The circulation of commodities is where capital starts. Commodity production, and commodity circulation grown into full-blown trade, are the historical conditions capital arises out of. World trade and the world market, opening up in the 16th century, begin capital's modern life-story.
Set aside the material side of commodity circulation — the swapping of one useful thing for another — and look only at the economic forms the process throws up: its final product is money. And this final product of commodity circulation is the first form in which capital appears.
Historically, capital everywhere first shows up facing landed property in the shape of money — as moneyed wealth, as the merchant's capital and the usurer's capital. But we don't have to go back to capital's origins to see that money is the first form it appears in; the same story plays out daily in front of us. Every new capital comes onto the stage — the market, whether the market for goods, for labour, or for money — to begin with, still as money: money that is meant to turn itself into capital through certain definite processes.
Money as money and money as capital differ, to begin with, in one thing only: the form of their circulation.
The immediate form of commodity circulation is C—M—C: a commodity turned into money and the money turned back into a commodity — selling in order to buy. But alongside it we find a second, distinctly different form, M—C—M: money turned into a commodity and the commodity turned back into money — buying in order to sell. Money that traces out this second circuit in its movement turns into capital, becomes capital, and is already, by what it is set up to do, capital.
Let's look at the circuit M—C—M more closely. Like simple commodity circulation, it runs through two opposite phases. In the first, M—C, the purchase, money is turned into a commodity. In the second, C—M, the sale, the commodity is turned back into money. The two phases together make one single movement: money is exchanged for a commodity and the same commodity again for money — a commodity is bought in order to be sold, or, if we ignore the formal difference between buying and selling, a commodity is bought with money and money is bought with a commodity. The result, in which the whole process dies out, is an exchange of money for money, M—M. If I buy 2,000 lbs. of cotton for £100 and resell the 2,000 lbs. of cotton for £110, I have in the end exchanged £100 for £110, money for money.
Now plainly the circuit M—C—M would be silly and empty if the point of its detour were to exchange one money-value for the very same money-value — £100 for £100, say. The hoarder's method would be far simpler and safer: he holds on to his £100 instead of exposing it to the dangers of circulation. And yet, whether the merchant resells his £100-worth of cotton for £110, or has to let it go for £100 or even £50, his money has in every case gone through a peculiar and original movement, of a wholly different kind from what it goes through in simple commodity circulation — in the hands, say, of the peasant who sells his corn and with the money so freed buys clothes.
So the first job is to pin down the difference in form between the circuits M—C—M and C—M—C. That will also bring out the difference in content that lurks behind those differences in form.
First, let's see what the two forms have in common.
Both circuits break down into the same two opposite phases, C—M, a sale, and M—C, a purchase. In each phase the same two thing-like elements face each other, a commodity and money — and two people wearing the same economic masks, a buyer and a seller. Each circuit is the unity of the same opposite phases, and each time this unity comes about through three parties stepping in, of whom one only sells, another only buys, and the third buys and sells in turn.
What sets the two circuits C—M—C and M—C—M apart from the very start is the reversed order of the same opposite phases. Simple commodity circulation begins with a sale and ends with a purchase; the circulation of money as capital begins with a purchase and ends with a sale. In the one case the commodity, in the other the money, is the starting-point and the end-point of the movement. In the first form money brings the whole course about; in the other, the commodity does.
In the circuit C—M—C the money is in the end turned into a commodity that serves as a use-value; the money is spent for good. In the reversed form M—C—M it is the other way round: the buyer lays out money precisely so that, as a seller, he can take money back in. Buying the commodity, he throws money into circulation only to withdraw it again by selling that same commodity. He lets the money go with just one sly aim — to get hold of it again. So the money is not spent; it is only advanced.
In the form C—M—C the same piece of money changes place twice. The seller gets it from the buyer and pays it away to another seller. The whole process, which begins with taking in money for a commodity, closes with paying out money for a commodity. It is the reverse in the form M—C—M. Here it is not the same piece of money that changes place twice, but the same commodity. The buyer takes it from the seller's hand and passes it on into another buyer's hand. Just as in simple commodity circulation the double change of place of the same piece of money carries it for good from one hand to another, so here the double change of place of the same commodity brings the money flowing back to its first starting-point.
The money flowing back to its starting-point does not depend on the commodity being sold dearer than it was bought. That only affects how big the returning sum is. The reflux itself happens as soon as the bought commodity is sold again — as soon as the circuit M—C—M is fully run through. Here, then, is a difference you can actually put your finger on between money circulating as capital and money circulating as mere money.
The circuit C—M—C is fully finished as soon as the money brought in by selling one commodity is taken out again by buying another. If money still flows back to its starting-point after that, it can only be through renewing or repeating the whole course. If I sell a quarter of corn for £3 and with that £3 buy clothes, the £3 are spent for good, as far as I'm concerned. They are no longer any business of mine; they belong to the clothes-dealer. If I now sell a second quarter of corn, money does flow back to me — but not as a result of the first transaction, only of its repetition. And it leaves me again the moment I round off this second transaction and buy anew.
So in the circuit C—M—C the spending of the money has nothing to do with its flowing back. In M—C—M it is the reverse: the money's flowing back is set up by the very way it is spent. Without that reflux the operation has miscarried, or the process is broken off and not yet finished, because its second phase is missing — the sale that completes and closes the purchase.
The circuit C—M—C sets out from one commodity at one end and closes with a different commodity at the other — a commodity that drops out of circulation and into consumption. Consumption, the meeting of needs, in a word use-value, is what it is finally for. The circuit M—C—M, by contrast, sets out from money at one end and comes back in the end to that same end, money. So what drives it and sets its purpose is exchange-value itself.
In simple commodity circulation the two ends have the same economic form: both are commodities. They are even commodities of the same value. But they are qualitatively different use-values — corn at one end, clothes at the other. What fills the movement here is the exchange of products, the switching of the different materials in which society's labour is embodied.
It is different in the circuit M—C—M. At first glance it looks empty, because it seems to say the same thing twice. Both ends have the same economic form: both are money — so not qualitatively different use-values at all, since money is precisely the transformed shape of commodities, the shape in which their particular use-values have been wiped out. To swap £100 for cotton and then that same cotton back for £100 — money for money by a roundabout path, the same for the same — seems as pointless as it is absurd. One sum of money can differ from another only in size. So the circuit M—C—M owes its content not to any qualitative difference between its ends, since both are money, but only to their difference in amount.
In the end more money is drawn out of circulation than was thrown in at the start. The cotton bought for £100 is resold, say, for £100 + £10, or £110. The complete form of this process is therefore M—C—M′, where M′ = M + ∆ M, that is, the sum of money originally advanced plus an increment. This increment, the excess over the original value, I call surplus-value. So the value first advanced not only keeps itself through circulation; inside circulation it alters its own magnitude, adds a surplus-value to itself, puts itself to work making more value. And it is this movement that turns it into capital.
It's true that in C—M—C too the two ends — corn and clothes, say — can be of unequal value. The peasant may sell his corn above its value, or buy the clothes below theirs; and he may in his turn be cheated by the clothes-dealer. But for this form of circulation such a difference in value is purely accidental. C—M—C doesn't lose all sense when its two ends are of equal value — corn and clothes worth exactly the same — the way the process M—C—M does. On the contrary, their being of equal value is here the condition of the thing running normally.
Selling in order to buy, repeated over and over, takes its measure and its goal — as the process itself does — from an end lying outside it: consumption, the meeting of definite needs. But in buying in order to sell, the beginning and the end are the same thing, money, exchange-value; and that alone makes the movement endless. True, £100 has become £100 + £10. But looked at just qualitatively, £110 is the same as £100 — money. And looked at quantitatively, £110 is a limited sum of value, just as £100 is. If the £110 were spent as money, they would drop out of their role; they would stop being capital. Withdrawn from circulation, they petrify into a hoard, and not a farthing would accrue to them though they lay there till doomsday.
So once it is a matter of value expanding itself, there is exactly the same call to make the £110 grow as to make the £100 grow — both are limited expressions of exchange-value, both therefore have the same vocation, to come as near as they can to wealth pure and simple by growing in size. For a moment, the value first advanced, the £100, does stand apart from the surplus-value of £10 that accrues to it in circulation — but that distinction melts away again at once. At the end of the process you don't get the original £100 on one side and the surplus-value of £10 on the other. What comes out is a single value of £110, in exactly the same fit condition to begin the expanding process afresh as the original £100 was. Money ends the movement only to begin it again.
And so the end of each single circuit, in which buying-for-selling is carried through, is of itself the start of a new one. Simple commodity circulation — selling in order to buy — serves an end that lies outside circulation, the getting of use-values, the meeting of needs. The circulation of money as capital, by contrast, is its own end and purpose, for value expands itself only within this constantly renewed movement. The movement of capital therefore has no measure and no limit.
As the conscious bearer of this movement, the owner of money becomes a capitalist. His person, or rather his pocket, is the point the money starts from and the point it returns to. What that circulation is objectively about — value expanding itself — is his own subjective aim; and only in so far as the growing appropriation of wealth in the abstract is the one motive driving his dealings does he function as a capitalist, as capital personified, endowed with a will and a consciousness. So use-value must never be treated as the capitalist's immediate aim — nor even the single gain on one deal, but only the restless movement of gaining.
This absolute drive to grow richer, this passionate hunt for value, the capitalist shares with the hoarder; but where the hoarder is merely the capitalist gone mad, the capitalist is the rational hoarder. The ceaseless swelling of value that the hoarder chases after by trying to rescue his money from circulation, the shrewder capitalist reaches by throwing his money into circulation again and again.
In simple circulation, value takes on independent forms — the money-forms — but these only serve to carry the exchange along. They vanish in the end-result of the movement. In the circuit M—C—M it is otherwise: there both commodity and money function only as different modes of existence of value itself — money its general mode, the commodity its particular, its disguised mode, so to speak. Value passes over and over from the one form into the other without losing itself in the change, and so turns into an automatic subject.
Fix your eye on the particular forms of appearance that this self-expanding value takes on in turn as it goes round its life-cycle, and you get these statements: capital is money; capital is commodities. But in truth what is happening here is that value becomes the subject of a process. Endlessly changing between the forms of money and commodity, it alters its own magnitude: it throws off surplus-value from itself as original value, and so expands itself. For the movement in which it adds surplus-value is its own movement; its expanding is therefore self-expanding, its own doing. It has taken on the occult power to make value simply because it is value. It breeds living young, or at the very least lays golden eggs.
Value is the overarching subject of this process — it takes on the money-form and the commodity-form and sheds them by turns, yet keeps and stretches itself through the change. So it needs, above all, an independent form of its own — one in which it can be pinned down as staying the same as itself. And this form it has only in money. Money, then, is the starting-point and the closing-point of every process of self-expansion. It was £100, it is now £110, and so on. But money here counts only as one form of value, for value has two of them. Without taking on the commodity-form, money does not become capital. So money here does not turn on the commodity as an enemy, the way it does in hoarding. The capitalist knows that all commodities, however shabby they look or however foul they smell, are in faith and in truth money — inwardly circumcised Jews — and on top of that a miraculous means for making more money out of money.
In simple circulation the value of commodities took on, at most, the independent form of money over against its use-value. Here it suddenly presents itself as a substance in process, moving itself, for which commodity and money are both just forms. But there is more. Instead of standing for relations between commodities, it now enters, so to speak, into a private relation with itself. It sets itself apart, as original value, from itself as surplus-value — as God the Father sets himself apart from himself as God the Son — and the two are of the same age and really make up only one person; for only through the surplus-value of £10 do the £100 advanced become capital, and once they have, once the Son is begotten and, through the Son, the Father, their difference vanishes again and both are one, £110.
So value becomes value in process, money in process, and, as such, capital. It comes out of circulation, goes back into it, keeps and multiplies itself within it, returns from it enlarged, and starts the same round over and over again. M—M′, money that breeds money — money which begets money — is how capital was described in the mouths of its first interpreters, the Mercantilists.
Buying in order to sell — or, more fully, buying in order to sell dearer, M—C—M′ — seems at first to be a form peculiar to just one kind of capital, the merchant's. But industrial capital too is money that turns into a commodity and, by selling that commodity, turns back into more money. Whatever acts go on between the buying and the selling, outside the sphere of circulation, change nothing about this form of the movement. And in interest-bearing capital, finally, the circuit M—C—M′ shows up shortened — its result without the step in between, in a kind of shorthand, as M—M′: money that is worth more money, value greater than itself.
So M—C—M′ really is the general formula of capital — as capital first appears, immediately, within the sphere of circulation.
The way money turns itself into capital goes against everything we have worked out so far — about what a commodity is, what value is, what money is, and how circulation itself works. The one thing that sets this new form apart from ordinary buying and selling is that the same two opposite acts come in reversed order: here you buy first and sell after, instead of selling first and buying after. But how could a difference that is purely one of order work a magic change on the very nature of these acts?
And there is more. This reversal is there for only one of the three trading partners. As a capitalist, I buy a good from A and sell it on to B; but if I were an ordinary owner of goods, I would sell a good to B and then buy one from A. For A and B, the difference does not exist at all. Each of them simply shows up as a buyer or a seller. And to each of them I too am nothing but an owner of money or of goods, a buyer or a seller — to A only a buyer, to B only a seller, to the one just money, to the other just a commodity. To neither of them am I capital, or a capitalist, or the stand-in for anything more than money or a commodity, or anything that could do more than money or a commodity can do.
For me, buying from A and selling to B make one connected series. But that connection is there for me alone. A could not care less about my deal with B, and B could not care less about my deal with A. If I tried to explain to them the special credit I earn by reversing the order, they would show me I have the order wrong in the first place: the whole thing did not begin with a purchase and end with a sale — it began with a sale and ended with a purchase. And they would be right. My first act, the buying, was a sale as far as A was concerned; my second act, the selling, was a purchase as far as B was concerned.
Not stopping there, A and B would call the whole roundabout series pointless — mere hocus-pocus. A will just sell his good straight to B, and B will buy it straight from A. And with that, the whole transaction shrinks back into a single one-sided act of ordinary buying and selling: from A's side just a sale, from B's side just a purchase. So reversing the order has not carried us one step outside ordinary buying and selling. We still have to find out whether, by its own nature, it lets the values that enter it grow — whether it allows any surplus-value to form at all.
Take buying and selling in the form where it looks like nothing but a straight swap of goods. That is what happens whenever two owners of goods buy from each other and, on the day of settling up, what each owes the other cancels out. Money here is only money of account — it is used to state the goods' values as prices, but no actual coin ever changes hands against the goods.
As far as usefulness goes, it is plain that both traders can come out ahead. Each hands over goods that are no use to him and gets goods he can actually use. And that need not be the only gain. A, who sells wine and buys corn, may be able to make more wine in a given stretch of working time than the corn-farmer B could, while B in that same time can grow more corn than the wine-grower A could. So A gets more corn, and B more wine, for the same exchange-value, than if each had had to make both wine and corn for himself without trading. In terms of usefulness, then, there is fair ground for the saying that "exchange is a transaction in which both sides gain." It is a different story with exchange-value.
Picture a man with plenty of wine and no corn dealing with a man who has plenty of corn and no wine. Between them, corn to the value of 50 changes hands for wine to the value of 50. This trade adds nothing to the exchange-value on either side; for each of them already held, before the trade, a value equal to the one he got for himself by means of it.
Nothing changes if money steps in between the goods as the means of circulation, so that the buying and the selling visibly come apart into two separate acts. A commodity's value is already set out in its price before it ever enters circulation — so the value is something circulation starts from, not something it produces.
Look at it in the abstract — setting aside anything that does not follow from the built-in laws of ordinary buying and selling — and nothing happens in an exchange except that one useful thing takes the place of another. It is a metamorphosis, a mere change in the commodity's form. The same value — the same quantity of social labour laid down in the thing — stays in the same owner's hands throughout: first as his own commodity, then as the money he turns it into, and finally as the commodity he turns that money back into. This change of form carries no change in the size of the value.
The only change the value itself goes through here is a change in its money-form. That value shows up first as the price of the good put up for sale, then as an actual sum of money — which was already named in the price — and finally as the price of an equal good in return. A change of form like this, taken on its own, alters the size of the value no more than breaking a five-pound note into sovereigns, half-sovereigns and shillings does.
So far as the circulation of a commodity brings about only a change in the form of its value, then — when the process runs cleanly — it is an exchange of equals. Even vulgar economics, little as it grasps what value is, takes this for granted: whenever it wants to look at the process in its pure state, it assumes that supply and demand match, which just means their pull on price drops out altogether. So while both traders can gain in usefulness, they cannot both gain in exchange-value. Here the rule is rather: "Where there is equality, there is no gain."
Goods can, of course, be sold at prices that stray from their values — but such straying shows up as a breach of the law of exchange, not the law itself. In its pure shape, exchange is a swap of equals, and so no way of growing richer in value. That is why, behind the attempts to make the circulation of goods look like a source of surplus-value, there usually lurks a quid pro quo — a mixing-up of use-value and exchange-value. Condillac, for instance:
"It is false that in trading goods we swap equal value for equal value. The opposite is true. Each of the two parties always gives a smaller value for a greater one. ... If we really did always trade equal values, no party could make a gain. Yet both gain, or ought to. Why? Because the value of things lies solely in what they mean to our needs. What is worth more to the one is worth less to the other, and the other way round. ... We are not supposed to be putting up for sale the things we need for our own use. ... We want to give away something useless to us in order to get something we need; we want to give less for more. ... It seemed natural to judge that in an exchange equal value is given for equal value, whenever each of the traded things was worth the same amount of money. ... But one more thing must enter the reckoning: the question is whether we are each trading away a surplus for something we need."
You can see how Condillac not only jumbles use-value and exchange-value together, but, in a truly childish way, saddles a society with fully developed commodity production with a picture that does not fit it — a picture in which each producer makes his own means of subsistence and throws into trade only what is left over beyond his own needs. And yet his argument keeps getting repeated by modern economists, above all when the point is to make the developed form of commodity exchange — trade — look like something that produces surplus-value.
"Trade," runs one such claim, "adds value to products, for the very same products are worth more in the consumer's hands than in the producer's, and it must therefore, strictly speaking, be counted as an act of production."
But you do not pay for goods twice — once for their use-value and again for their value. And if a good's use-value is worth more to the buyer than to the seller, its money-form is worth more to the seller than to the buyer — or why would he part with it? By the same token, you could just as well say the buyer, strictly speaking, performs an "act of production" when he turns, say, the merchant's stockings into money.
When goods, or goods and money, of equal exchange-value — equivalents — change hands, then plainly nobody pulls more value out of circulation than he put in. No surplus-value forms. And in its pure form, the circulation of goods does demand an exchange of equivalents. But in the real world things do not run so cleanly. So let us assume instead an exchange of non-equivalents — of things that are not equal in value.
On the market, in any case, one owner of goods faces another, and the only power these people hold over each other is the power of their goods. Goods differ in their physical kind, and that is what drives the exchange: it makes the owners depend on one another, since none of them is holding the thing he himself needs, while each is holding the thing the other needs. Apart from this difference in the kind of useful thing, goods differ in only one other way — the difference between a good in its natural shape and the shape it turns into, the difference between commodity and money. And so the owners themselves differ only as sellers, who own a commodity, and buyers, who own money.
Now suppose that, by some unexplained privilege, a seller is allowed to sell his good above its value — 110 when it is worth 100, a nominal markup of 10 per cent. He pockets a surplus-value of 10. But once he has sold, he turns into a buyer. Now a third owner of goods meets him as a seller, and enjoys the same privilege of selling 10 per cent too dear. Our man gained 10 as a seller only to lose 10 as a buyer. In the end it all comes to this: every owner of goods sells to every other at 10 per cent over value — which comes to exactly the same thing as selling at their true value. A general nominal markup like this works just as if values had been reckoned in silver instead of gold: the money-names, the prices, all swell up together, but the value-relations between the goods stay exactly where they were.
Suppose the opposite — that it is the buyer who has the privilege, buying goods below their value. Here we need not even remind ourselves that the buyer will become a seller in his turn. He was a seller before he became a buyer: he already lost his 10 per cent as a seller before he gains 10 per cent as a buyer. Once again everything stays just as it was. So the forming of surplus-value — and with it the turning of money into capital — cannot be explained by sellers selling above value, nor by buyers buying below it.
The problem gets no simpler if you smuggle in matters that do not belong to it — saying, for example, with Colonel Torrens:
"Effective demand consists in the power and the inclination (!) of consumers to give for goods — whether by direct or roundabout exchange — some larger portion of all the ingredients of capital than those goods cost to produce."
In circulation, producers and consumers meet only as sellers and buyers. To claim that the producer's surplus-value comes from consumers paying more than the goods are worth is just to dress up a plain statement: that the owner of goods, as a seller, has the privilege of selling too dear. The seller made the goods himself, or stands in for whoever did — but so did the buyer make the goods that his money stands for, or stands in for their maker. So it is really producer facing producer. The only thing setting them apart is that one is buying and the other selling. And it gets us nowhere to say that the same owner of goods, wearing the hat of producer, sells above value, and, wearing the hat of consumer, pays too much for it.
So those who hold, consistently, to the illusion that surplus-value springs from a nominal markup — from the seller's privilege of selling too dear — are driven to assume a class that only buys and never sells, that only consumes and never produces. From where we now stand, at the level of simple circulation, there is as yet no explaining how such a class could exist. But suppose we jump ahead and grant it. The money this class is forever spending must forever flow to it for nothing — without any exchange, handed over free, on whatever claims of right or force — from the owners of goods themselves. To sell goods to such a class above their value, then, is only to swindle back a part of money that was given away for nothing in the first place.
So it was that the towns of Asia Minor paid a yearly money-tribute to ancient Rome. With that money Rome bought goods from them, and bought them too dear. The people of Asia Minor cheated the Romans, wheedling back from their conquerors, through trade, a part of the tribute. Yet for all that, they stayed the cheated ones: their goods went on being paid for with their own money. This is no way to grow rich, and no way to make surplus-value.
So let us stay inside the bounds of ordinary exchange, where the sellers are also buyers and the buyers also sellers. Perhaps our difficulty comes from having taken the people only as stand-ins for economic roles, and not as individuals.
Owner A may be cunning enough to get the better of his fellows B or C, while they, try as they might, cannot pay him back in kind. A sells B wine worth £40 and gets corn worth £50 in return. A has turned his £40 into £50 — made more money out of less, and turned his goods into capital. Look closer, though. Before the trade there was £40 of wine in A's hands and £50 of corn in B's, £90 of value all told. After the trade there is still the same £90. The value in circulation has not grown by a single atom; only its distribution between A and B has changed. What shows up as a gain on the one side is exactly a loss on the other — a plus here that is a minus there. The very same shift would have happened if A had skipped the disguise of a trade and simply stolen the £10 from B outright. No rearranging of how the circulating values are shared out can add to their sum — no more than the country's stock of gold and silver grows because someone sells an old farthing from Queen Anne's day for a guinea. The capitalist class of a country, taken as a whole, cannot cheat itself.
Turn it and twist it however you like, the upshot is the same. Trade equals for equals, and no surplus-value appears; trade unequal for unequal, and still no surplus-value appears. Circulation — the exchange of goods — creates no value.
You can see, then, why in working out the basic form of capital — the form in which it shapes the economic life of modern society — we have for now set entirely to one side its popular and, so to speak, antediluvian shapes: merchant capital and usurer capital.
In merchant capital proper, the pattern M-C-M′ — buying in order to sell dearer — shows up at its purest. And its whole movement takes place inside circulation. But since the turning of money into capital, the forming of surplus-value, cannot be explained out of circulation itself, merchant capital looks impossible the moment equivalents are exchanged — and so seems to come only from the merchant cheating both sides at once, the buying producer and the selling producer, by wedging himself between them like a parasite. It is in this sense that Franklin says: "war is plunder, commerce is cheating." If the growth of merchant capital is to be explained by something more than the mere swindling of producers, a long chain of connecting links is needed — and here, where the simple circulation of goods is all we have to build on, that chain is still entirely missing.
What holds for merchant capital holds all the more for usurer capital. In merchant capital the two ends — the money thrown onto the market and the larger money drawn back out — are at least joined by a purchase and a sale, by the movement of circulation. In usurer capital the pattern M-C-M′ is cut down to its bare ends, M-M′: money exchanged for more money, a form that goes against the very nature of money and so cannot be explained from the standpoint of exchange. Hence Aristotle:
"The art of getting wealth is of two kinds: one belongs to trade, the other to household management. The second is necessary and worthy of praise; the first is built on circulation, and is rightly blamed, for it rests not on nature but on cheating one another. And so the usurer is hated with the fullest right, because with him money itself becomes the source of gain, and is not used for the purpose it was invented for. Money came into being for the exchange of goods — but interest makes more money out of money. That is the very meaning of its name" (in Greek, tokos means both interest and offspring): "for the offspring resemble those who beget them, and interest is money born of money. So of all the ways of getting a living, this one is the most against nature."
Both merchant capital and interest-bearing capital we shall meet, further on in the inquiry, as derived forms — and we shall see at the same time why they show up in history before capital's modern, basic form does.
We have seen that surplus-value cannot come out of circulation — so that when it is formed, something must be going on behind circulation's back, something you cannot see in the exchange itself. But can surplus-value come from anywhere other than circulation? Circulation is the sum of all the dealings that owners of goods have with one another. Step outside it, and an owner stands in relation only to his own good. As far as its value goes, that relation comes down to just this: the good holds a certain quantity of his own labour, measured by a definite social standard. That quantity of labour shows up as the size of his good's value, and — since value is reckoned in money of account — as a price, say £10.
But his labour does not show up both in the value of the good and in a surplus on top of that value: not in a price of 10 that is somehow also a price of 11, not in a value bigger than itself. By his labour the owner can make values, but not values that expand themselves. He can raise a good's value by adding fresh labour, and so fresh value, to the value already there — turning leather, say, into boots. The same material now has more value, because more labour sits in it. The boots are worth more than the leather was. But the value of the leather has stayed exactly what it was: it did not expand itself, did not put on any surplus-value while the boots were being made. And so it is impossible for a producer, outside the sphere of circulation, without ever coming into contact with other owners of goods, to make value expand — impossible for him to turn money or goods into capital that way.
So capital cannot arise out of circulation — and it cannot arise apart from circulation either. It must arise at one and the same time both within circulation and not within it.
A double result, then, has come out of this.
The turning of money into capital has to be worked out on the ground of the laws built into the exchange of goods, so that the exchange of equals stays our starting point. Our money-owner — for now no more than a capitalist in the caterpillar stage — must buy his goods at their value and sell them at their value, and still, at the end of it all, draw out more value than he put in. His unfolding into a butterfly has to happen inside the sphere of circulation, and it has to happen not inside it. These are the terms of the problem. Hic Rhodus, hic salta! [Here is Rhodes, jump here!]
The change in value of the money that is to become capital cannot take place in the money itself. As a means of buying and of paying, money only cashes out the price of the good it buys or settles; staying in its own shape, it just sets hard, a lump of value that never varies. Nor can the change come from the second act, the reselling of the good — that act only turns the good back out of its bodily shape into money again. So the change has to happen with the good bought in the first act, money-for-commodity — yet not with that good's value, since equivalents change hands and the good is paid for at its full worth. That leaves only one place for the change to come from: the good's use-value itself, its being used up. To draw value out of using up a good, our money-owner would have to be lucky enough to find, right there in the market, a good whose use-value had the peculiar quality of being a source of value — a good whose actual use would itself lay down labour, and so create value. And in the market he does find one such special good: the capacity for labour, or labour-power.
By labour-power, or capacity for labour, we mean the whole of those bodily and mental capabilities that live in a person — in his living body, his living self — and that he sets in motion whenever he produces useful things of any kind.
But for the money-owner to find labour-power on the market as a commodity, several conditions have to be met. Exchange, taken by itself, brings with it no bonds of dependence beyond those that follow from its own nature. On that footing, labour-power can show up on the market as a commodity only if — and only because — the person whose labour-power it is offers it, or sells it, as a commodity himself. And to sell it as a commodity, he must be able to dispose of it: he must be the free owner of his own capacity to work, of his own person. He and the money-owner meet on the market and deal with each other as owners of goods on an equal footing, set apart only in that one is the buyer and the other the seller — both, in the eyes of the law, equal persons.
For this relation to last, the owner of labour-power must always sell it only for a set stretch of time. For if he were to sell it wholesale, once and for all, he would be selling himself — turning from a free man into a slave, from an owner of a commodity into a commodity. He has to keep standing toward his labour-power as his own property, his own good; and he can do that only by handing it over to the buyer for use temporarily, for a fixed term, so that in parting with its use he never signs away his ownership of it.
The second condition that must hold, for the money-owner to find labour-power on the market as a commodity, is this: its owner, rather than being able to sell goods with his labour already worked up into them, must instead put up for sale his labour-power itself — which exists nowhere but in his own living body.
To sell goods of any other kind than his labour-power, a person must of course own means of production — raw materials, tools, and the like. You cannot make boots without leather. And he needs means of subsistence, the things a person lives on, as well. Nobody — not even "a musician of the future" — can feed himself on the products of the future, on useful things not yet finished; and just as on the first day he stepped onto the world's stage, a human being still has to consume every day, both before and while he produces. Where products are made as commodities, they have to be sold once they are made, and can meet the producer's own needs only after the sale. On top of the time it takes to produce them comes the time it takes to sell them.
For money to turn into capital, then, the money-owner has to find on the market a free worker — free in a double sense. Free, on the one hand, in that as a free person he has his labour-power at his own disposal, as his own commodity; and free, on the other hand, in that he has nothing else to sell, is rid and clear of every last thing he would need to put his labour-power to work.
Why this free worker turns up facing him in the sphere of circulation is a question that does not interest the money-owner, who takes the labour-market simply as one department of the wider market for goods. And for now it interests us just as little; we hold onto the bare fact, in theory, the way he holds onto it in practice. One thing, though, is clear. Nature does not turn out money-owners and owners of goods on the one side and, on the other, people who own nothing but their own labour-power. This relation is nothing that nature produces, and it is not some social arrangement common to every period of history either. It is plainly itself the outcome of an earlier historical development — the product of many economic upheavals, of the collapse of a whole run of older forms of social production.
The economic categories we looked at earlier carry their own trace of history too. Folded into the very fact that a product is a commodity are definite historical conditions. For a product to become a commodity, it must not be made as the producer's own immediate means of subsistence. Had we pressed on and asked under what conditions all products, or even most of them, take the form of commodities, we would have found that this happens only on the basis of one quite particular way of producing — the capitalist one. But that inquiry lay well outside the analysis of the commodity. Goods can be produced and can circulate even where the great bulk of what is produced is aimed straight at the producers' own needs and never turns into a commodity at all — so that social production is still far from being ruled through and through by exchange-value. For a product to appear as a commodity, the division of labour in society has to be developed far enough that the split between use-value and exchange-value, which first opens up in direct barter, is already complete. Yet that stage of development is shared by economic forms of society that in every other respect look utterly different across history.
Or take money: its very existence assumes that the exchange of goods has reached a certain level. The different roles money plays — as a plain stand-in for goods, as the means of circulation or the means of payment, as hoard and as world-money — point, depending on how far each role has spread and which one dominates, to widely different stages of social production. And yet experience shows that a fairly slight development of trade already suffices to bring all these forms into being. With capital it is otherwise. The historical conditions for capital to exist are not given at all just because money and goods are in circulation. Capital comes into being only where the owner of the means of production and subsistence finds, on the market, the free worker offering his labour-power for sale — and this one historical condition holds a whole world-history inside it. So capital, from its very first appearance, marks the opening of an epoch in social production.
This peculiar commodity, labour-power, now has to be looked at more closely. Like every other commodity, it has a value. How is that value fixed?
The value of labour-power, like that of any other commodity, is fixed by the labour-time needed to produce — and so also to reproduce — this particular article. As value, labour-power stands for nothing more than a definite amount of society's average labour worked up into it. Labour-power exists only as a capacity of the living individual, so producing it presupposes that the individual is there. Given that he is, producing his labour-power means keeping him alive and in working order — reproducing him. And to keep himself going, the living individual needs a certain amount of the means of subsistence. So the labour-time needed to produce labour-power comes down to the labour-time needed to produce those means of subsistence; in other words, the value of labour-power is the value of the means of subsistence needed to keep its owner going.
But labour-power becomes real only when it is exercised, only in the working. And in working, a definite amount of human muscle, nerve, and brain gets used up, and has to be restored — more spent, so more must come in. If the owner of labour-power has worked today, he must be able to go through the same process again tomorrow, in the same state of strength and health. His means of subsistence must therefore be enough to keep him, as a working person, in his normal condition of life.
What counts as a natural need — food, clothing, heating, housing — already varies with the climate and other natural features of a country. And beyond that, the range of so-called necessary needs, and the way they are met, is itself a historical product, and so depends heavily on the level of culture a country has reached — and, not least, on the conditions under which the class of free workers took shape, and the habits and standards of life it brought with it. So, unlike other commodities, fixing the value of labour-power carries within it a historical and moral element. For a particular country, in a particular period, though, the average range of the necessary means of subsistence is a given.
The owner of labour-power is mortal. If he is to keep appearing on the market — as the steady turning of money into capital requires — then the seller of labour-power must carry himself on, "the way every living being carries itself on, by breeding." The labour-power that wear and death take off the market must, at the very least, be steadily replaced by an equal amount of fresh labour-power. So the means of subsistence needed to produce labour-power take in the means of subsistence of the replacements too — the workers' children — so that this peculiar race of commodity-owners keeps itself going on the market.
To reshape ordinary human nature so that it gains skill and deftness in a particular line of work — so that it becomes developed, specialized labour-power — takes a certain schooling or training, and that in turn costs a larger or smaller sum in goods. The more roundabout the training a kind of labour-power needs, the more its schooling costs. For ordinary labour-power these learning-costs are vanishingly small; but small or not, they enter into the sum of values laid out to produce it.
The value of labour-power comes down to the value of a definite bundle of means of subsistence. So it also shifts with the value of those means — that is, with the amount of labour-time their production takes.
Some means of subsistence — food, fuel, and the like — are used up fresh each day and must be replaced each day. Others, such as clothes and furniture, wear out over longer stretches and so need replacing only over longer stretches. Goods of one sort must be bought or paid for daily, others weekly, others every quarter, and so on. But however these outlays happen to fall across, say, a year, they have to be covered by the average income, day in and day out.
Suppose the mass of goods needed each day to produce labour-power is A, the mass needed each week B, the mass needed each quarter C, and so on. Then the daily average of these goods is (365A + 52B + 4C + …) ÷ 365. Now suppose that in this mass of goods needed for the average day there sit 6 hours of social labour. Then half a day of society's average labour is laid down in labour-power each day — that is, half a working day is what it takes to produce labour-power daily. This amount of labour, needed for its daily production, makes up the day's value of labour-power, the value of the labour-power reproduced each day. And if half a day of average social labour is also embodied in a piece of gold worth three shillings — one taler — then a taler is the price that answers to the day's value of labour-power. If the owner of labour-power offers it for sale at a taler a day, its selling price equals its value; and, on our assumption, the money-owner, set on turning his taler into capital, pays that value.
The lowest limit, the floor, of the value of labour-power is set by the value of a bundle of goods without whose daily supply the bearer of labour-power — the human being — cannot renew his life from day to day: the value, that is, of the physically indispensable means of subsistence. If the price of labour-power sinks to this floor, it sinks below its value, for at that level labour-power can keep itself up and develop only in a stunted form. And the value of any commodity is set by the labour-time it takes to turn it out at normal quality.
It is a very cheap kind of sentimentality to call this way of fixing the value of labour-power — a way that follows from the very nature of the thing — brutal, and to wail, with Rossi:
"To take hold of the capacity for labour while leaving out the workers' means of subsistence during production is to take hold of a figment of the mind. Say labour, say capacity for labour, and you say in the same breath the labourer and his means of subsistence — the labourer and his wage."
To say capacity for labour is not to say labour — no more than saying capacity for digestion is to say digesting; that second process, as we all know, takes more than a good stomach. To say capacity for labour is not to leave out the means of subsistence it needs to keep going: their value is, in fact, expressed in its value. If the capacity goes unsold, it does the worker no good — indeed he feels it as a harsh law of nature that his capacity to work cost a definite bundle of subsistence to produce, and keeps demanding one over again to reproduce. He then finds out, with Sismondi: "capacity for labour is nothing unless it is sold."
There is something peculiar about labour-power as a commodity: when buyer and seller close their contract, its use-value has not yet really passed into the buyer's hands. Its value, like any commodity's, was settled before it entered circulation, since a definite amount of social labour went into producing it — but its use-value lies only in the later exercise of the power. So the parting-with of the power and its actual exercise, its life as a use-value, come apart in time. And with commodities like that — where the formal handing-over by sale and the actual delivery to the buyer fall at different times — the buyer's money usually works as a means of payment.
In every country where capitalist production rules, labour-power is paid only after it has already worked for the term set in the contract — at the end of each week, for instance. So everywhere the worker advances the capitalist the use-value of his labour-power: he lets the buyer consume it before he is paid its price; everywhere, that is, the worker gives the capitalist credit. That this credit is no empty notion is shown not just by the wages sometimes lost when a capitalist goes bankrupt, but by a whole run of more lasting effects. Still, whether money serves as a means of buying or as a means of payment changes nothing in the nature of the exchange itself. The price of labour-power is set by contract, even though it is only realized later, like the rent on a house; the labour-power is sold, even though it is paid for only afterward. But to keep our view of the relation clean, it is useful to assume, for the time being, that the owner of labour-power receives the agreed price at once, every time he sells.
We now know how the value paid to the owner of this peculiar commodity, labour-power, gets fixed. The use-value the money-owner gets in return shows itself only in the actual using-up, in the consuming of the labour-power. Everything needed for that — raw material and the rest — the money-owner buys on the market and pays for at full price. The consuming of labour-power is at one and the same time the producing of commodities and of surplus-value. And the consuming of labour-power, like that of any commodity, is carried out away from the market, outside the sphere of circulation. So let us leave this noisy sphere, where everything sits on the surface and in plain view of all, and follow the money-owner and the owner of labour-power both into the hidden place of production, on whose threshold is written: No admittance except on business. Here it will come out not only how capital produces, but how capital itself gets produced. The secret of how the extra is made must finally give itself up.
The sphere of circulation, of commodity exchange — the sphere within whose bounds the buying and selling of labour-power goes on — was in truth a very Eden of the inborn rights of man. What rules here, and here alone, is Freedom, Equality, Property, and Bentham. Freedom! For the buyer and the seller of a commodity, say of labour-power, are governed only by their own free will. They enter their contract as free persons, equal before the law; the contract is the end-result in which their two wills give themselves one common legal expression. Equality! For they stand to each other only as owners of goods, and they trade equal for equal. Property! For each disposes only of what is his own. Bentham! For each of the two looks only to himself. The one power that draws them together and sets them in relation is the power of their self-interest, their private advantage, their own gain. And just because each looks only to himself and none to any other, all of them — thanks to a pre-established harmony of things, or under the guidance of an all-cunning providence — bring about only their mutual advantage, the common good, the interest of all.
As we leave this sphere of simple circulation, of commodity exchange — the sphere from which the vulgar free-trader borrows his views, his notions, and the yardstick by which he judges a society of capital and wage-labour — the faces of our cast already seem to change a little. The one who was the money-owner now strides ahead as the capitalist; the owner of labour-power trails after as his worker — the one smirking with self-importance, keen to get down to business, the other shy and hanging back, like a man who has carried his own hide to market and now has nothing left to expect but — a tanning.
The circulation of commodities is where capital starts. Commodity production, and commodity circulation grown into full-blown trade, are the historical conditions capital arises out of. World trade and the world market, opening up in the 16th century, begin capital's modern life-story.
Set aside the material side of commodity circulation — the swapping of one useful thing for another — and look only at the economic forms the process throws up: its final product is money. And this final product of commodity circulation is the first form in which capital appears.
Historically, capital everywhere first shows up facing landed property in the shape of money — as moneyed wealth, as the merchant's capital and the usurer's capital. But we don't have to go back to capital's origins to see that money is the first form it appears in; the same story plays out daily in front of us. Every new capital comes onto the stage — the market, whether the market for goods, for labour, or for money — to begin with, still as money: money that is meant to turn itself into capital through certain definite processes.
Money as money and money as capital differ, to begin with, in one thing only: the form of their circulation.
The immediate form of commodity circulation is C—M—C: a commodity turned into money and the money turned back into a commodity — selling in order to buy. But alongside it we find a second, distinctly different form, M—C—M: money turned into a commodity and the commodity turned back into money — buying in order to sell. Money that traces out this second circuit in its movement turns into capital, becomes capital, and is already, by what it is set up to do, capital.
Let's look at the circuit M—C—M more closely. Like simple commodity circulation, it runs through two opposite phases. In the first, M—C, the purchase, money is turned into a commodity. In the second, C—M, the sale, the commodity is turned back into money. The two phases together make one single movement: money is exchanged for a commodity and the same commodity again for money — a commodity is bought in order to be sold, or, if we ignore the formal difference between buying and selling, a commodity is bought with money and money is bought with a commodity. The result, in which the whole process dies out, is an exchange of money for money, M—M. If I buy 2,000 lbs. of cotton for £100 and resell the 2,000 lbs. of cotton for £110, I have in the end exchanged £100 for £110, money for money.
Now plainly the circuit M—C—M would be silly and empty if the point of its detour were to exchange one money-value for the very same money-value — £100 for £100, say. The hoarder's method would be far simpler and safer: he holds on to his £100 instead of exposing it to the dangers of circulation. And yet, whether the merchant resells his £100-worth of cotton for £110, or has to let it go for £100 or even £50, his money has in every case gone through a peculiar and original movement, of a wholly different kind from what it goes through in simple commodity circulation — in the hands, say, of the peasant who sells his corn and with the money so freed buys clothes.
So the first job is to pin down the difference in form between the circuits M—C—M and C—M—C. That will also bring out the difference in content that lurks behind those differences in form.
First, let's see what the two forms have in common.
Both circuits break down into the same two opposite phases, C—M, a sale, and M—C, a purchase. In each phase the same two thing-like elements face each other, a commodity and money — and two people wearing the same economic masks, a buyer and a seller. Each circuit is the unity of the same opposite phases, and each time this unity comes about through three parties stepping in, of whom one only sells, another only buys, and the third buys and sells in turn.
What sets the two circuits C—M—C and M—C—M apart from the very start is the reversed order of the same opposite phases. Simple commodity circulation begins with a sale and ends with a purchase; the circulation of money as capital begins with a purchase and ends with a sale. In the one case the commodity, in the other the money, is the starting-point and the end-point of the movement. In the first form money brings the whole course about; in the other, the commodity does.
In the circuit C—M—C the money is in the end turned into a commodity that serves as a use-value; the money is spent for good. In the reversed form M—C—M it is the other way round: the buyer lays out money precisely so that, as a seller, he can take money back in. Buying the commodity, he throws money into circulation only to withdraw it again by selling that same commodity. He lets the money go with just one sly aim — to get hold of it again. So the money is not spent; it is only advanced.
In the form C—M—C the same piece of money changes place twice. The seller gets it from the buyer and pays it away to another seller. The whole process, which begins with taking in money for a commodity, closes with paying out money for a commodity. It is the reverse in the form M—C—M. Here it is not the same piece of money that changes place twice, but the same commodity. The buyer takes it from the seller's hand and passes it on into another buyer's hand. Just as in simple commodity circulation the double change of place of the same piece of money carries it for good from one hand to another, so here the double change of place of the same commodity brings the money flowing back to its first starting-point.
The money flowing back to its starting-point does not depend on the commodity being sold dearer than it was bought. That only affects how big the returning sum is. The reflux itself happens as soon as the bought commodity is sold again — as soon as the circuit M—C—M is fully run through. Here, then, is a difference you can actually put your finger on between money circulating as capital and money circulating as mere money.
The circuit C—M—C is fully finished as soon as the money brought in by selling one commodity is taken out again by buying another. If money still flows back to its starting-point after that, it can only be through renewing or repeating the whole course. If I sell a quarter of corn for £3 and with that £3 buy clothes, the £3 are spent for good, as far as I'm concerned. They are no longer any business of mine; they belong to the clothes-dealer. If I now sell a second quarter of corn, money does flow back to me — but not as a result of the first transaction, only of its repetition. And it leaves me again the moment I round off this second transaction and buy anew.
So in the circuit C—M—C the spending of the money has nothing to do with its flowing back. In M—C—M it is the reverse: the money's flowing back is set up by the very way it is spent. Without that reflux the operation has miscarried, or the process is broken off and not yet finished, because its second phase is missing — the sale that completes and closes the purchase.
The circuit C—M—C sets out from one commodity at one end and closes with a different commodity at the other — a commodity that drops out of circulation and into consumption. Consumption, the meeting of needs, in a word use-value, is what it is finally for. The circuit M—C—M, by contrast, sets out from money at one end and comes back in the end to that same end, money. So what drives it and sets its purpose is exchange-value itself.
In simple commodity circulation the two ends have the same economic form: both are commodities. They are even commodities of the same value. But they are qualitatively different use-values — corn at one end, clothes at the other. What fills the movement here is the exchange of products, the switching of the different materials in which society's labour is embodied.
It is different in the circuit M—C—M. At first glance it looks empty, because it seems to say the same thing twice. Both ends have the same economic form: both are money — so not qualitatively different use-values at all, since money is precisely the transformed shape of commodities, the shape in which their particular use-values have been wiped out. To swap £100 for cotton and then that same cotton back for £100 — money for money by a roundabout path, the same for the same — seems as pointless as it is absurd. One sum of money can differ from another only in size. So the circuit M—C—M owes its content not to any qualitative difference between its ends, since both are money, but only to their difference in amount.
In the end more money is drawn out of circulation than was thrown in at the start. The cotton bought for £100 is resold, say, for £100 + £10, or £110. The complete form of this process is therefore M—C—M′, where M′ = M + ∆ M, that is, the sum of money originally advanced plus an increment. This increment, the excess over the original value, I call surplus-value. So the value first advanced not only keeps itself through circulation; inside circulation it alters its own magnitude, adds a surplus-value to itself, puts itself to work making more value. And it is this movement that turns it into capital.
It's true that in C—M—C too the two ends — corn and clothes, say — can be of unequal value. The peasant may sell his corn above its value, or buy the clothes below theirs; and he may in his turn be cheated by the clothes-dealer. But for this form of circulation such a difference in value is purely accidental. C—M—C doesn't lose all sense when its two ends are of equal value — corn and clothes worth exactly the same — the way the process M—C—M does. On the contrary, their being of equal value is here the condition of the thing running normally.
Selling in order to buy, repeated over and over, takes its measure and its goal — as the process itself does — from an end lying outside it: consumption, the meeting of definite needs. But in buying in order to sell, the beginning and the end are the same thing, money, exchange-value; and that alone makes the movement endless. True, £100 has become £100 + £10. But looked at just qualitatively, £110 is the same as £100 — money. And looked at quantitatively, £110 is a limited sum of value, just as £100 is. If the £110 were spent as money, they would drop out of their role; they would stop being capital. Withdrawn from circulation, they petrify into a hoard, and not a farthing would accrue to them though they lay there till doomsday.
So once it is a matter of value expanding itself, there is exactly the same call to make the £110 grow as to make the £100 grow — both are limited expressions of exchange-value, both therefore have the same vocation, to come as near as they can to wealth pure and simple by growing in size. For a moment, the value first advanced, the £100, does stand apart from the surplus-value of £10 that accrues to it in circulation — but that distinction melts away again at once. At the end of the process you don't get the original £100 on one side and the surplus-value of £10 on the other. What comes out is a single value of £110, in exactly the same fit condition to begin the expanding process afresh as the original £100 was. Money ends the movement only to begin it again.
And so the end of each single circuit, in which buying-for-selling is carried through, is of itself the start of a new one. Simple commodity circulation — selling in order to buy — serves an end that lies outside circulation, the getting of use-values, the meeting of needs. The circulation of money as capital, by contrast, is its own end and purpose, for value expands itself only within this constantly renewed movement. The movement of capital therefore has no measure and no limit.
As the conscious bearer of this movement, the owner of money becomes a capitalist. His person, or rather his pocket, is the point the money starts from and the point it returns to. What that circulation is objectively about — value expanding itself — is his own subjective aim; and only in so far as the growing appropriation of wealth in the abstract is the one motive driving his dealings does he function as a capitalist, as capital personified, endowed with a will and a consciousness. So use-value must never be treated as the capitalist's immediate aim — nor even the single gain on one deal, but only the restless movement of gaining.
This absolute drive to grow richer, this passionate hunt for value, the capitalist shares with the hoarder; but where the hoarder is merely the capitalist gone mad, the capitalist is the rational hoarder. The ceaseless swelling of value that the hoarder chases after by trying to rescue his money from circulation, the shrewder capitalist reaches by throwing his money into circulation again and again.
In simple circulation, value takes on independent forms — the money-forms — but these only serve to carry the exchange along. They vanish in the end-result of the movement. In the circuit M—C—M it is otherwise: there both commodity and money function only as different modes of existence of value itself — money its general mode, the commodity its particular, its disguised mode, so to speak. Value passes over and over from the one form into the other without losing itself in the change, and so turns into an automatic subject.
Fix your eye on the particular forms of appearance that this self-expanding value takes on in turn as it goes round its life-cycle, and you get these statements: capital is money; capital is commodities. But in truth what is happening here is that value becomes the subject of a process. Endlessly changing between the forms of money and commodity, it alters its own magnitude: it throws off surplus-value from itself as original value, and so expands itself. For the movement in which it adds surplus-value is its own movement; its expanding is therefore self-expanding, its own doing. It has taken on the occult power to make value simply because it is value. It breeds living young, or at the very least lays golden eggs.
Value is the overarching subject of this process — it takes on the money-form and the commodity-form and sheds them by turns, yet keeps and stretches itself through the change. So it needs, above all, an independent form of its own — one in which it can be pinned down as staying the same as itself. And this form it has only in money. Money, then, is the starting-point and the closing-point of every process of self-expansion. It was £100, it is now £110, and so on. But money here counts only as one form of value, for value has two of them. Without taking on the commodity-form, money does not become capital. So money here does not turn on the commodity as an enemy, the way it does in hoarding. The capitalist knows that all commodities, however shabby they look or however foul they smell, are in faith and in truth money — inwardly circumcised Jews — and on top of that a miraculous means for making more money out of money.
In simple circulation the value of commodities took on, at most, the independent form of money over against its use-value. Here it suddenly presents itself as a substance in process, moving itself, for which commodity and money are both just forms. But there is more. Instead of standing for relations between commodities, it now enters, so to speak, into a private relation with itself. It sets itself apart, as original value, from itself as surplus-value — as God the Father sets himself apart from himself as God the Son — and the two are of the same age and really make up only one person; for only through the surplus-value of £10 do the £100 advanced become capital, and once they have, once the Son is begotten and, through the Son, the Father, their difference vanishes again and both are one, £110.
So value becomes value in process, money in process, and, as such, capital. It comes out of circulation, goes back into it, keeps and multiplies itself within it, returns from it enlarged, and starts the same round over and over again. M—M′, money that breeds money — money which begets money — is how capital was described in the mouths of its first interpreters, the Mercantilists.
Buying in order to sell — or, more fully, buying in order to sell dearer, M—C—M′ — seems at first to be a form peculiar to just one kind of capital, the merchant's. But industrial capital too is money that turns into a commodity and, by selling that commodity, turns back into more money. Whatever acts go on between the buying and the selling, outside the sphere of circulation, change nothing about this form of the movement. And in interest-bearing capital, finally, the circuit M—C—M′ shows up shortened — its result without the step in between, in a kind of shorthand, as M—M′: money that is worth more money, value greater than itself.
So M—C—M′ really is the general formula of capital — as capital first appears, immediately, within the sphere of circulation.
The way money turns itself into capital goes against everything we have worked out so far — about what a commodity is, what value is, what money is, and how circulation itself works. The one thing that sets this new form apart from ordinary buying and selling is that the same two opposite acts come in reversed order: here you buy first and sell after, instead of selling first and buying after. But how could a difference that is purely one of order work a magic change on the very nature of these acts?
And there is more. This reversal is there for only one of the three trading partners. As a capitalist, I buy a good from A and sell it on to B; but if I were an ordinary owner of goods, I would sell a good to B and then buy one from A. For A and B, the difference does not exist at all. Each of them simply shows up as a buyer or a seller. And to each of them I too am nothing but an owner of money or of goods, a buyer or a seller — to A only a buyer, to B only a seller, to the one just money, to the other just a commodity. To neither of them am I capital, or a capitalist, or the stand-in for anything more than money or a commodity, or anything that could do more than money or a commodity can do.
For me, buying from A and selling to B make one connected series. But that connection is there for me alone. A could not care less about my deal with B, and B could not care less about my deal with A. If I tried to explain to them the special credit I earn by reversing the order, they would show me I have the order wrong in the first place: the whole thing did not begin with a purchase and end with a sale — it began with a sale and ended with a purchase. And they would be right. My first act, the buying, was a sale as far as A was concerned; my second act, the selling, was a purchase as far as B was concerned.
Not stopping there, A and B would call the whole roundabout series pointless — mere hocus-pocus. A will just sell his good straight to B, and B will buy it straight from A. And with that, the whole transaction shrinks back into a single one-sided act of ordinary buying and selling: from A's side just a sale, from B's side just a purchase. So reversing the order has not carried us one step outside ordinary buying and selling. We still have to find out whether, by its own nature, it lets the values that enter it grow — whether it allows any surplus-value to form at all.
Take buying and selling in the form where it looks like nothing but a straight swap of goods. That is what happens whenever two owners of goods buy from each other and, on the day of settling up, what each owes the other cancels out. Money here is only money of account — it is used to state the goods' values as prices, but no actual coin ever changes hands against the goods.
As far as usefulness goes, it is plain that both traders can come out ahead. Each hands over goods that are no use to him and gets goods he can actually use. And that need not be the only gain. A, who sells wine and buys corn, may be able to make more wine in a given stretch of working time than the corn-farmer B could, while B in that same time can grow more corn than the wine-grower A could. So A gets more corn, and B more wine, for the same exchange-value, than if each had had to make both wine and corn for himself without trading. In terms of usefulness, then, there is fair ground for the saying that "exchange is a transaction in which both sides gain." It is a different story with exchange-value.
Picture a man with plenty of wine and no corn dealing with a man who has plenty of corn and no wine. Between them, corn to the value of 50 changes hands for wine to the value of 50. This trade adds nothing to the exchange-value on either side; for each of them already held, before the trade, a value equal to the one he got for himself by means of it.
Nothing changes if money steps in between the goods as the means of circulation, so that the buying and the selling visibly come apart into two separate acts. A commodity's value is already set out in its price before it ever enters circulation — so the value is something circulation starts from, not something it produces.
Look at it in the abstract — setting aside anything that does not follow from the built-in laws of ordinary buying and selling — and nothing happens in an exchange except that one useful thing takes the place of another. It is a metamorphosis, a mere change in the commodity's form. The same value — the same quantity of social labour laid down in the thing — stays in the same owner's hands throughout: first as his own commodity, then as the money he turns it into, and finally as the commodity he turns that money back into. This change of form carries no change in the size of the value.
The only change the value itself goes through here is a change in its money-form. That value shows up first as the price of the good put up for sale, then as an actual sum of money — which was already named in the price — and finally as the price of an equal good in return. A change of form like this, taken on its own, alters the size of the value no more than breaking a five-pound note into sovereigns, half-sovereigns and shillings does.
So far as the circulation of a commodity brings about only a change in the form of its value, then — when the process runs cleanly — it is an exchange of equals. Even vulgar economics, little as it grasps what value is, takes this for granted: whenever it wants to look at the process in its pure state, it assumes that supply and demand match, which just means their pull on price drops out altogether. So while both traders can gain in usefulness, they cannot both gain in exchange-value. Here the rule is rather: "Where there is equality, there is no gain."
Goods can, of course, be sold at prices that stray from their values — but such straying shows up as a breach of the law of exchange, not the law itself. In its pure shape, exchange is a swap of equals, and so no way of growing richer in value. That is why, behind the attempts to make the circulation of goods look like a source of surplus-value, there usually lurks a quid pro quo — a mixing-up of use-value and exchange-value. Condillac, for instance:
"It is false that in trading goods we swap equal value for equal value. The opposite is true. Each of the two parties always gives a smaller value for a greater one. ... If we really did always trade equal values, no party could make a gain. Yet both gain, or ought to. Why? Because the value of things lies solely in what they mean to our needs. What is worth more to the one is worth less to the other, and the other way round. ... We are not supposed to be putting up for sale the things we need for our own use. ... We want to give away something useless to us in order to get something we need; we want to give less for more. ... It seemed natural to judge that in an exchange equal value is given for equal value, whenever each of the traded things was worth the same amount of money. ... But one more thing must enter the reckoning: the question is whether we are each trading away a surplus for something we need."
You can see how Condillac not only jumbles use-value and exchange-value together, but, in a truly childish way, saddles a society with fully developed commodity production with a picture that does not fit it — a picture in which each producer makes his own means of subsistence and throws into trade only what is left over beyond his own needs. And yet his argument keeps getting repeated by modern economists, above all when the point is to make the developed form of commodity exchange — trade — look like something that produces surplus-value.
"Trade," runs one such claim, "adds value to products, for the very same products are worth more in the consumer's hands than in the producer's, and it must therefore, strictly speaking, be counted as an act of production."
But you do not pay for goods twice — once for their use-value and again for their value. And if a good's use-value is worth more to the buyer than to the seller, its money-form is worth more to the seller than to the buyer — or why would he part with it? By the same token, you could just as well say the buyer, strictly speaking, performs an "act of production" when he turns, say, the merchant's stockings into money.
When goods, or goods and money, of equal exchange-value — equivalents — change hands, then plainly nobody pulls more value out of circulation than he put in. No surplus-value forms. And in its pure form, the circulation of goods does demand an exchange of equivalents. But in the real world things do not run so cleanly. So let us assume instead an exchange of non-equivalents — of things that are not equal in value.
On the market, in any case, one owner of goods faces another, and the only power these people hold over each other is the power of their goods. Goods differ in their physical kind, and that is what drives the exchange: it makes the owners depend on one another, since none of them is holding the thing he himself needs, while each is holding the thing the other needs. Apart from this difference in the kind of useful thing, goods differ in only one other way — the difference between a good in its natural shape and the shape it turns into, the difference between commodity and money. And so the owners themselves differ only as sellers, who own a commodity, and buyers, who own money.
Now suppose that, by some unexplained privilege, a seller is allowed to sell his good above its value — 110 when it is worth 100, a nominal markup of 10 per cent. He pockets a surplus-value of 10. But once he has sold, he turns into a buyer. Now a third owner of goods meets him as a seller, and enjoys the same privilege of selling 10 per cent too dear. Our man gained 10 as a seller only to lose 10 as a buyer. In the end it all comes to this: every owner of goods sells to every other at 10 per cent over value — which comes to exactly the same thing as selling at their true value. A general nominal markup like this works just as if values had been reckoned in silver instead of gold: the money-names, the prices, all swell up together, but the value-relations between the goods stay exactly where they were.
Suppose the opposite — that it is the buyer who has the privilege, buying goods below their value. Here we need not even remind ourselves that the buyer will become a seller in his turn. He was a seller before he became a buyer: he already lost his 10 per cent as a seller before he gains 10 per cent as a buyer. Once again everything stays just as it was. So the forming of surplus-value — and with it the turning of money into capital — cannot be explained by sellers selling above value, nor by buyers buying below it.
The problem gets no simpler if you smuggle in matters that do not belong to it — saying, for example, with Colonel Torrens:
"Effective demand consists in the power and the inclination (!) of consumers to give for goods — whether by direct or roundabout exchange — some larger portion of all the ingredients of capital than those goods cost to produce."
In circulation, producers and consumers meet only as sellers and buyers. To claim that the producer's surplus-value comes from consumers paying more than the goods are worth is just to dress up a plain statement: that the owner of goods, as a seller, has the privilege of selling too dear. The seller made the goods himself, or stands in for whoever did — but so did the buyer make the goods that his money stands for, or stands in for their maker. So it is really producer facing producer. The only thing setting them apart is that one is buying and the other selling. And it gets us nowhere to say that the same owner of goods, wearing the hat of producer, sells above value, and, wearing the hat of consumer, pays too much for it.
So those who hold, consistently, to the illusion that surplus-value springs from a nominal markup — from the seller's privilege of selling too dear — are driven to assume a class that only buys and never sells, that only consumes and never produces. From where we now stand, at the level of simple circulation, there is as yet no explaining how such a class could exist. But suppose we jump ahead and grant it. The money this class is forever spending must forever flow to it for nothing — without any exchange, handed over free, on whatever claims of right or force — from the owners of goods themselves. To sell goods to such a class above their value, then, is only to swindle back a part of money that was given away for nothing in the first place.
So it was that the towns of Asia Minor paid a yearly money-tribute to ancient Rome. With that money Rome bought goods from them, and bought them too dear. The people of Asia Minor cheated the Romans, wheedling back from their conquerors, through trade, a part of the tribute. Yet for all that, they stayed the cheated ones: their goods went on being paid for with their own money. This is no way to grow rich, and no way to make surplus-value.
So let us stay inside the bounds of ordinary exchange, where the sellers are also buyers and the buyers also sellers. Perhaps our difficulty comes from having taken the people only as stand-ins for economic roles, and not as individuals.
Owner A may be cunning enough to get the better of his fellows B or C, while they, try as they might, cannot pay him back in kind. A sells B wine worth £40 and gets corn worth £50 in return. A has turned his £40 into £50 — made more money out of less, and turned his goods into capital. Look closer, though. Before the trade there was £40 of wine in A's hands and £50 of corn in B's, £90 of value all told. After the trade there is still the same £90. The value in circulation has not grown by a single atom; only its distribution between A and B has changed. What shows up as a gain on the one side is exactly a loss on the other — a plus here that is a minus there. The very same shift would have happened if A had skipped the disguise of a trade and simply stolen the £10 from B outright. No rearranging of how the circulating values are shared out can add to their sum — no more than the country's stock of gold and silver grows because someone sells an old farthing from Queen Anne's day for a guinea. The capitalist class of a country, taken as a whole, cannot cheat itself.
Turn it and twist it however you like, the upshot is the same. Trade equals for equals, and no surplus-value appears; trade unequal for unequal, and still no surplus-value appears. Circulation — the exchange of goods — creates no value.
You can see, then, why in working out the basic form of capital — the form in which it shapes the economic life of modern society — we have for now set entirely to one side its popular and, so to speak, antediluvian shapes: merchant capital and usurer capital.
In merchant capital proper, the pattern M-C-M′ — buying in order to sell dearer — shows up at its purest. And its whole movement takes place inside circulation. But since the turning of money into capital, the forming of surplus-value, cannot be explained out of circulation itself, merchant capital looks impossible the moment equivalents are exchanged — and so seems to come only from the merchant cheating both sides at once, the buying producer and the selling producer, by wedging himself between them like a parasite. It is in this sense that Franklin says: "war is plunder, commerce is cheating." If the growth of merchant capital is to be explained by something more than the mere swindling of producers, a long chain of connecting links is needed — and here, where the simple circulation of goods is all we have to build on, that chain is still entirely missing.
What holds for merchant capital holds all the more for usurer capital. In merchant capital the two ends — the money thrown onto the market and the larger money drawn back out — are at least joined by a purchase and a sale, by the movement of circulation. In usurer capital the pattern M-C-M′ is cut down to its bare ends, M-M′: money exchanged for more money, a form that goes against the very nature of money and so cannot be explained from the standpoint of exchange. Hence Aristotle:
"The art of getting wealth is of two kinds: one belongs to trade, the other to household management. The second is necessary and worthy of praise; the first is built on circulation, and is rightly blamed, for it rests not on nature but on cheating one another. And so the usurer is hated with the fullest right, because with him money itself becomes the source of gain, and is not used for the purpose it was invented for. Money came into being for the exchange of goods — but interest makes more money out of money. That is the very meaning of its name" (in Greek, tokos means both interest and offspring): "for the offspring resemble those who beget them, and interest is money born of money. So of all the ways of getting a living, this one is the most against nature."
Both merchant capital and interest-bearing capital we shall meet, further on in the inquiry, as derived forms — and we shall see at the same time why they show up in history before capital's modern, basic form does.
We have seen that surplus-value cannot come out of circulation — so that when it is formed, something must be going on behind circulation's back, something you cannot see in the exchange itself. But can surplus-value come from anywhere other than circulation? Circulation is the sum of all the dealings that owners of goods have with one another. Step outside it, and an owner stands in relation only to his own good. As far as its value goes, that relation comes down to just this: the good holds a certain quantity of his own labour, measured by a definite social standard. That quantity of labour shows up as the size of his good's value, and — since value is reckoned in money of account — as a price, say £10.
But his labour does not show up both in the value of the good and in a surplus on top of that value: not in a price of 10 that is somehow also a price of 11, not in a value bigger than itself. By his labour the owner can make values, but not values that expand themselves. He can raise a good's value by adding fresh labour, and so fresh value, to the value already there — turning leather, say, into boots. The same material now has more value, because more labour sits in it. The boots are worth more than the leather was. But the value of the leather has stayed exactly what it was: it did not expand itself, did not put on any surplus-value while the boots were being made. And so it is impossible for a producer, outside the sphere of circulation, without ever coming into contact with other owners of goods, to make value expand — impossible for him to turn money or goods into capital that way.
So capital cannot arise out of circulation — and it cannot arise apart from circulation either. It must arise at one and the same time both within circulation and not within it.
A double result, then, has come out of this.
The turning of money into capital has to be worked out on the ground of the laws built into the exchange of goods, so that the exchange of equals stays our starting point. Our money-owner — for now no more than a capitalist in the caterpillar stage — must buy his goods at their value and sell them at their value, and still, at the end of it all, draw out more value than he put in. His unfolding into a butterfly has to happen inside the sphere of circulation, and it has to happen not inside it. These are the terms of the problem. Hic Rhodus, hic salta! [Here is Rhodes, jump here!]
The change in value of the money that is to become capital cannot take place in the money itself. As a means of buying and of paying, money only cashes out the price of the good it buys or settles; staying in its own shape, it just sets hard, a lump of value that never varies. Nor can the change come from the second act, the reselling of the good — that act only turns the good back out of its bodily shape into money again. So the change has to happen with the good bought in the first act, money-for-commodity — yet not with that good's value, since equivalents change hands and the good is paid for at its full worth. That leaves only one place for the change to come from: the good's use-value itself, its being used up. To draw value out of using up a good, our money-owner would have to be lucky enough to find, right there in the market, a good whose use-value had the peculiar quality of being a source of value — a good whose actual use would itself lay down labour, and so create value. And in the market he does find one such special good: the capacity for labour, or labour-power.
By labour-power, or capacity for labour, we mean the whole of those bodily and mental capabilities that live in a person — in his living body, his living self — and that he sets in motion whenever he produces useful things of any kind.
But for the money-owner to find labour-power on the market as a commodity, several conditions have to be met. Exchange, taken by itself, brings with it no bonds of dependence beyond those that follow from its own nature. On that footing, labour-power can show up on the market as a commodity only if — and only because — the person whose labour-power it is offers it, or sells it, as a commodity himself. And to sell it as a commodity, he must be able to dispose of it: he must be the free owner of his own capacity to work, of his own person. He and the money-owner meet on the market and deal with each other as owners of goods on an equal footing, set apart only in that one is the buyer and the other the seller — both, in the eyes of the law, equal persons.
For this relation to last, the owner of labour-power must always sell it only for a set stretch of time. For if he were to sell it wholesale, once and for all, he would be selling himself — turning from a free man into a slave, from an owner of a commodity into a commodity. He has to keep standing toward his labour-power as his own property, his own good; and he can do that only by handing it over to the buyer for use temporarily, for a fixed term, so that in parting with its use he never signs away his ownership of it.
The second condition that must hold, for the money-owner to find labour-power on the market as a commodity, is this: its owner, rather than being able to sell goods with his labour already worked up into them, must instead put up for sale his labour-power itself — which exists nowhere but in his own living body.
To sell goods of any other kind than his labour-power, a person must of course own means of production — raw materials, tools, and the like. You cannot make boots without leather. And he needs means of subsistence, the things a person lives on, as well. Nobody — not even "a musician of the future" — can feed himself on the products of the future, on useful things not yet finished; and just as on the first day he stepped onto the world's stage, a human being still has to consume every day, both before and while he produces. Where products are made as commodities, they have to be sold once they are made, and can meet the producer's own needs only after the sale. On top of the time it takes to produce them comes the time it takes to sell them.
For money to turn into capital, then, the money-owner has to find on the market a free worker — free in a double sense. Free, on the one hand, in that as a free person he has his labour-power at his own disposal, as his own commodity; and free, on the other hand, in that he has nothing else to sell, is rid and clear of every last thing he would need to put his labour-power to work.
Why this free worker turns up facing him in the sphere of circulation is a question that does not interest the money-owner, who takes the labour-market simply as one department of the wider market for goods. And for now it interests us just as little; we hold onto the bare fact, in theory, the way he holds onto it in practice. One thing, though, is clear. Nature does not turn out money-owners and owners of goods on the one side and, on the other, people who own nothing but their own labour-power. This relation is nothing that nature produces, and it is not some social arrangement common to every period of history either. It is plainly itself the outcome of an earlier historical development — the product of many economic upheavals, of the collapse of a whole run of older forms of social production.
The economic categories we looked at earlier carry their own trace of history too. Folded into the very fact that a product is a commodity are definite historical conditions. For a product to become a commodity, it must not be made as the producer's own immediate means of subsistence. Had we pressed on and asked under what conditions all products, or even most of them, take the form of commodities, we would have found that this happens only on the basis of one quite particular way of producing — the capitalist one. But that inquiry lay well outside the analysis of the commodity. Goods can be produced and can circulate even where the great bulk of what is produced is aimed straight at the producers' own needs and never turns into a commodity at all — so that social production is still far from being ruled through and through by exchange-value. For a product to appear as a commodity, the division of labour in society has to be developed far enough that the split between use-value and exchange-value, which first opens up in direct barter, is already complete. Yet that stage of development is shared by economic forms of society that in every other respect look utterly different across history.
Or take money: its very existence assumes that the exchange of goods has reached a certain level. The different roles money plays — as a plain stand-in for goods, as the means of circulation or the means of payment, as hoard and as world-money — point, depending on how far each role has spread and which one dominates, to widely different stages of social production. And yet experience shows that a fairly slight development of trade already suffices to bring all these forms into being. With capital it is otherwise. The historical conditions for capital to exist are not given at all just because money and goods are in circulation. Capital comes into being only where the owner of the means of production and subsistence finds, on the market, the free worker offering his labour-power for sale — and this one historical condition holds a whole world-history inside it. So capital, from its very first appearance, marks the opening of an epoch in social production.
This peculiar commodity, labour-power, now has to be looked at more closely. Like every other commodity, it has a value. How is that value fixed?
The value of labour-power, like that of any other commodity, is fixed by the labour-time needed to produce — and so also to reproduce — this particular article. As value, labour-power stands for nothing more than a definite amount of society's average labour worked up into it. Labour-power exists only as a capacity of the living individual, so producing it presupposes that the individual is there. Given that he is, producing his labour-power means keeping him alive and in working order — reproducing him. And to keep himself going, the living individual needs a certain amount of the means of subsistence. So the labour-time needed to produce labour-power comes down to the labour-time needed to produce those means of subsistence; in other words, the value of labour-power is the value of the means of subsistence needed to keep its owner going.
But labour-power becomes real only when it is exercised, only in the working. And in working, a definite amount of human muscle, nerve, and brain gets used up, and has to be restored — more spent, so more must come in. If the owner of labour-power has worked today, he must be able to go through the same process again tomorrow, in the same state of strength and health. His means of subsistence must therefore be enough to keep him, as a working person, in his normal condition of life.
What counts as a natural need — food, clothing, heating, housing — already varies with the climate and other natural features of a country. And beyond that, the range of so-called necessary needs, and the way they are met, is itself a historical product, and so depends heavily on the level of culture a country has reached — and, not least, on the conditions under which the class of free workers took shape, and the habits and standards of life it brought with it. So, unlike other commodities, fixing the value of labour-power carries within it a historical and moral element. For a particular country, in a particular period, though, the average range of the necessary means of subsistence is a given.
The owner of labour-power is mortal. If he is to keep appearing on the market — as the steady turning of money into capital requires — then the seller of labour-power must carry himself on, "the way every living being carries itself on, by breeding." The labour-power that wear and death take off the market must, at the very least, be steadily replaced by an equal amount of fresh labour-power. So the means of subsistence needed to produce labour-power take in the means of subsistence of the replacements too — the workers' children — so that this peculiar race of commodity-owners keeps itself going on the market.
To reshape ordinary human nature so that it gains skill and deftness in a particular line of work — so that it becomes developed, specialized labour-power — takes a certain schooling or training, and that in turn costs a larger or smaller sum in goods. The more roundabout the training a kind of labour-power needs, the more its schooling costs. For ordinary labour-power these learning-costs are vanishingly small; but small or not, they enter into the sum of values laid out to produce it.
The value of labour-power comes down to the value of a definite bundle of means of subsistence. So it also shifts with the value of those means — that is, with the amount of labour-time their production takes.
Some means of subsistence — food, fuel, and the like — are used up fresh each day and must be replaced each day. Others, such as clothes and furniture, wear out over longer stretches and so need replacing only over longer stretches. Goods of one sort must be bought or paid for daily, others weekly, others every quarter, and so on. But however these outlays happen to fall across, say, a year, they have to be covered by the average income, day in and day out.
Suppose the mass of goods needed each day to produce labour-power is A, the mass needed each week B, the mass needed each quarter C, and so on. Then the daily average of these goods is (365A + 52B + 4C + …) ÷ 365. Now suppose that in this mass of goods needed for the average day there sit 6 hours of social labour. Then half a day of society's average labour is laid down in labour-power each day — that is, half a working day is what it takes to produce labour-power daily. This amount of labour, needed for its daily production, makes up the day's value of labour-power, the value of the labour-power reproduced each day. And if half a day of average social labour is also embodied in a piece of gold worth three shillings — one taler — then a taler is the price that answers to the day's value of labour-power. If the owner of labour-power offers it for sale at a taler a day, its selling price equals its value; and, on our assumption, the money-owner, set on turning his taler into capital, pays that value.
The lowest limit, the floor, of the value of labour-power is set by the value of a bundle of goods without whose daily supply the bearer of labour-power — the human being — cannot renew his life from day to day: the value, that is, of the physically indispensable means of subsistence. If the price of labour-power sinks to this floor, it sinks below its value, for at that level labour-power can keep itself up and develop only in a stunted form. And the value of any commodity is set by the labour-time it takes to turn it out at normal quality.
It is a very cheap kind of sentimentality to call this way of fixing the value of labour-power — a way that follows from the very nature of the thing — brutal, and to wail, with Rossi:
"To take hold of the capacity for labour while leaving out the workers' means of subsistence during production is to take hold of a figment of the mind. Say labour, say capacity for labour, and you say in the same breath the labourer and his means of subsistence — the labourer and his wage."
To say capacity for labour is not to say labour — no more than saying capacity for digestion is to say digesting; that second process, as we all know, takes more than a good stomach. To say capacity for labour is not to leave out the means of subsistence it needs to keep going: their value is, in fact, expressed in its value. If the capacity goes unsold, it does the worker no good — indeed he feels it as a harsh law of nature that his capacity to work cost a definite bundle of subsistence to produce, and keeps demanding one over again to reproduce. He then finds out, with Sismondi: "capacity for labour is nothing unless it is sold."
There is something peculiar about labour-power as a commodity: when buyer and seller close their contract, its use-value has not yet really passed into the buyer's hands. Its value, like any commodity's, was settled before it entered circulation, since a definite amount of social labour went into producing it — but its use-value lies only in the later exercise of the power. So the parting-with of the power and its actual exercise, its life as a use-value, come apart in time. And with commodities like that — where the formal handing-over by sale and the actual delivery to the buyer fall at different times — the buyer's money usually works as a means of payment.
In every country where capitalist production rules, labour-power is paid only after it has already worked for the term set in the contract — at the end of each week, for instance. So everywhere the worker advances the capitalist the use-value of his labour-power: he lets the buyer consume it before he is paid its price; everywhere, that is, the worker gives the capitalist credit. That this credit is no empty notion is shown not just by the wages sometimes lost when a capitalist goes bankrupt, but by a whole run of more lasting effects. Still, whether money serves as a means of buying or as a means of payment changes nothing in the nature of the exchange itself. The price of labour-power is set by contract, even though it is only realized later, like the rent on a house; the labour-power is sold, even though it is paid for only afterward. But to keep our view of the relation clean, it is useful to assume, for the time being, that the owner of labour-power receives the agreed price at once, every time he sells.
We now know how the value paid to the owner of this peculiar commodity, labour-power, gets fixed. The use-value the money-owner gets in return shows itself only in the actual using-up, in the consuming of the labour-power. Everything needed for that — raw material and the rest — the money-owner buys on the market and pays for at full price. The consuming of labour-power is at one and the same time the producing of commodities and of surplus-value. And the consuming of labour-power, like that of any commodity, is carried out away from the market, outside the sphere of circulation. So let us leave this noisy sphere, where everything sits on the surface and in plain view of all, and follow the money-owner and the owner of labour-power both into the hidden place of production, on whose threshold is written: No admittance except on business. Here it will come out not only how capital produces, but how capital itself gets produced. The secret of how the extra is made must finally give itself up.
The sphere of circulation, of commodity exchange — the sphere within whose bounds the buying and selling of labour-power goes on — was in truth a very Eden of the inborn rights of man. What rules here, and here alone, is Freedom, Equality, Property, and Bentham. Freedom! For the buyer and the seller of a commodity, say of labour-power, are governed only by their own free will. They enter their contract as free persons, equal before the law; the contract is the end-result in which their two wills give themselves one common legal expression. Equality! For they stand to each other only as owners of goods, and they trade equal for equal. Property! For each disposes only of what is his own. Bentham! For each of the two looks only to himself. The one power that draws them together and sets them in relation is the power of their self-interest, their private advantage, their own gain. And just because each looks only to himself and none to any other, all of them — thanks to a pre-established harmony of things, or under the guidance of an all-cunning providence — bring about only their mutual advantage, the common good, the interest of all.
As we leave this sphere of simple circulation, of commodity exchange — the sphere from which the vulgar free-trader borrows his views, his notions, and the yardstick by which he judges a society of capital and wage-labour — the faces of our cast already seem to change a little. The one who was the money-owner now strides ahead as the capitalist; the owner of labour-power trails after as his worker — the one smirking with self-importance, keen to get down to business, the other shy and hanging back, like a man who has carried his own hide to market and now has nothing left to expect but — a tanning.