h forms, commodity-capital as well as money-capital, are carriers of the value of both the fixed and the circulating component parts of productive capital. Both of them are capital of circulation, as distinguished from productive capital, but not circulating (fluent) capital as distinguished from fixed capital.
Finally, owing to the wholly erroneous explanation that profit is made by fixed capital staying in the process of production, and by circulating capital leaving it and being circulated, and also on account of the identity of form assumed in the turnover by the variable capital and the circulating constituent of the constant capital, their essential difference in the process of self-expansion and of the formation of surplus-value is hidden, so that the entire secret of capitalist production is obscured still more. The common designation "circulating capital" abolishes this essential difference. Political Economy subsequently went still farther by holding fast not to the antithesis between variable and constant capital but to the antithesis between fixed and circulating capital as the essential and sole delimitation.
After Adam Smith has designated fixed and circulating capital as two particular ways of investing capital, each of which yields a profit by itself, he says:
"No fixed capital can yield any revenue but by means of a circulating capital. The most useful machines and instruments of trade will produce nothing without the circulating capital which affords the materials they are employed upon, the maintenance of the workmen who employ them." (P. 188.)
Here it becomes apparent what the previously used expressions “yield a revenue,” “make a profit,” etc., signify, viz., that both parts of capital serve as creators of product.
Adam Smith then gives the following illustration:
“That part of the capital of the farmer which is employed in the instruments of agriculture is a fixed, that which is employed in the wages and maintenance of his labouring servants is a circulating capital.”
(Here the difference between fixed and circulating capital is correctly applied only to difference in circulation, to the turnovers of different constituent parts of productive capital.)
“He makes a profit of the one by keeping it in his own possession, and of the other by parting with it. The price or value of his labouring cattle is a fixed capital”
(here he is again correct when he says it is the value, not the material element, to which the difference applies)
“in the same manner as that of the instruments of husbandry; their maintenance” (that of the labouring cattle) “is a circulating capital in the same manner as that of the labouring servants. The farmer makes his profit by keeping the labouring cattle, and by parting with their maintenance.”
(The farmer keeps the fodder of the cattle, he does not sell it. He uses it to feed the cattle, while he uses us the cattle themselves as instruments of labour. The difference is only this: The fodder that goes for the maintenance of the labouring cattle is consumed wholly and must be continually replaced by new cattle fodder out of the products of agriculture or by their sale; the cattle themselves are replaced only as each head becomes incapacitated for work.)
“Both the price and the maintenance of the cattle which are bought in and fattened, not for labour but for sale, are a circulating capital. The farmer makes his profit by parting with them.” [Vol. II, pp. 255-56.]
(Every producer of commodities, hence likewise the capitalist producer, sells his product, the result of his process of production, but this is no reason why this product should form a part of either the fixed or the circulating component of his productive capital. The product now exists rather in that form in which it is thrust out of the process of production and must function as commodity-capital. The fattened stock function in the process of production as raw material, not as instruments of labour like the labouring cattle. Hence the fattened cattle enter into the product as substance, and their whole value enters int