Karl Marx/Capital1/Part2

This is a resource about the second part of the first volume of Capital by Karl Marx, entitled "The Transformation of Money into Capital".

This part holds three chapters:

• Chapter 4: The General Formula for Capital
• Chapter 5: Contradictions in the General Formula
• Chapter 6: The Sale and Purchase of Labour-Power

This part follows the first part of the first volume of Capital, in which Marx treated Commodities, Exchange and Money. The book started with a model of exchange based on barter of commodities. It is important to note, that at the time when Marx wrote his work, anyone was familiar with the (Ricardian) labour theory of value. Marx does not spend many words proving its correctness. So he simply assumes that exchange is based on the socially necessary labour time. Marx moves from this C-C relation to the form of exchange, mediated by money, C-M-C. Finally the M-C-M circulation is explained: money becoming the aim and object of exchange.

It is easy to understand that M-C-M only makes sense if it results in an increment of value: M-C-(M+ΔM). The increment of value is called surplus-value, and the problem is of course, where surplus-value comes from, if the M-C and C-M transactions are exchanges of equivalents. Only if a commodity can be found, that has the capacity to produce more value than it itself has, the mystery can be unveiled. "This is the broad transitional story told in these three chapters. The focus begins to shift from commodity exchange to capital circulation."

Chapter 4: The General Formula for Capital

In this chapter the logical analysis of commodity circulation is intertwined with historic development: "World trade and the world market date from the sixteenth century, and from then on the modern history of capital starts to unfold." (p. 247) In the transition from feudalism to capitalism merchants' capital and usurers' capital played important historical roles. These forms of capital must be distinguished from industrial capital, that is considered the central form of capital in (industrial) capitalism. But it is the independent social power of money, and of the money holders, that is necessary to come to a definition of capital. As long as the money only works as a circulating medium, the exchange cycle is completed with C-M-C: selling in order to buy. But if we consider the opposite movement: M-C-M, buying in order to sell, we see that money can transform into capital. In the simple circulation of commodities the cycle M-C-M "appears to lack any content, because it is tautological" (p. 250-251). The cycle M-C-M can only be considered as a meaningful process on its own, if it leads to a quantitative change: M-C-(M+ΔM). The original sum advanced to buy commodities returns after the selling of the commodities as "the original sum advanced plus an increment. This increment or excess over the original value I call 'surplus-value'. The value originally advanced, therefore, not only remains intact while in circulation, but increases its magnitude, adds to itself a surplus-value, or is valorized [verwertet sich]. And this movement converts it into capital. (p. 251-251).

As Harvey says: we now arrive for the first time at "the concept of surplus-value, which is, of course, fundamental to all of Marx's analysis. (…) Here, finally, is the definition of "capital"." He emphasizes that capital is not conceived as a thing, but as a process-"a process, specifically, of the circulation of values". He stresses the importance of this process definition of capital: a radical departure from the definition in classical political economy, "where capital was traditionally understood as a stock of assets." The process definition of capital is made explicit by Marx:

“ (…) value is here the subject of a process in which, while constantly assuming the form in turn of money and commodities, it changes its own magnitude, throws off surplus-value from itself considered as original value, and thus valorizes itself independently. For the movement in the course of which it adds surplus-value is its own movement, its valorization is therefore self-valorization [Selbstverwertung]. By virtue of being value, it has acquired the occult ability to add value to itself. It brings forth living offspring, or at least lays golden eggs. ” — p. 255

To which paragraph Harvey adds, for good measure, that this sentence is meant ironically, of course, and that the occult qualities of capital and its seemingly magical capacity to lay golden eggs "exist only in the realm of appearance".

Sources

• Harvey, David (2010). A Companion to Marx's Capital. London / New York: Verso. ISBN 978 1 84467 359 9.