Volume I analysed the production of surplus-value, treating circulation only where it was needed to reach the production process. Volume II takes circulation itself as its object: not the making of surplus-value but the movement of capital through the forms it must assume and shed to keep making it. Part One is the analysis of that movement in its simplest shape — the circuit of an individual capital through three functional forms, money capital, productive capital, and commodity capital, each with its own circuit, and all three united in the continuous motion of industrial capital. The through-line is that capital is not a thing but a process, a value in motion that is only capital so long as it keeps changing its form; arrest it in any one form and it ceases to function as capital. Chapter 1 traces the circuit from the standpoint of money capital (M–C…P…C′–M′), Chapter 2 from productive capital (P…P), Chapter 3 from commodity capital (C′…C′); Chapter 4 shows the three as figures of one circuit and defines industrial capital as their unity. Chapters 5 and 6 turn to circulation time and the costs of circulation, distinguishing what circulation adds to value from what it merely deducts.

The stakes are the ones the later Parts and Volume III build on: this Part supplies the categories — the functional forms of capital, the distinction between production time and circulation time, the difference between costs that create value and costs that only consume it — without which the turnover of capital (Part Two) and the reproduction of the total social capital (Part Three) cannot be stated. Figures from the reception (Heinrich, Mattick) who read these circuits against the value-form and the crisis theory are kept in view, but the brief reconstructs Marx's own text and seeks its context on its own terms.

Marx begins from the standpoint of money capital, tracing the whole circuit as it looks when money is both the starting point and the goal. The circuit has three stages, and the formula compresses them.

Thus the formula for the circuit of money capital is M–C…P…C′–M′. The dots indicate that the circulation process is interrupted, while C′ and M′ denote an increase in C and M as the result of surplus-value.

Marx, Capital II, page 109.

The first stage, M–C, is not an ordinary purchase. Its function in the circuit depends on the specific character of what is bought: the money divides into two, one part for labour-power, the other for means of production, and the two purchases go to two different markets. Marx writes the split as M–C, where C = L + mp, and stresses that the proportion between the two is fixed in advance by the surplus labour the workforce is to yield. When M–C is complete, the money-value has been converted into a form able to produce more value than it contains — productive capital.

The value that he has advanced in the form of money thus now exists in a natural form in which it can be realized as value which breeds surplus-value (in the shape of commodities). In other words, it exists in the state or form of productive capital, with the ability to function as creator of value and surplus-value. We call capital in this form P.

Marx, Capital II, page 111. The OCR-mangled phrase for the natural form is repaired to Fernbach's reading, confirmed against the EPUB.

Within this first stage it is the purchase of labour-power, not of means of production, that stamps the advance of money as an advance of capital. Marx isolates the moment precisely.

M–L is the characteristic moment of the transformation of money capital into productive capital, for it is the essential condition without which the value advanced in the money form cannot really be transformed into capital, into value-producing surplus-value. M–mp is necessary only in order to realize the mass of labour bought by way of M–L.

Marx, Capital II, page 113.

And the act M–L does not create the relation between the classes; it presupposes it.

The class relation between capitalist and wage-labourer is thus already present, already presupposed, the moment that the two confront each other in the act M–L (L–M from the side of the worker). This is a sale and purchase, a money relation, but a sale and purchase in which it is presupposed that the buyer is a capitalist and the seller a wage-labourer; and this relation does in fact exist, because the conditions for the realization of labour-power, i.e. means of subsistence and means of production, are separated, as the property of another, from the possessor of labour-power.

Marx, Capital II, page 115.

The second stage, P, is production, entered here only as the moment in which the value passes through and emerges augmented as commodity capital C′; the third stage, C′–M′, is the sale that realizes the surplus-value in money and returns the value to its money form, now enlarged. The circuit closes where it began, in money, but as M′ = M + m.

Taken as a whole, the circuit tolerates no arrest. Marx states what a stoppage at each stage means.

The circuit of capital proceeds normally only as long as its various phases pass into each other without delay. If capital comes to a standstill in the first phase, M–C, money capital forms into a hoard; if this happens in the production phase, the means of production cease to function, and labour-power remains unoccupied; if in the last phase, C′–M′, unsaleable stocks of commodities obstruct the flow of circulation.

Marx, Capital II, page 133.

The decisive critical point of the chapter is that this money-form starting-and-ending gives the circuit a deceptive appearance. Because value both departs and returns as money, the money-form looks like the essence of the process, when it is only one of the forms value passes through. This is the appearance that generated the Monetary and Mercantile systems.

The formula M–C…P…C′–M′, with the result M′ = M+m, contains in its form a certain deception; it bears an illusory character that derives from the existence of the advanced and valorized value in its equivalent form, in money. What is emphasized is not the valorization of the value, but the money form of this process, the fact that more value in the money form is finally withdrawn from the circulation sphere than was originally advanced to it, i.e. the increase in the mass of gold and silver belonging to the capitalist.

Marx, Capital II, page 141.

The illusion arises only when the money-capital circuit is taken as the sole and self-standing form, rather than as one continuously repeated figure that already implies the other two. Taken correctly, the money circuit points beyond itself: it presupposes the production process as its basis, and its endlessly repeated form already contains the circuit of productive capital and the circuit of commodity capital within it. Marx states the standing of this first form precisely.

The general form of the circuit of industrial capital is the circuit of money capital, in so far as the capitalist mode of production is presupposed, i.e. within a specific state of society determined by capitalist production. Hence the capitalist production process is the basic pre-condition, it is prior to all else.

Marx, Capital II, page 143.

The same total movement, begun and ended in productive capital rather than money, tells a different story. Where the money circuit foregrounds valorization as monetary gain, the productive circuit foregrounds reproduction — the periodic renewal of the production process.

The circuit of productive capital has the general formula: P…C′–M′–C…P. It signifies the periodically repeated function of the productive capital, i.e. reproduction. In other words it signifies that its production process is a reproduction process in respect of valorization; not only does production occur, but also the periodic reproduction of surplus-value.

Marx, Capital II, page 144.

Two things follow. First, the whole circulation phase — the selling and buying that lie between one production process and the next — now appears merely as an interruption mediating a reproduction that repetition makes continuous. Second, the circulation embedded in this circuit takes the inverse form to that of the money circuit: not M–C–M but C–M–C, the form of simple commodity circulation.

the entire circulation presents itself in the opposite form from that which it possessed in the circuit of money capital. There it was M–C–M (M–C. C–M), disregarding the value determination; here, again disregarding the value determination, it is C–M–C (C–M. M–C), i.e. the form of simple commodity circulation.

Marx, Capital II, page 145.

This is the circuit in which the distinction between simple reproduction and reproduction on an expanded scale must be decided, because everything turns on whether the surplus-value realized in C′–M′ is consumed by the capitalist (simple reproduction) or partly recapitalized (accumulation). Under simple reproduction the entire surplus-value goes to the capitalist's personal consumption; under accumulation, part of it is added to capital as it re-enters the circuit. Marx also examines here the accumulation-fund formed when surplus-value must be hoarded as money until it is large enough to function as additional capital — money capital held latent between circuits — so that hoarding, treated in Volume I as the fossilizing of circulation, reappears in Volume II as a necessary phase in the reproduction of capital on an expanding scale.

Marx fixes the decision point in the formula itself.

It depends on this decision whether the formula depicts simple reproduction or reproduction on an expanded scale. The character of the circuit is altered according to this decision.

Let us therefore start by taking the simple reproduction of the productive capital, in which connection we assume, as in the first chapter, that other circumstances remain the same and that commodities are bought and sold at their values. On this assumption, the entire surplus-value goes into the personal consumption of the capitalist.

Marx, Capital II, page 145.

The status of this accumulation-fund — a hoard that is a moment of accumulation without itself being accumulation — is stated in full.

The surplus-value thus builds up into a hoard, and in this form it constitutes latent money capital. Latent, because as long as it persists in the money form, it cannot function as capital. Thus the formation of a hoard appears here as a moment that is comprised within the process of capitalist accumulation, accompanies it but is at the same time essentially different from it. For the reproduction process is not itself expanded by the formation of latent money capital. On the contrary. Latent money capital is formed here because the capitalist producer cannot directly expand the scale of his production.

Marx, Capital II, page 158.

The third circuit begins and ends with commodity capital already valorized. Its distinguishing feature is that C′ figures not only as the product of the other two circuits but as their premise: one capital's purchase of means of production is another capital's sale of its commodity product.

The general formula for the circuit of commodity capital is: C′–M′–C…P…C′. Here C′ does not just appear as the product of the two earlier circuits, but also as their premise, since what is M–C for one capital already involves C′–M′ for another, at least in so far as a part of the means of production are themselves the commodity product of other individual capitals in their circuits.

Marx, Capital II, page 167.

Because it opens with the whole circulation and starts from a product that already contains surplus-value and is destined for both productive and individual consumption, this circuit cannot be contained within a single individual capital. It necessarily reaches into the circuits of other capitals and into the consumption of the whole society. This is the form that opens onto Part Three's analysis of the total social capital.

The dependence of this circuit on the consumption of the whole society is stated in the analysis of the form itself.

In the form C′…C′, the consumption of the entire commodity product is presupposed as the condition for the normal course of the circuit of capital itself. The individual consumption of the worker and the individual consumption of the non-accumulated part of the surplus product comprise, taken together, the total individual consumption. Thus consumption in its entirety – both individual and productive consumption – enters into the circuit of C′ as a precondition. Productive consumption (which in the nature of the case includes the individual consumption of the worker, for labour-power is the permanent product, within certain limits, of the worker’s individual consumption) is carried on by every individual capital. Individual consumption – other than is necessary for the existence of the individual capitalist – is presupposed only as a social act, in no way as the act of the individual capitalist.

Marx, Capital II, page 173.

In all these peculiarities, this circuit points beyond its own existence as the isolated circuit of a merely individual capital. In the figure C′…C′, the movement of the commodity capital, i.e. of the capitalistically produced total product, appears both as premise of the independent circuit of the individual capital, and as conditioned by it in turn.

Marx, Capital II, page 178.

Marx also marks the characteristic error this circuit invites. If attention fixes exclusively on C′…C′, where every element seems to enter as a commodity from circulation, the independent moments of the production process drop from view and all production appears to proceed from commodity circulation — the one-sided conception underlying the dogma that supply creates its own demand. The three circuits are therefore not three theories but three angles on one movement, each foregrounding what the others leave in shadow: valorization (M…M′), reproduction (P…P), and the social interlocking of the total product (C′…C′).

The chapter closes by crediting the one predecessor who built on this form rather than on the money circuit.

C′…C′ is the basis of Quesnay’s Tableau économique, and it shows great discernment on his part that he selected this form in opposition to M…M′ (the form fixed on and isolated by the Mercantile System), and not P…P.

Marx, Capital II, page 179.

Chapter 4 gathers the three circuits into one. Taken together, they show that every presupposition of the process is also its result, produced by the process itself; the total movement is the unity of production and circulation, each mediating the other.

If we take all three forms together, then all the premises of the process appear as its result, as premises produced by the process itself. Each moment appears as a point of departure, of transit, and of return. The total process presents itself as the unity of the process of production and the process of circulation; the production process is the mediator of the circulation process, and vice versa.

Marx, Capital II, page 180.

The three circuits are not three kinds of capital but three simultaneous aspects of one. A single industrial capital is always in all three at once: part of it functions as money, part as productive capital in the workshop, part as commodities on the market, and each part is continuously passing into the next. The distinction between the circuits is a distinction for the observer; in reality they run alongside one another without cease.

In reality, however, each individual industrial capital is involved in all three at the same time. The three circuits, the forms of reproduction of the three varieties of capital, are continuously executed alongside one another. … Here, therefore, the entire circuit is the real unity of its three forms.

Marx, Capital II, page 181. The ellipsis drops the illustration of one part functioning as commodity capital while another passes into circulation as new commodity capital.

Marx then states the unity as a simultaneity: the circuit is one only because every part of the capital is in a different phase of it at once.

The real circuit of industrial capital in its continuity is therefore not only a unified process of circulation and production, but also a unity of all its three circuits. But it can only be such a unity in so far as each different part of the capital runs in succession through the successive phases of the circuit, can pass over from one phase and one functional form into the other; hence industrial capital, as the whole of these parts, exists simultaneously in its various phases and functions, and thus describes all three circuits at once.

Marx, Capital II, page 183.

Each individual portion of capital moves in fits — one form cast aside, the next assumed, each stage excluding the others — yet continuity is the technical requirement of capitalist production, achieved by staggering the portions so that the capital as a whole is always in every phase at once. From this Marx draws the definition of capital that the whole volume rests on, and that his readers in the value-form tradition return to: capital is not a thing but a self-moving value, an abstraction made real by its own motion.

Capital, as self-valorizing value, does not just comprise class relations, a definite social character that depends on the existence of labour as wage-labour. It is a movement, a circulatory process through different stages, which itself in turn includes three different forms of the circulatory process. Hence it can only be grasped as a movement, and not as a static thing. Those who consider the autonomization [Verselbstständigung] of value as a mere abstraction forget that the movement of industrial capital is this abstraction in action.

Marx, Capital II, page 185.

Having established the forms of the circuit, Marx turns to time. The total time of a capital's circuit divides into production time and circulation time. Production time includes the working time but also intervals in which capital is latent (raw materials in stock, wine maturing, crops growing) — time in which it functions as productive capital even when not being actively worked. Circulation time is the time capital spends in the market as commodity capital or money capital, changing form. The load-bearing result is that the two are mutually exclusive: capital in circulation produces nothing.

Circulation time and production time are mutually exclusive. During its circulation time, capital does not function as productive capital, and therefore produces neither commodities nor surplus-value.

Marx, Capital II, page 203.

It follows that circulation time is a pure limit on valorization. The longer a capital's aliquot parts linger in the market, the smaller the portion at work in production at any moment, and the less surplus-value the whole capital yields over a year. Circulation time creates no value; it only sets bounds on the time available for creating it. This is the premise Part Two develops into the theory of turnover.

Marx states the limit in both directions — the closer circulation time comes to zero, the greater the capital’s productivity.

The expansion and contraction of the circulation time hence acts as a negative limit on the contraction or expansion of the production time, or of the scale on which a capital of a given magnitude can function. The more that the circulation metamorphoses of capital are only ideal, i.e. the closer the circulation time comes to zero, the more the capital functions, and the greater is its productivity and self-valorization. If a capitalist works to order, receives payment on the delivery of his product, and is paid in his own means of production, then his time of circulation approaches zero.

Capital’s circulation time generally restricts its production time, and hence its valorization process. Moreover, it restricts this in proportion to its duration.

Marx, Capital II, page 203.

The final chapter of the Part sorts the costs of circulation into those that add value and those that only consume it. The pure costs of circulation — the buying and selling time, the bookkeeping, the money needed to run the transactions — arise from the mere change of form between commodity and money. Because selling at value only converts a value from one shape into another without altering its magnitude, these costs create nothing; they are a deduction.

The argument opens with buying and selling time itself.

Since it was assumed that commodities are bought and sold at their values, all that is involved in these acts is the conversion of the same value from one form into another – from the commodity form into the money form, and from the money form into the commodity form – a change of state. If the commodities are sold at their values, then the amounts of value in the hands of both buyer and seller remain unchanged; it is only the form of existence that has altered.

Marx, Capital II, page 207.

The time and labour which this change of state costs are therefore spent without creating value.

The change of state costs time and labour-power, not to create value, but rather to bring about the conversion of the value from one form into the other, and so the reciprocal attempt to use this opportunity to appropriate an excess quantity of value does not change anything. This labour, increased by evil intent on either side, no more creates value than the labour that takes place in legal proceedings increases the value of the object in dispute.

Marx, Capital II, page 208.

Book-keeping receives the same treatment.

By way of book-keeping, which also includes the determination or reckoning of commodity prices (price calculation), the movement of capital is registered and controlled. The movement of production, and particularly of valorization – in which commodities figure only as bearers of value, as the names of things whose ideal value-existence is set down in money of account – thus receives a symbolic reflection in the imagination.

Marx, Capital II, page 211.

Yet the function itself outlives the social form that makes it a cost.

Book-keeping, however, as the supervision and the ideal recapitulation of the process, becomes ever more necessary the more the process takes place on a social scale and loses its purely individual character; it is thus more necessary in capitalist production than in the fragmented production of handicraftsmen and peasants, more necessary in communal production than in capitalist.

Marx, Capital II, page 212.

The money-material itself is the third pure circulation cost.

Gold and silver, as the money commodities, constitute for society costs of circulation that arise simply from the social form of production. They are faux frais of commodity production in general, which grow with the development of this production, and with capitalist production in particular. This is a part of the social wealth which has to be sacrificed to the circulation process.

Marx, Capital II, page 214.

Passing to the costs of storage, Marx marks the boundary on which the whole chapter turns.

Those circulation costs that proceed from the mere change in form of value, from circulation in its ideal sense, do not enter into the value of commodities. The portions of capital spent on them constitute mere deductions from the capital productively spent, as far as the capitalist is concerned. The circulation costs that we shall deal with now are different in nature. They can arise from production processes that are simply continued in the circulation sphere, and whose productive character is thus merely hidden by the circulation form.

Marx, Capital II, page 214.

The section on transport costs opens by compressing the doctrine into a general law.

The general law is that all circulation costs that arise simply from a change in form of the commodity cannot add any value to it. They are simply costs involved in realizing the value or transferring it from one form into another.

Marx, Capital II, page 225.

The capital expended in these costs (including the labour it commands) belongs to the faux frais of capitalist production. The replacement of these costs must come from the surplus product, and from the standpoint of the capitalist class as a whole it forms a deduction of surplus-value or surplus product, in just the same way as the time that a worker needs to buy his means of subsistence is lost time for him.

Marx, Capital II, page 226.

Transport is the decisive exception, and Marx handles it carefully to keep the value-theory consistent. Storage that merely holds a commodity waiting for sale, and the bookkeeping and money-handling of pure circulation, add no value; but transport is not a pure circulation cost — it is a continuation of the production process within circulation, because a use-value is often not usable until it has been moved to where it is consumed. The labour of moving it therefore creates value in the ordinary way.

The peculiarity of the transport industry had already been fixed in the analysis of the circuit as a whole, and the formulation there is the sharpest.

But what the transport industry sells is the actual change of place itself. The useful effect produced is inseparably connected with the transport process, i.e. the production process specific to the transport industry. People and commodities travel together with the means of transport, and this journeying, the spatial movement of the means of transport, is precisely the production process accomplished by the transport industry. The useful effect can only be consumed during the production process; it does not exist as a thing of use distinct from this process, a thing which functions as an article of commerce and circulates as a commodity only after its production.

Marx, Capital II, page 135.

But the use-value of things is realized only in their consumption, and their consumption may make a change of location necessary, and thus also the additional production process of the transport industry. The productive capital invested in this industry thus adds value to the products transported.

Marx, Capital II, pages 226–227.

The distinction is precise and consequential: what merely changes the form of value (buying, selling, accounting, holding for sale) is unproductive circulation cost, replaced out of surplus-value; what changes the physical condition or location of the use-value, and so continues production in the sphere of circulation, adds value like any other labour. With this the analysis of the individual circuit is complete, and Part Two can proceed to its repetition over time — the turnover of capital.

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 233.

The definition of turnover follows directly.

The circuit of capital, when this is taken not as an isolated act but as a periodic process, is called its turnover. The duration of this turnover is given by the sum of its production time and its circulation time. This period of time forms the capital’s turnover time. It thus measures the interval between one cyclical period of the total capital value and the next; the periodicity in the capital’s life-process, or, if you like, the time required for the renewal and repetition of the valorization and production process of the same capital value.

Marx, Capital II, page 235.

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 measure and the formula are given together.

As the working day forms the natural measuring unit for the function of labour-power, so the year forms the natural measuring unit for the turnovers of capital in process. The natural basis for this measurement is that the most important food crops in the temperate zone, the native ground of capitalist production, are annual products.

If we call the year, as measurement unit of the turnover time, U, the turnover time of a particular capital u, and the number of its turnovers n, then n = U/u. If the turnover time u is three months, for example, then n = 12/3 = 4; the capital completes four turnovers in a year, or turns over four times. If u = 18 months, then n = 12/18 = 2/3; the capital only gets through two thirds of its turnover time in one year. If the turnover time amounts to several years, then it is reckoned in terms of multiples of a year.

Marx, Capital II, page 236.

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 238. 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.

Fixedness is a function, not a property of things: the same machine is circulating capital in one hand and fixed capital in another.

It is only the function of a product as a means of labour in the production process that makes it fixed capital. It is in no way fixed capital in itself, just as it emerges from a process. A machine that is the product and thus the commodity of a machine-builder is part of his commodity capital. It only becomes fixed capital in the hands of its buyer, the capitalist who employs it productively.

Marx, Capital II, page 240.

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.

The chapter ends with the consequence that made these dry averages famous: the lifespan of the fixed capital gives the industrial cycle its material rhythm.

We can assume that, for the most important branches of large-scale industry, this life cycle is now on average a ten-year one. The precise figure is not important here. The result is that the cycle of related turnovers, extending over a number of years, within which the capital is confined by its fixed component, is one of the material foundations for the periodic cycle in which business passes through successive periods of stagnation, moderate activity, over-excitement and crisis. The periods for which capital is invested certainly differ greatly, and do not coincide in time. But a crisis is always the starting-point of a large volume of new investment.

Marx, Capital II, page 264.

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.

Against Smith, Marx severs the fluidity of the wage-capital from its role as the source of surplus-value.

Although the part of capital spent on wages belongs to the fluid part of productive capital, and has this fluidity in common with a portion of the objective elements of product formation, the raw materials, etc., as opposed to the fixed component of productive capital, this has absolutely nothing to do with the role that this variable part of capital plays in the valorization process as opposed to the constant part. It is simply related to how this part of the capital value advanced has to be replaced, renewed, and thus reproduced out of the value of the product, by way of circulation.

Marx, Capital II, page 291.

The method-point beneath the whole critique is stated in the argument with Ricardo.

In the same way, ancillaries such as fertilizer, if they give up their value in the same particular way as do the greater part of means of labour, are fixed capital, although they are not means of labour. What is at issue here is not a set of definitions under which things are to be subsumed. It is rather definite functions that are expressed in specific categories.

Marx, Capital II, page 303.

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.

The definitions are worth carrying whole. First, the working period.

A working day of this kind, which is formed by the succession of more or less numerous interrelated working days, I call a working period. If we speak of the working day, then we mean the length of time for which the worker must daily expend his labour-power, must work. If we speak of the working period, on the other hand, this means the number of inter-related working days that are required, in a particular line of business, to complete a finished product.

Marx, Capital II, page 308.

Then production time in excess of working time.

Working time is always production time, i.e. time during which capital is confined to the production sphere. But it is not true, conversely, that the entire time for which capital exists in the production process is necessarily therefore working time.

Marx, Capital II, page 316.

What is involved is rather an interruption independent of the length of the labour process, an interruption conditioned by the nature of the product and its production, during which the object of labour is subjected to natural processes of shorter or longer duration, and has to undergo physical, chemical or physiological changes while the labour process is either completely or partially suspended.

Marx, Capital II, page 316.

And the compulsion that drives the whole arrangement of staggered capitals.

But apart from the greater waste of fixed capital during the idle period of sixteen weeks, and the increased cost of labour, which has to be paid for the whole year even if only a part of this is worked, a regular interruption of this kind in the production process would be incompatible with the running of modern large-scale industry. Continuity is itself a productive force of labour.

Marx, Capital II, page 356.

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 definition and its resolution follow.

The ratio of the total surplus-value annually produced to the value of the variable capital advanced, we call the annual rate of surplus-value. In the present case this is 5,000/500 = 1,000 percent

If we analyse this rate more closely, it is clear that it is equal to the rate of surplus-value that the variable capital advanced produces during one turnover period, multiplied by the number of turnovers of the variable capital (which is the same as the number of turnovers of the total circulating capital).

Marx, Capital II, page 371.

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.

The passage deserves quoting whole, for it names the wreck of a whole school.

This phenomenon makes it appear, moreover, as if the rate of surplus-value did not depend only on the amount of variable capital and the rate of exploitation of the labour-power set in motion by it, but also on inexplicable influences deriving from the circulation process; and in fact the phenomenon has been interpreted in this way, if not in this pure form, then at least in its more complicated and concealed form (that of the annual rate of profit). Since the beginning of the 1820s, this phenomenon has led to the complete destruction of the Ricardian school.

Marx, Capital II, page 372.

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 373.

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.

Marx first strips the question to its correct form.

Thus the question is not: where does surplus-value come from? But rather: where does the money come from which it is turned into?

In bourgeois economics, the existence of surplus-value is taken for granted. Thus not only is it presupposed, but it is also presupposed at the same time that a part of the mass of commodities cast into circulation consists of surplus product, and thus represents a value that the capitalist did not cast into circulation with his capital; that the capitalist therefore casts into circulation an excess over and above his capital, and withdraws this excess from it again.

Marx, Capital II, page 404.

At the level of the class, the paradox is stated with full force.

Thus the capitalist class remains the sole starting-point of the money circulation. If it needs £400 for payment for means of production, and £100 for payment of labour-power, then it casts £500 into circulation. But the surplus-value contained in the product, given a rate of surplus-value of 100 per cent, makes up a value of £100. How can the capitalist class continue to extract £600 from circulation, if it only ever puts £500 in? Out of nothing, nothing comes. The entire capitalist class cannot extract anything from the circulation sphere that was not put into it already.

Marx, Capital II, page 408.

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 410.

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 410.

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.

This is the summit of Volume II and one of the most consequential passages Marx wrote. Having analysed the circuit and turnover of the individual capital, Part Three shifts to the total social capital — the sum of all individual capitals — and asks how the annual social product is reproduced, in both its value and its material form, so that production can begin again. The answer is the reproduction schema: society's total output is divided into two great departments, Department I producing means of production and Department II producing means of consumption, and reproduction is possible only if the products of each can find their needed buyers in the other. Chapter 18 defines the object; Chapter 19 clears the ground by settling accounts with the classical economists, above all Adam Smith's dogma that the whole product resolves into revenue; Chapter 20 builds the schema of simple reproduction and derives its fundamental condition, that Department I's variable capital plus surplus-value must equal Department II's constant capital; Chapter 21 extends the analysis to reproduction on an expanded scale, where accumulation requires that Department I's output exceed what simple replacement demands. The reproduction schemas are the charter's capture-target for this volume, and they are the direct ancestor of input–output analysis, of the crisis and realization debates from Luxemburg onward, and of the disproportionality theory of crisis. The brief lays out Marx's own construction and holds the interpretive debates in view without adjudicating them.

Marx defines the new object. The movement of the total social capital is nothing but the interlocking totality of the individual turnovers, but analysing it requires including what the study of the individual capital could set aside: the consumption of the whole society, both productive and individual.

But each individual capital forms only a fraction of the total social capital, a fraction that has acquired independence and been endowed with individual life, so to speak, just as each individual capitalist is no more than an element of the capitalist class. The movement of the social capital is made up of the totality of movements of these autonomous fractions, the turnovers of the individual capitals.

Marx, Capital II, page 427.

Considered as a totality, the movement now includes what the analysis of the individual capital could bracket: consumption in both of its forms.

This overall process involves both productive consumption (the immediate production process) together with the changes of form that mediate it (which considered in their material aspect are exchanges), and individual consumption, with the changes of form or exchanges which mediate this. It involves on the one hand the conversion of variable capital into labour-power and the consequent incorporation of labour-power into the capitalist production process. In this aspect, the worker enters the scene as the seller of his commodity, labour-power, and the capitalist as its buyer. On the other hand, however, the sale of commodities involves their purchase by the working class, i.e. the workers’ individual consumption. Here, the working class appears as a buyer of commodities, and the capitalists as sellers of commodities to the workers.

Marx, Capital II, page 428.

And the object of Part Three is fixed accordingly.

The circuits of the individual capitals, therefore, when considered as combined into the social capital, i.e. considered in their totality, do not encompass just the circulation of capital, but also commodity circulation in general. In its fundamentals, the latter can consist of only two components: (1) the specific circuit of capital, and (2) the circuit of those commodities that go into individual consumption, i.e. the commodities on which the workers spend their wages and the capitalists their surplus-value (or part of it).

Marx, Capital II, page 428.

The decisive addition is that the total annual product must be traced not only in value but in its natural form: means of production must be replaced by means of production, means of consumption consumed and replaced. The question is no longer whether an individual capital returns enlarged, but whether the aggregate product contains, in the right proportions and the right physical shapes, everything needed to replace what was used up and to feed and employ the population — so that the same scale of production can resume. This is a question about the material composition of the product, not just its value, and it is what the schema is built to answer.

Before building his own account, Marx surveys the field. He credits Quesnay's Tableau économique as a work of genius — the first attempt to represent the annual reproduction of a whole nation's capital as a circuit of flows between classes — while noting the limits imposed by the Physiocrats' belief that only agriculture is productive. The bulk of the chapter is a sustained attack on Adam Smith's dogma, the error that blocked all subsequent analysis of reproduction: that the price of the entire annual product resolves without remainder into revenues — wages, profit, and rent.

Quesnay first. The opening tribute states what the Tableau achieved.

Quesnay’s Tableau économique shows in a few broad lines how the annual result of national production, defined in terms of value, is distributed by circulation in such a way that, with other circumstances remaining the same, simple reproduction can take place, i.e. reproduction on the same scale.

Marx, Capital II, page 435.

Adam Smith's dogma that the price or 'exchangeable value' of every single commodity – and thus of all the commodities comprising the annual social product (he correctly assumes capitalist production everywhere) – is composed of, or 'resolves itself into', the three 'component parts' wages, profit and rent, can be reduced to the thesis that commodity value = v + s, i.e. the value of the variable capital advanced, plus the surplus-value.

Marx, Capital II, page 446.

Marx restates the dogma in his own notation, and it is this form the critique works on.

The dogma that the prices of all commodities (and therefore of the annual commodity product) can be resolved into wages plus profit plus rent of land, assumes the form, even in the intermittent esoteric part of Smith’s work, that the value of any commodity, and thus of the society’s annual commodity product, = v+s, i.e. the capital value laid out on labour-power and constantly reproduced by the workers, plus the surplus-value added by the workers through their labour.

Marx, Capital II, page 448.

The dogma omits the constant capital c. If the whole product resolved into v + s (income), there would be nothing to replace the used-up means of production — and yet society must replace them or production halts. Smith could not say where the value that reconstitutes constant capital comes from, because his dogma had spent the entire product as revenue. This is precisely the gap the two-department schema fills: it shows how the constant capital of the whole society is reproduced in kind through the exchange between the departments, something a one-dimensional "adding-up" theory of value can never display.

Marx now builds the schema. The total social product is divided into two departments by the natural destination of the goods produced: Department I makes means of production, Department II makes means of consumption. He assumes a rate of surplus-value of 100 per cent and abstracts (provisionally) from the part of fixed capital not replaced within the year. The figures may be read in millions of any currency.

The division is given in Marx’s own words.

The society’s total product, and thus its total production process, breaks down into two great departments:

I. Means of production: commodities that possess a form in which they either have to enter productive consumption, or at least can enter this.

II. Means of consumption: commodities that possess a form in which they enter the individual consumption of the capitalist and working classes.

Marx, Capital II, page 471.

The schema itself, as Marx sets it out, should be carried verbatim.

For our investigation of simple reproduction, we intend to use the following schema, in which c = constant capital, v = variable capital, s = surplus-value, and the rate of valorization s/v is taken as 100 per cent.

The figures may be in millions of marks, francs or pounds sterling.

I. Production of means of production:

Capital 4,000c+1,000v = 5,000.

Commodity product 4,000c+1,000v+1,000s = 6,000,

existing in the form of means of production.

II. Production of means of consumption:

Capital 2,000c+500v = 2,500.

Commodity product 2,000c+500v+500s = 3,000,

existing in means of consumption.

The total annual commodity product, taken together, is thus:

I. 4,000c+1,000v+1,000s = 6,000 means of production.

II. 2,000c+500v+500s = 3,000 means of consumption.

Marx, Capital II, page 473.

Simple reproduction means the whole surplus-value is consumed unproductively and production resumes on the same scale. For that to be possible, three great exchanges must balance. Within Department I, the 4,000c is means of production already in the right physical form to replace Department I's own used-up constant capital, so it can be exchanged internally. Within Department II, the 500v + 500s is means of consumption that Department II's own workers and capitalists consume directly. The pivot is the exchange between the departments: Department I's workers and capitalists (the 1,000v + 1,000s) need means of consumption, which only Department II produces; Department II needs means of production to replace its 2,000c, which only Department I produces. Reproduction is possible only if these two match.

Marx opens the exchange analysis with this pivot.

We begin with the major exchange between the two departments. (1,000v+1,000s)I, values that exist in the hands of their producers in the natural form of means of production, are exchanged for 2,000 IIc, values that exist in the natural form of means of consumption.

Marx, Capital II, page 474.

In department I, the collective capitalist has already paid the workers £1,000 … for the v-component of the value of a product of department I … The workers use this £1,000 to purchase means of consumption of the same value from the capitalists in department II, and thereby transform half of department II's constant capital into money. The capitalists in department II, for their part, use this £1,000 to buy means of production to the value of 1,000 from the capitalists in department I; as a result of this, the variable capital value, = 1,000v, which existed as a part of department I's product in the natural form of means of production, is transformed back again into money.

Marx, Capital II, page 475. Ellipses drop the parenthetical noting the money-form notation and the identification of the product as means of production.

Tracing the surplus-value component the same way, the whole inter-departmental exchange resolves into the fundamental condition of simple reproduction: the sum of Department I's variable capital and surplus-value must equal Department II's constant capital.

The condition is stated in full at the close of the exchange section.

The result of all this is that, in the case of simple reproduction, the value components v+s of the commodity capital in department I (and therefore a corresponding proportionate part of department I’s total commodity product) must be equal to the constant capital IIc similarly precipitated out by department II as a proportionate part of its total commodity product; in other words, I(v+s) = IIc.

Marx, Capital II, page 478.

If this equality holds, every element of the annual product finds its place: the means of production reproduce the constant capital of both departments, the means of consumption feed both departments' workers and capitalists, and production begins again at the same scale. If it fails — if the two sides do not match in value and in physical composition — reproduction is disrupted. Marx then reintroduces the money that mediates these exchanges (showing the capitalists themselves supply it, as Chapter 17 argued) and, in the chapter's difficult later sections, the replacement of fixed capital, where the fact that some capitalists are replacing worn-out machinery in a given year while others are only setting aside depreciation as a money hoard introduces a standing possibility of imbalance between the two flows. Even simple reproduction, Marx shows, is a knife-edge of proportions that nothing guarantees the market will hit.

The money mediation is put beyond doubt at the level of the two classes.

In relation to the capitalist class as a whole, however, the proposition that it must itself cast into circulation the money needed to realize its surplus-value (and also to circulate its capital, constant and variable) is not only far from paradoxical, it is in fact a necessary condition of the overall mechanism. For here there are just two classes: the working class, which only disposes of its labour-power, and the capitalist class, which has the monopoly of the means of social production, and of money.

Marx, Capital II, page 497.

For the wear-and-tear component of the fixed capital, likewise, the money must come from inside the system.

Since we showed in sub-section (a) that the hypothesis according to which department I casts additional money into circulation in order to realize the 200 IIc(d) has to be rejected as absurd, we have left only the apparently still more absurd hypothesis that department II itself casts into circulation the money with which that value component of commodities is realized which has to replace the wear and tear of its fixed capital. The portion of value that Mr X’s spinning machine loses in the course of production, for example, reappears as a part of the value of his yarn. The loss that his spinning machine suffers in value he thus collects on the other side as money.

Marx, Capital II, page 533.

And the knife-edge is named for what it is.

There would be a crisis – a crisis of production – despite reproduction on a constant scale.

In short, if in the case of simple reproduction and with other circumstances remaining the same – i.e. particularly with the productivity, overall amount and intensity of labour remaining unchanged – a constant proportion is not assumed between the defunct fixed capital (that needing renewal) and the fixed capital which continues to operate in the old natural form (merely adding value to its products to replace its wear and tear), then in one case the amount of circulating components to be reproduced remains the same, but the amount of fixed components to be replaced will have increased; the total production of department I therefore has to grow, or else there would be an insufficient amount of reproduction, quite independent of the monetary relations.

Marx, Capital II, page 543.

Under accumulation, part of the surplus-value is not consumed but converted into additional constant and variable capital, so production must expand. Marx works from a starting schema in which the proportions differ from the simple-reproduction case, because expansion is only possible if Department I produces a surplus of means of production over what mere replacement requires.

Before the schema can expand, the surplus-value destined for accumulation must first pass through the money form, and Marx is emphatic about what this hoarding is and is not.

If capitalist A, for example, sells the quantities of commodity product that he successfully produced in the course of a year or a number of years, then he thereby successively transforms that part of his commodity product that is the bearer of surplus-value – the surplus product – i.e. the surplus-value that he produced in the commodity form, into money, stores this away bit by bit, and in this way forms for himself potential new money capital; potential on account of its capacity and its destiny, which is to be converted into elements of productive capital. In fact, however, he only performs simple hoard formation, which is not an element of real reproduction.

Marx, Capital II, page 566.

The hoards form and dissolve only through sales and purchases that are one-sided, and their balance is itself a condition.

We see now that the periodic renewal of the fixed capital portion of IIc (the entire capital value IIc being exchanged for elements to the value of I(v+s)), presupposes on the one hand a one-sided purchase of that fixed part of IIc which is transformed back from the money form into the natural form and to which corresponds a one-sided sale of Is; on the other hand it presupposes a one-sided sale on the part of IIc, the sale of that fixed value component (wear and tear) which is precipitated out in money and to which corresponds a one-sided purchase of Is. In order that the exchange should take place normally, it has to be assumed that the one-sided purchase by IIc is equal in value to its one-sided sale, and similarly that the one-sided sale of Is to IIc, section 1, is equal to its one-sided purchase from IIc, section 2 (p. 540). Otherwise, simple reproduction would be disrupted; the one-sided purchase at one point must be covered by a one-sided sale at another.

Marx, Capital II, page 570.

The fundamental condition now shifts. In simple reproduction, Department I's variable capital plus surplus-value exactly equals Department II's constant capital. Under accumulation, it must exceed it, because Department I retains part of its own surplus product to enlarge its own constant capital, and must also furnish the additional means of production that Department II needs to expand.

It is self-evident that, on the assumption of accumulation, I(v+s) is greater than IIc, and not equal to it as in simple reproduction; since (1) department I incorporates a part of its surplus product into its own productive capital and transforms five sixths of this into constant capital, so that it cannot simultaneously exchange this five sixths for means of consumption II; and (2) department I has to supply the material for the constant capital needed for accumulation within department II out of its surplus product.

Marx, Capital II, page 590.

The paired schemas from which the demonstration proceeds should be carried as Marx gives them.

A) Schema of simple reproduction

I. 4,000c+1,000v+1,000s = 6,000 / II. 2,000c+500v+500s = 3,000 Total = 9,000.

(B) Initial schema for reproduction on an expanded scale

I. 4,000c+1,000v+1,000s = 6,000 / II. 1,500c+750v+750s = 3,000 Total = 9,000.

If we assume that in schema (B) half the surplus-value in department I is accumulated, i.e. 500, then we get in the first place (1,000v+500s)I or 1,500 I(v+s) to be replaced by 1,500 IIc; there then remains in department I, 4,000c+500s, the latter having to be accumulated.

Marx, Capital II, page 586.

Marx then works the accumulation through several years, showing that if the two departments accumulate in the right proportions the schema expands smoothly, each year's enlarged output providing exactly the additional means of production and means of consumption the next year's expanded production requires. The demonstration is that expanded reproduction is possible — that capitalist accumulation need not break down for lack of a market, provided the proportions between the departments are maintained. But the proportions are exacting, and nothing in the anarchic decisions of individual capitals guarantees they will be met. Marx leaves the manuscript unfinished here, and it is precisely this gap — whether the required proportionality is a normal outcome, a happy accident, or a systematically violated condition — that Rosa Luxemburg, Bukharin, and the later disproportionality and underconsumption theorists fought over. The schema does not by itself decide the crisis question; it supplies the framework within which the crisis question can be posed with precision, which is why it stands as the analytical foundation for everything that follows in the Marxist theory of accumulation and reproduction.