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.