, weekly, as happens among poor artisans and labourers, who receive and pay every Saturday, then 40/52 parts of 1 million of money would answer these ends, but if the circles be quarterly,
according
to our custom of paying rent, and gathering taxes, then 10 millions were requisite.
Marx - Capital-Volume-I
97
Chapter 3
? Make the hoar leprosy ador'd; place thieves, And give them title, knee and approbation; With senators on the bench, this is it;
That makes the wappen'd widow wed again: . . . Come damned earth,
Though common whore of mankind. " (Shakespeare: Timon of Athens. )
43b (Sophocles, Antigone. )
44 The desire of avarice to draw Pluto himself out of the bowels of the earth. ? (The Deipnosophistst, VI, 23, Athenaeus)
45 --Accrescere quanto piu` si puo` il numero de'venditori d'ogni merce, diminuere quanto piu` si puo il numero dei compratori, quest) sono i cardini sui quali si raggirano tutte le operazioni di economia politica. ? [--These are the pivots around which all the measures of political economy turn: the maximum possible increase in the number of sellers of each commodity, and the maximum possible decrease in the number of buyers? ] (Verri, l. c. , p. 52. )
46 --There is required for carrying on the trade of the nation a determinate sum of specifick money which varies, and is sometimes more, sometimes less, as the circumstances we are in require. . . . This ebbing and flowing of money supplies and accommodates itself, without any aid of Politicians. . . . The buckets work alternately; when money is scarce, bullion is coined; when bullion is scarce, money is melted. ? (Sir D. North, l. c. , Postscript, p. 3. ) John Stuart Mill, who for a long time was an official of the East India Company, confirms the fact that in India silver ornaments still continue to perform directly the functions of a hoard. The silver ornaments are brought out and coined when there is a high rate of interest, and go back again when the rate of interest falls. (J. S. Mill's Evidence --Reports on Bank Acts,? 1857, 2084. ) According to a Parliamentary document of 1864 on the gold and silver import and export of India, the import of gold and silver in 1863 exceeded the export by ? 19,367,764. During the 8 years immediately preceding 1864, the excess of imports over exports of the precious metals amounted to ? 109,652,917. During this century far more than ? 200,000,000 has been coined in India.
47 The following shows the debtor and creditor relations existing between English traders at the beginning of the 18th century. --Such a spirit of crudity reigns here in England among the men of trade, that is not to be met with in any other society of men, nor in any other kingdom of the world. ? (--An Essay on Credit and the Bankrupt Act,? Lond. ,
48 It will be seen from the following quotation from my book which appeared in 1859, why I take no notice in the text of an opposite form: --Contrariwise, in the process in M--C, the money can be alienated as a real means of purchase, and in that way, the price of the commodity can be realised before the use-value of the money is realised and the commodity actually delivered. This occurs constantly under the every-day form of prepayments. And it is under this form, that the English government purchases opium from the ryots of India. . . . In these cases, however, the money always acts as a means of purchase. . . . Of course capital also is advanced in the shape of money. . . . This point of view, however, does not fall within the horizon of simple circulation. ? (--Zur Kritik, &c. ,? pp. 119, 120. )
49 The monetary crisis referred to in the text, being a phase of every crisis, must be clearly distinguished from that particular form of crisis, which also is called a monetary crisis, but which may be produced by itself as an independent phenomenon in such a way as to react only indirectly on industry and commerce. The pivot of these crises is to be found in moneyed capital, and their sphere of direct action is therefore the sphere of that capital, viz. , banking, the stock exchange, and finance.
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50 --The sudden reversion from a system of credit to a system of hard cash heaps theoretical fright on top of the practical panic; and the dealers by whose agency circulation is affected, shudder before the impenetrable mystery in which their own economic relations are involved? (Karl Marx, l. c. , p. 126. ) --The poor stand still, because the rich have no money to employ them, though they have the same land and hands to provide victuals and clothes, as ever they had; . . . which is the true riches of a nation, and not the money. ? John Bellers, Proposals for Raising a College of Industry, London, 1696, p3.
51 he following shows how such times are exploited by the --amis du commerce. ? --On one occasion (1839) an old grasping banker (in the city) in his private room raised the lid of the desk he sat over, and displayed to a friend rolls of bank-notes, saying with intense glee there were ? 600,000 of them, they were held to make money tight, and would all be let out after three o'clock on the same day. ? (--The Theory of Exchanges. The Bank Charter Act of 1844. ? Lond. 1864, p. 81). The Observer, a semi-official government organ, contained the following paragraph on 24th April, 1864: --Some very curious rumours are current of the means which have been resorted to in order to create a scarcity of banknotes. . . . Questionable as it would seem, to suppose that any trick of the kind would be adopted, the report has been so universal that it really deserves mention. ?
52 --The amount of purchases or contracts entered upon during the course of any given day, will not affect the quantity of money afloat on that particular day, but, in the vast majority of cases, will resolve themselves into multifarious drafts upon the quantity of money which may be afloat at subsequent dates more or less distant. . . . The bills granted or credits opened, to-day, need have no resemblance whatever, either in quantity, amount or duration, to those granted or entered upon to- morrow or next day, nay, many of today's bills, and credits, when due, fall in with a mass of liabilities whose origins traverse a range of antecedent dates altogether indefinite, bills at 12, 6, 3 months or 1 often aggregating together to swell the common liabilities of one particular day. . . . ? (--The Currency Theory Reviewed; in a Letter to the Scottish People. ? By a Banker in England. Edinburgh, 1845, pp. 29, 30 passim. )
53 As an example of how little ready money is required in true commercial operations, I give below a statement by one of the largest London houses of its yearly receipts and payments. Its transactions during the year 1856, extending to many millions of pounds sterling, are here reduced to the scale of one million.
? Receipts.
Bankers' and Merchants'
Cheques on Bankers, &c. payable on demand
Country Notes
Bank of England Notes Gold
Silver and Copper
Payments.
? 533,596 Bills payable after date
357,715 Cheques on London
Bankers
9,627 Bank of England Notes
68,554 Gold
28,089 Silver and Copper
1,486
? 302,674 663,672
22,743
9,427 1,484
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? Post Office Orders 933
Total ? 1,000,000 Total ? 1,000,000
--Report from the Select Committee on the Bank Acts, July, 1858,? p. lxxi.
54 --The course of trade being thus turned, from exchanging of goods for goods, or delivering and taking, to selling and paying, all the bargains . . . are now stated upon the foot of a Price in money. ? (--An Essay upon Publick Credit. ? 3rd Ed. Lond. , 1710, p. 8. )
55 --L'argent . . . est devenu le bourreau de toutes choses. ? Finance is the --alambic, qui a fait e? vaporer une quantite? effroyable de biens et de denre? es pour faire ce fatal pre? cis. ? --L'argent de? clare la guerre a` tout le genre humain. ? [--Money . . . has become the executioner of all things. ? Finance is the --alembic that evaporates a frightful quantity of goods and commodities in order to obtain this fatal extract. ? --Money [. . . ] declares war [. . . ] on the whole human race? ] (Boisguillebert: --Dissertation sur la nature des richesses, de l'argent et des tributs. ? Edit. Daire. Economistes financiers. Paris, 1843, t. i. , pp. 413, 419, 417. )
56 --On Whitsuntide, 1824,? says Mr. Craig before the Commons' Committee of 1826, --there was such an immense demand for notes upon the banks of Edinburgh, that by 11 o'clock they had not a note left in their custody. They sent round to all the different banks to borrow, but could not get them, and many of the transactions were adjusted by slips of paper only; yet by three o'clock the whole of the notes were returned into the banks from which they had issued! It was a mere transfer from hand to hand. --Although the average effective circulation of bank-notes in Scotland is less than three millions sterling, yet on certain pay days in the year, every single note in the possession of the bankers, amounting in the whole to about ? 7,000,000, is called into activity. On these occasions the notes have a single and specific function to perform, and so soon as they have performed it, they How back into the various banks from which they issued. (See John Fullarton, --Regulation of Currencies. ? Lond. 1845, p. 86, note. ) In explanation it should be stated, that in Scotland, at the date of Fullarton's work, notes and not cheques were used to withdraw deposits.
57 Note by the Institute of Marxism-Leninism in the Russian edition: Apparently a slip of the pen. When writing faverse the author evidently meant direct.
58 To the question, --If there were occasion to raise 40 millions p. a. , whether the same 6 millions (gold) . . . would suffice for such revolutions and circulations thereof, as trade requires,? Petty replies in his usual masterly manner, --I answer yes: for the expense being 40 millions, if the revolutions were in such short circles, viz.
, weekly, as happens among poor artisans and labourers, who receive and pay every Saturday, then 40/52 parts of 1 million of money would answer these ends, but if the circles be quarterly, according to our custom of paying rent, and gathering taxes, then 10 millions were requisite. Wherefore, supposing payments in general to be of a mixed circle between one week and 13, then add 10 millions to 40/52, the half of which will be 51/2, so as if we have 51/2 millions we have enough. ? (William Petty: --Political Anatomy of Ireland. ? 1672, Edit. : Lond. 1691, pp. 13, 14. )
59 Hence the absurdity of every law prescribing that the banks of a country shall form reserves of that precious metal alone which circulates at home. The --pleasant difficulties? thus self-created by the Bank of England, are well known. On the subject of the great epochs in the history of the changes in the relative value of gold and silver, see Karl Marx, l. c. , p. 136 sq. Sir Robert Peel, by his Bank Act of 1844, sought to tide over the difficulty, by allowing the Bank of England to issue notes against silver bullion, on condition that the reserve of silver should never exceed more than one-fourth of the reserve of gold. The value of silver being for that purpose estimated at its price in the London market.
.
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Added in the 4th German edition. -- We find ourselves once more in a period of serious change in the relative values of gold and silver. About 25 years ago the ratio expressing the relative value of gold and silver was 15-1/2:1; now it is approximately 22:1, and silver is still constantly falling as against gold. This is essentially the result of a revolution in the mode of production of both metals. Formerly gold was obtained almost exclusively by washing it out from gold-bearing alluvial deposits, products of the weathering of auriferous rocks. Now this method has become inadequate and has been forced into the background by the processing of the quartz lodes themselves, a way of extraction which formerly was only of secondary importance, although well known to the ancients (Diodorus, III, 12- 14) (Diodor's v. Sicilien --Historische Bibliothek,? book III, 12-14. Stuttgart 1828, pp. 258-261). Moreover, not only were new huge silver deposits discovered in North America, in the Western part of the Rocky Mountains, but these and the Mexican silver mines were really opened up by the laying of railways, which made possible the shipment of modern machinery and fuel and in consequence the mining of silver on a very large scale at a low cost. However there is a great difference in the way the two metals occur in the quartz lodes. The gold is mostly native, but disseminated throughout the quartz in minute quantities. The whole mass of the vein must therefore be crushed and the gold either washed out or extracted by means of mercury. Often 1,000,000 grammes of quartz barely yield 1-3 and very seldom 30-60 grammes of gold. Silver is seldom found native, however it occurs in special quartz that is separated from the lode with comparative ease and contains mostly 40-90% silver; or it is contained, in smaller quantities, in copper, lead and other ores which in themselves are worthwhile working. From this alone it is apparent that the labour expended on the production of gold is rather in creasing while that expended on silver production has decidedly decreased, which quite naturally explains the drop in the value of the latter. This fall in value would express itself in a still greater fall in price if the price of silver were not pegged even to-day by artificial means. But America's rich silver deposits have so far barely been tapped, and thus the prospects are that the value of this metal will keep on dropping for rather a long time to come. A still greater contributing factor here is the relative decrease in the requirement of silver for articles of general use and for luxuries, that is its replacement by plated goods, aluminium, etc. One may thus gauge the utopianism of the bimetallist idea that compulsory international quotation will raise silver again to the old value ratio of 1:15-1/2. It is more likely that silver will forfeit its money function more and more in the markets of the world. -- F E. ]
60 The opponents, themselves, of the mercantile system, a system which considered the settlement of surplus trade balances in gold and silver as the aim of international trade, entirely misconceived the functions of money of the world. I have shown by the example of Ricardo in what way their false conception of the laws that regulate the quantity of the circulating medium, is reflected in their equally false conception of the international movement of the precious metals (l. c. , pp. 150 sq. ). His erroneous dogma: --An unfavourable balance of trade never arises but from a redundant currency. . . . The exportation of the coin is caused by its cheapness, and is not the effect, but the cause of an unfavourable balance,? already occurs in Barbon: --The Balance of Trade, if there be one, is not the cause of sending away the money out of a nation; but that proceeds from the difference of the value of bullion in every country. ? (N. Barbon; l. c. , pp. 59, 60. ) MacCulloch in --The Literature of Political Economy, a classified catalogue, Lond. 1845,? praises Barbon for this anticipation, but prudently passes over the naive forms, in which Barbon clothes the absurd supposition on which the --currency principle? is based. The absence of real criticism and even of honesty, in that catalogue culminates in the sections devoted to the history of the theory of money; the reason is that MacCulloch in this part of the work is flattering Lord Overstone whom he calls --facile princeps argentanorum. ?
61 For instance, in subsidies, money loans for carrying on wars or for enabling banks to resume cash payments, &c. , it is the money-form, and no other, of value that may be wanted.
? ? 101 Chapter 3
62 --I would desire, indeed, no more convincing evidence of the competency of the machinery of the hoards in specie-paying countries to perform every necessary office of international adjustment, without any sensible aid from the general circulation, than the facility with which France, when but just recovering from the shock of a destructive foreign invasion, completed within the space of 27 months the payment of her forced contribution of nearly 20 millions to the allied powers, and a considerable proportion of the sum in specie, without any perceptible contraction or derangement of her domestic currency, or even any alarming fluctuation of her exchanges. ? (Fullerton, l. c. , p. 141. ) [Added in the 4th German edition. -- We have a still more striking example in the facility with which the same France was able in 1871-73 to pay off within 30 months a forced contribution more than ten times as great, a considerable part of it likewise in specie. -- F. E. ]
63 --L'argent se partage entre les nations relativement au besoin qu'elles en ont . . . e? tant toujours attire? par les productions. ? [--Money is shared among the nations in accordance with their need for it . . . as it is always attracted by the products? ] (Le Trosne, l. c. , p. 916. ) --The mines which are continually giving gold and silver, do give sufficient to supply such a needful balance to every nation. ? (J. Vanderlint, l. c. , p. 40. )
64 --Exchanges rise and fall every week, and at some particular times in the year run high against a nation, and at other times run as high on the contrary. ? (N. Barbon, l. c. , p. 39)
65 These various functions are liable to come into dangerous conflict with one another whenever gold and silver have also to serve as a fund for the conversion of bank-notes.
66 --What money is more than of absolute necessity for a Home Trade, is dead stock . . . and brings no profit to that country it's kept in, but as it is transported in trade, as well as imported. ? (John Bellers, --Essays,? p. 13. ) --What if we have too much coin? We may melt down the heaviest and turn it into the splendour of plate, vessels or utensils of gold or silver, or send it out as a commodity, where the same is wanted or desired; or let it out at interest, where interest is high. ? (W. Petty: --Quantulumcunque,? p. 39. ) --Money is but the fat of the Body Politick, whereof too much cloth as often hinder its agility, as too little makes it sick . . . as fat lubricates the motion of the muscles, feeds in want of victuals, fills up the uneven cavities, and beautifies the body; so cloth money in the state quicken its action, feeds from abroad in time of dearth at home, evens accounts . . . and beautifies the whole; altho more especially the particular persons that have it in plenty. ? (W. Petty, --Political Anatomy of Ireland,? p. 14. )
? ? Part 2: Transformation of Money into Capital
Chapter 4: The General Formula for Capital
The circulation of commodities is the starting-point of capital. The production of commodities, their circulation, and that more developed form of their circulation called commerce, these 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.
If we abstract from the material substance of the circulation of commodities, that is, from the exchange of the various use-values, and consider only the economic forms produced by this process of circulation, we find its final result to be money: this final product of the circulation of commodities is the first form in which capital appears.
As a matter of history, capital, as opposed to landed property, invariably takes the form at first of money; it appears as moneyed wealth, as the capital of the merchant and of the usurer. 1 But we have no need to refer to the origin of capital in order to discover that the first form of appearance of capital is money. We can see it daily under our very eyes. All new capital, to commence with, comes on the stage, that is, on the market, whether of commodities, labour, or money, even in our days, in the shape of money that by a definite process has to be transformed into capital.
The first distinction we notice between money that is money only, and money that is capital, is nothing more than a difference in their form of circulation.
The simplest form of the circulation of commodities is C-M-C, the transformation of commodities into money, and the change of the money back again into commodities; or selling in order to buy. But alongside of this form we find another specifically different form: M-C-M, the transformation of money into commodities, and the change of commodities back again into money; or buying in order to sell. Money that circulates in the latter manner is thereby transformed into, becomes capital, and is already potentially capital.
Now let us examine the circuit M-C-M a little closer. It consists, like the other, of two antithetical phases. In the first phase, M-C, or the purchase, the money is changed into a commodity. In the second phase, C-M, or the sale, the commodity is changed back again into money. The combination of these two phases constitutes the single movement whereby money is exchanged for a commodity, and the same commodity is again exchanged for money; whereby a commodity is bought in order to be sold, or, neglecting the distinction in form between buying and selling, whereby a commodity is bought with money, and then money is bought with a commodity. 2 The result, in which the phases of the process vanish, is the exchange of money for money, M-M. If I purchase 2,000 lbs. of cotton for ? 100, and resell the 2,000 lbs. of cotton for ? 110, I have, in fact, exchanged ? 100 for ? 110, money for money.
Now it is evident that the circuit M-C-M would be absurd and without meaning if the intention were to exchange by this means two equal sums of money, ? 100 for ? 100. The miser's plan would be far simpler and surer; he sticks to his ? 100 instead of exposing it to the dangers of circulation. And yet, whether the merchant who has paid ? 100 for his cotton sells it for ? 110, or lets it go for ? 100, or even ? 50, his money has, at all events, gone through a characteristic and
? 103 Chapter 4
original movement, quite different in kind from that which it goes through in the hands of the peasant who sells corn, and with the money thus set free buys clothes. We have therefore to examine first the distinguishing characteristics of the forms of the circuits M-C-M and C-M-C, and in doing this the real difference that underlies the mere difference of form will reveal itself.
Let us see, in the first place, what the two forms have in common.
Both circuits are resolvable into the same two antithetical phases, C-M, a sale, and M-C, a purchase. In each of these phases the same material elements - a commodity, and money, and the same economic dramatis personae, a buyer and a seller - confront one another. Each circuit is the unity of the same two antithetical phases, and in each case this unity is brought about by the intervention of three contracting parties, of whom one only sells, another only buys, while the third both buys and sells.
What, however, first and foremost distinguishes the circuit C-M-C from the circuit M-C-M, is the inverted order of succession of the two phases. The simple circulation of commodities begins with a sale and ends with a purchase, while the circulation of money as capital begins with a purchase and ends with a sale. In the one case both the starting-point and the goal are commodities, in the other they are money. In the first form the movement is brought about by the intervention of money, in the second by that of a commodity.
In the circulation C-M-C, the money is in the end converted into a commodity, that serves as a use-value; it is spent once for all. In the inverted form, M-C-M, on the contrary, the buyer lays out money in order that, as a seller, he may recover money. By the purchase of his commodity he throws money into circulation, in order to withdraw it again by the sale of the same commodity. He lets the money go, but only with the sly intention of getting it back again. The money, therefore, is not spent, it is merely advanced. 3
In the circuit C-M-C, the same piece of money changes its place twice. The seller gets it from the buyer and pays it away to another seller. The complete circulation, which begins with the receipt, concludes with the payment, of money for commodities. It is the very contrary in the circuit M-C- M. Here it is not the piece of money that changes its place twice, but the commodity. The buyer takes it from the hands of the seller and passes it into the hands of another buyer. Just as in the simple circulation of commodities the double change of place of the same piece of money effects its passage from one hand into another, so here the double change of place of the same commodity brings about the reflux of the money to its point of departure.
Such reflux is not dependent on the commodity being sold for more than was paid for it. This circumstance influences only the amount of the money that comes back. The reflux itself takes place, so soon as the purchased commodity is resold, in other words, so soon as the circuit M-C- M is completed. We have here, therefore, a palpable difference between the circulation of money as capital, and its circulation as mere money.
The circuit C-M-C comes completely to an end, so soon as the money brought in by the sale of one commodity is abstracted again by the purchase of another.
Chapter 3
? Make the hoar leprosy ador'd; place thieves, And give them title, knee and approbation; With senators on the bench, this is it;
That makes the wappen'd widow wed again: . . . Come damned earth,
Though common whore of mankind. " (Shakespeare: Timon of Athens. )
43b (Sophocles, Antigone. )
44 The desire of avarice to draw Pluto himself out of the bowels of the earth. ? (The Deipnosophistst, VI, 23, Athenaeus)
45 --Accrescere quanto piu` si puo` il numero de'venditori d'ogni merce, diminuere quanto piu` si puo il numero dei compratori, quest) sono i cardini sui quali si raggirano tutte le operazioni di economia politica. ? [--These are the pivots around which all the measures of political economy turn: the maximum possible increase in the number of sellers of each commodity, and the maximum possible decrease in the number of buyers? ] (Verri, l. c. , p. 52. )
46 --There is required for carrying on the trade of the nation a determinate sum of specifick money which varies, and is sometimes more, sometimes less, as the circumstances we are in require. . . . This ebbing and flowing of money supplies and accommodates itself, without any aid of Politicians. . . . The buckets work alternately; when money is scarce, bullion is coined; when bullion is scarce, money is melted. ? (Sir D. North, l. c. , Postscript, p. 3. ) John Stuart Mill, who for a long time was an official of the East India Company, confirms the fact that in India silver ornaments still continue to perform directly the functions of a hoard. The silver ornaments are brought out and coined when there is a high rate of interest, and go back again when the rate of interest falls. (J. S. Mill's Evidence --Reports on Bank Acts,? 1857, 2084. ) According to a Parliamentary document of 1864 on the gold and silver import and export of India, the import of gold and silver in 1863 exceeded the export by ? 19,367,764. During the 8 years immediately preceding 1864, the excess of imports over exports of the precious metals amounted to ? 109,652,917. During this century far more than ? 200,000,000 has been coined in India.
47 The following shows the debtor and creditor relations existing between English traders at the beginning of the 18th century. --Such a spirit of crudity reigns here in England among the men of trade, that is not to be met with in any other society of men, nor in any other kingdom of the world. ? (--An Essay on Credit and the Bankrupt Act,? Lond. ,
48 It will be seen from the following quotation from my book which appeared in 1859, why I take no notice in the text of an opposite form: --Contrariwise, in the process in M--C, the money can be alienated as a real means of purchase, and in that way, the price of the commodity can be realised before the use-value of the money is realised and the commodity actually delivered. This occurs constantly under the every-day form of prepayments. And it is under this form, that the English government purchases opium from the ryots of India. . . . In these cases, however, the money always acts as a means of purchase. . . . Of course capital also is advanced in the shape of money. . . . This point of view, however, does not fall within the horizon of simple circulation. ? (--Zur Kritik, &c. ,? pp. 119, 120. )
49 The monetary crisis referred to in the text, being a phase of every crisis, must be clearly distinguished from that particular form of crisis, which also is called a monetary crisis, but which may be produced by itself as an independent phenomenon in such a way as to react only indirectly on industry and commerce. The pivot of these crises is to be found in moneyed capital, and their sphere of direct action is therefore the sphere of that capital, viz. , banking, the stock exchange, and finance.
? 98 Chapter 3
50 --The sudden reversion from a system of credit to a system of hard cash heaps theoretical fright on top of the practical panic; and the dealers by whose agency circulation is affected, shudder before the impenetrable mystery in which their own economic relations are involved? (Karl Marx, l. c. , p. 126. ) --The poor stand still, because the rich have no money to employ them, though they have the same land and hands to provide victuals and clothes, as ever they had; . . . which is the true riches of a nation, and not the money. ? John Bellers, Proposals for Raising a College of Industry, London, 1696, p3.
51 he following shows how such times are exploited by the --amis du commerce. ? --On one occasion (1839) an old grasping banker (in the city) in his private room raised the lid of the desk he sat over, and displayed to a friend rolls of bank-notes, saying with intense glee there were ? 600,000 of them, they were held to make money tight, and would all be let out after three o'clock on the same day. ? (--The Theory of Exchanges. The Bank Charter Act of 1844. ? Lond. 1864, p. 81). The Observer, a semi-official government organ, contained the following paragraph on 24th April, 1864: --Some very curious rumours are current of the means which have been resorted to in order to create a scarcity of banknotes. . . . Questionable as it would seem, to suppose that any trick of the kind would be adopted, the report has been so universal that it really deserves mention. ?
52 --The amount of purchases or contracts entered upon during the course of any given day, will not affect the quantity of money afloat on that particular day, but, in the vast majority of cases, will resolve themselves into multifarious drafts upon the quantity of money which may be afloat at subsequent dates more or less distant. . . . The bills granted or credits opened, to-day, need have no resemblance whatever, either in quantity, amount or duration, to those granted or entered upon to- morrow or next day, nay, many of today's bills, and credits, when due, fall in with a mass of liabilities whose origins traverse a range of antecedent dates altogether indefinite, bills at 12, 6, 3 months or 1 often aggregating together to swell the common liabilities of one particular day. . . . ? (--The Currency Theory Reviewed; in a Letter to the Scottish People. ? By a Banker in England. Edinburgh, 1845, pp. 29, 30 passim. )
53 As an example of how little ready money is required in true commercial operations, I give below a statement by one of the largest London houses of its yearly receipts and payments. Its transactions during the year 1856, extending to many millions of pounds sterling, are here reduced to the scale of one million.
? Receipts.
Bankers' and Merchants'
Cheques on Bankers, &c. payable on demand
Country Notes
Bank of England Notes Gold
Silver and Copper
Payments.
? 533,596 Bills payable after date
357,715 Cheques on London
Bankers
9,627 Bank of England Notes
68,554 Gold
28,089 Silver and Copper
1,486
? 302,674 663,672
22,743
9,427 1,484
? 99 Chapter 3
? Post Office Orders 933
Total ? 1,000,000 Total ? 1,000,000
--Report from the Select Committee on the Bank Acts, July, 1858,? p. lxxi.
54 --The course of trade being thus turned, from exchanging of goods for goods, or delivering and taking, to selling and paying, all the bargains . . . are now stated upon the foot of a Price in money. ? (--An Essay upon Publick Credit. ? 3rd Ed. Lond. , 1710, p. 8. )
55 --L'argent . . . est devenu le bourreau de toutes choses. ? Finance is the --alambic, qui a fait e? vaporer une quantite? effroyable de biens et de denre? es pour faire ce fatal pre? cis. ? --L'argent de? clare la guerre a` tout le genre humain. ? [--Money . . . has become the executioner of all things. ? Finance is the --alembic that evaporates a frightful quantity of goods and commodities in order to obtain this fatal extract. ? --Money [. . . ] declares war [. . . ] on the whole human race? ] (Boisguillebert: --Dissertation sur la nature des richesses, de l'argent et des tributs. ? Edit. Daire. Economistes financiers. Paris, 1843, t. i. , pp. 413, 419, 417. )
56 --On Whitsuntide, 1824,? says Mr. Craig before the Commons' Committee of 1826, --there was such an immense demand for notes upon the banks of Edinburgh, that by 11 o'clock they had not a note left in their custody. They sent round to all the different banks to borrow, but could not get them, and many of the transactions were adjusted by slips of paper only; yet by three o'clock the whole of the notes were returned into the banks from which they had issued! It was a mere transfer from hand to hand. --Although the average effective circulation of bank-notes in Scotland is less than three millions sterling, yet on certain pay days in the year, every single note in the possession of the bankers, amounting in the whole to about ? 7,000,000, is called into activity. On these occasions the notes have a single and specific function to perform, and so soon as they have performed it, they How back into the various banks from which they issued. (See John Fullarton, --Regulation of Currencies. ? Lond. 1845, p. 86, note. ) In explanation it should be stated, that in Scotland, at the date of Fullarton's work, notes and not cheques were used to withdraw deposits.
57 Note by the Institute of Marxism-Leninism in the Russian edition: Apparently a slip of the pen. When writing faverse the author evidently meant direct.
58 To the question, --If there were occasion to raise 40 millions p. a. , whether the same 6 millions (gold) . . . would suffice for such revolutions and circulations thereof, as trade requires,? Petty replies in his usual masterly manner, --I answer yes: for the expense being 40 millions, if the revolutions were in such short circles, viz.
, weekly, as happens among poor artisans and labourers, who receive and pay every Saturday, then 40/52 parts of 1 million of money would answer these ends, but if the circles be quarterly, according to our custom of paying rent, and gathering taxes, then 10 millions were requisite. Wherefore, supposing payments in general to be of a mixed circle between one week and 13, then add 10 millions to 40/52, the half of which will be 51/2, so as if we have 51/2 millions we have enough. ? (William Petty: --Political Anatomy of Ireland. ? 1672, Edit. : Lond. 1691, pp. 13, 14. )
59 Hence the absurdity of every law prescribing that the banks of a country shall form reserves of that precious metal alone which circulates at home. The --pleasant difficulties? thus self-created by the Bank of England, are well known. On the subject of the great epochs in the history of the changes in the relative value of gold and silver, see Karl Marx, l. c. , p. 136 sq. Sir Robert Peel, by his Bank Act of 1844, sought to tide over the difficulty, by allowing the Bank of England to issue notes against silver bullion, on condition that the reserve of silver should never exceed more than one-fourth of the reserve of gold. The value of silver being for that purpose estimated at its price in the London market.
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Added in the 4th German edition. -- We find ourselves once more in a period of serious change in the relative values of gold and silver. About 25 years ago the ratio expressing the relative value of gold and silver was 15-1/2:1; now it is approximately 22:1, and silver is still constantly falling as against gold. This is essentially the result of a revolution in the mode of production of both metals. Formerly gold was obtained almost exclusively by washing it out from gold-bearing alluvial deposits, products of the weathering of auriferous rocks. Now this method has become inadequate and has been forced into the background by the processing of the quartz lodes themselves, a way of extraction which formerly was only of secondary importance, although well known to the ancients (Diodorus, III, 12- 14) (Diodor's v. Sicilien --Historische Bibliothek,? book III, 12-14. Stuttgart 1828, pp. 258-261). Moreover, not only were new huge silver deposits discovered in North America, in the Western part of the Rocky Mountains, but these and the Mexican silver mines were really opened up by the laying of railways, which made possible the shipment of modern machinery and fuel and in consequence the mining of silver on a very large scale at a low cost. However there is a great difference in the way the two metals occur in the quartz lodes. The gold is mostly native, but disseminated throughout the quartz in minute quantities. The whole mass of the vein must therefore be crushed and the gold either washed out or extracted by means of mercury. Often 1,000,000 grammes of quartz barely yield 1-3 and very seldom 30-60 grammes of gold. Silver is seldom found native, however it occurs in special quartz that is separated from the lode with comparative ease and contains mostly 40-90% silver; or it is contained, in smaller quantities, in copper, lead and other ores which in themselves are worthwhile working. From this alone it is apparent that the labour expended on the production of gold is rather in creasing while that expended on silver production has decidedly decreased, which quite naturally explains the drop in the value of the latter. This fall in value would express itself in a still greater fall in price if the price of silver were not pegged even to-day by artificial means. But America's rich silver deposits have so far barely been tapped, and thus the prospects are that the value of this metal will keep on dropping for rather a long time to come. A still greater contributing factor here is the relative decrease in the requirement of silver for articles of general use and for luxuries, that is its replacement by plated goods, aluminium, etc. One may thus gauge the utopianism of the bimetallist idea that compulsory international quotation will raise silver again to the old value ratio of 1:15-1/2. It is more likely that silver will forfeit its money function more and more in the markets of the world. -- F E. ]
60 The opponents, themselves, of the mercantile system, a system which considered the settlement of surplus trade balances in gold and silver as the aim of international trade, entirely misconceived the functions of money of the world. I have shown by the example of Ricardo in what way their false conception of the laws that regulate the quantity of the circulating medium, is reflected in their equally false conception of the international movement of the precious metals (l. c. , pp. 150 sq. ). His erroneous dogma: --An unfavourable balance of trade never arises but from a redundant currency. . . . The exportation of the coin is caused by its cheapness, and is not the effect, but the cause of an unfavourable balance,? already occurs in Barbon: --The Balance of Trade, if there be one, is not the cause of sending away the money out of a nation; but that proceeds from the difference of the value of bullion in every country. ? (N. Barbon; l. c. , pp. 59, 60. ) MacCulloch in --The Literature of Political Economy, a classified catalogue, Lond. 1845,? praises Barbon for this anticipation, but prudently passes over the naive forms, in which Barbon clothes the absurd supposition on which the --currency principle? is based. The absence of real criticism and even of honesty, in that catalogue culminates in the sections devoted to the history of the theory of money; the reason is that MacCulloch in this part of the work is flattering Lord Overstone whom he calls --facile princeps argentanorum. ?
61 For instance, in subsidies, money loans for carrying on wars or for enabling banks to resume cash payments, &c. , it is the money-form, and no other, of value that may be wanted.
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62 --I would desire, indeed, no more convincing evidence of the competency of the machinery of the hoards in specie-paying countries to perform every necessary office of international adjustment, without any sensible aid from the general circulation, than the facility with which France, when but just recovering from the shock of a destructive foreign invasion, completed within the space of 27 months the payment of her forced contribution of nearly 20 millions to the allied powers, and a considerable proportion of the sum in specie, without any perceptible contraction or derangement of her domestic currency, or even any alarming fluctuation of her exchanges. ? (Fullerton, l. c. , p. 141. ) [Added in the 4th German edition. -- We have a still more striking example in the facility with which the same France was able in 1871-73 to pay off within 30 months a forced contribution more than ten times as great, a considerable part of it likewise in specie. -- F. E. ]
63 --L'argent se partage entre les nations relativement au besoin qu'elles en ont . . . e? tant toujours attire? par les productions. ? [--Money is shared among the nations in accordance with their need for it . . . as it is always attracted by the products? ] (Le Trosne, l. c. , p. 916. ) --The mines which are continually giving gold and silver, do give sufficient to supply such a needful balance to every nation. ? (J. Vanderlint, l. c. , p. 40. )
64 --Exchanges rise and fall every week, and at some particular times in the year run high against a nation, and at other times run as high on the contrary. ? (N. Barbon, l. c. , p. 39)
65 These various functions are liable to come into dangerous conflict with one another whenever gold and silver have also to serve as a fund for the conversion of bank-notes.
66 --What money is more than of absolute necessity for a Home Trade, is dead stock . . . and brings no profit to that country it's kept in, but as it is transported in trade, as well as imported. ? (John Bellers, --Essays,? p. 13. ) --What if we have too much coin? We may melt down the heaviest and turn it into the splendour of plate, vessels or utensils of gold or silver, or send it out as a commodity, where the same is wanted or desired; or let it out at interest, where interest is high. ? (W. Petty: --Quantulumcunque,? p. 39. ) --Money is but the fat of the Body Politick, whereof too much cloth as often hinder its agility, as too little makes it sick . . . as fat lubricates the motion of the muscles, feeds in want of victuals, fills up the uneven cavities, and beautifies the body; so cloth money in the state quicken its action, feeds from abroad in time of dearth at home, evens accounts . . . and beautifies the whole; altho more especially the particular persons that have it in plenty. ? (W. Petty, --Political Anatomy of Ireland,? p. 14. )
? ? Part 2: Transformation of Money into Capital
Chapter 4: The General Formula for Capital
The circulation of commodities is the starting-point of capital. The production of commodities, their circulation, and that more developed form of their circulation called commerce, these 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.
If we abstract from the material substance of the circulation of commodities, that is, from the exchange of the various use-values, and consider only the economic forms produced by this process of circulation, we find its final result to be money: this final product of the circulation of commodities is the first form in which capital appears.
As a matter of history, capital, as opposed to landed property, invariably takes the form at first of money; it appears as moneyed wealth, as the capital of the merchant and of the usurer. 1 But we have no need to refer to the origin of capital in order to discover that the first form of appearance of capital is money. We can see it daily under our very eyes. All new capital, to commence with, comes on the stage, that is, on the market, whether of commodities, labour, or money, even in our days, in the shape of money that by a definite process has to be transformed into capital.
The first distinction we notice between money that is money only, and money that is capital, is nothing more than a difference in their form of circulation.
The simplest form of the circulation of commodities is C-M-C, the transformation of commodities into money, and the change of the money back again into commodities; or selling in order to buy. But alongside of this form we find another specifically different form: M-C-M, the transformation of money into commodities, and the change of commodities back again into money; or buying in order to sell. Money that circulates in the latter manner is thereby transformed into, becomes capital, and is already potentially capital.
Now let us examine the circuit M-C-M a little closer. It consists, like the other, of two antithetical phases. In the first phase, M-C, or the purchase, the money is changed into a commodity. In the second phase, C-M, or the sale, the commodity is changed back again into money. The combination of these two phases constitutes the single movement whereby money is exchanged for a commodity, and the same commodity is again exchanged for money; whereby a commodity is bought in order to be sold, or, neglecting the distinction in form between buying and selling, whereby a commodity is bought with money, and then money is bought with a commodity. 2 The result, in which the phases of the process vanish, is the exchange of money for money, M-M. If I purchase 2,000 lbs. of cotton for ? 100, and resell the 2,000 lbs. of cotton for ? 110, I have, in fact, exchanged ? 100 for ? 110, money for money.
Now it is evident that the circuit M-C-M would be absurd and without meaning if the intention were to exchange by this means two equal sums of money, ? 100 for ? 100. The miser's plan would be far simpler and surer; he sticks to his ? 100 instead of exposing it to the dangers of circulation. And yet, whether the merchant who has paid ? 100 for his cotton sells it for ? 110, or lets it go for ? 100, or even ? 50, his money has, at all events, gone through a characteristic and
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original movement, quite different in kind from that which it goes through in the hands of the peasant who sells corn, and with the money thus set free buys clothes. We have therefore to examine first the distinguishing characteristics of the forms of the circuits M-C-M and C-M-C, and in doing this the real difference that underlies the mere difference of form will reveal itself.
Let us see, in the first place, what the two forms have in common.
Both circuits are resolvable into the same two antithetical phases, C-M, a sale, and M-C, a purchase. In each of these phases the same material elements - a commodity, and money, and the same economic dramatis personae, a buyer and a seller - confront one another. Each circuit is the unity of the same two antithetical phases, and in each case this unity is brought about by the intervention of three contracting parties, of whom one only sells, another only buys, while the third both buys and sells.
What, however, first and foremost distinguishes the circuit C-M-C from the circuit M-C-M, is the inverted order of succession of the two phases. The simple circulation of commodities begins with a sale and ends with a purchase, while the circulation of money as capital begins with a purchase and ends with a sale. In the one case both the starting-point and the goal are commodities, in the other they are money. In the first form the movement is brought about by the intervention of money, in the second by that of a commodity.
In the circulation C-M-C, the money is in the end converted into a commodity, that serves as a use-value; it is spent once for all. In the inverted form, M-C-M, on the contrary, the buyer lays out money in order that, as a seller, he may recover money. By the purchase of his commodity he throws money into circulation, in order to withdraw it again by the sale of the same commodity. He lets the money go, but only with the sly intention of getting it back again. The money, therefore, is not spent, it is merely advanced. 3
In the circuit C-M-C, the same piece of money changes its place twice. The seller gets it from the buyer and pays it away to another seller. The complete circulation, which begins with the receipt, concludes with the payment, of money for commodities. It is the very contrary in the circuit M-C- M. Here it is not the piece of money that changes its place twice, but the commodity. The buyer takes it from the hands of the seller and passes it into the hands of another buyer. Just as in the simple circulation of commodities the double change of place of the same piece of money effects its passage from one hand into another, so here the double change of place of the same commodity brings about the reflux of the money to its point of departure.
Such reflux is not dependent on the commodity being sold for more than was paid for it. This circumstance influences only the amount of the money that comes back. The reflux itself takes place, so soon as the purchased commodity is resold, in other words, so soon as the circuit M-C- M is completed. We have here, therefore, a palpable difference between the circulation of money as capital, and its circulation as mere money.
The circuit C-M-C comes completely to an end, so soon as the money brought in by the sale of one commodity is abstracted again by the purchase of another.
