is labor-power. This is the broad transitional story told in these three chapters. The focus begins to shift from commodity exchange to capital circulation.
There is, however, one important feature in these chapters that deserves some preliminary scrutiny. Several times already I have asked whether Marx is making a logical argument (based on a critique of the utopian propositions of classical liberal political economy) or a historical argument about the evolution of actually existing capitalism. By and large I have preferred the logical reading to the historical one, even though there may be important historical insights to be gained in considering the circumstances necessary to facilitate the rise of a capitalist mode of production (such as the work of the state in relation to the different money-forms). This manner of approach would be consistent with the methodological argument he makes elsewhere, that we can only properly understand history by looking backward from where we are today. This was his key point in the Grundrisse:
Bourgeois society is the most developed and the most complex historical organization of production. The categories which express its relations, the comprehension of its structure, thereby also allows insights into the structure and relations of production of all the vanished social formations out of whose ruins and elements it built itself up, whose partly still unconquered remnants are carried along within it, whose mere nuances have developed explicit significance within it, etc. Human anatomy contains a key to the anatomy of the ape.1
But while “the intimations of higher development … can be understood only after the higher development is already known,” this should not delude us into seeing the prototypes of “bourgeois relations in all forms of society” or thinking “that the categories of bourgeois economics possess a truth for all other forms of society.”2 Marx does not accept a Whig interpretation of history or a simple teleology. The bourgeois revolution fundamentally reconfigured preexisting elements into fundamentally new forms, at the same time allowing us to see those preexisting elements in a new light.
CHAPTER 4: THE GENERAL FORMULA FOR CAPITAL
In these three chapters, the reading of history seems to have an important independent role to play in the theorizing. He starts off chapter 4, for example, with a historical statement: “World trade and the world market date from the sixteenth century, and from then on the modern history of capital starts to unfold.” The logical starting point is given in the parallel statement that “commodity circulation is the first form of appearance of capital” (247). So the logical and historical arguments are immediately juxtaposed. We need, therefore, to pay careful attention to how these arguments work together in these chapters in order to understand how the methodological prescriptions set out in the Grundrisse are put into practice in Capital.
Marx begins by examining how capital historically confronted the power of landed property in the transition from feudalism to capitalism. In this transition, merchants’ capital and usurers’ capital—specific forms of capital—played an important historical role. But these forms of capital are different from the “modern” industrial form of capital that Marx considers central to a fully developed capitalist mode of production (247). The dissolution of the feudal order, the dissolution of the power of landed property and of feudal land control, was largely accomplished through the powers of merchant capital and usury. This is a theme you find strongly articulated also in the Communist Manifesto. Interestingly, it’s a history that assumes a logical place in Capital, because what we see in usurers’ capital in particular is the independent social power of money (and of the money holders), an independent power that he showed in the money chapter to be socially necessary within a capitalist mode of production. It is through the deployment of this independent power that usury and the usurers helped bring feudalism to its knees.
This brings him back to the starting point for understanding the role of money (as opposed to the commodity) in the circulation process. Money can be used to circulate commodities, it can be used to measure value, to store wealth and so on. Capital, however, is money used in a certain way. Not only is the M-C-M process an inversion of the C-M-C process, but, as Marx observed in the previous chapter, “money does not come onto the scene as a circulating medium, in its merely transient form of an intermediary in the social metabolism, but as the individual incarnation of social labour, the independent presence of exchange-value, the universal commodity” (235). The representation of value (money), in other words, becomes the aim and objective of circulation. This form of circulation, however, “would be absurd and empty if the intention were, by using this roundabout route, to exchange two equal sums of money, ₤100 for ₤100” (248). The exchange of equal values is perfectly fine with respect to use-values because it is the qualities that matter. But the only logical reason to engage in the M-C-M circulation, as we saw in chapter 3, is to have more value at the end than at the beginning. Marx laboriously arrives at the fairly obvious conclusion:
The process M-C-M does not therefore owe its content to any qualitative difference between its extremes, for they are both money, but solely to quantitative changes. More money is finally withdrawn from circulation than was thrown into it at the beginning … The complete form of this process is therefore M-C-M’, where M’ = M + ΔM, i.e. the original sum advanced plus an increment. This increment or excess over the original value I call ‘surplus-value’. (251)
With this we arrive for the first time at the concept of surplus-value, which is, of course, fundamental to all of Marx’s analysis.
What happens is that “the value originally advanced … not only remains intact while in circulation, but increases its magnitude, adds to itself a surplus-value, or is valorized … And this movement converts it into capital” (252). Here, finally, is the definition of “capital.” For Marx, capital is not a thing, but a process—a process, specifically, of the circulation of values. These values are congealed in different things at various points in the process: in the first instance, as money, and then as commodity before turning back into the money-form.
Now, this process definition of capital is terribly important. It marks a radical departure from the definition you’ll find in classical political economics, where capital was traditionally understood as a stock of assets (machines, money, etc.), as well as from the predominant definition in conventional economics, where capital is viewed as a thing-like “factor of production.” Conventional economics has in practice a hard time measuring (valuing) the factor of production that is capital. So they just label it K and put it into their equations. But actually, if you ask, “What is K and how do you get a measure of it?” the answer is far from simple. Economists come up with all kinds of measures, but they can’t agree on what capital actually “is.” It plainly exists in the form of money, but it also exists as machines, factories and means of production; and how do you put an independent monetary value on the means of production, independent of the value of the commodities they help to produce? As was shown in the so-called capital controversy of the early 1970s, the whole of contemporary economic theory is dangerously close to being founded on a tautology: the monetary value of K in physical asset-form is determined by what it is supposed to explain, viz. the value of the commodities produced3 (208–9).
Again, Marx looks at capital as a process. I could make capital right now by taking money out of my pocket and putting it into circulation to make more money. Or I could take capital out of circulation simply by choosing to put the money back into my pocket. It then follows that not all money is capital. Capital is money used in a certain way. The definition of capital cannot be divorced from the human choice to launch money-power into this mode of circulation. But this poses a whole set of problems. To begin with, there is the question of how much of an increment capital can possibly yield. Recall that one of the findings in the chapter on money was that the accumulation of money-power is potentially limitless; Marx repeats that here (235, 256–7). Its full significance, however, will only be taken up much later (in chapters 23 and 24 in particular).
A capitalist, Marx says, is “the conscious bearer … of this movement, the possessor of money becomes a capitalist. His person, or rather his pocket, is the point from which the money starts, and to which it returns.” From this it follows that “use-values must therefore never be treated as the immediate aim of the capitalist.” That is, the capitalist produces use-values only in order to gain exchange-value.