 the question of how the division of productive capital into its different elements, apart from their different spheres of investment, affects their turnover.
Adam Smith immediately continues:
“First, it may be employed in raising, manufacturing, or purchasing goods, and selling them again with a profit.” [Vol. II, p. 254.]
He does not tell us anything else here than that capital may be employed in agriculture, manufacture, and commerce. He speaks therefore only of the different spheres of investment of capital, including such in which, as in commerce, capital is not directly embodied in the process of production, hence does not function as productive capital. In so doing he abandons the foundation on which the physiocrats base the distinctions within productive capital and their effect on the turnover. More. He uses merchant’s capital as an illustration in a problem which concerns exclusively differences within the productive capital in the product and value-creating process, which in turn cause differences in its turnover and reproduction.
“The capital employed in this manner yields no revenue or profit to its employer, while it either remains in his possession or continues in the same shape.” [Vol. II, p. 254.]
“The capital employed in this manner!” But Smith speaks of capital invested in agriculture, in industry, and he tells us later that a capital so employed divides into fixed and circulating capital! Hence investment of capital in this manner cannot make fixed or circulating capital of it.
Or does he mean to say that capital employed in order to produce goods and to sell these at a profit must be sold after its transformation into goods and by means of the sale must in the first place pass from the possession of the seller into that of the buyer, and in the second place change from its bodily form, goods, into its money-form, so that it is of no use to its owner so long as it either remains in his possession or continues in the same shape? In that case, the whole thing amounts to this: The capital-value that formerly functioned in the form of productive capital, in a form peculiar to the process of production, now functions as commodity-capital and money-capital, in forms peculiar to the process of circulation, where it is no longer either fixed or circulating capital. And this applies equally to those elements of value which are added by raw and auxiliary material, i.e., by circulating capital, and to those which are added by the wear and tear of instruments of labour hence by fixed capital. We do not get any nearer to the difference between fixed and circulating capital in this way.
“The goods of the merchant yield him no revenue or profit till he sells them for money, and the money yields him as little till it is again exchanged for goods. His capital is continually going from him in one shape, and returning to him in another, and it is only by means of such circulation, or successive exchanges, that it can yield him any profit. Such capitals therefore may very properly be called circulating capitals.” [Vol. II, p. 254.]
What Adam Smith here defines as circulating capital is what I want to call capital of circulation, capital in a form pertinent to the process of circulation, to a change of form by means of exchange (a change of substance and change of hands), hence commodity-capital and money-capital, as distinguished from its form pertinent to the process of production, that of productive capital. These are not different kinds into which the industrial capitalist divides his capital, but different forms over and over again assumed and stripped off successively by the same advanced capital-value during its curriculum vitae. Adam Smith lumps this together — and this is a big step back compared to the physiocrats — with the distinctions in form which arise in the sphere of circulation of capital-value, in its circular course through its successive forms, while the capital-value exists in the form of productive capital; and they arise because of the different ways in which the different elements of productive ca