Chapter 4: The General Formula for Capital

Submitted by libcom on August 10, 2005

Outline of Marx's Discussion

First form of capital was money
-- merchant's capital
-- usurer's capital

In (M - C - M') as opposed to (C - M - C)
-- commodity is only a mediator, not the purpose
-- money is alpha and omega
-- only a quantitative expansion
-- valorization

Money, Marx says, is the first form of appearance of capital. Historically capital first appears in the form of merchants' capital, usurers' capital and monetary wealth. Daily capital appears in the form of money in the sense that it always first steps onto the stage of action in that form, i.e., the capitalists launch their enterprises with money. (as in M - C - M')

In this chapter that Marx repeats what he does in the Contribution when he juxtaposes C - M - C with M-C-M. And he points out that M - C - M "would be absurd and empty if the intention were, by using this roundabout route, to exchange two equal sums of money." The problem therefore is to analyse this form to discover its logic.

He begins by examining a series of formal distinctions within the forms. I want to follow his analysis but to supplement his abstract discussion of C - M - C with that of the most important case in capitalism: the sale of labor power by the working class in exchange for a wage which is then spent for the means of subsistence, LP - M - C(MS). This is the subject of chapter 6 so I won't go into detail here, yet it is useful to see how these two forms represent two class perspectives on exchange.

1. The order of the phases in M - C - M is inverted in comparison with the order of the phases in the circuit of the commodity. The phases in M - C - M appear as M - C, C - M, compared to the C - M, M - C in C - M - C. When we take LP -M - C(MS) as an example of C - M - C, then we can see that the counterpart of the worker's sale of labor power LP - M, is the capitalst purchase of labor power M - C (LP) as the first part of the circuit of M - C - M'. The second phase --when the worker spends the wage M on the means of subsistence M - C (MS) has as its capitalist counterpart the sale of such MS, i.e., C - M which constitutes the second part of the the circuit M - C - M'.

2. C - M - C has money as mediator whereas M - C - M has commodity as mediator. In the case of LP - M - C(MS) the money mediator is usually the wage although it might be some other form of income paid in exchange for labor power. In other words, for workers money is only the means to an end, it is not an end in itself -unless, of course, they have internalized the values and goals of capital. (In which case, to the degree that they are able they might save their wage rather than spend it, thus partially breaking/reducing the circuit LP - M - C(MS).)(1)

In the case of capital, money is the beginning and the end, the alpha and the omega, the means and the goal. The mediating C is only simple in the case of merchant capital which buys a good in order to resell it at a higher price. When we turn to industrial capital -the quintessential form of capital for Marx- the analysis of what happens to this C will take us (in chapter 7) into the heart of production.

3. Money is "spent" in C - M - C, but only "advanced" in M - C - M (in the sense that while workers spend their money to get what they really want (the means of life), the capitalists expects to get their money back (-augmented, of course, as M' rather than M).

4. Money is displaced twice in M - C - M, but the commodity is displaced twice in C - M - C. Money flows out and back for the capitalist; one commodity (labor power) is traded away and another is acquired by the worker.

5. In the case of C - M - C, money passes from one set of hands to another, whereas in M - C - M money flows back to the original owner, in a reflux; this reflux is "conditioned by the very manner in which it is expended" (p. 250) -i.e., in the reflux the money will return (as revenue, including profit) upon the second sale.

6. In C - M - C use-value is the final goal; in M - C - M its determining purpose is exchange-value. This observation parallel's my discussion of use value and exchange value in chapter 3 of Reading Capital Politically. That is to say, just as there I argued that the working class was mainly interested in the use values of commodities (only concerned with their exchange values because they had to buy them) while the capitalists were primarily interested in their exchange value (only concerned with their use values because they had to sell them), so here Marx is pointing out that workers engage in exchange to meet their needs. They must buy commodities to live but their goal is the consumption of the use value as part of their lives, of living. On the other hand, the capitalists deal with C only because they must in order to augment their money, i.e., exchange value as profit.

7. In C - M - C the two extremes are qualitatively different use-values. In M - C - M the two extremes are qualitatively identical quantities of money; therefore M - C - M cannot draw its meaning from any qualitative change, but only from a quantitative one. Therefore "the complete form of this process is M - C - M'", and the increment of M' - M = surplus-value.

In the abstact formulation of this chapter, this conclusion that the second M must be augmented so that M'>M appears purely logical and formal. But the basic point is merely a continuation of the previous discussion. If the object of capitalists is exchange value rather than use-value, then we know from the analysis of chapter one that the exchange value is the form of value whose substance is one particular aspect of labor, i.e., its function as social organization and domination. Therefore, the only possible point of engaging in activities which begin and end with money is more money, whose social purpose lies the imposition of more work.

8. Final goal of C - M - C is a use-value whose realization lies outside of circulation as an integral part of the more general realization of people's lives. Final goal of M - C - M' is the circulation of capital --"an end in itself"-- and thus limitless. (Here we should remember the infinity of the expanded, general and money forms of value.)

As the "conscious bearer of this movement" Marx says, the capitalist has this "boundless drive for enrichment, this passionate chase after value." Thus, the objective content of M - C - M' is the "valorization of value" as increase in magnitude. The subjective content of the capitalist is just this objective movement, so the capitalist acts as "capital personified and endowed with consciousness and a will."

This is pretty much the way Marx treats capitalists throughout the book. He is not interested in them as individuals but as personifications or functionaries of capital. In this book, which sets out the logic of the class relations of capital he is not interested in any behavior on their part that might violate that logic, e.g., an individual's prediliction for consumption over investment. For the most part in Marx's treatment, the consumption of the capitalist falls outside the analysis. Unlike many anti-capitalists, he is not constantly inveighing against "fat cats" and pointing his finger at capitalist wealth and ostenstatious consumption. His interest is elsewhere: their behavior as they act as capitalists per se: as the agents of investment and the endless imposition of work.

However, despite his general lack of interest in the capitalist qua individual, Marx does comment here on the conscious mind-set of many capitalists: avarice, a passion for money-making. This is the kind of individual capitalist often portrayed and mocked in literature. In Charles Dicken's Hard Times, for example, the greedy and egotistical Mr. Bounderby is a good example of this type. On the other hand, not all capitalists are simply greedy. Some, who often rise to positions of policy making and political responsibility, can see beyond the money fetish and understand that in their investments which impose work on others they are, in fact, organizing society by shaping the lives of most people. Capitalists who come to understand this sometimes acquire a sense of "noblesse oblige", i.e., a sense of responsibility for the general social welfare. Thus, when David Rockefeller said "profits are the measure of our [business'] contribution to society", we can interpret him as meaning: profits are invested, investment creates jobs, jobs make it possible for people to live and improve their lives, thus business "contributes" to society with their profits. No matter that, from a workers' point of view, he has conveniently presented a process of exploitation as a kind of benevolence; the point is that his consciousness has grasped his profit making activity M - C - M' in social terms and understood that what is really at stake is the organization of society through work. At this point, in their own peculiar, class-biased way, they achieve something of what Marx's theory provides: an understanding of the social meaning of such fetishized categories as money and profit.

Based on the above analysis of the two forms, we now have a new perspective on the change of form discussed in Chapter Three. Instead of the metamorphosis of the commodity, we have the metamorphosis of capital in which money and commodities appear only as "different modes of existence" or "capital is money, capital is commodities." (2) Since value is the subject of this movement to change its own magnitude via changes in form, we can say that "valorization is therefore self-valorization". (3) The "independent form or existence of this self-activating movement is money . By means of which [value's] identity with itself may be asserted." Here Marx falls back into a Hegelian language in which value, if we fail to remember what it is, appears as a reified (thing-in-itself) relationship that acts independently. But value, that value which expands itself, we know to be the real social content of the capitalist-worker relationship: work, the imposition and struggle against work. So it is this work that finds money as its independent expression, and it is this struggle over the imposition of work which is constantly expanding. Self-valorization means that the capital/labor relation need not look outside itself but finds the motive of its own expansion within itself --within the struggle.

Because M - C - M' is the form peculiar to merchant's capital, industrial capital and interest-bearing capital, Marx concludes that M-C-M' is the general formula for capital in the sphere of circulation. Nota Bene: the qualifier at the end of the definition "in the sphere of circulation," this form is not adequate to express capital once we have examined its substance in the sphere of production. Then we must have M - C . . . P . . . C' - M' which explicitly recognizes both spheres.
Concepts For Review
merchants capital M - C - M
M - C - M'
metamorphosis of capital
industrial capital

Questions For Review

(An * indicates that one possible answer to the question can be found at the end of the study guide.)

1. Explain the purpose of Chapter Four. How does it relate to what comes before and what comes afterwards?

2. What is the theoretical origin of M-C-M and why is it absurd as it stands?

3. What can one deduce from the fact that the point of departure and the goal of M-C-M' are qualitatively identical?

4. Explain the ways in which C-M-C represents the viewpoint of the working class and M-C-M represents the viewpoint of capital.

5. What does the general formula for capital suggest about business attitudes toward the commodities they produce? How does this jive with their professed purpose of meeting consumer demand?

6. Given that there have been merchant capitalists around for thousands of years, why do we date the emergence of capitalism from only the 16th or 17th Centuries?

1 This is not to say that all, or even most, savings by workers is emmulation of capitalist habits. Most working class savings are merely means to redistribute income through time (e.g., pension funds) and to maintain a reserve against emergencies.

2 This simple way of putting the relationship holds a profound truth: not only are money and commodities moments of capital, but all the elements of the relationships Marx investigates are moments of capital, just as capital is each and every one of them.

3 Marx uses the term "self-valorization" to denote the expansion of capital. You will remember the discussion in my book on reading Capital politically about how this term has been appropriated and redefined to denote the self activity of workers against and beyond capital.