Grundrisse: Notebook V – Circulation and creation of value

Circulation and creation of value. (Equalization between different capitals in the conditions of circulation.) Capital not a source of value-creation. – Circulation costs. – Continuity of production presupposes suspension of circulation time

It follows from the relation of circulation time to the production process that the sum of values produced, or the total realization of capital in a given epoch, is determined not simply by the new value which it creates in the production process, or by the surplus time realized in the production process, but rather by this surplus time (surplus value) multiplied by the number which expresses how often the production process of capital can be repeated within a given period of time. The number which expresses this frequency of repetition may be regarded as the coefficient of the production process or of the surplus value created through it. However, this coefficient is not positively but negatively determined by the velocity of circulation. I.e. if the velocity of circulation were absolute, i.e. if no interruption in production resulting from circulation occurred at all, then this coefficient would be at its maximum. If the real conditions of e.g. wheat production in a given country permit only one harvest, then no velocity of circulation can make two harvests out of it. But if an obstruction in the circulation occurred, if the farmer could not sell his wheat soon enough e.g. to hire workers again, then production would be delayed. The maximum of the coefficient of the production process or the realization process in a given period of time is determined by the absolute time taken up by the production phase itself. With circulation completed, capital is able to begin its production process anew. Thus if circulation caused no delay at all, if its velocity were absolute and its duration = 0, i.e. if it were accomplished in no time, then this would only be the same as if capital had been able to begin its production process anew directly it was finished; i.e. circulation would not have existed as a limiting barrier for production, and the repetition of the production process in a given period of time would be absolutely dependent on, identical with, the duration of the production process. Thus if the development of industry allowed x lb. of twist to be produced in 4 months with a capital of 100, then with that capital the production process could be repeated only 3 times per year, and only 3x lb. of twist could be produced. No velocity of circulation could increase the reproduction of capital, or rather the repetition of its realization process, beyond that point. That could occur only in consequence of an increase in the forces of production. Circulation time in itself is not a productive force of capital, but a barrier to its productive force arising from its nature as exchange value. The passage through the various phases of circulation here appears as a barrier to production, a barrier posited by the specific nature of capital itself. All that can happen through the acceleration and abbreviation of circulation time – of the circulation process – is the reduction of the barrier posited by the nature of capital. The natural barriers to the repetition of the production process e.g. in agriculture coincide with the duration of one cycle of the production phase. The barrier posited by capital is the lag not between seeding and harvest, but between harvest and the transformation of the harvest into money, and retransformation of the money into say e.g. purchase of labour. The circulation-artists who imagine that they can do something with the velocity of circulation other than lessen the obstacles to reproduction posited by capital itself are on the wrong track. (Even madder, of course, are those circulation-artists who imagine that credit institutes and inventions which abolish the lag of circulation time will not only do away with the delays and interruptions in production caused by the transformation of the finished product into capital, but will also make the capital, with which productive capital exchanges, itself superfluous; i.e. they want to produce on the basis of exchange value but to remove at the same time, by some witchcraft, the necessary conditions of production on this basis.) The most that credit can do in this respect – as regards mere circulation – is maintain the continuity of the production process, if all other conditions of this continuity are present, i.e. if the capital to be exchanged with actually exists etc.

It is posited in the circulation process that the transformation of the capital into money is posited as a condition for the realization of capital through production, for the exploitation of labour by capital; or, the exchange of capital for capital * is posited as barrier to the exchange of capital for labour and vice versa.

* For from the present standpoint we still only have labour or capital at all points of circulation.

Capital exists as capital only in so far as it passes through the phases of circulation, the various moments of its transformation, in order to be able to begin the production process anew, and these phases are themselves phases of its realization – but at the same time, as we saw, of its devaluation. As long as capital remains frozen in the form of the finished product, it cannot be active as capital, it is negated capital. Its realization process is delayed in the same degree, and its value-in-process [prozessierender Wert] negated. This thus appears as a loss for capital, as a relative loss of its value, for its value consists precisely in its realization process. This loss of capital means in other words nothing else but that time passes it by unseized, time during which it could have been appropriating alien labour, surplus labour time through exchange with living labour, if the deadlock had not occurred. Now let us imagine many capitals in particular branches of business, all of which are necessary (which would become evident if, in the eventuality of a massive flight of capital from a given branch, supply falling below demand, the market price would therefore rise above the natural price in that branch), and let a single branch of business require e.g. that capital A remain longer in the form of devaluation, i.e. that the time in which it passes through the various phases of circulation is longer than in all other branches of business, in which case this capital A would regard the smaller new value which it could produce as a positive loss, just as if it had so many more outlays to make in order to produce the same value. It would thus charge relatively more exchange value for its products than the other capitals, in order to share the same rate of gain. But this could take place in fact only if the loss were distributed among the other capitals. If A demands more exchange value for the product than there is labour objectified in it, then it can obtain this more only if the others obtain less than the real value of their products. That is, the less favourable conditions under which A has produced would be borne in proportional shares by all the capitalists who exchange with it, and in this way an equal average level would come out. But the sum of the surplus value created by all these capitals together would be lessened exactly by the amount of capital A’s lesser realization in relation to the other capitals; only, instead of this reduction falling exclusively on capital A, it is borne as a general loss, as a loss shared proportionally by all the capitals. Nothing can therefore be more ridiculous than the notion (see e.g. Ramsay) that, apart from the exploitation of labour, capital forms an original source, separately from labour, of value-creation, because the distribution of surplus labour among the capitals takes place not in proportion to the surplus labour time achieved by the individual capital, but in proportion to the total surplus labour which the totality of capitals achieved, and hence a higher value-creation can be attributed to the individual capital than is directly explicable from its particular exploitation of labour power. But this more on one side has to be compensated by a less on the other. This is what average means, if it means anything at all. The question how the relation of capital to alien capital, i.e. the competition of capitals, distributes the surplus value among them obviously has nothing to do with the absolute amount of this surplus value. Nothing more absurd, then, than to conclude that, because one capital obtains a compensation for its exceptional circulation time, i.e. puts its relatively lesser realization to account as positively greater realization, now all capitals combined, capital can make something out of nothing, make a plus out of a minus, make a plus-surplus value out of a minus-surplus value or out of minus-surplus labour time, and that it possesses, therefore, a mystical wellspring of value independent of the appropriation of alien labour. The manner in which the capitals among other things compute their proportional share of the surplus value – not only according to the surplus labour time which they set in motion, but also in accordance with the time which their capital has worked as such, i.e. lain fallow, found itself in the phase of devaluation – does of course not alter in the least the total sum of the surplus value which they have to distribute among themselves. This sum itself cannot grow by being smaller than it would have been if capital A, instead of lying fallow, had created surplus value; i.e. by having created less surplus value in the same time as the other capitalists. And this lying-fallow is made good for capital A only in so far as it arises necessarily out of the conditions of the particular branch of production, and hence appears in respect to capital as such as a burden on realization, as a necessary barrier to its realization generally. The division of labour leaves this barrier as a barrier only as regards the production process of this particular capital. If the production process is regarded as conducted by capital as such, this lying-fallow is a general barrier to capital’s realization. If one imagines all production carried out by labour alone, then all the larger advances which it requires during its realization appear as what they are – deductions from surplus value.

Circulation can create value only in so far as it requires fresh employment – of alien labour – in addition to that directly consumed in the production process. This is then the same as if more necessary labour were used in the direct production process. Only the actual circulation costs increase the value of the product, but decrease the surplus value.

To the extent that the circulation of capital (the product etc.) does not merely express the phases necessary to begin the production process anew, this circulation (see Storch’s example) does not form a moment of production in its totality – is hence not circulation posited by production, and, in so far as it creates expenses, these are faux frais de production.The costs of circulation generally, in so far as their merely economic moments, circulation proper, are concerned (bringing the product to market gives it a new use value), are to be regarded as deduction from surplus value, i.e. as an increase of necessary labour in relation to surplus labour.

The continuity of production presupposes that circulation time has been suspended. If it has not been suspended, then time must pass between the different metamorphoses through which capital must travel; its circulation time must appear as deduction from its production time. On the other hand, the nature of capital presupposes that it travels through the different phases of circulation not as it does in the mind, where one concept turns into the next at the speed of thought, in no time, but rather as situations which are separate in time. It must spend some time as a cocoon before it can take off as a butterfly. Thus the conditions of production arising out of the nature of capital itself contradict each other. The contradiction can be suspended and overcome only  in two ways:

Firstly, credit: A pseudo-buyer B – i.e. someone who really pays but does not really buy – mediates the transformation of capitalist A’s product into money. But B himself is paid only after capitalist C has bought A’s product. Whether the money which this credit-man, B, gives to A is used by A to buy labour or to buy raw material and instrument, before A can replace either of them from the sale of his product, does not alter the case. Given our presupposition, he must basically give him both – i.e. all the conditions of production (these represent, however, a greater value than the original ones with which A began the production process). In this case capital B replaces capital A; but they are not realized at the same time. Now B takes the place of A; i.e. his capital lies fallow, until it is exchanged with capital C. It is frozen in the product of A, who has made his product liquid in capital B.

* Except if one imagines that all capitals produce to order for each other, and that the product is therefore always immediately money, a notion which contradicts the nature of capital and hence also the practice of large-scale industry.

Ramsay. Circulation time. Concludes therefore that capital is its own source of profit. – Ramsay. Confusion about surplus value and profit and law of values. (No surplus value according to Ricardo’s law.) – Ricardo. Competition. – Quincey. Ricardo’s theory of value. Wages and profit. Quincey. – Ricardo. – Wakefield. Conditions of capitalist production [in] colonies

The economists’ absolute confusion in respect of Ricardo‘s determination of value through labour time – something which is founded on a basic defect of his own development – emerges very clearly with Mr Ramsay. He says (after having previously drawn, from the influence of the circulation time of capitals on their relative realization, i.e. their relative share of the general surplus value, the nonsensical conclusion that: ‘This shows how capital may regulate value independently of labour’ (IX, 84. R, 43)  or ‘that capital is a source of value independent of labour’ ) – he says, literally: ‘A circulating capital (approvisionnement) will always maintain more labour than that formerly bestowed upon itself. Because, could it employ no more than had been previously bestowed upon itself, what advantage could arise to the owner from the use of it as such?’ (loc. cit. 49.) ‘Given two capitals of equal value, each produced through the labour of 100 men operating for a given time, of which the one is entirely circulating, the other entirely fixed, and may perhaps consist of wine kept to improve. Now, this circulating capital, raised by the labour of 100 men, will set 150 men in motion. Therefore the product at the end of the coming year will in this case be the result of the labour of 150 men. But still it will be of no more value than the wine at the termination of the same period, although only 100 men employed upon the latter.’ (50.) ‘Or is it asserted that the quantity of labour which every circulating capital will employ is no more than equal to the [quantity] previously bestowed upon it? That would mean, that the value of the capital expended = that of the product.’ (52.) Great confusion between the labour bestowed upon capital and that which it will employ. The capital which is exchanged for labour capacity, the approvisionnement – and this he here calls circulating capital – can never employ more labour than has been bestowed upon it. (The reaction of a development of the productive forces on present capital is beside the point here.) But there has been more labour bestowed upon it than it has paid for – surplus labour, which is converted into surplus value and surplus produce, enabling the capital to renew this profitable bargain, where the mutuality is all on one side, on a more enlarged scale. It is enabled to employ more new living labour, because during the process of production a portion of fresh labour has been bestowed upon it beyond the accumulated labour of which it consisted before entering that process.

Mr Ramsay seems to imagine that, if a capital is the product of 20 working days (necessary and surplus together), this product of 20 working days can employ 30 working days. But this is by no means the case. Say that 10 days of necessary labour and 10 surplus days were employed on the product. Then the surplus value = 10 surplus days. If the capitalist then exchanges these again for raw material, instrument and labour, then he can set new necessary labour into motion with the surplus product. The point is not that he employed more labour time than is present in the product, but that he exchanges the surplus labour time, which costs him nothing, for new necessary labour time – in other words, precisely, that he employs the entire labour time bestowed upon the product, while he has paid only part of that labour. Mr Ramsay’s conclusion, that if the quantity of labour which every circulating capital will employ was no more than equal to that previously bestowed upon it, the value of the capital expended would be equal to that of the produce, i.e. no surplus value would be left, would be correct only if the quantity of labour bestowed upon the capital were wholly paid for, i.e. if capital did not appropriate a part of the labour without equivalent. These misunderstandings on Ricardo’s part  obviously arise from the fact that he himself was not clear about the process, nor, as a bourgeois, could he be. Insight into this process is = to the statement that capital is not only, as A. Smith thinks,  command over alien labour, in the sense that every exchange value is that, since it gives its possessor buying power, but that it is the power to appropriate alien labour without exchange, without equivalent, but with the semblance of exchange. Ricardo knows no argument to refute those, like A. Smith and others, who fall into the same error regarding value as determined by labour, and value as determined by the price of labour (wages), other than to say: with the product of the same quantity of labour one can set sometimes more and sometimes less living labour into motion, i.e. he regards the product of labour in respect of the worker only as use value – only the part of the product which he needs to be able to live as worker. But how it comes about that the worker suddenly only represents use value in the exchange, or only draws use value from the exchange, is by no means clear to him, as is already proved by his arguments against A. Smith, which are never in general terms, but always about particular examples. But why is it, then, that the share of the worker in the value of the product is determined not by the value, but rather by the use value of the product, thus not by the labour time employed on it, but by its quality of maintaining living labour capacity? If he tries to explain this with, say, competition among the workers, then the answer which would have to be given is the same as that which he gives A. Smith about competition among capitalists, i.e. that competition may well even out, equalize the level of profit, but in no way creates the measure of this level.  Likewise, competition among the workers could press down a higher wages level etc., but the general standard of wages, or as Ricardo puts it the natural price of wages, could not be explained by the competition between worker and worker, but only by the original relation between capital and labour. Competition generally, this essential locomotive force of the bourgeois economy, does not establish its laws, but is rather their executor. Unlimited competition is therefore not the presupposition for the truth of the economic laws, but rather the consequence – the form of appearance in which their necessity realizes itself. For the economists to presuppose, as does Ricardo, that unlimited competition exists  is to presuppose the full reality and realization of the bourgeois relations of production in their specific and distinct character. Competition therefore does not explain these laws; rather, it lets them be seen, but does not produce them. Then Ricardo says, too: the production costs of living labour depend on the production costs of making the values required to reproduce it. While he previously regarded the product in relation to the worker only as a use value, he now regards the worker only as an exchange value in relation to the product. The historic process through which product and living labour come into this mutual relation is none of his concern. He is just as vague about the way in which this relation is perpetuated. Capital, with him, is the result of saving; this already shows that he misunderstands the process of its origins and reproduction. He therefore also imagines that production is impossible without capital, although he can very well imagine capital possible without ground rent. The distinction between profit and surplus value does not exist for him, proof that he is clear about the nature of neither one. His procedure already shows this from the very beginning. Originally, he makes workers exchange with workers – and their exchange is then determined by the equivalent, by the labour time reciprocally expended in production. Then comes the real problem of his economics, to demonstrate that this determination of value is not altered by the accumulation of capitals – i.e. by the presence [Dasein] of capital. Firstly, he has no inkling that his first spontaneous relation is itself only a relation abstracted from the mode of production resting on capital. Secondly, what he has available is a definite amount of objective labour time, which may of course increase, and he asks himself, how is it distributed? The question is rather how is it created, and there it is precisely the specific nature of the relation of capital and labour, or the specific and distinct character of capital, which explains this. As Quincey (X, 5) puts it, modern economics (the economics of Ricardo) is in fact concerned only with the dividends, while the total product is regarded as fixed, determined by the quantity of labour employed on it – its value appraised in accordance with that.  Accordingly, Ricardo has rightly been accused of not understanding surplus value, although his opponents understand it even less. Capital is represented as appropriating a certain part of the ready and available value of labour (of the product); the creation of this value, which it appropriates above and beyond the reproduced capital, is not presented as the source of the surplus value. This creation is identical with the appropriation of alien labour without exchange, and for that reason the bourgeois economists are never permitted to understand it clearly. Ramsay accuses Ricardo of forgetting that the fixed capital (which consists of capital not included in approvisionnement, with Ramsay the raw material at the same time along with the instrument) is a deduction from the sum total available for distribution among capitalist and worker. ‘Ricardo forgets that the whole product is divided not only between wages and profits, but that another part is necessary for replacing fixed capital.’ (IX, p. 88. R. 174, note.) Indeed, since Ricardo does not grasp the relation between objectified and living labour in its living movement – [a relation] not to be deduced from the dividends of a given quantity of labour, but from the positing of surplus labour – and does not, therefore, grasp the relation among the different component parts of capital, it therefore seems with him as if the entire product were divided into wages and profits, so that the reproduction of capital is itself counted as part of profit. Quincey (loc. cit. Notebook X, 5) gives this exposition of the Ricardian doctrine: ‘If the price is 10s. then wages and profit as a whole cannot exceed 10s. But do not the wages and profits as a whole, themselves, on the contrary, predetermine the price? No, that is the old superannuated doctrine.’ (p. 204). ‘The new economics has shown that all price is governed by proportional quantity of the producing labour, and by that only. Being itself once settled, then ipso facto, price settles the fund out of which both wages and profits must derive their separate dividends.’ (loc. cit. 204.) Capital here appears not as positing surplus value, i.e. surplus labour, but only as making deductions from a given quantity of labour. The fact that instrument and raw material appropriate these dividends then has to be explained by their use value in production, which then presupposes the absurdity that raw material and instrument create use value through their separation from labour. For this separation makes them into capital. Considered for themselves, they are themselves labour, accumulated labour. Besides, this clashes with sound common sense, because the capitalist knows very well that he counts wages and profit among the production costs and regulates the necessary price accordingly. This contradiction in the determination of the product by relative labour time, and the limitation of the sum of profit and wages by the sum of this labour time, and the real determination of prices in practice, comes about only because profit is not grasped as itself a derivative, secondary form of surplus value; the same is true of what the capitalist justly regards as his production costs. His profit arises simply from the fact that a part of the cost of production costs him nothing, hence does not enter into his outlays, his production costs.