Capital Vol. 1, Ch. 4–6 — mind map

Economic Manuscripts: Capital Vol. I - Chapter Four — marxists.org

Capital Vol. I : Chapter Four (The General Formula for Capital)

Part Two: The Transformation of Money into Capital

Chs. 4 – 6

The riddle: every exchange is an exchange of equivalents — so where does the more come from? Ch.4 states the formula, Ch.5 shows it cannot be explained from circulation, Ch.6 finds the one commodity that solves it.

Ch. 4 — The General Formula for Capital

The circulation of commodities is the starting-point of capital. Historically, capital first confronts landed property in the form of money — merchant’s wealth, usurer’s wealth — and its modern history opens with world trade and the world market in the sixteenth century. Money is the first form of appearance of capital, and every new capital still enters the stage as money.

Two circuits, made of the same elements in reverse order.

C–M–C: selling in order to buy. The end is a use-value, consumed; the money is spent.

M–C–M: buying in order to sell. The end is money again; the money is advanced. But money exchanged for the same sum of money would be pointless — so the second circuit is only meaningful as M–C–M′, where M′ = M + ΔM.

This increment or excess over the original value I call “surplus-value”.

The value originally advanced, therefore, not only remains intact while in circulation, but increases its magnitude, adds to itself a surplus-value, or is valorized. And this movement converts it into capital.

In C–M–C the two extremes differ qualitatively (linen for a coat), and the circuit comes to rest in consumption. In M–C–M′ they can differ only quantitatively — and a quantitative difference has no natural stopping-point.

The circulation of money as capital is an end in itself, for the valorization of value takes place only within this constantly renewed movement. The movement of capital is therefore limitless.

The capitalist is the conscious bearer of this movement — capital personified and endowed with consciousness and a will. Use-values are never his aim, nor the profit on a single deal, but only the restless never-ending process of profit-making.

Value itself becomes the subject of the process. It passes from money into commodity and back again, changing its magnitude, throwing off surplus-value from itself, valorizing itself independently — it becomes an automatic subject. Value in process, money in process, and as such, capital.

M–C–M′ is in fact therefore the general formula for capital, in the form in which it appears directly in the sphere of circulation.

Ch. 5 — Contradictions in the General Formula

M–C–M′ contradicts every law of commodity exchange established so far. Take exchange at its purest: equivalent for equivalent. Both parties gain in use-value, but neither gains in value. Circulation, or the exchange of commodities, creates no value.

Now suppose non-equivalents are exchanged — sellers charging 10% over value. Then everyone is also a buyer, and loses as buyer what he gained as seller. The sum of values in circulation is unchanged by any redistribution of it.

What if one party simply cheats? A sells B wine worth £40 for corn worth £50. A has £10 more, B £10 less; the total is still £90. Fraud redistributes existing value; it cannot create any. Merchant’s capital and usurer’s capital, taken as pure forms, are equally incapable of explaining surplus-value.

Capital cannot therefore arise from circulation, and it is equally impossible for it to arise apart from circulation. It must have its origin both in circulation and not in circulation.

The conditions of the problem, stated exactly: the money-owner must buy commodities at their value, sell them at their value, and still draw more value out of circulation at the end than he threw in at the beginning. Both his transformation into a capitalist and its solution must be developed on the basis of the laws of exchange, and without violating them.

Hic Rhodus, hic salta!

Ch. 6 — The Sale and Purchase of Labour-Power

The change in value cannot happen in the money (it only realises prices), nor in the resale (equivalents again). It must happen in the use-value of the commodity bought — its consumption. So the money-owner must find on the market a commodity whose use-value possesses the peculiar property of being a source of value.

That commodity is labour-power: the aggregate of the mental and physical capabilities existing in the living personality of a human being, which he sets in motion whenever he produces a use-value.

For labour-power to be on sale as a commodity, its owner must be free in a double sense:

1. Free as a person, disposing of his labour-power as his own commodity — and selling it only for a limited time, for if he sold it once and for all he would be selling himself, a slave.

2. Free of any other commodity to sell — with no means of production of his own, and so no way to realise his labour-power except by selling it.

Nature does not produce money-owners on one side and owners of nothing but their labour-power on the other. This relation is the result of a past historical development.

Labour-power has a value like any other commodity: the labour-time needed to produce — here, to reproduce — it. That is the value of the means of subsistence necessary to maintain the worker in his normal state as a working individual.

But this is not a physiological minimum. In contrast with the case of other commodities, the determination of the value of labour-power contains a historical and moral element. It must also cover the worker’s replacements — his children — and the cost of his training.

And it is paid after the work is done: everywhere the worker advances the use-value of his labour-power to the capitalist, giving credit before being paid.

The sphere of circulation, where labour-power is bought and sold, is a very Eden of the innate rights of man … Freedom, Equality, Property and Bentham. Both parties contract as free persons, exchange equivalent for equivalent, dispose only of what is their own, and look only to their own advantage.

So we leave this noisy sphere on the surface, where everything happens in full view, and follow the two of them into the hidden abode of production, on whose threshold there hangs the notice “No admittance except on business”.

And their faces change. The money-owner strides ahead as capitalist; the owner of labour-power follows as his worker — like someone who has brought his own hide to market and now has nothing else to expect but — a tanning.

What the value of labour-power covers

• the worker’s own means of subsistence
• averaged over a year: some items daily, some weekly, some yearly
• the reproduction of the class — his replacements
• the cost of education and training for the trade
• a historical and moral element, set by struggle and custom

Below this level labour-power is reproduced only in a crippled state — the ultimate limit of its value.

The problem, stated exactly

Surplus-value must be explained on the assumption that:

• commodities are bought at their value
• commodities are sold at their value
• the capitalist nevertheless ends with more

…and the origin must lie both in circulation (where else are commodities bought?) and outside it (where circulation creates no value).

That is the riddle Ch.6 has to answer.

The two circuits

C – M – C sell → buy · ends in a use-value · money spent · finite, satisfied by consumption · extremes differ in kind

M – C – M′ buy → sell · ends in money · money advanced · limitless, restarts itself · extremes differ only in amount

M′ – M = ΔM = surplus-value

The simplest form of capital, before we know where ΔM comes from.

The same elements, reversed — but the reversal changes everything. In C–M–C money is a means; in M–C–M′ it is the end, and use-value drops to a mere moment of the circuit. This is the formal definition of capital before we know anything about production.

The drive is structural, not a character flaw. Marx: the boundless urge for enrichment is common to capitalist and miser — the miser is merely a capitalist gone mad, the capitalist a rational miser. The miser hoards money out of circulation; the capitalist keeps throwing it back in.

The hinge of Part Two. Cheating, buying cheap and selling dear, usury — all only redistribute value already in existence. If surplus-value is real and general, it must be produced, not swindled. The answer has to respect the law of value, not suspend it.

Labour vs. labour-power — the distinction the classical economists lacked and Marx regards as his own contribution. The worker cannot sell labour: it does not exist until it is being performed, and by then it belongs to the buyer. What is sold is the capacity. Its use-value (Ch.7) is that using it creates value.

The double freedom is a historical result, not a natural fact. How people came to be separated from their means of production is deferred to Part Eight on so-called primitive accumulation. For now Marx simply takes the fact as given — the way the capitalist finds it on the market.

The historical and moral element matters. What counts as necessary subsistence is set by the history and habits of a country and its class of free workers — so the wage is a site of struggle, not a biological datum. And note: the transaction is fair. Labour-power is bought at its value.

The ideological payoff. Liberal freedom and equality are not lies — they are true of circulation and false of what happens next. The vulgar economist stays on the surface, where the free contract is all there is to see. Capital goes through the door marked No Admittance.