My synopses and notes on Capital Vol 1 Part II: The Transformation of Money into Capital - Karl Marx

<*- home: away from foundational challenges to capitalism

 Karl Marx

Chapter 4: The General Formula for Capital (Read here) This chapter chiefly distinguishes between two types of commerce: purchasing a commodity for consumption and purchasing a commodity for resale with the intention of augmenting the amount of money owned. My synopsis. 1. World embracing commerce can be traced back to the 16th century. Money is the final product of the circulation of commodities and the first form in which capital appears. 2. In the circulation of commodities there exist two types of circuits. 2.1 The first: C-M-C. In which one commodity is sold first to acquire money. And the money acquired is used to purchase a different commodity which finally exits circulation through consumption. 2.2 The second: M-C-M. In which a commodity is purchased with the explicit purpose of resale. Since selling the commodity again at the same value would be absurd and purposeless, it is typically done so with the intention of augmenting money. i.e the form more accurately is M-C-M' where M'=M+d where the original sum is "advanced" with an added increment called surplus value. Such increment in value might be purely accidental in C-M-C trades but intentional in M-C-M trrades. Money that circulates in the latter manner (with the explicit purpose of augmentation) is thereby transformed into, becomes capital, and is already potentially capital. 3. The conscious representative of this movement, the possessor of money becomes a capitalist. His person, or rather his pocket, is the point from which the money starts and to which it returns. The expansion of value is the capitalist's subjective aim. Even profit from a single transaction does not suffice for the capitalist's contentment since the capitalist seeks for boundless, infinite expansion in value. 4. "M-C-M' is therefore in reality the general formula of capital as it appears prima facie within the sphere of circulation." Noteworthy excerpts and important questions: Is there really that significant a difference between purchase of a commodity for consumption compared to its purchase for further exchange? Marx initially asserts that money is just the universal equivalent form of commodities. Aren't commodities often sought by an individual so that they may explicitly used for further prosperity, eg purchasing a tool for making production easier. What about commodities that are sold at a later date when its use to the owner has been subsided and needs to be dispensed with (refurbished or second hand goods). Such goods/commodities are sold at a price that's often lower than that of the initial purchase and is initiated without any intent towards "greedy" desires for infinite expansion of value but out of pragmatic exchanges between two consenting adults. Is the seller of a refurbished good, a capitalist too? Is a capitalist defined by caricature of greed that seeks infinite expansion of profit without social context? Is the description of circulation commodities through the abstraction of "M-C-M" and "C-M-C" "circuits" adequate? Moreover, are they even particularly distinct considering money and labor are equivalent expressions of value determined by labor and differ only in form? There's a very distinct method of reasoning used in the four chapters so far. It's the dialectical method. My intuitions of how to think and reason using deduction and description of objects and their appropriation by people is vastly distinct from those that underscore the dialectical method. This makes it considerably difficult for me to grasp abstruse statements that one cannot remark on unless firmly embedded in said tradition of thinking. The description of differing conceptual forms of commodities and money i find largely superfluous. But perhaps macro models require special terminology to abstract and describe laws. But "greedy capitalist" hardly seems the kind of special terminology that would yield a theoretical model of much use considering it essentializes a particular aspect of economic behavior without situating it in economic or historical use.

1. "The contrast between the power, based on the personal relations of dominion and servitude, that is conferred by landed property, and the impersonal power that is given by money, is well expressed by the two French proverbs, “Nulle terre sans seigneur,” and “L’argent n’a pas de maître,” – “No land without its lord,” and “Money has no master.”

2. “When a thing is bought in order to be sold again, the sum employed is called money advanced; when it is bought not to be sold, it may be said to be expended.”

3. "Aristotle opposes Oeconomic to Chrematistic. He starts from the former. So far as it is the art of gaining a livelihood, it is limited to procuring those articles that are necessary to existence, and useful either to a household or the state. “True wealth (o aleqinos ploutos) consists of such values in use; for the quantity of possessions of this kind, capable of making life pleasant, is not unlimited. There is, however, a second mode of acquiring things, to which we may by preference and with correctness give the name of Chrematistic, and in this case there appear to be no limits to riches and possessions. Trade (e kapelike is literally retail trade, and Aristotle takes this kind because in it values in use predominate) does not in its nature belong to Chrematistic, for here the exchange has reference only to what is necessary to themselves (the buyer or seller).” Therefore, as he goes on to show, the original form of trade was barter, but with the extension of the latter, there arose the necessity for money. On the discovery of money, barter of necessity developed into kapelike, into trading in commodities, and this again, in opposition to its original tendency, grew into Chrematistic, into the art of making money. Now Chrematistic is distinguishable from Oeconomic in this way, that “in the case of Chrematistic circulation is the source of riches poietike crematon ... dia chrematon diaboles. And it appears to revolve about money, for money is the beginning and end of this kind of exchange (to nomisma stoic eion tes allages estin). Therefore also riches, such as Chrematistic strives for, are unlimited. Just as every art that is not a means to an end, but an end in itself, has no limit to its aims, because it seeks constantly to approach nearer and nearer to that end, while those arts that pursue means to an end, are not boundless, since the goal itself imposes a limit upon them, so with Chrematistic, there are no bounds to its aims, these aims being absolute wealth. Oeconomic not Chrematistic has a limit ... the object of the former is something different from money, of the latter the augmentation of money.... By confounding these two forms, which overlap each other, some people have been led to look upon the preservation and increase of money ad infinitum as the end and aim of Oeconomic.” (Aristoteles, De Rep. edit. Bekker, lib. l.c. 8, 9. passim.)"

Surely neither Aristotle and Marx have envisaged infinite wealth. Or a measure of wealth which cannot be imagined to have specific social use? One thinks of the colossal amount of wealth owned by current billionaires but is it beyond imagination that it may find its use in spurring production over several generations if adequately distributed? Largely unremarkable chapter with dated economic modeling and language.
Chapter Five: Contradictions in the General Formula of Capital(Read here) Synopsis: 1. Exchange of commodities begets no augmentation in exchange value. The "quantity of labor" remains the same in possession of the owner of commodities. There is metamorphoses in form but not value. Commodities may be exchanged at prices deviating from their value but that might happen under coercion or factors unrelated to the exchange and said deviation is not a part of the exchange itself (is it not?) 2. Behind all attempts to represent the circulation of commodities as a source of surplus-value, there lurks a quid pro quo, a mixing up of use-value and exchange-value. 3. Condillac is refuted. Condilac disagrees that equal value is exchanged. Instead claiming that both parties give less for a greater value thereby making profit possible. Both parties gain because the value of a thing exists in relation to the wants of the user thereby making it possible that two parties exchange commodities superfluous to each but necessary to the other. Marx disagrees. Claims Condillac's argument used by modern economists is childish and confuses exchange-value and use-value and assumes that only that is thrown into circulation by producers which is superfluous and excess to their needs/wants. Marx claims that commodities are not paid twice over (for use value and value) and although the use-value is more "serviceable" to the buyer, the money form is more "serviceable" to the seller (perhaps a more formal rigorous equation of value would have sufficed here). 4. The creation of surplus-value, and the consequent conversion of money into capital, can be explained neither on the assumption that commodities are sold above their value, nor that they are bought below their value. Because anyone acquiring said surplus value would lose it to another seller or buyer exchanging their commodity at increased/decreased price to offset the gain. Loss to one, is surplus to another. The net value in circulation remains constant. Circulation or exchange of commodities begets no value. 5. Since it is impossible, by circulation alone, to account for the conversion of money into capital, for the formation of surplus-value, it would appear that merchants’ capital is an impossibility, so long as equivalents are exchanged. Therefore, it can only have its origin in the two-fold advantage gained, over both the selling and the buying producers, by the merchant who parasitically shoves himself in between them. A long series of intermediate steps are necessary for this. 6. The augmentation of value through surplus must occur by the addition of labor to a commodity.
Chapter Six: The Buying and Selling of Labour-Power(Read here) This is a grand chapter, presenting powerful arguments and the radical culmination of the premises and constructions laid out till now. The conclusions it arrives at are highly socially and historically significant, particularly with regard to the role of labour and its relationship to the capitalist and principles of freedom, equality and proprietorship in a system of commodities confronting each other in the market. It has hitherto been established that money advanced to purchase a commodity only realizes its price and cannot be augmented simply by the process of exchange in circulation. This augmentation occurs through the addition of value i.e labor to the commodity. To extract value from the consumption of a specific commodity, a commodity is required that is a source of value, which is found in the market in the form of "labour-power". "Labour-power or capacity for labour is to be understood the aggregate of those mental and physical capabilities existing in a human being, which he exercises whenever he produces a use-value of any description." The intuitive understanding of the concept and its colloquial usage suffice for an adequate understanding. For labour-power to be available for consumption in the market, some prerequisites are mandatory: 1. Its possessor, the individual whose labour-power it is, offers it for sale, or sells it, as a commodity. In order that he may be able to do this, he must have it at his disposal, must be the untrammelled owner of his capacity for labour, i.e., of his person. [c1] He and the owner of money meet in the market, and deal with each other as on the basis of equal rights, with this difference alone, that one is buyer, the other seller; both, therefore, equal in the eyes of the law. This sale ought to be for a definite period, else it would lead to the conversion of the owner of the commodity into the commodity - ie a slave (and?)) 2. The labourer must be 'obliged' to offer for sale his labour power as a commodity instead of a commodity embodying his labour itself. To offer labour power directly for sale instead of the commodities it produces, the labourer must be short of the means of production - raw materials, implements, means of subsistence and time for sale. Therefore the labourer enters the market as a free man in two senses - free to dispose his labour and also fre of any commodities for sale. 3. "Nature does not produce on the one side owners of money or commodities, and on the other men possessing nothing but their own labour-power. This relation has no natural basis, neither is its social basis one that is common to all historical periods. It is clearly the result of a past historical development, the product of many economic revolutions, of the extinction of a whole series of older forms of social production." 4. There are different historical periods marked by the emergence of new economic phenomena that alter the social relations between man and man. These economic phenomena are products of historical conditions. And it is due to such definite historical conditions that are necessary for a product to become a commodity. The appearance of products as commodities pre-supposes such a development of the social division of labour, that the separation of use-value from exchange-value, a separation which first begins with barter, must already have been completed.". The circulation of commodities suffices to explain the emergence of the stage in which money appears. However, it doesn't explain capital. It can spring into life, only when the owner of the means of production and subsistence meets in the market with the free labourer selling his labour-power. And this one historical condition comprises a world’s history. Capital's emergence marks a new epoch in the process of social production. 5. The value of labour-power resolves itself into the value of a definite quantity of the means of subsistence. This includes the means of its subsistence which allow it to replenish itself day after day and put it at the disposal of the capitalist. These include costs of clothes, furniture, food, fuel, furniture. If the labourer is mortal, the perpetuation of labour power would require including the costs of procreation, sum of subsistence of raising children for substituting. 6. There's a minimum limit of value of labour-power determined by the amount without which it cannot renew its energy and below which it will remain crippled. 7. The use value of labour-power does not immediately pass into the hands of its buyer. The development of labor-power, it's appropriation, its employment as a use-value and purchase are separated by intervals of time. "But in those cases in which the formal alienation by sale of the use-value of a commodity, is not simultaneous with its actual delivery to the buyer, the money of the latter usually functions as means of payment."* In every country, it is customary for capitalist to pay labour until it has been exercised. Thus the labourer extends credit to the capitalist. * The system of commercial credit had to start at the moment when the labourer, the prime creator of products, could, thanks to his savings, wait for his wages until the end of the week.” 8. "The consumption of labour-power is at one and the same time the production of commodities and of surplus-value. The consumption of labour-power is completed, as in the case of every other commodity, outside the limits of the market or of the sphere of circulation." Notable excerpts:

-"The consumption of labour-power is at one and the same time the production of commodities and of surplus-value. The consumption of labour-power is completed, as in the case of every other commodity, outside the limits of the market or of the sphere of circulation. Accompanied by Mr. Moneybags and by the possessor of labour-power, we therefore take leave for a time of this noisy sphere, where everything takes place on the surface and in view of all men, and follow them both into the hidden abode of production, on whose threshold there stares us in the face “No admittance except on business.” Here we shall see, not only how capital produces, but how capital is produced. We shall at last force the secret of profit making. This sphere that we are deserting, within whose boundaries the sale and purchase of labour-power goes on, is in fact a very Eden of the innate rights of man. There alone rule Freedom, Equality, Property and Bentham. Freedom, because both buyer and seller of a commodity, say of labour-power, are constrained only by their own free will. They contract as free agents, and the agreement they come to, is but the form in which they give legal expression to their common will. Equality, because each enters into relation with the other, as with a simple owner of commodities, and they exchange equivalent for equivalent. Property, because each disposes only of what is his own. And Bentham, because each looks only to himself. The only force that brings them together and puts them in relation with each other, is the selfishness, the gain and the private interests of each. Each looks to himself only, and no one troubles himself about the rest, and just because they do so, do they all, in accordance with the pre-established harmony of things, or under the auspices of an all-shrewd providence, work together to their mutual advantage, for the common weal and in the interest of all. On leaving this sphere of simple circulation or of exchange of commodities, which furnishes the “Free-trader Vulgaris” with his views and ideas, and with the standard by which he judges a society based on capital and wages, we think we can perceive a change in the physiognomy of our dramatis personae. He, who before was the money-owner, now strides in front as capitalist; the possessor of labour-power follows as his labourer. The one with an air of importance, smirking, intent on business; the other, timid and holding back, like one who is bringing his own hide to market and has nothing to expect but — a hiding. "

-[c1] "Hence legislation in various countries fixes a maximum for labour-contracts. Wherever free labour is the rule, the laws regulate the mode of terminating this contract. In some States, particularly in Mexico (before the American Civil War, also in the territories taken from Mexico, and also, as a matter of fact, in the Danubian provinces till the revolution effected by Kusa), slavery is hidden under the form of peonage. By means of advances, repayable in labour, which are handed down from generation to generation, not only the individual labourer, but his family, become, de facto, the property of other persons and their families. Juarez abolished peonage. The so-called Emperor Maximilian re-established it by a decree, which, in the House of Representatives at Washington, was aptly denounced as a decree for the re-introduction of slavery into Mexico. “I may make over to another the use, for a limited time, of my particular bodily and mental aptitudes and capabilities; because in consequence of this restriction, they are impressed with a character of alienation with regard to me as a whole. But by the alienation of all my labour-time and the whole of my work, I should be converting the substance itself, in other words, my general activity and reality, my person, into the property of another.” (Hegel, “Philosophie des Rechts.” Berlin, 1840, p. 104, § 67.)"

This chapter is the most politically and economically significant piece of text I've read in a long time. It establishes the value of man qua labourer, of the economic function of children as substitutes for their parents in replenishing labour-power, the conditions that compel a person to sell labour-power instead of the commodity it can produce that involve qualitative deprivation of resources compared to the capitalist, the description of a capitalist as the temporary owner of the commodity of labour-power and the entity to which the labourer advances credit even under significant duress, the problems posed by the separation by intervals of time between exercise of labour power and its actual payment, and the source of surplus value in the exercise of labour-power itself. There exist ofcourse concerns with LTV, but accepting its premises has already yielded some significant political and economic results.
End of part II

pulkit manocha october 2020