STUDYING DAS KAPITAL: Part 2 (of 8)
Summarizing , mostly defending and, at times, critiquing Volume I
CHAPTER 4: The General Formula for Capital
We are now at the beginning of Part 2 of Das Kapital. Marx called Part 2 “Transformation of Money into Capital” which consists of chapters 4, 5 and 6. If you prefer to download a PDF with all eight parts of my study notes combined into a single document, click the button below to do that.
William Roberts called chapters 4-11 as the “Capital and capitalist exploitation” chapters. See the diagram at the opening of the notes on Part 1.
So what is “capital” according to Marx? Finally (a fifth of the way through a book with “capital” in the title) he defines it as anything the capitalist can convert into money to circulate commodities. Later in the book this will become more clear when he defines constant and variable capital.
The circulation of commodities is the starting-point of capital.
If we abstract from the material substance of the circulation of commodities, that is, from the exchange of the various use-values, and consider only the economic forms produced by this process of circulation, we find its final result to be money: this final product of the circulation of commodities is the first form in which capital appears.
As a matter of history, capital, as opposed to landed property, invariably takes the form at first of money;
He says below that the C-M-C circuit is selling in order to buy. The M-C-M circuit is buying in order to sell. The M-C-M circuit ends with more money at the end, or else nobody would bother with it he says. The extra amount of money he defines as “surplus value”.
The C-M-C circuit is limited by our capacity for consumption but that M-C-M is (for reasons he does not yet explain) something drives it to keep taking place. If we had incentive to make $100 into $110, why not the same for $110 and so on. If we stop and hoard the $10 nothing more comes of it, but if we keep doing M-C-M we keep expanding surplus value.
Marx defines a capitalist, now that he has defined capital, as a “rational miser”. The miser is obsessed with saving (which Marx dismisses as short-sighted) but the capitalist is addicted to keeping the M-C-M circuit going: “while the miser is merely a capitalist gone mad, the capitalist is a rational miser.”
Marx then introduces distinctions among industrial capitalists (industrialists) and financial capitalists (financiers) and speculators (which is what he seems to consider Mercantilists). He concludes with what he calls the general formula of capital: M-C-M’. He uses M’ to call out the surplus value generated by circulation.
ASIDE: Marx was Jewish but this remark below was antisemitic:
“The capitalist knows that all commodities, however scurvy they may look, or however badly they may smell, are in faith and in truth money, inwardly circumcised Jews…”
Chapter 5: Contradictions in the General Formula of Capital
He begins to explore how surplus value is created. He says that when commodities are exchanged there appears to be a straightforward exchange of equivalents, Yes, he concedes, some vendors may overcharge but Marx argues that such occurrences are rare when markets are competitive.
ASIDE: Marx uses the terms “supply and demand” in this chapter. Apparently Alfred Marshal , in 1791, 76 years before Das Kapital was published, was first to draw supply and demand curves. Marx refers nine times in the book to “supply and demand”. Adam Smith’s “Wealth of Nations” never does because it predates that terminology.
Marx stresses what he does not mean by surplus value. He does not mean selling things for more than they are worth. Things would then be bought - including by capitalists - for more than they are worth. Nobody would get ahead.. He then adds that buying cheaply then selling at prevailing prices is no better. If you buy too cheaply somebody else will make you sell too cheap. If you sell too expensive, somebody else will also make you buy too expensive. Marx is, for now, assuming very competitive markets in which speculators cannot prosper for very long or at any significant scale.
Finally, Marx explains that surplus value (surplus exchange value to be more explicit) is created because a producer adds value to his raw materials through labor. Commodity circulation is required for surplus value to be created but it does not actually create it by itself. The creation of surplus value requires commodity circulation but circulation is not enough to explain surplus value. As he ends the chapter, he has still not explained what exactly creates surplus value.
Chapter 6: The Buying and Selling of Labour- Power
Marx says that a labour market can only exist if slavery is abolished, and workers have no other way to live than by selling their labour power (capacity for labour).
A labour market is a more efficient way to exploit labour power. With a labour market the competition for workers does not end at the slave auction.
ASIDE: The term “means of production “ appear with a very limited meaning - as basic material inputs to production. There are 152 hits for the term “means of production” in the book but up until now uses it to mean raw material inputs.
Capitalism and capitalists are a unique social and historical development. It is human-made.
Nature does not produce on the one side owners of money or commodities, and on the other men possessing nothing but their own labour-power.
Features of capitalism (commodity production and the use of money to circulate them) pre-date capitalism, but when most production is for commodities then a capitalist society has evolved into being.
In fact, he goes on to stress that what really announces the arrival of capitalism is “free” workers selling their labor power (and only their labor power) in the marketplace to another class of people who own the means of production.
The exchange value of labor is itself equal to the labour time required to keep the worker alive and able to keep working. And education can sometimes increase the amount of labour time that must be put into a worker; therefore the worker’s exchange value.
But the “free” labour market allows the capitalist to ruthlessly prey on the desperation of workers. Footnote 14, the last footnote in this chapter, describes how workers, out of desperation, accept bread they know is “adulterated with alum, soap, pearl ashes, chalk”
Excellent project!