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Chapter 4
Chapter 4: The General Formula for Capital
The circulation of commodities is the starting-point of capital. The production of commodities,
their circulation, and that more developed form of their circulation called commerce, these form
the historical ground-work from which it rises. The modern history of capital dates from the
creation in the 16th century of a world-embracing commerce and a world-embracing market.
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; it appears as moneyed wealth, as the capital of the merchant and of the usurer.
1
But we
have no need to refer to the origin of capital in order to discover that the first form of appearance
of capital is money. We can see it daily under our very eyes. All new capital, to commence with,
comes on the stage, that is, on the market, whether of commodities, labour, or money, even in our
days, in the shape of money that by a definite process has to be transformed into capital.
The first distinction we notice between money that is money only, and money that is capital, is
nothing more than a difference in their form of circulation.
The simplest form of the circulation of commodities is C-M-C, the transformation of
commodities into money, and the change of the money back again into commodities; or selling in
order to buy. But alongside of this form we find another specifically different form: M-C-M, the
transformation of money into commodities, and the change of commodities back again into
money; or buying in order to sell. Money that circulates in the latter manner is thereby
transformed into, becomes capital, and is already potentially capital.
Now let us examine the circuit M-C-M a little closer. It consists, like the other, of two antithetical
phases. In the first phase, M-C, or the purchase, the money is changed into a commodity. In the
second phase, C-M, or the sale, the commodity is changed back again into money. The
combination of these two phases constitutes the single movement whereby money is exchanged
for a commodity, and the same commodity is again exchanged for money; whereby a commodity
is bought in order to be sold, or, neglecting the distinction in form between buying and selling,
whereby a commodity is bought with money, and then money is bought with a commodity.
2
The
result, in which the phases of the process vanish, is the exchange of money for money, M-M. If I
purchase 2,000 lbs. of cotton for £100, and resell the 2,000 lbs. of cotton for £110, I have, in fact,
exchanged £100 for £110, money for money.
Now it is evident that the circuit M-C-M would be absurd and without meaning if the intention
were to exchange by this means two equal sums of money, £100 for £100. The miser’s plan
would be far simpler and surer; he sticks to his £100 instead of exposing it to the dangers of
circulation. And yet, whether the merchant who has paid £100 for his cotton sells it for £110, or
lets it go for £100, or even £50, his money has, at all events, gone through a characteristic and
original movement, quite different in kind from that which it goes through in the hands of the
peasant who sells corn, and with the money thus set free buys clothes. We have therefore to
examine first the distinguishing characteristics of the forms of the circuits M-C-M and C-M-C,
and in doing this the real difference that underlies the mere difference of form will reveal itself.
Let us see, in the first place, what the two forms have in common.
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Chapter 4
Both circuits are resolvable into the same two antithetical phases, C-M, a sale, and M-C, a
purchase. In each of these phases the same material elements - a commodity, and money, and the
same economic dramatis personae, a buyer and a seller - confront one another. Each circuit is the
unity of the same two antithetical phases, and in each case this unity is brought about by the
intervention of three contracting parties, of whom one only sells, another only buys, while the
third both buys and sells.
What, however, first and foremost distinguishes the circuit C-M-C from the circuit M-C-M, is the
inverted order of succession of the two phases. The simple circulation of commodities begins
with a sale and ends with a purchase, while the circulation of money as capital begins with a
purchase and ends with a sale. In the one case both the starting-point and the goal are
commodities, in the other they are money. In the first form the movement is brought about by the
intervention of money, in the second by that of a commodity.
In the circulation C-M-C, the money is in the end converted into a commodity, that serves as a
use-value; it is spent once for all. In the inverted form, M-C-M, on the contrary, the buyer lays
out money in order that, as a seller, he may recover money. By the purchase of his commodity he
throws money into circulation, in order to withdraw it again by the sale of the same commodity.
He lets the money go, but only with the sly intention of getting it back again. The money,
therefore, is not spent, it is merely advanced.
3
In the circuit C-M-C, the same piece of money changes its place twice. The seller gets it from the
buyer and pays it away to another seller. The complete circulation, which begins with the receipt,
concludes with the payment, of money for commodities. It is the very contrary in the circuit M-C-
M. Here it is not the piece of money that changes its place twice, but the commodity. The buyer
takes it from the hands of the seller and passes it into the hands of another buyer. Just as in the
simple circulation of commodities the double change of place of the same piece of money effects
its passage from one hand into another, so here the double change of place of the same
commodity brings about the reflux of the money to its point of departure.
Such reflux is not dependent on the commodity being sold for more than was paid for it. This
circumstance influences only the amount of the money that comes back. The reflux itself takes
place, so soon as the purchased commodity is resold, in other words, so soon as the circuit M-C-
M is completed. We have here, therefore, a palpable difference between the circulation of money
as capital, and its circulation as mere money.
The circuit C-M-C comes completely to an end, so soon as the money brought in by the sale of
one commodity is abstracted again by the purchase of another.
If, nevertheless, there follows a reflux of money to its starting-point, this can only happen through
a renewal or repetition of the operation. If I sell a quarter of corn for £3, and with this £3 buy
clothes, the money, so far as I am concerned, is spent and done with. It belongs to the clothes
merchant. If I now sell a second quarter of corn, money indeed flows back to me, not however as
a sequel to the first transaction, but in consequence of its repetition. The money again leaves me,
so soon as I complete this second transaction by a fresh purchase. Therefore, in the circuit C-M-
C, the expenditure of money has nothing to do with its reflux. On the other hand, in M-C-M, the
reflux of the money is conditioned by the very mode of its expenditure. Without this reflux, the
operation fails, or the process is interrupted and incomplete, owing to the absence of its
complementary and final phase, the sale.
The circuit C-M-C starts with one commodity, and finishes with another, which falls out of
circulation and into consumption. Consumption, the satisfaction of wants, in one word, use-value,