Capital II, Chapter 9 - Part 1

The Aggregate Turnover of Advanced Capital, Cycles of Turnover

The advanced capital of a business consists of fixed and circulating capital. Of the circulating capital, this consists of both constant, in the form of raw and auxiliary materials, and variable capital i.e. labour-power. Because the Technical Composition of Capital means that a certain quantity of labour-power is required to process a given quantity of material, the turnover time of the circulating capital will tend to be homogeneous, i.e. a certain amount is advanced as material, and at the same time, a certain amount is advanced as labour-power to process it. Both are transformed simultaneously in the production process, into the end product. It becomes commodity-capital, which becomes money-capital, which is used to replace the material and labour-power consumed.  In other words, in this circuit of productive-capital, the physical capital is continually reproduced in the same quantity, and at the same time, the capital-value is continually undergoing a process of change of form.

But, the fixed capital is not homogeneous. Not only does it last much longer than the circulating capital, but different types of fixed capital last much longer than others. It is not just a quantitative difference that exists, but a qualitative difference, because whilst the circulating capital is continuously reproduced with each circuit, the fixed capital is not. A portion of its value passes into the end product, and is reproduced in money form, but the fixed capital itself is only replaced at one time. In order to reduce everything down to merely a quantitative difference, so that an aggregate turnover time can be calculated, this qualitative difference has to be removed.

The circuit, P … P, the circuit of productive capital, is not the basis for this, because it is a circuit of like for like reproduction (including expansion). But, some of the fixed capital, at least, is not reproduced physically at the end of a year.

The circuit M – M, however, does enable things to be reduced to purely a quantitative level, because it does show the return of the capital-value, transferred to the end product, as wear and tear, in its money form. So, if £10,000 has been advanced to buy a machine, and it transfers 10% of its value, in wear and tear, to the end product, M – M would show 10,000 – 1,000, meaning that 10% of the advanced capital was turned over in a year. Or, put another way, the advanced capital completed 0.1 turnovers in a year.

By the same token, but in reverse, it is clear that the circulating capital completes several turnovers in a year, so that,

“... even if by far the greater part of the advanced productive capital consists of fixed capital whose period of reproduction, hence also of turnover, comprises a cycle of many years, the capital-value turned over during the year may, on account of the repeated turnovers of the circulating capital within the same year, be larger than the aggregate value of the advanced capital.” (p 187)

Its important to note here that what Marx is calculating is not the actual money laid out, but the capital-value in money form. He is using M – M, rather than P...P, only to be able to make that calculation. What is still at issue, what is actually being turned over is still physical capital, not money-capital.  Marx makes clear his difference with the TSSI, in this respect, in that his rate of profit is calculated on this productive-capital, not on the money-capital used to purchase it. So, he writes,

“The rate of profit must be calculated by measuring the mass of produced and realised surplus-value not only in relation to the consumed portion of capital reappearing in the commodities, but also to this part plus that portion of unconsumed but applied capital which continues to operate in production. However, the mass of profit cannot be equal to anything but the mass of profit or surplus-value, contained in the commodities themselves, and to be realised by their sale.”

Capital III, Chapter 13

In other words, its clear here that for Marx the rate of profit is calculated on the capital value of the productive-capital, “the consumed portion of capital reappearing in the commodities”, and not on the money-capital advanced to buy it.

 If, the machine suffers some form of depreciation, so that its value falls to £5,000, the fact that £10,000 in money had originally been laid out for it is irrelevant. What M – M is considering is the actual capital-value advanced, and returned. Now, the Capital advanced at the start of this circuit, is £5,000 – the new capital value of the machine. If it continues to lose 10% of its value in wear and tear, then it will transfer now, £500, rather than £1,000 to the end product. That will be realised in the sale of the end product, so that £500 will then flow back as money i.e. M – M, becomes £5,000 - £500. The advanced capital-value continues to turn over at the rate of 0.1% a year.

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