Monday, August 11, 2014

Capital[i] Vol. I, Ch, 5

Capital[i] Vol. I, Ch, 5
Contradictions in the general formula of Capital
Summary
“The circulation of commodities is the starting point of the capital. The production of commodities, their circulation and the more developed form of their circulation called commerce form the historical ground work from which it rises. The modern history of capital dates from the creation in the 16th century of a world embracing commerce and a world embracing market.” (CI, Ch4)[ii].

Chapter IV explains the General Formula for Capital -- the transformation of money from money as, the means of payment in the simple circulation (C-M-C) into capital in the capitalist circulation (M-C-M). In the former, the end points are commodities, the use values C-C, involving exchange of 2 qualitatively different commodities of the same value, i.e. the exchange of equivalents. “If the commodities, or the commodities and the money of equal exchange value and consequently equivalents are exchanged, it is clear that no one extracts more value from than he throws into circulation. There is no creation of surplus value.”[iii](Ch 5) In simple circulation the circuit begins and ends with C. One sells a commodity to buy another. The values of the commodities do not expand, “attained at the most a form independent of their use values, i.e. the form of money…… (Ch 4)[iv] In capitalist circulation circuit, M-C-M the process is inverted. The owner of the money buys for sale, the end results are M-M.

 Chapter 5, Contradictions in the General Formula of the Capital explains the contradiction between use value and the exchange value and generation of the surplus value, i.e. the expansion of the value advanced in the form of money.. Two of the three actors involved in the process of circulation -- the producer from whom the buys the commodity C for money M and the consumer whom he sells it for money M’ remain unconcerned with the inversion.  The difference between M and the M’, i.e. the value added to the capital advanced in the beginning of the circulation, M’-M is the surplus extracted by the capitalist in the form of profit. “The circuit M-C-M, buying in order to ell dearer is seen most clearly in genuine merchants’ capital. The merchant “parasitically shoves in between”[v] two producers, who in turn are consumers also. Same is true about money lenders capital also.

“What we have said with reference to merchants’ capital, applies still more to the money lenders capital. ……. In moneylenders’ capital, the form M-C-M is reduced to 2 extremes without a mean, M-M, money exchanged for more money.” This applies still more to contemporary banking system that functions on the formula of peoples’ money controlled by banks and used by the capitalist.

“The form, which circulation takes when money becomes capital, is opposed to all the laws we have hitherto investigated bearing on the nature of commodities, value and money, and even of circulation itself. What distinguishes this form from that of the simple circulation of commodities is, the inverted order of the two antithetical processes, the sale and purchase.”[vi]  

To sum up, no surplus is created in pre-capitalist, simple circulation, involving exchange of commodities of equal values and the money does not take the form of capital but remains as means of payment in the process of exchange. With the inversion of the “order of the two antithetical processes, the sale and purchase”, money acquires the form of capital – the mercantile or the merchant’s capital. This inversion of the circulation circuit marks the beginning of the generation the surplus value and its appropriation by the capitalist and laid the foundation of the subsequent industrial capitalism. Creation of surplus cannot be entirely explained in terms of the circulation that shall be dealt in subsequent chapters but also cannot be explained without it.






[i]  Marx, Karl, Capital, A criticl tudy of Capitalist Production, Vol I, Foreign Languages Publishig House, Moscow. 1977
[ii]P 146
[iii]  P. 160
[iv] P. 154 
[v] P.161
[vi] P.258 (Pebguin edition)

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