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# Capital: A Critique of Political Economy, Vol. II. The Process of Circulation of Capital

 Marx, Karl (1818-1883) Display paragraphs in this book containing:
 Editor/Trans. Friedrich Engels, ed. Ernest Untermann, trans. First Pub. Date 1885 Publisher/Edition Chicago: Charles H. Kerr and Co. Pub. Date 1909 Comments Das Kapital, based on the 2nd edition.
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### Part II, Chapter XVITHE TURN-OVER OF THE VARIABLE CAPITAL.

#### I. THE ANNUAL RATE OF SURPLUS-VALUE.

II.XVI.1

We start out with a circulating capital of 2500 p. st., four-fifths of which, or 2000 p. st., are constant capital (materials of production), and one-fifth of which, or 500 p. st., is variable capital invested in wages.

II.XVI.2

Let the period of turn-over be 5 weeks; the working period 4 weeks, the period of circulation 1 week. Then capital I is 2000 p. st., consisting of 1600 p. st. of constant capital and 400 p. st. of variable capital; capital II is 500 p. st., 400 of which are constant and 100 variable. In every working week, a capital of 500 p. st. is invested. In a year of 50 weeks an annual product of 50 times 500, or 25,000 p. st., is manufactured. The capital I, continuously invested in one working period and amounting to 2000 p. st., is turned over 12½ times. 12½ times 2000 make 25,000 p. st. Of this sum of 25,000 p. st., four-fifths, or 20,000 p. st., are constant capital invested in materials of production, and one-fifth, or 5000 p. st., is variable capital invested in wages. The total capital of 2500 p. st. is turned over 10 times, which is 25,000 divided by 2500.

II.XVI.3

The variable circulating capital expended in production can serve afresh in the process of circulation only to the extent that the product in which its value is reproduced is sold, converted from a commodity-capital into a money-capital, in order to be once more expended in the payment of labor-power. But the same is true of the constant circulating capital invested in production for materials, the value of which reappears as a portion of the value of the product. That which is common to these two portions of the circulating capital, the variable and constant capital, and which distinguishes them from the fixed capital, is not that the value transferred from them to the product is circulated by the commodity-capital, circulated as a commodity through the circulation of the product. For one portion of the value of the product, and thus of the product circulating as a commodity, the commodity-capital, always consists of the wear of the fixed capital, that is to say, of that portion of the value of the fixed capital which is transferred to the product during the process of production. The difference is rather this: The fixed capital continues to serve in the process of production in its old natural form for a longer or shorter cycle of periods of turn-over of the circulating capital (which consists of constant circulating plus variable circulating capital), while every single turn-over is conditioned on the reproduction of the entire circulating capital passing from the sphere of production in the form of commodity-capital into the sphere of circulation. The constant and variable circulating capital both have in common the first phase of the circulation, C'—M'. But in the second phase they separate. The money, into which the commodity is reconverted, is in part transformed into a productive supply (constant circulating capital). According to the different terms of purchase of this material, a portion may be sooner, another later, converted from money into materials of production, but finally it is wholly consumed that way. Another portion of the money realized by the sale of the commodity is held in the form of a money-supply, in order to be gradually expanded in the payment of labor-power incorporated in the process of production. This portion constitutes the variable circulating capital. Nevertheless the entire reproduction of either portion is due to the turn-over of the capital, to their conversion into a product, from a product into a commodity, from a commodity into money. This is the reason why, in the preceding chapter, the turn-over of the circulating constant and variable capital was discussed separately and simultaneously without any regard to the fixed capital.

II.XVI.4

For the purposes of the question which we have to discuss now, we must go a step farther and proceed with the variable portion of the circulating capital as though it constituted the circulating capital by itself. In other words, we leave out of consideration the constant circulating capital which is turned over together with it.

II.XVI.5

A sum of 2500 p. st. has been advanced, and the value of the annual product is 25,000 p. st. But the variable portion of the circulating capital is 500 p. st. The variable capital contained in 25,000 p. st. therefore amounts to 25,000 divided by 5, or 5000 p. st. If we divide these 5000 p. st. by 500, we find that 10 is the number of turn-overs, just as it is in the case of the total capital of 2500 p. st.

II.XVI.6

Here, where it is only a question of the production of surplus-value, it is quite correct to make this average calculation, according to which the value of the annual product is divided by the value of the advanced capital, not by the value of that portion of this capital which is employed continually in one working period (in the present case not by 400, but by 500, not by capital I, but by capital I plus II). We shall see later, that, from another point of view, this is not quite exact. In other words, this calculation serves well enough for the practical purposes of the capitalist, but it does not express exactly or appropriately all the real circumstances of the turn-over.

II.XVI.7

We have hitherto ignored one portion of the commodity-capital, namely the surplus-value contained in it, which was produced during the process of production and incorporated in the product. We have now to direct our attention to this.

II.XVI.8

Take it, that the variable capital of 100 p. st. expended weekly produces a surplus-value of 100%, or 100 p. st., then the variable capital of 500 p. st., advanced for a period of turn-over of 5 weeks, produces 500 p. st. of surplus-value, in other words, one-half of the working day consists of surplus-labor.

II.XVI.9

If 500 p. st. of variable capital produce a surplus-value of 500 p. st., then 5000 p. st. produce ten times 500, or 5000 p. st. of surplus-value. The proportion of the total quantity of surplus-value produced during one year to the value of the advanced variable capital is what we call the annual rate of surplus-value. In the present case, this is as 5000 to 500, or 1000%. If we analyze this rate more closely, we find that it is equal to the rate of surplus-value produced by the advanced variable capital during one period of turn-over, multiplied by the number of turn-overs of the variable capital (which coincides with the number of turn-overs of the entire circulating capital).

II.XVI.10

The variable capital advanced in the present case for one period of turn-over is 500 p. st. The surplus-value produced during this period is likewise 500 p. st. The rate of surplus-value for one period of turn-over is, therefore, as 500 s to 500 v, or 100%. This 100%, multiplied by 10, the number of turn-overs in one year, makes 1000%, a rate of 5000 to 500.

II.XVI.11

This applies to the annual rate of surplus-value. As for the quantity of surplus-value obtained during a certain period of turn-over, it is equal to the value of the variable capital advanced for this period, in the present case 500 p. st., multiplied by the rate of surplus-value, in the present case, therefore, 500 times 100-100, or 500 times 1, or 500 p. st. If the advanced variable capital were 1500 p. st., with the same rate of surplus-value, then the quantity of surplus-value would be 1500 times 100-100, or 1500 p. st.

II.XVI.12

The variable capital of 500 p. st., which is turned over ten times per year, producing a surplus-value of 5000 p. st., and thus having a rate of surplus-value amounting to 1000%, shall be called capital A.

II.XVI.13

Now let us assume that another variable capital, B, of 5000 p. st., is advanced for one whole year (that is to say for 50 working weeks), so that it is turned over only once a year. We assume furthermore that, at the end of the year, the product is paid for on the same day that it is finished, so that the money-capital, into which it is converted, flows back on the same day. The circulation time is then zero, the period of turn-over equal to the working period, that is to say, one year. As in the preceding case, so there is now in the labor-process of each week a variable capital of 100 p. st., or of 5000 p. st., in 50 weeks. Let the rate of surplus-value be likewise the same, or 100%, that is to say, one-half of the working day of the same length as before consists of surplus-labor. If we study a period of 5 weeks, then the advanced variable capital is 500 p. st., the rate of surplus-value 100%, the quantity of surplus-value produced in 5 weeks likewise 500 p. st. The quantity of labor-power, which is here exploited, and the intensity of its exploitation, are assumed to be the same as those of capital A.

II.XVI.14

In each week, the invested variable capital of 100 p. st. produces a surplus-value of 100 p. st., hence in 50 weeks the total invested capital produces a surplus-value of 50 times 100, or 5000 p. st. The quantity of the surplus-value produced per year is the same as in the previous case, 5000 p. st., but the annual rate of surplus-value is entirely different. It is equal to the surplus-value produced in one year, divided by the advanced variable capital, that is to say it is as 5000 s to 5000 v, or 100%, while in the case of capital A it was 1000%.

II.XVI.15

In the case of both capitals A and B, we have invested a variable capital of 100 p. st. per week. The rate of surplus-value per week, or the intensity of self-expansion, is likewise the same, 100%, so is the magnitude of the variable capital the same, 100 p. st. The same quantity of labor-power is exploited, the volume and intensity of exploitation are equal in both cases, the working days are the same and subdivided in the same way in necessary labor and surplus-labor. The quantity of variable capital employed in the course of the year is 5000 p. st. in either case, sets the same amount of labor in motion, and extracts the same amount of surplus-value from the labor power set in motion by these two equal capitals, namely 5000 p. st. Nevertheless, there is a difference of 900% in the annual rate of surplus-value of the two capitals A and B.

II.XVI.16

This phenomenon makes indeed the impression as though the rate of surplus-value were not only dependent on the quantity and intensity of exploitation of the labor-power set in motion by the variable capital, but also on inexplicable influences arising from the process of circulation. It has actually been so interpreted, and has completely routed the Ricardian school since the beginning of the twenties of the 19th century, at least in its more complicated and disguised form, that of the annual rate of profit, if not in the simple and natural form indicated above.

II.XVI.17

The strangeness of this phenomenon disappears at once, when we place capital A and B in exactly the same conditions, not seemingly, but actually. These equal circumstances are present only when the variable capital B is expended in the payment of labor-power in its entire volume and in the same period of time as capital A.

II.XVI.18

In that case, the 5000 p. st. of capital B are invested for 5 weeks. 1000 p. st. per week makes an investment of 50,000 p. st. per year. The surplus-value is then likewise 50,000 p. st., according to our assumption. The turned-over capital of 50,000 p. st., divided by the advanced capital of 5000 p. st., makes the number of turn-overs 10. The rate of surplus-value, 5000 to 5000, or 100%, multiplied by the number of turn-overs, 10, makes the annual rate of surplus-value as 50,000 to 5000, or 10 to 1, or 1000%. Now the annual rates of surplus-value for A and B are alike, namely 1000%, but the quantities of surplus-value are 50,000 p. st. in the case of B, and 5000 p. st. in the case of A. The quantities of the produced surplus-values now are proportioned to one another as the advanced capital-values of B and A, to-wit: as 50,000 to 5000, or 10 to 1. But at the same time, capital B has set in motion ten times as much labor-power as capital A has in the same time.

II.XVI.19

It is only the capital actually invested in the working process which produces any surplus-value and for which all laws relating to surplus-value are in force including for instance the law according to which the quantity of surplus-value is determined by the relative magnitude of the variable capital if the rate of surplus-value is given.

II.XVI.20

The labor-process itself is determined by the time. If the length of the working period is given (as it is here, where we assume all circumstances relating to A and B to be equal, in order to elucidate the difference in the annual rate of surplus-value), the working week consists of a certain number of working days. Or, we may consider any working period, for instance this working period of 5 weeks, as one single working day of 300 hours, if the working day has 10 hours and the working week 6 days. We must further multiply this number with the number of laborers who are employed every day simultaneously in the same labor-process. If there were 10 laborers, there would be 60 times 10, or 600 working hours in one week, and a working period of 5 weeks would have 600 times 5, or 3000 working hours. Variable capitals of equal magnitude are, therefore, employed, the rate of surplus-value and the working days being the same if equal quantities of labor-power are set in motion in the same time (a labor-power of the same price multiplied with the same number).

II.XVI.21

II.XVI.22

The circumstances which differentiate the relations of the advanced to the employed capital, influence the production of surplus-value—the rate of surplus-value being given—only to the extent that they differentiate the quantity of variable capital which can be actually employed in a certain period of time, for instance in one week, 5 weeks, etc. The advanced variable capital serves as variable capital only for the time that it is actually employed, not for the time in which it is held available without being employed. But all the circumstances which differentiate the relations between the advanced and the employed variable capital, are comprised in the difference of the periods of turn-over (determined by the difference in the working period, the circulation period or both). The law of the production of surplus-value decrees that equal quantities of employed variable capital produce equal quantities of surplus-value, if the rate of surplus-value is the same. If, then, equal quantities of variable capitals are employed by the capitals A and B in equal periods of time with an equal rate of surplus-value, they must produce equal quantities of surplus-value in equal periods of time, no matter what may be the proportion of this variable capital, employed during definite periods of time to the variable capital advanced for the same time and no matter, therefore, what may be the proportion of the quantities of surplus-value produced, not to the employed, but to the total advanced variable capital in general. The difference of this proportion, so far from contradicting the laws of the production of surplus-value demonstrated by us, rather corroborates them and is one of their inevitable consequences.

II.XVI.23

Let us consider the first productive section of 5 weeks of capital B. At the end of the fifth week, 500 p. st. have been employed and consumed. The value of the product is 100 p. st., hence the rate as 500 s to 500 v or 1100%, the same as in the case of capital A. The fact that, in the case of capital A, the surplus-value is realized together with the advanced capital, while in the case of B it is not, does not concern us here, where it is merely a question of the production of surplus-value and of its proportion to the variable capital advanced during its production. But if we calculate the proportion of surplus-value in B, not as compared to that portion of the advanced capital of 5000 p. st. which has been employed and consumed in its production, but to this total advanced capital itself, we find that it is as 500 s to 5000 v, or as 1 to 10, or 10%. In other words, it is 10% for capital B and 100% for capital A, ten times more. If any one were to say that this difference in the rate of surplus-value for equal capitals, setting in motion equal quantities of labor which is equally divided into paid and unpaid labor, is contrary to the laws of the production of surplus-value, then the answer would be simple and prompted by the mere inspection of the actual conditions: In the case of A, the actual rate of surplus-value is expressed, that is to say, the proportion of a surplus-value of 500 p. st., to a variable capital of 500 p. st., which produced it in 5 weeks. In the case of B, on the other hand, we are dealing with a calculation which has nothing to do either with the production of surplus-value, or with the determination of its corresponding rate of surplus-value. For the 500 p. st., of surplus-value produced by a variable capital of 500 p. st. are not calculated with reference to the 500 p. st. of variable capital advanced in their production, but with reference to a capital of 5000 p. st., nine-tenths of which, or 4500 p. st., have nothing whatever to do with the production of this surplus-value of 500 p. st., but are rather intended for gradual service in the following 45 weeks, so that they do not exist at all so far as the production of the first 5 weeks is concerned, which is alone significant in this instance. Under these circumstances, the difference in the rate of surplus-value of A and B is no problem at all.

II.XVI.24

Let us now compare the annual rates of surplus-value for capitals A and B. For B it is as 5000 s to 5000 v, or 100%; for A it is as 5000 s to 500 v, or 1000%. But the proportion of the rates of surplus-value toward one another is the same as before. There we had

(Rate of Surplus-Value of Capital B)/(Rate of Surplus-Value of Capital A) = 10%/100%.

II.XVI.25

Now we have

(Annual Rate of Surplus-Value of Capital B)/(Annual Rate of Surplus-Value of Capital A) = 100%/1000%

II.XVI.26

But 10% is to 100% as 100% is to 1000%, so that the ratio is the same.

II.XVI.27

But now the problem is reversed. The annual rate of capital B is as 5000 s to 5000 v, or 100%, offering not the slightest deviation, nor even the semblance of a deviation, from the laws of production known to us and the rate of surplus-value corresponding to this production. 5000 v have been advanced and consumed productively during the year, and they have produced 5000 s. The rate of surplus-value is, therefore the same as shown in the above proportion, 5000 s to 5000 v, or 100%. The annual rate agrees with the actual rate of surplus-value. In this case, it is not capital B, but capital A, which presents an anomaly that is to be explained.

II.XVI.28

In the case of A, we have the rate of surplus-value as 5000 s to 500 v, or 1000%. But while in the case of B, a surplus-value of 500 p. st., the product of 5 weeks, was calculated with reference to an advanced capital of 5000 p. st., nine-tenths of which were not employed in its production, we have now a surplus-value of 5000 s calculated on a variable capital of 500 v, that is to say, on only one-tenth of the variable capital of 5000 p. st. actually employed in the production of 5000 s. For the 5000 s are the product of a variable capital of 5000 v, productively consumed during 50 weeks, not that of a capital of 500 p. st. productively consumed in one working period of 5 weeks. In the former case, the surplus-value produced in 5 weeks had been calculated for a capital advanced for 50 weeks, a capital ten times larger than the one consumed during the 5 weeks. In the present case, the surplus-value produced in 50 weeks is calculated for a capital advanced for only 5 weeks, a capital ten times smaller than the one consumed in 50 weeks.

II.XVI.29

Capital A, of 500 p. st., is never advanced for more than 5 weeks. At the end of this time it has flown back and may repeat the same process in the course of the year ten times, by ten turn-overs. Two conclusions follow from this:

II.XVI.30

First. The Capital advanced in the case of A is only five times larger than that portion of capital which is continually employed in the productive process of one week. Capital B, on the other hand, which is turned over only once in 50 weeks, is fifty times larger than that one of its portions which can be used only in continuous successions of one week. The turn-over, therefore, modifies the relations of the capital advanced during the year for the process of production to the capital employed continuously for a certain period of production, say, for one week. And this is illustrated by the first case, in which the surplus-value of 5 weeks is not calculated for the capital employed during these 5 weeks, but for a capital ten times larger and employed for 50 weeks.

II.XVI.31

Second. The period of turn-over of 5 weeks of capital A comprises only one-tenth of the year, so that one year contains ten such periods of turn-over, in which capital A of 500 p. st. is successively reinvested. The employed capital is here equal to the capital advanced for 5 weeks, multiplied by the number of periods of turn-over per year. The capital employed during the year is 500 times 10, or 5000 p. st. The capital advanced during the year is 5000 divided by 10, or 500 p. st. Indeed, although the 500 p. st. are always re-employed, the sum advanced for 5 weeks never exceeds these same 500 p. st. On the other hand, in the case of capital B, it is true that only 500 p. st. are employed for 5 weeks and advanced for these 5 weeks. But as the period of turn-over is in this case 50 weeks, the capital employed in one year is equal to the capital advanced for 50 weeks, not to that advanced for every 5 weeks. But the annual quantity of surplus-value depends, given the rate of surplus-value, on the capital employed during the year, not on the capital advanced for the year. Hence it is not larger for this capital of 5000 p. st., which is turned over once a year, than it is for the capital of 500 p. st., which is turned over ten times per year. And it has this size only because the capital turned over once a year is ten times larger than the capital turned over ten times per year.

II.XVI.32

The variable capital turned over during one year—and hence that portion of the annual product, or of the annual expenditure, which is equal to that portion—is the variable capital employed and productively consumed during the year. It follows that, assuming the variable capital A turned over annually and the variable capital B turned over annually to be equal, and to be employed under equal conditions of investment, so that the rate of surplus-value is the same for both of them, the quantity of surplus-value produced annually must likewise be the same for both of them. Hence the annual rate of surplus-value must also be the same for them so far as it is expressed by the formula

(Quantity of Surplus-Value Produced Annually)/(Variable Capital Turned-Over Annually.)

II.XVI.33

Or, generally speaking: Whatever may be the relative magnitude of the turned over variable capitals, the rate of the surplus-value produced by them in the course of the year is determined by the rate of surplus-value at which the respective capitals have been employed in average periods (for instance the average of a week or a day).

II.XVI.34

This is the only result following from the laws of the production of surplus-value and the determination of the rate of surplus-value.

II.XVI.35

Let us now consider what is expressed by the ratio of the

taking into account, as we have said before, only the variable capital. The division shows the number of turn-overs made by the capital advanced in one year.

II.XVI.36

In the case of capital A, we have:

(5000 p. st. of Capital Turned-Over Annually)/(500 p. st. of Capital Advanced)

II.XVI.37

In the case of capital B, we have:

(5000 p. st. of Capital Turned Over Annually)/(5000 p. st. of Capital Advanced)

II.XVI.38

In both ratios, the numerator expresses the capital advanced multiplied by the number of turn-overs, in the case of A, 500 times 10, in the case of B 5000 times 1. Or, it may be multiplied by the inverted time of turn-over calculated for one year. The time of turn-over for A is 1-10 year; the inverted time of turn-over is 10-1 year, hence we have 500 times 10-1, or 5000. In the case of B, 5000 times 1-1. The denominator expresses the turned over capital multiplied by the inverted number of turn-overs; in the case of A, 5000 times 1-10, in the case of B, 5000 times 1-1.

II.XVI.39

The respective quantities of labor (the sum of the paid and unpaid labor), which is set in motion by the two variable capitals turned over annually, are equal in this case, because the turned-over capitals themselves are equal and their rate of self-expansion is likewise equal.

II.XVI.40

The ratio of the variable capital turned over annually to the variable capital advanced indicates (1) the ratio of the capital intended for investment to the variable capital employed during a definite working period. If the number of turn-overs is 10, as in the case of A, and the year is assumed to have 50 working weeks, then the period of turn-over is 5 weeks. For these 5 weeks, variable capital must be advanced, and the capital advanced for 5 weeks must be 5 times as large as the variable capital employed during one week. That is to say, only one-fifth of the advanced capital (in this case of 500 p. st.) can be employed in the course of one week. On the other hand, in the case of capital B, where the number of turn-overs is 1-1, the time of turn-over is 1 year of 50 weeks. The ratio of the advanced capital to the capital employed weekly is, therefore, as 50 to 1. If matters were the same for B as they are for A, then B would have to invest 1000 p. st. per week instead of 100. (2). It follows, that B has employed ten times as much capital (5000 p. st.) as A, in order to set in motion the same quantity of variable capital and, the rate of surplus-value being the same, of labor (paid and unpaid), and thus to produce the same quantity of surplus-value during one year. The current rate of surplus-value expresses nothing but the ratio of the variable capital employed during a certain period to the surplus-value produced in the same time; or, the quantity of unpaid labor set in motion by the variable capital employed during this time. It has absolutely nothing to do with that portion of the variable capital which is advanced for a time in which it is not employed. Hence it has nothing to do, in the case of different capitals, with the ratio, determined and differentiated by the period of turn-over, of that portion of capital which is advanced for a definite time and that portion which is employed in the same time.

II.XVI.41

The essential result of the preceding analysis is that the annual rate of surplus-value coincides only in one single case with the current rate of surplus-value which expresses the intensity of exploitation, namely in the case that the advanced capital is turned over only once a year, so that the capital advanced is equal to the capital turned over in the course of the year, so that the ratio of the quantity of surplus-value produced during the year to the capital employed during the year in this production coincides with and is identical with the ratio of the quantity of surplus-value produced during the year to the capital advanced during the year.

(A) The annual rate of surplus-value is equal to
(the Quantity of Surplus-Value Produced during the Year)/(Variable Capital Advanced)

But the quantity of the surplus-value produced during the year is equal to the current rate of surplus-value multiplied by the variable capital employed in its production. The capital employed in the production of the annual quantity of surplus-value is equal to the advanced capital multiplied by the number of its turn-overs, which we shall call n in the present case. Substituting these terms in formula (A) we obtain:

(B) The annual rate of surplus-value is equal to the
(Cur. Rate of Surpl.Val. mltpl.b. the Var.Cap. Adv. mltpl. b n)/(Var. Cap. Adv.)

II.XVI.42

For instance, in the case of capital B, we should have

(100 times 5000 times 1)/5000, or 100%.

II.XVI.43

Only when n is equal to 1, that is to say when the variable capital advanced is turned over once a year, so that it is equal to the capital employed or turned over, the annual rate of surplus-value is equal to the current rate of surplus-value.

II.XVI.44

Let us call the annual rate of surplus-value S', the current rate of surplus-value s', the advanced variable capital v, the number of turn-overs n. Then

S' is equal to s'vn/v, or s'n.

In other words, S' is equal to s'n, and it is equal to s' only when n is 1, so that then S' is s' times 1, or s'.

II.XVI.45

It follows furthermore that the annual rate of surplus-value is always equal to s'n, that is to say, always equal to the current rate of surplus-value produced in one period of turn-over by the variable capital consumed during that period multiplied by the number of turn-overs of this variable capital during one year, or, what amounts to the same, multiplied with its inverted time of turn-over calculated for one year. (If the variable capital is turned over ten times per year, then its time of turn-over is 1-10 year, its inverted time of turn-over therefore 10-1 year, or 10 years.)

II.XVI.46

We have seen that S' is equal to s', when n is 1. S' is greater than s', when n is greater than 1, that is to say, when the advanced capital is turned over more than once a year, or the turned-over capital is greater than the capital advanced.

II.XVI.47

Finally, S' is smaller than s', when n is smaller than 1, that is to say, when the capital turned over during one year is only a part of the advanced capital, so that the period of turn-over is longer than one year.

II.XVI.48

Let us linger a moment over this last case.

II.XVI.49

We retain all the premises of our former illustration, only the period of turn-over is to be 55 weeks instead of 50 weeks. The labor-process requires a variable capital of 100 p. st. per week, so that 5500 p. st. are needed for the period of turn-over, and every week 100 s is produced, s' is, therefore, smaller than 100%. Indeed, if the annual rate turn-overs, n, is then 50/55 or 10/11, because the time of turn-over is 1 plus 1-10 year (of 50 weeks), or 11-10 year.

II.XVI.50

S' is equal to

(100% times 5500 times 10-11)/5500

II.XVI.51

equal to 100 times 10-11, or 1000-11, or 90 10-11%. It is, therefore, smaller than 100%. Indeed, if the annual rate of surplus-value were 100%, then 5500 v would have to produce 5500 s, while 11-10 years are required for that. The 5500 v produce only 5000 s during one year, therefore the annual rate of surplus-value is (5000 s)/(5500 v), or 10-11, or 90 10-11%.

II.XVI.52

The annual rate of surplus-value, or the comparison between the surplus-value produced during one year and the variable capital advanced (as distinguished from the variable capital turned over during one year), is therefore not merely a subjective matter, but the actual movement of capital causes this juxtaposition. So far as the owner of capital A is concerned, his advanced variable capital of 500 has returned to him at the end of the year, and it has produced 5000 p. st. of surplus-value in addition. It is not the quantity of capital employed by him during the year, but the quantity returning to him periodically, that expresses the magnitude of his advanced capital. It is immaterial for the present question, whether the capital exists at the end of the year partly in the form of a productive supply, or partly in that of money or commodity-capital, and what may be the proportions of these different parts. On the other hand, so far as the owner of capital B is concerned, his advanced capital of 5000 p. st. has returned to him, with an additional surplus-value of 5000 p. st. And as for the owner of capital C (the last mentioned 5500 p. st.), surplus-value to the amount of 5000 p. st. has been produced for him (advanced 5000 p. st., rate of surplus-value 100%), but his advanced capital has not yet returned to him nor has he pocketed his surplus-value.

II.XVI.53

The formula S' equal to s'n indicates that the rate of surplus-value in force for the employed variable capital, to wit,

(Quantity of S.-V. produced in one Period of T.-O.)/(Var. Cap employed in one Period of T.-O.)

must be multiplied with the number of periods of turn-over, or of the periods of reproduction of the advanced variable capital, that number of periods in which it renews its cycle.

II.XVI.54

We have seen already in volume I, chapter IV (The Transformation of Money into Capital), and furthermore in volume I, chapter XXIII (Simple Reproduction), that the capital value is not all spent, but advanced, as this value, having passed through the various phases of its cycle, returns to its point of departure, enriched by surplus-value. This fact shows that it has been merely advanced. The time consumed from the moment of its departure to the moment of its return is the one for which it was advanced. The entire rotation of capital-value, measured by the time from its advance to its return, constitutes its turn-over, and the duration of this turn-over is a period of turn-over. When this period has elapsed and the cycle is completed, the same capital-value can renew the same rotation, can expand itself some more, create some more surplus-value. If the variable capital is turned over ten times in one year, as in the case of capital A, then the same advance of capital creates in the course of one year, ten times the quantity of surplus-value created in one period of turn-over.

II.XVI.55

One must come to a clear conception of the nature of this advance from the standpoint of capitalist society.

II.XVI.56

Capital A, which is turned over ten times in one year, is advanced ten times during one year. It is advanced anew for every new period of turn-over. But at the same time, A never advances more than this same capital-value of 500 p. st., and disposes never of more than these 500 p. st. for the productive process considered by us. As soon as these 500 p. st. have completed one cycle, A starts them once more on the same cycle. In short, capital by its very nature preserves its character as capital only by means of continued service in successive processes of production. In the present case, it was never advanced for more than 5 weeks. If the turn-over lasts longer, this capital is inadequate. If the turn-over is contracted, a portion of this capital is released. Not ten capitals of 500 p. st. are advanced, but one capital of 500 p. st. is advanced ten times in successive intervals. The annual rate of surplus-value is, therefore, not calculated on ten advances of a capital of 500 p. st., not on 5000 p. st., but on one advance of a capital of 500 p. st. It is the same in the case of one dollar which circulates ten times and yet represents never more than one single dollar in circulation, although it performs the function of 10 dollars. But in the hand, which holds it after each change of hands, it remains the same value of one dollar as before.

II.XVI.57

Just so the capital A indicates at each successive return, and likewise at its return at the end of the year that its owner has operated always with the same capital-value of 500 p. st. Hence only 500 p. st. flow back into his hand at each turn-over. His advanced capital is never more than 500 p. st. Hence the advanced capital represents the denominator of the fraction which expresses the annual rate of surplus-value. We had for it the formula

S' equal to s'vn/v, or s'n.

As the current rate of surplus-value, s', is equal to s/v, equal to the quantity of surplus-value divided by the variable capital which produced it, we may substitute the value of s' in s'n, that is to say s/v, in our formula, thus making it

S' equal to sn/v.

II.XVI.58

But by its tenfold turn-over, and thus the tenfold renewal of its advance, the capital of 500 p. st. performs the function of a ten times larger capital, of a capital of 5000 p. st., just as 500 dollar coins, which circulate ten times per year, perform the same function as 1000 dollar coins which circulate once a year.

#### II. THE TURN-OVER OF THE INDIVIDUAL VARIABLE CAPITAL.

II.XVI.59

"Whatever the form of the process of production in a society, it must be a continuous process, must continue to go periodically through the same phases...When viewed, therefore, as a connected whole, and as flowing on with incessant renewal, every social process of production is, at the same time, a process of reproduction...As a periodic increment of the capital advanced, or periodic fruit of capital in process, surplus-value acquires the form of a revenue flowing out of capital." (Volume I, chapter XXIII, pages 619, 620.)

II.XVI.60

In the case of capital A, we have 10 periods of turn-over of 5 weeks each. In the first period of turn-over, 500 p. st. of variable capital are advanced, that is to say, 100 p. st. are converted into labor-power every week, so that 500 p. st., have been converted into labor power at the end of the first period of turn-over. These 500 p. st., originally a part of the total capital advanced, have then ceased to be capital. They are paid out in wages. The laborers in their turn pay them out in the purchase of means of subsistence, consuming subsistence to the amount of 500 p. st. A quantity of commodities of that value is therefore annihilated (what the laborer may save up in money, etc., is not capital). This quantity of commodities has been consumed unproductively from the standpoint of the laborer, except in so far as it preserves his labor-power, an indispensable instrument of the capitalist. In the second place, these 500 p. st. have been converted, from the standpoint of the capitalist, into labor-power of the same value (or price). Labor-power is consumed by him productively in the labor-process. At the end of 5 weeks, a product valued at 1,000 p. st. has been created. Half of this, or 500 p. st., is the reproduced value of the variable capital paid out for wages. The other half, or 500 p. st., is newly produced surplus-value. But 5 weeks of labor-power, by the consumption of which a portion of a capital was transformed into variable capital, is likewise expended, consumed, although productively. The labor which was active yesterday is not the one which is active today. Its value, together with that of the surplus-value created by it, exists now as the value of a thing separate from labor-power, to wit, a product. But by converting the product into money, that portion of it, which is equal to the value of the variable capital advanced, may once more be transformed into labor-power and thus perform again the functions of variable capital. It is immaterial that the same laborers, that is to say, the same bearers of the labor-power may be employed not only with the reproduced, but also with the reconverted capital-value in the form of money. It might be possible that the capitalist might hire different laborers for the second period of turn-over.

II.XVI.61

It is, therefore, a fact that a capital of 5,000, and not of 500 p. st., is paid out for labor-power in the ten periods of turn-over of 5 weeks each. The capital of 5,000 p. st. so advanced is consumed. It does not exist any more. On the other hand, labor-power to the value of 5,000, not of 500, p. st. is incorporated successively in the productive process and reproduces not only its own value of 5,000 p. st., but also a surplus value of 5,000 p. st. over and above its value. The variable capital of 500 p. st., which is advanced for the second period of turn-over, is not the identical capital of 500 p. st., which had been advanced for the first period of turn-over. This has been consumed, expended in labor-power. But it is replaced by new variable capital of 500 p. st., which was produced in the first period of turn-over in the form of commodities and reconverted into money. This new money-capital is, therefore, the money-form of the quantity of commodities newly produced in the first period of turn-over. The fact that an identical sum of 500 p. st. is again in the hands of the capitalist, apart from the surplus-value, a sum equal to the one which he had originally advanced, disguises the circumstance that he now operates with a newly produced capital. (As for the other constituents of value of the commodity-capital, which replace the constant parts of capital, their value is not newly produced, but only the form is changed in which this value exists.) Let us take the third period of turn-over. Here it is evident that the capital of 500 p. st., advanced for a third time, is not an old, but a newly produced capital, for it is the money-form of the quantity of commodities produced in the second, not in the first, period of turn-over that is to say, of that portion of this quantity of commodities, whose value is equal to that of the advanced variable capital. The quantity of commodities produced in the first period of turn-over is sold. Its value, to the extent that it was equal to the variable portion of the value of the advanced capital, was transformed into the new labor-power of the second period of turn-over and produced a new quantity of commodities, which were sold in their turn and a portion of whose value constitutes the capital of 500 p. st. advanced for the third period of turn-over.

II.XVI.62

And so forth during the ten periods of turn-over. In the course of these, newly produced quantities of commodities are thrown upon the market every 5 weeks, in order to incorporate ever new labor-power in the progress of production. (The value of these commodities, to the extent that it replaces variable capital, is likewise newly produced, and does not merely appear so, as in the case of the constant circulating capital.)

II.XVI.63

That which is accomplished by the tenfold turn-over of the advanced variable capital of 500 p. st., is not that this capital can be productively consumed ten times, nor that a capital lasting for 5 weeks can be employed for 50 weeks. Ten times 500 p. st. of variable capital are rather employed in those 50 weeks, and the capital of 500 p. st. lasts only for 5 weeks at a time and must be replaced at the end of the 5 weeks by a newly produced capital of 500 p. st. This applies equally to capital A and B. But at this point, the difference begins.

II.XVI.64

At the end of the first period of 5 weeks, a variable capital of 500 p. st. has been advanced and expended by both capitalists A and B. Both B and A have transformed its value into labor-power and replaced it by that portion of the value of the new product created by this labor-power which is equal to the value of the advanced variable capital of 500 p. st. And for both B and A, the labor-power has not only reproduced the value of the expended variable capital of 500 p. st. by a new value of the same amount, but also added a surplus-value, which, according to our assumption, is of the same magnitude.

II.XVI.65

But in the case of B, the product which replaces the advanced variable capital and adds a surplus-value to it, is not in the form in which it can serve once more as a productive, or a variable, capital. On the other hand, it is in such a form in the case of A. B, however, does not possess the variable capital consumed in the first 5 and every subsequent 5 weeks up to the end of the year, although it has been reproduced by newly created value with a superadded surplus-value, in the form in which it may once more perform the function of productive, or variable, capital. Its value is indeed replaced, or reproduced, by new value, but the form of its value (in this case the absolute form of value, its money-form) is not reproduced.

II.XVI.66

For the second period of 5 weeks (and so forth for every succeeding 5 weeks of the year), 500 p. st. must again be available, the same as for the first period. Making exception of the conditions of credit, 5,000 p. st. must, therefore, be available at the beginning of the year as a latent advanced capital, although they are expended only gradually for labor-power in the course of the year.

II.XVI.67

But in the case of A, the cycle, the turn-over of the advanced capital, being completed, the reproduced value is after the lapse of 5 weeks in the precise form in which it may set new labor-power in motion for another term of 5 weeks, in its original money-form.

II.XVI.68

Both A and B consume new labor-power in the second period of 5 weeks and expend a new capital of 500 p. st. for the payment of this labor-power. The means of subsistence of the laborer paid with the first 500 p. st. are gone, their value has in every case disappeared from the hands of the capitalist. With the second 500 p. st., new labor-power is bought, new means of subsistence withdrawn from the market. In short, it is a new capital of 500 p. st. which is expended, not the old. But in the case of A, this new capital of 500 p. st. is the money-form of the newly produced substitute for the value of the formerly expended 500 p. st.; while in the case of B, this substitute is in a form, in which it cannot serve as variable capital. It is there but not in the form of variable capital. For the continuation of the process of production for the next 5 weeks, an additional capital of 500 p. st. must, therefore, be available in the form of money, which is indispensable in this case, and must be advanced. Thus both A and B expend an equal amount of variable capital, pay for and consume an equal quantity of labor-power, during 50 weeks. Only, B must pay for it with an advanced capital equal to its total value of 5,000 p. st., while A pays for it successively by the ever renewed money-form of the substitute produced in every 5 weeks for the capital of 500 p. st. advanced for every 5 weeks. In no case more capital is advanced by A than is required for 5 weeks, that is to say, 500 p. st. These 500 p. st. last for the entire year. It is, therefore, evident that, the intensity of exploitation and the current rate of surplus-value being the same for the two capitals, the annual rates of A and B must hold an inverse ratio to one another than the magnitudes of the variable money-capitals, which had to be advanced in order to set in motion the same quantity of labor-power during the year. The rate of A is as 5,000 s to 500 v, or 1,000%; that of B is as 5,000 s to 5,000 v, or 100%. But 500 v is to 5,000 v as 1 to 10, or as 100% to 1,000%.

II.XVI.69

The difference is due to the difference of the periods of turnover, that is to say, to the period in which the substitute for the value of a certain variable capital employed for a certain time can renew its function of capital, can serve as a new capital. In the case of both B and A, the same reproduction of value of the variable capital employed during the same periods take place. There is also the same increment of surplus-value during the same periods. But in the case of B, while there is every 5 weeks a reproduction of the value of 500 p. st. and a surplus-value of 500 p. st., these values do not yet make a new capital, because they are not in the form of money. In the case of A, on the other hand, the value of the old capital is not only reproduced by a new value, but it is rehabilitated in its money-form, so that it may at once assume the functions of a new capital.

II.XVI.70

So far as the mere production of surplus-value is concerned, the rapid or slow transformation of the substitute for the value advanced into money, and thus into the form in which the variable capital is advanced, is an insignificant circumstance. This production depends on the magnitude of the employed variable capital and the intensity of exploitation. But the more or less rapid transformation referred to does modify the magnitude of the money-capital which must be advanced in order to set a definite quantity of labor-power in motion during the year, and therefore it determines the annual rate of surplus-value.

#### III. THE TURN-OVER OF THE VARIABLE CAPITAL, CONSIDERED FROM THE POINT OF VIEW OF SOCIETY.

II.XVI.71

Let us look for a moment at this matter from the point of view of society. Let the wages of one laborer be 1 p. st. per week, the working day 10 hours. Both A and B employ 100 laborers per week (100 p. st. for 100 laborers per week, or 500 p. st. for 5 weeks, or 5,000 p. st. for 50 weeks), and each one of them works 60 hours per week of 6 days. Then 100 laborers work 6,000 hours per week, and 300,000 hours in 50 weeks. This labor-power is engaged by A and B, and cannot be expended by society for anything else. To this extent, the matter is the same socially that it is in the case of A and B. Furthermore: Both A and B pay their respective 100 laborers 5,000 p. st. in wages per year (or together for 200 laborers 10,000 p. st.) and withdraw from society means of subsistence to that amount. So far, the matter is socially likewise the same as in the case of A and B. Since the laborers in either case are paid by the week, they weekly withdraw their means of subsistence from society and throw in either case a weekly equivalent in money into the circulation. But here the difference begins.

II.XVI.72

First. The money, which the laborer of A throws into the circulation, is not only, as it is for the laborer of B, the money-form for the value of the labor-power (an actual payment for labor already performed); it is also, beginning with the second period of turn-over since the opening of the business, the money form of the value of his own product (price of labor-power plus surplus-value) created during the first period of turn-over, by which his labor during the second period of turn-over is paid. This is not the case with the laborer of B. The money is here indeed a medium of payment for labor already performed by the laborer, but this labor is not paid for with its own product turned into money (the money-form of the value produced by itself). This cannot be done until the beginning of the second year, when the laborer of B is paid with the money-form of the value of his product of the preceding year.

II.XVI.73

The shorter the period of turn-over of capital—the shorter, therefore, the intervals in which the periods of reproduction are renewed—the quicker is the variable portion of the capital, advanced by the capitalist in the form of money, transformed into the money-form of the product (including surplus-value) created by the laborer in place of the variable capital; the shorter is the time for which the capitalist must advance money out of his own funds, the smaller is the capital advanced by him compared to the given scale of production; and the greater is the proportionate quantity of surplus-value which he realizes with a given rate of surplus-value during the year, because he can buy the laborer so much more frequently with the money-form of the product created by the labor of that laborer and set his labor into motion.

II.XVI.74

Given the scale of production, the absolute magnitude of the advanced variable capital (and of the circulating capital in general) decreases in proportion as the period of turn-over is shortened, and so does the annual rate of surplus-value increase. Given the magnitude of the advanced capital, and the rate of surplus-value, the scale of production and the absolute quantity of surplus-value created in one period of turnover increases simultaneously with the rise in the annual rate of surplus-value due to the contraction of the periods of reproduction. It follows in general from the preceding analysis that, according to the different length of the periods of turn-over, money-capital of considerably different quantity must be advanced, in order to set in motion the same quantity of productive circulating capital and the same quantity of labor-power with the same intensity of exploitation.

II.XVI.75

II.XVI.76

To the extent that the greater or smaller length of the period of turn-over depends on the working period, strictly so called, that is to say on the period which is required to get the product ready for the market, it rests on the existing material conditions of production of the various investments of capital. In agriculture, they partake more of the character of natural conditions of production, in manufacture and the greater part of the extractive industry they vary with the social development of the process of production itself.

II.XVI.77

Furthermore, to the extent that the length of the working period is conditioned on the size of the orders (the quantitative volume in which the product is generally thrown upon the market), this point depends on conventions. But convention itself depends for its material basis on the scale of production, and it is accidental only when considered individually.

II.XVI.78

Finally, so far as the length of the period of turn-over depends on that of the period of circulation, the latter is, indeed, conditioned on the incessant change of market combinations, the greater or smaller ease of selling, and the resulting necessity to throw a part of the product to more or less remote markets. Apart from the volume of the general demand, the movement of prices plays here one of the main roles, since sales are intentionally restricted when prices are falling, while production proceeds; vice versa, production and sale keep step, when prices are rising, and sales may even be made in advance. But we must consider the actual distance of the place of production from the market as the real material basis.

II.XVI.79

For instance, English cotton goods or yarn are sold to India. The export merchant may pay the English cotton manufacturer. (The export merchant does so willingly only when the money-market stands well. If the manufacturer replaces his money-capital by operating credit on his own part, matters are already in a bad state). The exporter sells his cotton goods later in the Indian market, whence his advanced capital is returned to him. Until the time of this return the case is identical with the one in which the length of the working period necessitates the advance of new money-capital, in order to maintain the process of production on a certain scale. The money-capital with which the manufacturer pays his laborers and renews the other elements of his circulating capital, is not the money-form of the yarn produced by him. This cannot be the case until the value of this yarn has returned to England in the form of money or products. It is additional capital as before. The difference is only that it is advanced by the merchant instead of the manufacturer, and that it reaches the merchant by means of manipulations of credit. Furthermore, before this money is thrown on the market, or simultaneously with it, no additional product has been thrown on the English market, to be bought with this money and to be consumed productively or individually. If this condition occurs for a long period on a large scale, it must cause the same effects as a prolongation of the working period, previously mentioned.

II.XVI.80

Now it may be that the yarn is sold even in India on credit. With this credit, products are bought in India and sent back to England, or drafts are remitted to this amount. If this condition is prolonged, there is a pressure on the Indian money-market, and its reaction may cause a crisis in England. This crisis, even if combined with an export of precious metals to India, causes a new crisis in that country on account of the bankruptcy of English business houses and their Indian branch houses, who had received credit from the Indian banks. Thus a crisis occurs simultaneously on the market which is credited with the balance of trade and on the one which is charged with it. This phenomenon may be still more complicated. Take it, for instance that England has sent silver ingots to India, but the English creditors of India now collect their debts in that country, and India will soon after have reshipped its silver ingots to England.

II.XVI.81

It is possible that the export trade to India and the import trade from India might approximately balance one another, although the imports (with the exception of peculiar circumstances, such as arise in the price of cotton), will be determined as to their volume and stimulated by the export trade. The balance of trade between England and India may seem to be squared, or may show but slight fluctuations on either side. But as soon as the crisis appears in England it is seen that unsold cotton goods are stored in India (and have not been transformed from commodity capital into money-capital—an overproduction to this extent), and that, on the other hand, there are in England not only unsold supplies of Indian goods, but that a considerable portion of the sold and consumed goods is not yet paid for. Hence, that which appears as a crisis on the money-market, is in reality an expression of abnormal conditions in the process of production and reproduction.

II.XVI.82

Third. So far as the employed circulating capital (constant and variable) is concerned, the length of the period of turn-over, to the extent that it is due to the working period, makes this difference: In the case of several turn-overs during one year, an element of the variable or constant circulating capital may be supplied by its own product, for instance in the production of coal, the tailoring business, etc. Otherwise, this cannot take place, at least not within the same year.

### Notes for this chapter

In the manuscript, the following note is here inserted for future elaboration: "Contradiction in the capitalist mode of production; the laborers as buyers of commodities are important for the market. But as sellers of their own commodity—labor-power—capitalist society tends to depress them to the lowest price. Further contradiction: The epochs in which capitalist production exerts all its forces are always periods of overproduction, because the forces of production can never be utilized to such a degree that more value is not only produced but also realized; but the sale of commodities, the realization on the commodity-capital, and thus on surplus-value, is limited, not by the consumptive demand of society in general, but by the consumptive demand of a society in which the majority are poor and must always remain poor. However, this belongs into the next part."

Part II, Chapter XVII.

### End of Notes

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