therefore 200 always remain free for the next working period. We find, then, that in the given case, where the working period has been assumed to be greater than the circulation period, a money-capital will at all events have been set free at the close of each working period, which is of the same magnitude as capital II advanced for the circulation period. In our three illustrations capital II was 300 in the first, 400 in the second, and 200 in third. Accordingly, the capital set free at the close of each working period was 300, 400 and 200 respectively. The total turnover is as follows: In all cases investigated it was assumed that both the working period and the circulation period remain the same throughout the year in any of the businesses here examined. This assumption was necessary if we wished to ascertain the influence of the time of circulation on the turnover and advancement of capital. That in reality this assumption is not so unconditionally valid, and that it frequently is not valid at all does not alter the case in the least. In this entire section we have discussed only the turnovers of the circulating capital, not those of the fixed, for the simple reason that the question at issue has nothing to do with fixed capital. The instruments of labour, etc., employed in the process of production form only fixed capital, inasmuch as their time of employment exceeds the period of turnover of the circulating capital; inasmuch as the period of time during which these instruments of labour continue to serve in perpetually repeated labour-processes is greater than the period of turnover of the circulating capital, and hence equal to the n periods of turnover of the circulating capital. Regardless of whether the total time represented by these n periods of turnover of the circulating capital is longer or shorter, that portion of the productive capital which was advanced for this time in fixed capital is not advanced anew during its course. It continues its functions in its old use-form. The difference is merely this: In proportion to the varying length of a single working period of each period of turnover of the circulating capital, the fixed capital gives up a greater or smaller part of its original value to the product of that working period, and proportionally to the duration of the circulation time of each period of turnover this value-part of the fixed capital given up to the product returns quicker or slower in money-form. The nature of the subject we are discussing in this section the turnover of the circulating portion of productive capital derives from the very nature of this portion. The circulating capital employed in a working period cannot be applied in a new working period until it has completed its turnover, until it has been transformed into commodity-capital, from that into money-capital, and from that back into productive capital. Hence, in order that the first working period may be immediately followed by a second, capital must be advanced anew and converted into the circulating elements of productive capital, and its quantity must be sufficient to fill the void occasioned by the circulation period of the circulating capital advanced or the first working period. This is the source of the influence exerted by the length of the working period of the circulating capital over the scale of the labour-process and the division of the advanced capital or the addition of new portions of capital. This was precisely what we had to examine in this section. A very considerable portion of the social circulating capital, which is turned over several times a year, will therefore periodically exist in the form of released capital during the annual turnover cycle. It is furthermore evident that, all other circumstances being equal, the magnitude of the released capital grows with the volume of the labour-process or with the scale of production, hence with the development of capitalist production in general. In the case cited under B, (2), because the total advanced capital increases; in B (1), because with the development of capitalist production the length of the period of circulation grows, hence also the period of turnover in those cases where the working period is less than the period of circulation, and there is no regular ratio between the two periods. In the first case for instance we had to invest 100 per week. This required 600 for a working period of 6 weeks, 300 for a circulation period of 3 weeks, totalling 900. In that case 300 are released continually. On the other hand if 300 are invested weekly, we have 1,800 for the working period and 900 for the circulation period. Hence 900 for the circulation period. Hence 900 instead of 300 are periodically set free. Abstractly speaking, it is all the same whether 600 work during 6 times 8, or 48, weeks (product 4,800) or whether the total capital of 900 is expended during 6 weeks in the labour-process and then lies idle during the 3-week period of circulation. In the latter case, it would be working, in the course of the 48 weeks, 5 times 6, or 32 weeks (product 5 times 900, or 4,800), and lie idle for 16 weeks. But, apart from the greater spoilage of the fixed capital during the idle 16 weeks and apart from the appreciation of labour, which must be paid during the entire year, even if employed only during a part of it, such a regular interruption of the process of production is altogether irreconcilable with the operations of modern big industry. This continuity is itself a productive power of labour. Now, if we take a closer look at the released, or rather suspended, capital, we find that a considerable part of it must always be in the form of money-capital. Let us adhere to our illustration: Working period 6 weeks, period of circulation 3 weeks, investment per week 100. In the middle of the second working period, end of the 9th week, 600 return, and only 300 of them must be invested for the remainder of the working period. At the end of the second working period, 300 are therefore released. In what state are these 300? We shall assume that is invested for wages and are for raw and auxiliary materials. Then 200 of the returned 600 exist in the form of money for wages and 400 in the form of productive supply, in the form of elements of the constant circulating productive capital. But since only one half of this productive supply is required for the second half of the second working period, the other half exists for 3 weeks in the form of a surplus productive supply, i.e., of a supply exceeding the requirements of one working period. But the capitalist knows that he needs only one half, or 200, of this portion ( 400) of the returned capital for the current working period. It will therefore depend on market conditions whether he will immediately reconvert these 200, in whole or in part, into a surplus productive supply, or keep them entirely or partially in the form of money-capital in anticipation of a more favourable market. On the other hand it goes without saying that the portion to be laid out for wages ( 200) is retained in the form of money. The capitalist cannot store labour-power in warehouses after he has bought it, as he may do with the raw material. He must incorporate it in the process of production and pay for it at the end of the week. At any rate these 100 of the released capital of 300 will therefore have the form of money-capital set free, i.e., not required for the working period. The capital released in the form of money-capital must therefore be at least equal to the variable portion of capital invested in wages. At a maximum, it may comprise the entire released capital. In reality it fluctuates constantly between this minimum and maximum. The money-capital thus released by the mere mechanism of the turnover movement (together with that freed by the successive reflux of fixed capital and that required in every labour-process for variable capital) must play an important role as soon as the credit system develops and must at the same time form one of the latter s foundations. Let us assume that the time of circulation in our illustration is shortened from 3 to 2 weeks. This is not to be a normal change, but due, say, to prosperous times, shorter terms of payment, etc. The capital of 600, which is laid out during the working period, returns one week earlier than needed. It is therefore released for this week. Furthermore, in the middle of the working period, as before, 300 are released (a portion of those 600), but for 4 weeks instead of 3. There are then, on the money-market 600 for one week and 300 for 4 instead of 3 weeks. As this concerns not one capitalist alone but many and occurs in various periods in different businesses, more available money-capital makes its appearance in the market. If this condition lasts for some time, production will be expanded wherever feasible. Capitalists operating on borrowed money will exercise less demand on the money-market, which eases it as much as increased supply; or finally the sums which have become superfluous for the mechanism are thrown definitely on the money-market. In consequence of the contraction of the time of circulation from 3 weeks to 2, and consequently of the period of turnover from 9 weeks to 8, one-ninth of the total capital advanced becomes superfluous. The 6-week working period can now be kept going as continuously with 800 as formerly with 900. One portion of the value of the commodity-capital, equal to 100, once it has been reconverted into money, persists therefore in the state of money-capital without performing any more functions as a part of the capital advanced for the process of production. While the scale of production and other conditions, such as prices, etc., remain the same, the sum of value of the advanced capital is reduced from 900 to 800. The remainder of the originally advanced value amounting to 100 is eliminated in the form of money-capital. As such it enters the money-market and forms an additional portion of the capitals functioning here. This shows the way in which a plethora of money-capital may arise and not only in the sense that the supply of money-capital is greater than the demand; this is always only a relative plethora, which occurs for instance in the melancholy period opening a new cycle after the end of a crisis. But also in the sense that a definite portion of the capital-value advanced becomes superfluous for the operation of the entire process of social reproduction which includes the process of circulation and is therefore eliminated in the form of money-capital a plethora brought about by the mere contraction of the period of turnover, while the scale of production and prices remain the same. The amount of money in circulation, whether great or small, did not influence it in the least. Let us assume on the contrary that the period of circulation is prolonged from, say, 3 weeks to 5. In that case at the very next turnover the reflux of the advanced capital takes place 2 weeks too late. The last part of the process of production of this working period cannot be carried on further by the mechanism of the turnover of the advanced capital itself. Should this condition last any length of time, a contraction of the process of production, a reduction of its volume, might take place, just as an extension occurred in the previous case. But in order to continue the process on the same scale, the advanced capital would have to be increased by 2/9, or 200, for the entire term of the prolongation of the circulation period. This additional capital can be obtained only from the money-market. If the lengthening of the period of circulation applies to one or several big branches of business, it may exert pressure on the money-market, unless this effect is paralysed by some counter-effect. In this case it is likewise evident and obvious that this pressure, like that plethora before, had nothing whatever to do with a movement either of prices of the commodities or the mass of existing circulating medium. [The preparation of this chapter for publication presented no small number of difficulties. Firmly grounded as Marx was in algebra, he did not get the knack of handling figures, particularly commercial arithmetic, although there exists a thick batch of copybooks containing numerous examples of all kinds of commercial computations which he had solved himself. But knowledge of the various methods of calculation and exercise in daily practical commercial arithmetic are by no means the same, and consequently Marx got so tangled up in his computations of turnovers that besides places left uncompleted a number of things were incorrect and contradictory. In the tables reproduced above I have preserved only the simplest and arithmetically correct data. My reason for doing so was mainly the following: The uncertain results of these painstaking calculations led Marx to attach unwarranted importance to a circumstance, which in my opinion, has actually little significance. I refer to what he calls the release of money-capital. The actual state of affairs, based on the above assumptions, is this: No matter what may be the ratio between the working period and circulation time, hence between capital I and capital II, there is returned to the capitalist, in the form of money, after the end of the first turnover and thereafter at regular intervals equal to the duration of one working period, the capital required for one working period, i.e., a sum equal to capital I. If the working period is 5 weeks, the circulation time 4 weeks, and capital I 500, then a sum of money equal to 500 returns each time at the end of the 9th, 14th, 19th, 24th, 29th week, etc. If the working period is 6 weeks, the circulation time 3 weeks, and capital I 600, then 600 return at the end of the 9th, 15th, 21st, 27th, 33rd week, etc. Finally, if the working period is 4 weeks, the circulation time 5 weeks, and capital I 400, then 400 are returned at the end of the 9th, 13th, 17th, 21st, 25th week, etc. Whether any, and if so how much, of this returned money is superfluous and thus released for the current working period is immaterial. It is assumed that production continues uninterruptedly on the current scale, and in order that this may come about money must be available and must therefore return, whether released or not. If production is interrupted, release stops likewise. In other words: There is indeed a release of money, a formation therefore of latent, merely potential, capital in the form of money. But it takes place under all circumstances and not only under the special conditions set forth in the text; and it comes about on a larger scale than that assumed in the text. So far as circulating capital I is concerned, the industrial capitalist is in the same situation at the end of each turnover as when he established his business: he has all of it in one bulk, while he can convert it back into productive capital only gradually. The essential point in the text is the proof that on the one hand a considerable portion of the industrial capital must always be available in the form of money and that on the other hand a still more considerable portion must temporarily assume the form of money. The proof is, if anything, rendered stronger by these additional remarks of mine. F. E.] In the second place however one half of the originally advanced capital-value of 900, or 450, which (a) passed successively through the forms of money-capital, productive capital, and commodity-capital, and (b) existed simultaneously and constantly side by side partly in the form of money-capital, partly in that of productive capital, and partly in that of commodity-capital, would be eliminated from the circuit of Business X, and thus come into the money-market as additional money-capital, affecting it as an additional constituent. These released 450 act as money-capital, not because they have become superfluous money for the operation of Business X but because they are a constituent part of the original capital-value, and hence are intended to function further as capital and not to be expended as mere means of circulation. The best method of letting them operate as capital is that of throwing them as money-capital on the money-market. On the other hand the scale of production (apart from fixed capital) might be doubled. In that case a productive process of double the previous volume would be carried on with the same advanced capital of 900. If on the other hand the prices of the circulation elements of productive capital were to increase by one half, 1500 instead of 100 or 1,350 instead of 900 would be required per week. It would take an additional capital of 450 to carry on the business on the same scale, and this would exert a pro tanto pressure on the money-market, big or small depending on its condition. If all the capital available on this market were then already engaged, there would be increased competition for available capital. If a portion of it were unemployed, it would pro tanto be called into action. But, in the third place, given a certain scale of production, the turnover velocity and the prices of the elements of the circulating productive capital remaining the same, the price of the products of Business X may rise or fall. If the price of the commodities supplied by Business X falls, the price of its commodity-capital of 600, which it constantly threw into circulation, drops to, say, 500. Hence one-sixth of the value of the advanced capital does not return from the process of circulation. (The surplus-value contained in the commodity-capital is not considered here.) It is lost in that process. But since the value, or price, of the elements of production remains the same, this reflux of 500 suffices only to replace 5/6 of the capital of 600 constantly engaged in the process of production. It would therefore require an additional money-capital of 100 to continue production on the same scale. Vice versa, if the price of the product of Business X were to rise, then the price of the 600 commodity-capital would be increased, say, to 700. One-seventh of this price, or 100, does not originate in the process of production, is not advanced in this process, but derives from the process of circulation. But only 600 are needed to replace the elements of production. Hence, the release of 100. It does not fall within the scope of the investigation hitherto made to ascertain why, in the first case, the period of turnover is shortened or lengthened, and why in the second case the prices of raw materials and labour, and in the third, the prices of the products supplied, rise or fall. But the following does belong in it: Business X supplies, just as before, the same six weeks product of the same value of 600, and as work continues year in year out without interruption, it supplies in 51 weeks the same quantity of products, valued at 5,100. There is, then, no change so far as the quantity and price of the product thrown into circulation by this business are concerned, nor in the times when it throws its product on the market. But 100 are eliminated because due to the contraction of the circulation period the requirements of the process are satisfied with only 800 instead of the former 900. The 100 eliminated capital exist in the form of money-capital. But they do not by any means represent that portion of the advanced capital which would have to function constantly in the form of money-capital. Let us assume that 4/5, or 480, of the advanced circulating capital I of 600 are constantly invested in productive materials and 1/5, or 120, in wages. Then the weekly investment in materials of production would be 80 and in wages 20. Capital II, amounting to 300, should then also be divided into 4/5, or 240, for materials of production and 1/5, or 60, for wages. The capital invested in wages must always be advanced in the form of money. As soon as the commodity-product, worth 600, has been reconverted into the money-form, or sold, 480 of it can be transformed into materials of production (productive supply), but 120 retain their money-form in order to serve for the payment of wages for six weeks. These 120 are the minimum of the returning capital of 600 which must always be renewed and replaced in the form of money-capital and therefore must always be kept on hand as that portion of the advanced capital which functions in the form of money. Now, if 100 of the 300 periodically released for three weeks, and likewise divisible into 240 for productive supply and 60 for wages, is entirely eliminated, completely thrust out of the turnover mechanism, in the form of money-capital by shortening the circulation time, where does the money for this money-capital of 100 come from? Only one-fifth of this amount consists of money-capital periodically set free within the turnovers. But four-fifths, or 80, are already replaced by an additional productive supply of the same value. In what manner is this additional productive supply converted into money, and where does the money for this conversion come from? If the abridged period of circulation has become a fact, then only 400 of the above 600, instead of 480, are reconverted into productive supply. The remainder, 80, is retained in its money-form and constitutes, together with the above 20 for wages, the 100 of eliminated capital. Although these 100 come from the sphere of circulation through the sale of the 600 worth of commodity-capital and are now withdrawn from it by not being reinvested in wages and elements of production, it must not be forgotten that, being in the money-form, they are once more in that form in which they were originally thrown into circulation. In the beginning 900 were invested in productive supply and wages. Now only 800 are necessary to carry out the same productive process. The 100 thus released in money now form a new, employment-seeking money-capital, a new constituent part of the money-market. True, they have already previously been periodically in the form of released money-capital and of additional productive capital, but these latent states were themselves the requisites for the execution of the process of production, because they were the requisites for its continuity. Now they are no longer needed for that purpose and for this reason form new money-capital and a constituent part of the money-market, although they by no means form either an additional element of the available social money-supply (for they existed at the beginning of the business and were thrown by it into the circulation), or a newly accumulated hoard. These 100 are now in actual fact withdrawn from circulation inasmuch as they are a part of the advanced money-capital that is no longer employed in the same business. But this withdrawal is possible only because the conversion of the commodity-capital into money, and of this money into productive capital, C' M C, is accelerated by one week, so that the circulation of the money operating in this process is likewise hastened. They have been withdrawn from it because they are no longer needed for the turnover of capital X. It has been assumed here that the advanced capital belongs to him who employs it. Had he borrowed it nothing would be changed. With the shortening of the time of circulation he would have to borrow only 800 instead of 900. The 100, if returned to the lender, would as before form 100 of new money-capital, only in the hands of Y instead of X. Should capitalist X receive 480 worth of materials of production on credit, so that he has to advance only 210 in money for wages out of his own pocket, he would now have to procure 80 worth of materials less on credit and this sum would constitute superfluous commodity-capital for the capitalist granting the credit, while capitalist X would have eliminated 20 in money. The additional supply for production is now reduced by one-third. It consisted of 240 constituting four-fifths of 300, the additional capital II, but now it is only 160, i.e., additional supply for 2 instead of 3 weeks. It is now renewed every 2 weeks instead of every 3, but only for 2 instead of 3 weeks. The purchases, for instance in the cotton market, are thus more frequent and smaller. The same amount of cotton is withdrawn from the market, for the quantity of the product remains the same. But the withdrawals are distributed differently in time, extending over a longer period. Supposing that it is a question of 3 months or 2. If the annual consumption of cotton amounts to 1,200 bales, the sales in the first case will be: But in the second case: Hitherto we presupposed that the contraction of the time of circulation in Business X was due to the fact that X sold his articles quicker, received his money for them sooner, or, in the event of credit, was given shorter terms of payment. The contraction was therefore attributed to a quicker sale of the commodities, to a quicker transformation of commodity-capital into money-capital, C' M, the first phase of the process of circulation. But it might also derive from the second phase, M C, and hence from a simultaneous change, be it in the working period or in the time of circulation of capitals Y, Z, etc., which supply capitalist X with the productive elements of his circulating capital. For instance if cotton, coal, etc., with the old methods of transport, are three weeks in transit from their place of production or storage to the place of production of capitalist X, then X s productive supply must last at least for three weeks, until the arrival of new supplies. So long as cotton and coal are in transit, they cannot serve as means of production. They are then rather a subject of labour for the transport industry and the capital employed in it; they are also commodity-capital in the process of circulation for the producer of coal or the dealer in cotton. Suppose improvements in transport reduce the transit to two weeks. Then the productive supply can be changed from a three-weekly into a fortnightly supply. This releases the additional advanced capital 80 set aside for this purpose and likewise the 20 for wages, because the turned-over capital of 600 returns one week sooner. On the other hand if for instance the working period of the capital which supplies the raw materials is cut down (examples of which were given in the preceding chapters), so that the possibility arises of renewing the supply of raw materials in less time, then the productive supply may be reduced and the interval between periods of renewal shortened. If, vice versa, the time of circulation, and thus the period of turnover, are prolonged, then it is necessary to advance additional capital. This must come out of the pocket of the capitalist himself if he has any additional capital. But it will then be invested in some form or other as a part of the money-market. To make it available, it must be pried loose from its old form. For instance stocks must be sold, deposits withdrawn, so that in this case too the money-market is indirectly affected. Or he must borrow it. As for that part of the additional capital which is needed for wages, it must under normal conditions always be advanced in the form of money-capital, and for that purpose the capitalist X exerts his share of direct pressure on the money-market. But this is indispensable for the part which must be invested in materials of production only if he must pay for them in cash. If he can get them on credit, this does not have any direct influence on the money-market, because the additional capital is then advanced directly as a productive supply and not in the first instance as money-capital. But if the lender throws the bill of exchange received from X directly on the market, discounts it, etc., this would influence the money-market indirectly, through someone else. If, however, he uses this note to cover a debt not yet due for instance, this additional advanced capital does not affect the money-market either directly or indirectly. If the materials of production drop to half, they require for the 6-week period only 240 instead of 480, and for the additional capital No. II only 120 instead of 240. Capital I is thus reduced from 600 to 240 plus 120, or 360, and capital II from 300 to 120 plus 60, or 180. The total capital of 900 is therefore reduced to 360 plus 180, or 540. A sum of 360 is therefore released. This eliminated and now unemployed capital, or money-capital, seeking employment in the money-market, is nothing but a portion of the capital of 900 originally advanced as money-capital, which, due to the fall in the prices of the materials of production, into which it is periodically reconverted, has become superfluous if the business is not to be expanded but carried on in the same scale. If this fall in prices were not due to accidental circumstances (a particularly rich harvest, over-supply, etc.) but to an increase of productive power in the branch of production which furnishes the raw materials, then this money-capital would be an absolute addition to the money-market, and to the capital available in the form of money-capital in general, because it would no longer constitute an integral part of the capital already invested. If, on the contrary, the price of the product rises, a portion of the capital which was not advanced is taken out of circulation. This is not an organic part of the capital advanced in the process of production and unless production is expanded therefore constitutes money-capital eliminated. As we have assumed that the prices of the elements of the product were given before it was brought to market as commodity-capital, a real change of value might have caused the rise of prices since it acted retroactively, causing a subsequent rise in the price of, say, raw materials. In that event capitalist X would realise a gain on his product circulating as commodity-capital and on his available productive supply. This gain would give him an additional capital, which would now be needed for the continuation of his business with the new and higher prices of the elements of production. Or the rise of prices is but temporary. What capitalist X then needs by way of additional capital becomes released capital for the other side, insofar as X s product forms an element of production for other branches of business. What the one has lost the other has gained.
Economic Manuscripts: Capital: Volume Two