Part Two — The Turnover of Capital Chapters 7–17. Turnover time and its number, fixed and circulating capital, the theories of the classical economists, the working and production periods, and the turnover of variable capital and the circulation of surplus-value.

Part One analysed a single circuit. Part Two treats the circuit as a periodic process — one that repeats, and whose speed of repetition governs how much surplus-value a given capital yields in a year. This is the turnover of capital. The turnover time is the whole span from the advance of a capital-value in a given form until its return in that form, and it is composed of production time and circulation time. From this Marx builds a distinction that structures the whole Part and that the classical economists had garbled: the difference between fixed capital, which stays in production and yields its value piecemeal over many turnovers, and circulating capital, whose value returns whole each time. The Part's decisive results come at its end: turnover affects not only the magnitude of capital that must be advanced but the annual rate of surplus-value, so that two capitals of equal size and equal rate of exploitation can yield very different annual surpluses if they turn over at different speeds (Chapter 16); and the circulation of surplus-value raises the question — pursued to its limit in Part Three — of where the money comes from to realize the surplus-value the whole class produces (Chapter 17). The middle chapters develop the working period, production time, and circulation time, and settle accounts with the Physiocrats, Smith, and Ricardo, whose confusion of fixed and circulating capital with constant and variable capital is the negative foil against which Marx's distinction is drawn.

The turnover is the circuit taken as a repeating process. Its unit of measure is the turnover time — the interval from the advance of a capital-value in a given form to its return in that same form — and this is simply the sum of the two times distinguished in Part One.

the overall time of circulation of a given capital is the sum of its circulation time proper and its production time. It is the period of time that elapses from the moment that the capital value is advanced in a particular form until the return of the capital value in process in the same form.

Marx, Capital II, page 232.

Marx takes the year as the natural unit of comparison and defines the number of turnovers as the year divided by the turnover time of a given capital. A capital that turns over four times a year does in three months what another does in a year. This ratio — how many times a capital renews itself annually — is the quantity the rest of the Part is built to analyse, because it, not the mere size of the capital, governs the annual yield.

The central distinction of the Part rests on how different parts of capital give up their value. The means of labour — machines, buildings — stay in the production process across many labour processes and part with their value only gradually, as they wear out. This is fixed capital.

The part of the capital value that is fixed in the means of labour circulates, just like any other part. … But the circulation of the part of the capital considered here is a peculiar one. In the first place, it does not circulate in its use form. It is rather its value that circulates, and this does so gradually, bit by bit, in the degree to which it is transferred to the product that circulates as a commodity. … This peculiarity is what gives this part of the constant capital the form of fixed capital. All other material components of the capital advanced in the production process, on the other hand, form, by contrast to it, circulating or fluid capital.

Marx, Capital II, page 237. Ellipses drop the intervening sentences establishing that all capital circulates and that a portion of the fixed capital's value always remains behind in the means of labour.

The point that Chapters 10 and 11 turn into a running argument with the classics is that this distinction is a distinct axis from the one drawn in Volume I. Constant versus variable capital is a distinction about the production of surplus-value: variable capital creates value, constant capital only transfers it. Fixed versus circulating is a distinction about the mode of turnover: fixed capital yields value piecemeal, circulating capital whole each period. The two axes cut across each other — raw materials are constant capital but circulating; labour-power is variable capital but also circulating, since the whole of its value returns each turnover. Marx marks that the fixed/circulating distinction "has nothing to do with" the production of surplus-value, and it is exactly this that Smith and Ricardo lost, collapsing a turnover distinction into a value-production one.

Since a real capital is composed of fixed and circulating parts that turn over at different speeds, its overall turnover is an average. Marx computes it as the total value turned over in a year divided by the total capital advanced, and shows that this average figure conceals very different underlying rhythms: a large fixed component (turning slowly) and a small circulating component (turning fast) can yield the same average as the reverse. The point of the exercise is to warn that the average turnover of a capital tells us little on its own; what matters analytically is the separate turnover of the parts, and above all of the variable part, which Chapter 16 isolates.

Two chapters trace the history of the fixed/circulating distinction to show how it went wrong. Marx credits the Physiocrats — Quesnay's Tableau économique above all — with the first attempt to grasp the reproduction of capital as a circuit of advances (avances) and returns (reprises), the seed of Part Three's schemas. Adam Smith took the distinction over but confused it fatally: he ran together the difference between fixed and circulating capital (a matter of turnover) with the difference between capital consumed in production and capital that yields a revenue, and in doing so let the constant/variable distinction — the one that actually explains surplus-value — drop out of sight entirely. Ricardo inherited and compounded the confusion, treating fixed and circulating capital as though the distinction bore on the production of value and the determination of profit, when it bears only on the manner of turnover. Marx's aim in these chapters is not antiquarian: by diagnosing exactly what the classics collapsed, he fixes his own two axes — constant/variable (value production) and fixed/circulating (turnover) — as independent, which is the conceptual condition for everything in Chapters 16 and 17.

Four chapters analyse the components of turnover time. The working period (Chapter 12) is the number of connected working days a particular product requires before it is finished — one day's spinning yields sellable yarn, but a locomotive or a building ties up capital across a long continuous stretch before anything can be sold. The longer the working period, the more capital must be advanced and locked up before any return, and the greater the exposure to interruption. Production time (Chapter 13) adds the intervals in which the object is subjected to natural processes rather than labour — wine maturing, grain in the ground, timber seasoning — time in which capital is productive but idle of labour, and which capital constantly strives to shorten. Circulation time (Chapter 14) is the selling and buying time already established as a pure limit. Chapter 15 draws the consequence for the magnitude of capital advanced: to keep production continuous while one portion of capital is tied up in circulation, an additional portion must be advanced to fill the gap, so that circulation time compels a capital to be larger than its production alone would require. The length of the working period and the length of circulation time together determine how much capital must lie latent — released and re-advanced in a rhythm that the individual capitalist experiences as the perennial problem of liquidity, and that the credit system later steps in to manage.

This is the theoretical payoff of the Part. Marx compares two capitals, A and B, with the same variable capital in play each week, the same rate of surplus-value, and the same working day — differing only in turnover speed. The one whose variable capital turns over faster produces a higher annual rate of surplus-value, because the same money is used to buy labour-power more times in the year. The annual rate of surplus-value is thus the rate of surplus-value multiplied by the number of turnovers of the variable capital.

The result generates a dangerous appearance: it looks as though surplus-value depends not only on the variable capital and the rate of exploitation but on "inexplicable influences deriving from the circulation process" — an appearance that, in its developed form as the annual rate of profit, "led to the complete destruction of the Ricardian school." Marx dissolves the appearance without abandoning the value theory: turnover changes how much variable capital is applied over the year, but value is still created only in production.

It is only the capital actually operating in the labour process which creates surplus-value and to which all the laws given for surplus-value apply, including the law that, with a given rate of surplus-value, the mass of surplus-value is given by the relative magnitude of the variable capital.

Marx, Capital II, page 372.

Faster turnover raises the annual rate of surplus-value not by creating value in circulation but by allowing a smaller advanced capital to set the same total labour in motion over a year — a distinction that looks pedantic until one sees that missing it is exactly what wrecked classical political economy on the rocks of the profit rate. This is the bridge from the theory of surplus-value in Volume I to the theory of profit in Volume III.

The closing chapter of the Part poses a question that seems trivial and turns out to be the seed of Part Three and of a century of debate: where does the money come from to realize the surplus-value? The commodities the capitalist class throws onto the market contain more value than the money it advanced; so to sell them all at their values, more money must circulate than the class advanced. Where does the extra come from? Marx's answer works only at the level of the class. The individual capitalist, before the first return of his capital, must spend money out of his own pocket on his personal consumption — and that money, thrown into circulation as a consumer rather than advanced as capital, comes back to him as the money-form of his own surplus-value.

This is obviously an arbitrary assumption in relation to the individual capitalist. But it must be correct for the capitalist class as a whole, on the assumption of simple reproduction. It simply expresses the same thing as this assumption implies, namely that the entire surplus-value is unproductively consumed (but no more than this, i.e. no fraction of the original capital stock).

Marx, Capital II, page 409.

The residual gap — the money that must exist before any of it can return — is filled by the one branch whose product is money. The gold-producing sector casts money into circulation from the start, part of which is surplus-value already in the money-form.

One part of the society's surplus-value thus consists of gold, and not of products that are turned into money only in the course of circulation. It consists of gold from the start, and is cast into the circulation sphere in order to withdraw products from this.

Marx, Capital II, page 409.

The chapter thus resolves the money-circulation of surplus-value into a class-level accounting: the capitalist class itself advances the money that realizes its own surplus-value, replenished by gold production. This is the point at which the analysis of the individual capital's turnover exhausts itself and demands the standpoint of the total social capital, where the products of all capitals must find each other as buyers and sellers. Part Three takes up that standpoint.