commodity it produces. Instead Labour-power creates entirely new value as part of that process. One portion of this new value is equal to the capital-value of the variable-capital advanced, i.e. the capital-value of the labour-power consumed in the production process, and the other portion is equal to the surplus value created by the labour-power in the production process. Because, the productive-capital is comprised of commodities, the capital-value is constantly changing, because, like all other commodities, the value of the commodities that comprise the productive-capital are themselves constantly changing as productivity changes.
Money-Capital and Commodity-Capital. Commodity-capital is the form that capital takes at the end of the production process. It necessarily contains, therefore, both the capital-value of the productive-capital, advanced in production, and the surplus-value created in that process.
The commodity-capital has a money equivalent, equal to the market value of the commodities produced. However, that money equivalent is not immediately money-capital, but only money. The commodities, when they are sold, are not sold as capital, but only as commodities. They exchange their value, for an equal amount of value in the money paid for them. It is only money-capital if it is used to reproduce the productive-capital consumed in the production process. If instead the money is used to buy commodities for the personal consumption of the capitalist, or others who share in the surplus value – for example money capitalists who lent money, or landlords who charge a rent for the use of land and buildings, or the state which levies taxes – or to finance speculation by any of the above, then it is only money.
capital. Capital, therefore, seeks to reduce such periods to a minimum.
These three physical forms of capital, and the capital-value they represent each has its own circuit, and the three circuits combined makes up the circuit of industrial capital. The circuit of productive-capital is P.. C' – M'. M – C ...P. The productive-capital comprising a certain quantity of labour-power, and of means of production (machines, materials etc) engages in the production process.
constant capital) and of the labour-power (variable capital) consumed in that process is reproduced from the value of the new commodity. This capital-value is not the same as the money paid for that capital, for the reasons set out above, i.e. the value of the capital consumed is constantly changing because it is comprised of commodities whose value is itself constantly changing, because changes in productivity mean that more or less labour-time is required for their production. If, for example, the value of cotton rises, then this new value applies as much to the cotton the textile producer has in their warehouse, or that is currently being spun and woven, and even that which is being sent to market as completed textiles, as it does to the cotton currently being shipped by cotton producers. It is this new value of cotton that will be transferred into the value of the textiles, whatever was previously paid for the cotton used in their production.
This capital-value has a money equivalent, that is then different from the actual money laid out for their purchase. As Marx describes it, money here is simply a means of calculation, it is money simply as unit of account. But, this money equivalent is also important, because it is the money equivalent of the capital-value that has to be reproduced so that the circuit of the productive-capital can be completed.
“In calculating the aggregate turnover of the advanced productive capital we therefore fix all its elements in the money-form, so that the return to that form concludes the turnover. We assume that value is always advanced in money, even in the continuous process of production, where this money-form of value is only that of money of account. Thus we can compute the average.” (Capital II, p 187)
So, the capital-value of the productive-capital consumed in the production process is then transferred to the value of the commodity-capital. If we ignore the surplus value produced in that process for now, we then have P..C. C here is the equivalent of the C which entered the production process as the commodities which comprise the Productive-Capital. In other words, if the original C comprised 100 units of labour-power, and 100 units of cotton, this second C has a value equal to the current cost of replacing that 100 units of labour-power, and 100 units of cotton.
However, in the production process, a surplus value has also been created by the labour-power. It is represented by a surplus product, c, which has a money equivalent m. It can be seen, therefore, why Marx says that the rate of profit must be calculated on this productive-capital.
“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
The consequence of a fall in the value of the means of production, thereby does not change the process of its reproduction, but does facilitate the expansion of capital. As the rate of profit, for Marx, is nothing but the real extent of the self-expansion of capital, it is this measure based upon the productive-capital that is crucial.