READING CAPITAL III

In my last post about Capital, I asked, if the flow of capital nowadays is so ephemeral, can we even talk of a thing called capital?

Marx´s definition of capital is simple : "Capital is money ; Capital is commodities." Money can buy commodities ; commodities can buy money.

Let us imagine two scenarios :

(1) A farmer produces a certain amount of oats, and sells it to a merchant for 100 pounds. With this 100 pounds he buys clothes for himself.

(2) A merchant buys a certain amount of oats with 100 pounds. He then sells the oats for 110 pounds.

In both of these scenarios, commodities and money are being circulated ; and in both, we have buyers and sellers. The difference is this : "the simple circulation of commodities (in scenario (1)) begins with a sale and ends in a purchase, while the circulation of money as capital (in scenario (2)) begins with a purchase and ends in a sale." In (1) "the money is in the end converted into a commodity, that serves as a use-value ; it is spent once and for all." But in (2), the agent "lets the money go, but only with the sly intention of getting it back again. The money, therefore, is not spent, but merely advanced."

Here we see the difference between what Marx calls use-value, and exchange-value. In scenario (1), which we can formularise as C-M-C, the intention of the transaction is the use-value of the final commodity, i.e. the warmth which the clothes will afford the buyer. In (2), M-C-M, the intention is the maximisation of the exchange-value of the commodity. In (2), the capitalist will seek to perpetuate the profits gained by his exchange, ad infinitum.

The simple circulation of commodities - selling in order to buy - is a means of carrying out a purpose unconnected with circulation, namely, the appropriation of use-values, the satisfaction of wants. The circulation of money as capital is, on the contrary, an end in itself, for the expansion of value takes place only within this constantly renewed movement. The circulation of capital has therefore no limits.

The capitalist has no interest in use-values, as such, and therefore scenario (1), C-M-C, is of no real value to him. C-M-C is a one-off, closed circuit ; the capitalist, on the other hand, seeks a circulation of capital that is perpetually open, and which therefore has the potential for endless profit.

So, if the maximisation of value depends on an active, moving process, its form can only be money, for money both opens and concludes the simple transaction M-C-M. But, as Marx states, "the money itself is only one of the two forms of value. Unless it takes the form of some commodity, it does not become capital." In the circulation C-M-C, money only serves to buy a commodity for its use-value, and thus terminates the exchange. But in M-C-M, money develops a momentum of its own, outside of its value.

It differentiates itself as original value from itself as surplus-value; as the father differentiates himself from himself qua the son, yet both are one and of one age: for only by the surplus-value of £10 does the £100 originally advanced become capital, and so soon as this takes place, so soon as the son, and by the son, the father, is begotten, so soon does their difference vanish, and they again become one, £110.

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To recap, the formula for capital is : M-C-M. But to whom does this apply?

For the producer of the oats in scenario (2) - the seller in the transaction M-C - it would appear to make little difference whether the buyer decides to sell the oats for a profit, or to turn it into porridge for his family. Likewise, the buyer in the transaction C-M will not care much at what price the seller originally bought the oats. To the first, the capitalist is a buyer ; to the second, he is a seller ; that, it would seem, is all. Indeed, it is only for him that the sequence M-C-M exists at all. His identity as a capitalist, as someone who lives to perpetuate the exchange of capital, must, therefore, derive elsewhere.

A further difference between use-value transactions and exchange-value transactions is this : "(In exchange-value), the value of a commodity is expressed in its price before it goes into circulation, and is therefore a precedent condition of circulation, not its result."

So, Marx supposes, what if a seller decides to sell a commodity above its value : say, a quantity of corn worth 100 pounds (which, for Marx, means it incorporates 100 pounds of socially-necessary labour) for 110 pounds? The seller will obviously make a 10 pound, or 10%, profit. Now, in order to keep the perpetual M-C-M-C-M... circulation going, he must invest his money in a new commodity : perhaps candles. And the candle-seller must now also sell this product for 10% above its value, for if our corn-seller is the only profiteer in the land, he will attain a monopoly, and capitalism will go under. So he buys candles from the candle-seller at 10% above their value, and thus loses his original 10% profit. What goes around, comes around : which means we still have not explained where surplus-value comes from. As Marx explains,

the upholders of the delusion that surplus-value has its origin in a nominal rise of prices or in the privilege which the seller has of selling too dear, must assume the existence of a class that only buys and does not sell, i.e., only consumes and does not produce. The existence of such a class is inexplicable from the standpoint we have so far reached, viz., that of simple circulation. But let us anticipate. The money with which such a class is constantly making purchases, must constantly flow into their pockets, without any exchange, gratis, by might or right, from the pockets of the commodity-owners themselves.

To be sure, says Marx, something strange and contradictory is going on here. Surplus-value is created during the exchange of capital, yet it must arise outside the circulation itself. Anyone with a vague knowledge of Marx will know where all this is leading. "Our friend Moneybags," Marx concludes in Chapter 5, "who as yet is only an embryo capitalist, must buy his commodities at their value, must sell them at their value, and yet at the end of the process must withdraw more value from circulation than he threw into it at starting." Well, indeed...

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And so we come to the heart of the matter :

In order to be able to extract value from the consumption of a commodity, our friend, Moneybags, must be so lucky as to find, within the sphere of circulation, in the market, a commodity, whose use-value possesses the peculiar property of being a source of value, whose actual consumption, therefore, is itself an embodiment of labour, and, consequently, a creation of value. The possessor of money does find on the market such a special commodity in capacity for labour or labour-power.

To turn his money into capital, the capitalist must do a deal with someone who has (a) labour-power at his disposal that he is willing to sell and (b) no other commodity or money that he can put into circulation. The reason why such a deal might come about - the reason why the capitalist has the resources to make the purchase, and why the labourer must complete the sale in order to survive - is a complex question. It is, in fact, explained by the birth of capitalism.

Anyhow, to explain the origin of surplus-value, we must look beyond the simple transaction, to the place where labour, as a commodity, creates it own, and a further, value.

This sphere that we are deserting, within whose boundaries the sale and purchase of labour-power goes on, is in fact a very Eden of the innate rights of man (...) On leaving this sphere of simple circulation or of exchange of commodities, which furnishes the “Free-trader Vulgaris” with his views and ideas, and with the standard by which he judges a society based on capital and wages, we think we can perceive a change in the physiognomy of our dramatis personae. He, who before was the money-owner, now strides in front as capitalist; the possessor of labour-power follows as his labourer. The one with an air of importance, smirking, intent on business; the other, timid and holding back, like one who is bringing his own hide to market and has nothing to expect but — a hiding.

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PS : I am very aware that, thus far, I am merely summarising Capital. I am barely equipped to undertake much of an analysis at the moment, except from my own experiences. This is probably not very helpful ; anyone who has ever worked for a wage can relate their own experiences to what Marx says. Nevertheless, Marx is often criticised for the flimsiness of evidence which he gives for the labour theory of value, which we are fast approaching. I know of one essay - Joan Robinson´s "Essay of Marxian Economics" - which addresses this. If anyone knows of others, please let me know, and I shall add these counter-arguments to the heap.

PPS : There is one type of transaction which Marx neglects to mention. He deals with selling commodities to buy other commodities (C-M-C), and with buying commodities to sell on (M-C-M), but not with the transaction I am most familiar with : buying commodities, and then losing or breaking them (M-C-X). So far in Bolivia, my damned purchases include :

• 1 ashtray made entirely of salt - lost in a hostel, recovered with a chunk missing from the rim (maybe someone was hungry?), lost again.
• 1 pair of earrings for romantic-interest - accidentally sat on by purchaser.
• 1 travel Scrabble set - left out in the rain for three days, recovered, but with only 17 letters, including only one e.
• 1 pair of llama-wool gloves - burned beyond repair while being used as oven-mits.
• 1 Grace Jones CD - accidentally sat on by purchaser´s romantic interest.
• 1 pair of robust shoes - left on bus (though thankfully I did remember my bag of rotten fruit...)
• 1 can of deodorant - last seen, inexplicably, in the refrigerator of hostel.

Now come on Karl - where is your chapter on M-C-X?!