Capital, Volume II

''Capital: A Critique of Political Economy'' (), also known as ''Capital'' or (), is the most significant work by Karl Marx and the cornerstone of Marxian economics, published in three volumes in 1867, 1885, and 1894. The culmination of his life's work, the text contains Marx's analysis of capitalism, to which he sought to apply his theory of historical materialism in a critique of classical political economy. 's second and third volumes were completed from manuscripts after Marx's death in 1883 and published by Friedrich Engels and David Ricardo. His earlier works, including '' Economic and Philosophic Manuscripts of 1844'' and '' The German Ideology'' (1846, with Engels), laid the groundwork for his theory of historical materialism, which posits that the economic structures of a society (in particular, the forces and relations of production) are the most crucial factors in shaping its nature. Rather than a simple description of capitalism as an economic model, instead examines the system as a historical epoch and a mode of production, and seeks to trace its origins, development, and decline. Marx argues that capitalism is not transhistorical, but a form of economic organization which has arisen and developed in a specific historical context, and which contains contradictions which will inevitably lead to its decline and collapse.

Central to Marx's analysis of capitalism in is his theory of surplus value, the unpaid labor which capitalists extract from workers in order to generate profit. He also introduces the concept of commodity fetishism, describing how capitalist markets obscure the social relationships behind economic transactions, and argues that capitalism is inherently unstable due to the tendency of the rate of profit to fall, which leads to cyclical economic crises. Volume I focuses on production and labor exploitation, Volume II examines capital circulation and economic crises, and Volume III explores the distribution of surplus value among economic actors. According to Marx, is a scientific work based on extensive research, and a critique of both capitalism and the bourgeois political economists who argue that it is efficient and stable.

initially attracted little mainstream attention, but gained prominence as socialist and labor movements expanded in the late 19th and early 20th centuries. Beyond these movements, has profoundly influenced economic thought and political science, and today is the most cited book in the social sciences published before 1950. Even critics of Marxism acknowledge its significance in the development of theories of labor dynamics, economic cycles, and the effects of industrial capitalism. Scholars continue to engage with its themes, particularly in analyses of global capitalism, inequality, and labor exploitation.

Background and influences

Karl Marx's emerged from his lifelong project of developing a comprehensive "critique of political economy". His work was a synthesis and critical engagement with three major intellectual and political traditions: classical political economy, German critical philosophy, and utopian socialism.

Marx meticulously studied classical political economists from the seventeenth to the mid-nineteenth century. This included British thinkers like William Petty, John Locke, Thomas Hobbes, David Hume, Adam Smith, Thomas Malthus, and David Ricardo, as well as James Steuart. He also engaged with the French tradition of Physiocrats like François Quesnay and Anne Robert Jacques Turgot, and later economists such as Jean Charles Léonard de Sismondi and Jean-Baptiste Say. Marx's extensive notes on these thinkers, published as '' Theories of Surplus Value'', demonstrate his method of deconstructing their arguments, accepting certain insights while identifying gaps and contradictions to transform their theories. His critique aimed not just at specific theories but at the categorical presuppositions of the entire field, challenging the way political economy posed its questions and what it accepted as self-evident.

Philosophical reflection, originating with Greek thought (Marx wrote his dissertation on Epicurus and was familiar with Aristotle), formed another crucial foundation. He was thoroughly trained in the German philosophical tradition, particularly the works of Baruch Spinoza, Gottfried Wilhelm Leibniz, Immanuel Kant, and, most significantly, Georg Wilhelm Friedrich Hegel. The critical climate generated by the Young Hegelians in the 1830s and 1840s, and Marx's engagement with thinkers like Ludwig Feuerbach, profoundly influenced his early development and his conception of alienation. Marx sought to reconfigure Hegelian dialectics to grasp the "transient aspect" of society and understand processes of motion, change, and transformation.

The third major influence was utopian socialism, primarily French in Marx's time, though with English precursors like Thomas More and Robert Owen. Thinkers such as Henri de Saint-Simon, Charles Fourier, and Pierre-Joseph Proudhon, as well as figures like Étienne Cabet and Louis Auguste Blanqui, contributed to a vibrant utopian discourse in the 1830s and 1840s. Marx was familiar with this tradition, particularly during his time in Paris before 1844. While he sought to distance himself from what he saw as the shallow utopianism that failed to provide a practical path to a new society, he often proceeded in his arguments by way of a critical negation of their ideas, particularly those of Fourier and Proudhon. His aim was to convert what he considered a rather superficial utopian socialism into a " scientific communism", by interrogating classical political economy with the tools of German critical philosophy, all applied to illuminate the French utopian impulse.

Marx's aims and method

Marx's central aim in was to understand and critique the capitalist mode of production. He intended to lay bare the "economic law of motion of modern society" by examining its essential determinants and internal organization, presenting it in its "ideal average". This was not merely an academic exercise; Marx's work was driven by a commitment to critical theory and the revolutionary transformation of society. He sought to provide a scientific basis for the workers' movement by revealing the inherent contradictions and exploitative nature of capitalism.

Marx's method of presentation in , as he explained in the postface to the second German edition, differed from his method of inquiry. The inquiry involved appropriating the material in detail, analyzing its different forms of development, and tracking down their inner connections. Only after this work was done could the "real movement be appropriately presented". Consequently, begins by laying out foundational concepts—such as the commodity, value, and money—which are the results of his prior inquiry. These concepts are presented in a somewhat ''a priori'' fashion in the opening chapters, making the initial reading particularly arduous. Marx's argument unfolds not in a linear, brick-by-brick manner, but more like an "onion", starting from surface appearances, moving to a conceptual core, and then growing outward again, with concepts becoming richer and more meaningful as the analysis progresses.

A key aspect of Marx's method is the use of abstraction. Recognizing that social science cannot conduct controlled experiments in a laboratory, Marx employed the power of abstraction to isolate and analyze the fundamental dynamics of capitalism. His analysis focuses on the capitalist mode of production in its "pure" form, often abstracting from historical contingencies or specific empirical variations to reveal underlying structures and tendencies.

The dialectical method is central to Marx's approach, though he never wrote a separate treatise on it. Derived from Hegel but "exactly opposite to it" in its foundations, Marx's dialectic aims to understand "every historically developed form as being in a fluid state, in motion", grasping the "transient aspect" of society. It involves examining concepts in their interrelations and contradictions, understanding them as codependent parts of a totality. Rather than a closed system of thesis, antithesis, and synthesis, Marx's dialectic is an "expansionary logic", where contradictions are internalized and lead to further development of the argument, revealing a "perpetual expansion of the contradictions".

The starting point of with the commodity appears somewhat arbitrary to many readers. Marx had struggled for decades with where to begin his critique. His "method of descent"—proceeding from immediate reality to deeper, fundamental concepts—led him to the commodity as the elementary form of wealth in capitalist societies. From this starting point, Marx unfolds his analysis, examining the dual character of the commodity (use-value and exchange-value), which leads to the concept of value, and then to money as the necessary form of appearance of value. This progression through dualities and their (often contradictory) unities is characteristic of his dialectical presentation.

Marx's critique of political economy is not simply a refutation of previous theories but a critique of the very categories and presuppositions of bourgeois economic thought. He challenges the "naturalization" and " reification" of social relations, whereby historically specific capitalist relations are presented as eternal and natural properties of things. A central example is the fetishism of commodities, where the social relations between producers appear as relations between things (the products of their labor), obscuring the underlying social reality. Marx aims to penetrate this "enchanted, distorted and upside-down world" to reveal the "religion of everyday life" that underpins both everyday consciousness and the categories of political economy.

Writing process

The writing of was a long and arduous process, spanning several decades. Marx began intensive economic studies in the 1840s, particularly during his exile in Paris and later in London. His '' Economic and Philosophic Manuscripts of 1844'' represent an early, rough draft of ideas that would eventually mature into . Throughout the 1850s and 1860s, Marx filled numerous notebooks with research, excerpts from economic texts, and his own developing theories. The , a series of notebooks written in 1857–1858, represents a significant milestone in the development of , containing extensive discussions on alienation, dialectics, and the theory of value, and serving as a missing link between his earlier manuscripts and the final published work. A preliminary version, '' A Contribution to the Critique of Political Economy'', was published in 1859 but covered only a fraction of Marx's planned work and received little attention. Marx continued to revise and expand his manuscript, driven by new research and his engagement with events like the American Civil War and the rise of the International Working Men's Association, of which he became a leading figure.

Marx's perfectionism and his tendency to get sidetracked by polemics and contemporary political events significantly delayed the book's completion. He often complained of ill health, particularly liver problems and carbuncles, which he attributed to the stress of his work and dire financial circumstances. His friend and collaborator Friedrich Engels's '' The Unknown Masterpiece''. He saw a parallel between the story's protagonist, a painter who endlessly reworks his masterpiece to the point where nothing remains, and his own protracted struggle with . This anecdote reveals Marx's anxieties about the intelligibility and reception of his complex work, as well as his self-perception as a creative artist engaged in a monumental task.

Ultimately, Marx's project extends beyond the three published volumes of . His preparatory writings, such as the , indicate a much larger plan encompassing the state, foreign trade, and the world market. The conceptual apparatus developed in , particularly in its opening chapters, was intended to lay the foundation for this broader, though incomplete, project.

Synopsis

Volume I: ''The Process of Production of Capital''

Volume I, published in 1867, is Marx's most extensive and historically detailed work, focusing on the immediate process of production of capital. It lays out the foundational categories of his critique of political economy and traces the ways in which surplus value is generated through the exploitation of labor.

Part I: Commodities and Money

Marx begins his analysis with the commodity as the elementary form of wealth in capitalist societies. He establishes its dual character: it has a "use-value", satisfying some human want or need, and an " exchange-value", the proportion in which it exchanges for other commodities. This commensurability in exchange, Marx argues, points to an underlying common element: " value", which he defines as congealed " human labour in the abstract", measured by " socially necessary labour time" – the average time required to produce a commodity under normal conditions of production with the average degree of skill and intensity prevalent in that society. For a commodity to have value, its labor must be useful, meaning it must produce a use-value that someone wants, needs, or desires. This section introduces the concept of the " fetishism of commodities", where the social relations between producers "assume... the fantastic form of a relation between things". The market system and money-forms disguise these real social relations, making them appear as objective properties of the commodities themselves.

The exchange process itself necessitates a universal equivalent, a " money commodity" (historically gold and silver), which functions as the "measure of value" and the " medium of circulation". Marx traces the development of the form of value from the simple or accidental form, through the expanded and general forms, to the money form. Money serves as a measure of value (allowing commodities to express their values as price) and as a medium of circulation (facilitating the exchange of commodities, C-M-C). These two functions are contradictory: as a measure of value, money should be stable (like gold), but as a means of circulation, it needs to be efficient and adaptable, leading to the use of tokens and credit money. The circulation of commodities C-M-C (selling in order to buy) contains the formal possibility of crises, as the sale (C-M) and the purchase (M-C) are separated in time and space, meaning there is no automatic guarantee that a sale will be followed by a purchase. Money also functions as a hoard (a store of value), as a means of payment (for settling debts, introducing the creditor-debtor relation), and as " world money" in international trade.

Part II: The Transformation of Money into Capital

Marx then examines how money is transformed into capital. The simple circulation of commodities is C-M-C (selling in order to buy another commodity of equivalent value). Capital, however, circulates as M-C-M' (buying in order to sell dearer), where M' is M + ΔM, the increment ΔM being "surplus value". Capital is thus defined not as a thing (like money or machines) but as a process: "value in motion", specifically "self-valorizing value". The capitalist, as the "conscious bearer" of this movement, is driven by the "unceasing movement of profit-making".

Marx argues that surplus value cannot arise from the sphere of circulation if equivalents are exchanged (M-C and C-M both adhering to value equivalence). While individual capitalists might cheat by buying cheap or selling dear, this merely redistributes existing value. The problem is to explain how the capitalist class as a whole can extract surplus value while adhering to the laws of commodity exchange. The solution lies in finding a unique commodity whose use-value is itself a source of more value than it costs. This commodity is " labor power", the capacity to labor. For labor-power to be available as a commodity, two conditions must be met: the laborer must be a "free proprietor" of their labor-power, able to sell it for a definite period; and the laborer must be "free" in the double sense of not possessing the means of production, thus having no other commodity to sell and being compelled to sell their labor-power to survive. This "double freedom" is the result of a historical process of primitive accumulation which divorces the producers from the means of production.

The "value of labor-power" is determined, like that of any other commodity, by the labor-time necessary for its reproduction. This includes the means of subsistence required to maintain the laborer in their normal state as a working individual and to reproduce the working class. Marx emphasizes that this value contains a "historical and moral element", varying according to the level of civilization, the habits and expectations of the working class, and the outcomes of class struggle. The capitalist purchases labor-power at its value, and then consumes its use-value in the labor process. The "secret of profit-making" is that the value created by the laborer in the production process is greater than the value of their own labor-power.

Part III: The Production of Absolute Surplus-Value

Marx moves from the sphere of circulation ("a very Eden of the innate rights of man") into the "hidden abode of production". The capitalist production process is a unity of the " labor process" (the purposeful activity of producing use-values) and the " valorization process" (the process of creating value and surplus-value).

In the labor process, the capitalist controls the work and owns the product. Capital advanced is divided into " constant capital" (c) – the value of the means of production (raw materials, auxiliary materials, and instruments of labor) – and " variable capital" (v) – the value laid out in purchasing labor-power. Constant capital merely transfers its existing value to the new product, while variable capital, through the expenditure of living labor, creates new value. The new value created is greater than the value of the variable capital (v); this excess is surplus value (s). The total value of the commodity is thus c + v + s.

The "rate of surplus value" (s/v) is the measure of the exploitation of labor-power. It expresses the ratio of surplus labor-time (the time the worker labors beyond what is necessary to reproduce the value of their labor-power) to necessary labor-time (the time required to reproduce the value of labor-power).

The working day is the site of a struggle between the capitalist class (seeking to maximize its length) and the working class (seeking to limit it). Capital, as "dead labour which, vampire-like, lives only by sucking living labour", has an inherent drive to extend the working day beyond its physical and social limits. This struggle is not resolvable by appeals to the "rights" of commodity exchange, as both capitalist and worker can claim their rights as buyer and seller respectively. "Between equal rights, force decides", leading to a historical struggle, exemplified by the fight for the Factory Acts in Britain. Marx details the often brutal conditions and excessive hours imposed on workers, particularly women and children, in various industries. The establishment of a "normal working day" is thus a product of protracted class struggle and state intervention, influenced by factors such as the need for a healthy workforce and military conscripts. "Absolute surplus-value" is produced by prolonging the working day, thus extending surplus labor-time, given a constant necessary labor-time. The "mass of surplus-value" is the rate of surplus-value multiplied by the number of laborers employed.

Part IV: The Production of Relative Surplus-Value

"Relative surplus-value" is produced by shortening necessary labor-time, typically through increases in the productivity of labor in those industries that produce wage goods. If the value of the means of subsistence falls, the value of labor-power also falls, allowing the capitalist to appropriate a larger share of the working day as surplus labor-time, even if the length of the working day remains constant or is shortened.

Individual capitalists are driven by the coercive laws of competition to seek an "extra surplus-value" (or extra profit) by introducing new technologies or organizational methods that make their individual value of production lower than the social average. This extra surplus-value is ephemeral, disappearing once the new methods become generalized. This constant hunt for ephemeral extra surplus-value is the immanent drive within capitalism for perpetual technological and organizational dynamism. Marx notes that a rise in the physical standard of living of workers (more use-values) can be compatible with a rising rate of exploitation if productivity increases sufficiently.

Marx then examines the specific methods of producing relative surplus-value:
* Cooperation: The bringing together of many workers under the command of a single capitalist creates a new "social productive power of labour", a collective force greater than the sum of individual powers. This collective power appears as a productive power of capital itself. The capitalist's function of direction and supervision becomes necessary, but it is also a function of exploitation, a "despotic" command.
* Division of labour and manufacture: Manufacture, based on handicraft skills, involves breaking down the production process into specialized, partial operations performed by "detail laborers". This increases productivity but "converts the worker into a crippled monstrosity" by suppressing a "whole world of productive drives and inclinations". A hierarchical structure of labor-powers emerges, and the intellectual potentialities of production become concentrated in capital. Marx distinguishes the division of labor in the workshop (despotic and planned) from the division of labor in society (anarchic, mediated by market exchange).
* Machinery and large-scale industry: The introduction of machinery revolutionizes the technical basis of production. The machine, as a tool taken out of the worker's hands and incorporated into a mechanism, confronts the worker as "capital, dead labour, that dominates, and pumps dry, living labour-power". The skill of the worker passes over to the machine, and the worker becomes a mere appendage to the "automatic system of machinery". Machinery cheapens commodities (and thus labor-power) and is a powerful weapon in the hands of capital for prolonging the working day (to recoup its value before obsolescence), intensifying labor, and suppressing worker resistance. Marx discusses the struggle between worker and machine, noting that workers eventually learn to distinguish between machinery itself and its capitalist employment. The Factory Acts, while limiting hours and regulating conditions, also accelerate the concentration of capital and the generalization of the factory system. Large-scale industry creates the material conditions for a "new and higher synthesis" of agriculture and industry, but under capitalism, this often leads to the ruining of the soil and the worker. Marx notes the contradiction that capitalism requires an increasingly flexible, adaptable, and educated workforce ("the totally developed individual") while simultaneously degrading and stultifying labor.

Part V: The Production of Absolute and Relative Surplus-Value

In this part, Marx synthesizes the discussions on absolute and relative surplus-value. Capitalists employ a variety of strategies to increase the rate and mass of surplus-value, often combining methods. For example, increases in productivity (relative surplus-value) can be used to intensify labor (a form of absolute surplus-value if the working day remains constant). The "form-giving fire" of living labor is the ultimate source of surplus-value, and capital's drive is to appropriate as much of this unpaid labor as possible. Marx revisits the idea of the "collective laborer", emphasizing that as the scale and cooperation of production increase, the concept of productive labor expands to include not only those directly working on the material but also those involved in the general coordination and scientific application within the production process. However, he narrows the definition from capital's perspective: "the only worker who is productive is one who produces surplus-value for the capitalist".

Part VI: Wages

Marx analyzes the various forms of wages, arguing that they obscure the underlying reality of exploitation.
* Time wages: Wages appear as the price of labor for a certain period (e.g., per hour or day). This creates the illusion that all labor is paid labor, concealing the distinction between necessary and surplus labor-time.
* Piece wages: Wages are paid per piece produced. This form is well-suited to capitalist exploitation, as it intensifies labor and encourages workers to overwork themselves, while making supervision less necessary. It fosters competition among workers and obscures the fact that the price per piece is ultimately determined by what the average worker can produce in a given time.
* National differences in wages: Marx briefly considers how wage levels differ between countries, influenced by factors such as historical development, the cost of subsistence, the intensity of labor, and the value of money. He notes that higher wages in one country might correspond to a higher rate of surplus-value if productivity is also much higher.

Part VII: The Process of Accumulation of Capital

This part examines how surplus-value is reconverted into capital, leading to capital accumulation on an ever-expanding scale. Marx's analysis here operates under specific assumptions: a closed system (no foreign trade), no problems of realizing commodities at their values, and the exclusion of the division of surplus-value into rent, interest, and industrial profit.
* Simple reproduction: Marx first considers a hypothetical scenario where the entire surplus-value is consumed by the capitalist as revenue, meaning capital is merely reproduced on the same scale. Even under these conditions, he argues, the continuity of the production process means that all capital eventually becomes capitalized surplus-value. The worker constantly produces the capital that exploits them, and the capital relation itself is reproduced.
* Expanded reproduction (accumulation): Capitalists are driven by the "historical mission" of "accumulation for accumulation's sake, production for production's sake". Part of the surplus-value is capitalized, i.e., used to purchase additional means of production and labor-power, leading to production on an expanded scale. Marx critiques classical political economy's "erroneous conceptions" of accumulation, particularly its neglect of the need to produce additional means of production (constant capital) alongside additional means of subsistence for an expanded workforce. The capitalist's drive to accumulate is presented as an objective necessity imposed by competition, rather than mere subjective greed.
* The general law of capitalist accumulation: Accumulation affects the demand for labor. If the " organic composition of capital" (c/v, the ratio of constant to variable capital, reflecting productivity) remains constant, accumulation leads to increased demand for labor-power, potentially raising wages. However, the general tendency of capitalist accumulation is towards a "rising organic composition of capital", as capitalists introduce labor-saving machinery in pursuit of relative surplus-value and to gain competitive advantage. This means that the demand for labor falls relative to the magnitude of the total capital.

Capitalist accumulation "constantly produces... a relatively redundant working population, i.e. a population which is superfluous to capital's average requirements for its own valorization, and is therefore a surplus population". This " industrial reserve army" (or relative surplus population) is a necessary product of accumulation and a condition for its existence, providing a readily available supply of labor for expansion and exerting downward pressure on wages. Marx identifies different forms of the reserve army: the "floating" (e.g., temporarily unemployed factory workers), the "latent" (e.g., agricultural populations being drawn into industry, or women and children entering the workforce), and the "stagnant" (e.g., irregularly employed workers, including those in the "sphere of pauperism" like vagabonds and criminals).

The "absolute general law of capitalist accumulation" is that "in proportion as capital accumulates, the situation of the worker, be his payment high or low, must grow worse". This means an " accumulation of misery, the torment of labour, slavery, ignorance, brutalization and moral degradation at the opposite pole" to the accumulation of wealth. Marx emphasizes that this is a tendency within the specific model of Volume I, which abstracts from factors like the realization of value and the distribution of surplus-value which are addressed in Volumes II and III.

Part VIII: So-Called Primitive Accumulation

In the final part of Volume I, Marx addresses the historical origins of the capital relation, a process he terms " primitive accumulation". This process is "primitive" because it forms the pre-history of capital and the capitalist mode of production, establishing the fundamental conditions for capitalist accumulation to begin. Marx contrasts his historical account with the "idyllic methods" portrayed by classical political economy, which depicted the emergence of capital and wage-labor as a gradual and peaceful result of diligence and frugality. For Marx, "in actual history, it is notorious that conquest, enslavement, robbery, murder, in short, force, play the greatest part".

Primitive accumulation is fundamentally the historical process of "divorcing the producer from the means of production". This involves two transformations: the social means of subsistence and production are turned into capital, and the immediate producers are turned into wage-laborers.

Key aspects of primitive accumulation include:
* Expropriation of the agricultural population from the land: Marx details the enclosure of common lands, the dissolution of feudal bands of retainers, and the forcible eviction of peasants, particularly in England from the late 15th to the 19th century. This created a "free and rightless" proletariat for urban industries. The "law itself now becomes the instrument by which the people's land is stolen".
* Bloody legislation against the expropriated: Those driven off the land were often criminalized as vagabonds and beggars, subjected to "grotesquely terroristic laws" that whipped, branded, and tortured them into accepting the discipline of the wage-labor system.
* Genesis of the capitalist farmer and the industrial capitalist: Marx traces the emergence of the capitalist tenant farmer and the rise of industrial capital, often aided by state power, colonialism, the public debt system, protectionist policies, and the slave trade. "Force is the midwife of every old society which is pregnant with a new one. It is itself an economic power."
* The "secret" of primitive accumulation and colonialism: Marx concludes with a discussion of Edward Gibbon Wakefield's theory of colonization. Wakefield "discovered" that capital is not a thing but a social relation between persons mediated through things. In colonies like Australia, where land was cheap and laborers could easily become independent producers, capital could not function. The "great secret" was the necessity of the state to artificially raise the price of land or otherwise restrict access to it, to ensure a supply of wage-laborers for capital. This, for Marx, revealed the artificial and historically constructed nature of the capital relation, dependent on the expropriation of the worker.

Marx argues that the "expropriation of the great mass of the people" by a few usurpers is eventually superseded by the expropriation of a few usurpers by the great mass of the people, as the contradictions of capitalism and the organization of the working class lead to the "knell of capitalist private property".

Volume II: ''The Process of Circulation of Capital''

Volume II, published by Engels in 1885, shifts the focus from the immediate production process to the process of circulation of capital. While Volume I assumed that commodities could be sold at their values without difficulty, Volume II examines the conditions and contradictions involved in realizing the value and surplus-value produced. Marx's analysis here is highly abstract and technical, often abstracting from technological change and assuming commodities exchange at their values to isolate the specific problems of circulation.

Part I: The Metamorphoses of Capital and their Circuits

Marx analyzes the circulation of industrial capital as a unity of three intertwined circuits, corresponding to the different forms capital takes:
* Circuit of money capital (M-C...P...C'-M'): Capital begins as money (M), is transformed into commodities (C) (labor-power and means of production), passes through the production process (P) to create new commodities (C') impregnated with surplus-value, which are then sold for more money (M'). This circuit emphasizes the role of money as the starting and end point, highlighting capital's aim of "money making".
* Circuit of productive capital (P...C'-M'-C...P): This circuit begins and ends with capital in its productive form (P). It emphasizes the necessity of continuous production and the reconversion of realized commodity capital (M') back into the elements of productive capital (C – labor-power and means of production).
* Circuit of commodity capital (C'-M'-C...P...C'): Starting and ending with commodity capital (C'), this circuit highlights the aggregate flow of commodities in the economy as a whole, including both means of production and means of consumption. It is from this perspective that Marx later develops his reproduction schemas.

Marx stresses that these are not independent types of capital but functional forms that industrial capital successively assumes and sheds. The continuity of capital flow through these metamorphoses is crucial, and any interruption or blockage in one phase (e.g., unsaleable commodities, lack of money, or disruptions in production) affects the entire process. The time capital spends in the sphere of circulation (buying and selling) is circulation time, and the time spent in production is production time. Reducing circulation time is crucial for accelerating the turnover of capital. This section also considers the costs of circulation (e.g., transport, storage, bookkeeping), which are necessary but unproductive of value.

Part II: The Turnover of Capital

This part examines the "turnover of capital", defined as the sum of its production time and circulation time. The speed of turnover influences the annual rate of surplus-value and the mass of surplus-value produced by a given capital.

Marx distinguishes between "fixed capital" and "circulating capital".
* Circulating capital includes raw materials, auxiliary materials, and the part of capital laid out in wages (variable capital). These components transfer their value entirely to the product in a single turnover period and must be constantly renewed.
* Fixed capital comprises the instruments of labor (machines, buildings, etc.) which transfer their value to the product gradually, bit by bit, over multiple turnover periods corresponding to their average lifetime. The circulation of fixed capital involves peculiar problems, such as the need to accumulate a sinking fund for its eventual replacement and the issue of "moral depreciation" (obsolescence due to new, more efficient machinery being introduced before the old is physically worn out). Marx discusses how the development of transport and communications shortens circulation time and how the credit system can help to overcome the rigidities imposed by fixed capital and differential turnover times.

Part III: The Reproduction and Circulation of the Aggregate Social Capital

In the final part, Marx analyzes the reproduction of the total social capital, using his famous "reproduction schemas". He divides the entire economy into two major departments:
* Department I: Produces means of production.
* Department II: Produces means of consumption.

For simple reproduction (where all surplus-value is consumed as revenue and there is no net accumulation), an equilibrium condition must be met: the constant capital of Department II (c2) must be equal to the sum of the variable capital and surplus-value of Department I (v1 + s1). This means that the demand for means of production from Department II must match the demand for means of consumption from the workers and capitalists in Department I.

For "expanded reproduction" (accumulation), a portion of the surplus-value in both departments must be capitalized, i.e., reinvested to purchase additional means of production and labor-power. This requires a different set of equilibrium conditions. Marx demonstrates arithmetically how such balanced growth is theoretically possible, but also highlights the numerous points at which disproportionalities and crises can arise due to the "anarchic" nature of capitalist production and the complexities of interdepartmental exchanges, particularly concerning the replacement of fixed capital. He emphasizes the crucial role of money capital and the "virtual money capital" (hoarded savings) in mediating these exchanges and facilitating accumulation, hinting at the necessity of a credit system which is largely abstracted from in Volume II. The "ultimate reason for all real crises", Marx notes, "always remains the poverty and restricted consumption of the masses, in the face of the drive of capitalist production to develop the productive forces as if only the absolute consumption capacity of society set a limit to them".

Volume III: ''The Process of Capitalist Production as a Whole''

Volume III, published by Engels in 1894, aims to depict the capitalist mode of production in its totality, as it appears on the surface of society, involving competition between capitals and the distribution of surplus-value into various forms of revenue. It integrates the analyses of production (Volume I) and circulation (Volume II) to explain the "concrete forms which grow out of the process of capital's movement considered as a whole".

Part I: The Transformation of Surplus-Value into Profit and of the Rate of Surplus-Value into the Rate of Profit

Marx begins by examining how surplus-value appears to the individual capitalist as "profit". While surplus-value is calculated on variable capital alone (s/v), profit is calculated on the total capital advanced (constant + variable capital, or C = c + v). The " rate of profit" is therefore s/C or s/(c+v). This form of appearance mystifies the origin of surplus-value in the exploitation of labor, making it seem as if profit arises from the total capital advanced. The capitalist is primarily concerned with the rate of profit, not the rate of surplus-value. Marx discusses various factors that can affect the rate of profit, including the economization in the use of constant capital and the acceleration of capital turnover.

Part II: Transformation of Profit into Average Profit

Competition between capitals in different spheres of production, with varying organic compositions (c/v), leads to the formation of a "general rate of profit" or "average profit". Capitals tend to flow from spheres with lower rates of profit to those with higher rates, leading to an equalization of profit rates across the economy. This means that individual capitals do not appropriate the surplus-value produced directly within their own sphere but rather a share of the total social surplus-value proportional to their share of the total social capital.

Consequently, commodities do not exchange at their individual values (c+v+s) but at "prices of production", which are equal to their cost-price (c+v) plus the average profit. This "transformation of values into prices of production" represents a further mystification of the source of profit and the nature of exploitation. Marx's quantitative method for this transformation has been a subject of extensive debate (the " transformation problem").

Part III: The Law of the Tendency of the Rate of Profit to Fall

Marx argues that there is an inherent tendency for the general rate of profit to fall in the long run. This tendency arises from the typically capitalist method of increasing productivity, which involves a rising organic composition of capital (c/v) – meaning more constant capital (machinery, raw materials) is used relative to variable capital (labor-power). Since only variable capital produces surplus-value, a rising c/v (even with an increasing rate of surplus-value s/v) will tend to depress the rate of profit s/(c+v).

Marx presents this "law" as "the most important law of modern political economy". However, he also outlines several "counteracting tendencies" that can offset or temporarily reverse the fall in the rate of profit. These include: increasing the intensity of exploitation, depression of wages below the value of labor-power, cheapening of the elements of constant capital, relative overpopulation, foreign trade, and the increase of stock capital. The law operates as a tendency, subject to these countervailing forces, and its actual manifestation is complex and can lead to crises. The validity and precise formulation of this law have been among the most debated aspects of Marx's theory.

Part IV: Transformation of Commodity Capital and Money Capital into Commercial Capital and Financial Capital (Merchant's Capital)

This part, which Marx also refers to as dealing with "merchant's capital" or "trading capital", examines forms of capital that operate exclusively within the sphere of circulation.
* Commercial capital (commodity-dealing capital) undertakes the functions of buying and selling commodities (C-M and M-C). While it creates no value or surplus-value itself, it helps to reduce the circulation time of industrial capital and facilitate the realization of surplus-value. Commercial capital obtains a share of the total surplus-value in the form of commercial profit, which is equalized with the average rate of profit. The labor employed by commercial capitalists (e.g., clerks) is unproductive of surplus-value, though it is exploited.
* Money-dealing capital specializes in the technical operations of handling money (payments, collections, bookkeeping, etc.) for the capitalist class as a whole.

Part V: Division of Profit into Interest and Profit of Enterprise. Interest-Bearing Capital

Here, Marx analyzes "interest-bearing capital", where money itself appears to beget more money (M-M'). The owner of money capital (the money-capitalist or financier) lends it to a functioning capitalist (industrial or commercial), who employs it to produce surplus-value. The surplus-value (gross profit) is then divided between the functioning capitalist, who receives "profit of enterprise", and the money-capitalist, who receives interest.

Interest is the price paid for the use-value of money capital – its capacity to function as capital and produce profit. The rate of interest is determined by supply and demand for money capital and by competition between lenders and borrowers; there is no "natural" rate of interest. This division makes profit of enterprise appear as the "wages of superintendence" for the functioning capitalist, while interest appears as the fruit of mere ownership of capital. This is the "most superficial and fetishized form" of the capital relation, where capital appears as an automatic, self-valorizing source, "money breeding money".

The development of the credit system and banking centralizes money capital and transforms it into social capital, available to all capitalists. This accelerates accumulation but also intensifies contradictions and crises. Marx discusses the role of banks in concentrating loanable capital and creating "credit money" (e.g., banknotes, bills of exchange).

Fictitious capital arises with the development of tradable securities like government bonds and company shares. These represent titles to a stream of future revenue (interest or dividends) and their market price (capitalized value) can fluctuate independently of the real capital they supposedly represent, leading to speculation and financial crises. Marx examines the dynamics of the industrial cycle (boom, crisis, stagnation, recovery), highlighting the role of credit and fictitious capital in both fueling speculation and precipitating crashes. He critiques the "currency principle" and the Bank Act of 1844 in Britain, arguing that such legislation cannot abolish crises, which are inherent in the capitalist mode of production.

Part VI: Transformation of Surplus Profit into Ground Rent

This part examines " ground rent", the portion of surplus-value paid to landowners for the use of land. Marx distinguishes between different forms of rent:
* "Differential rent" arises from differences in the fertility or location of land. More fertile or better-located land yields a surplus profit for the capitalists cultivating it, which is then appropriated by the landowner as differential rent.
* "Absolute rent" arises from the monopoly of private landownership, which allows landowners to extract a rent even from the least fertile land, independent of its productive qualities. This is possible because capital invested in agriculture typically has a lower organic composition than the social average, thus producing more surplus-value, a part of which can be siphoned off as absolute rent by landowners without violating the general tendency towards the equalization of profit rates.

Marx also discusses the price of land, which is the capitalized ground rent, and the historical development of capitalist relations in agriculture.

Part VII: The Revenues and their Sources

In the final part, Marx critiques the "trinity formula" (Capital–Profit/Interest, Land–Rent, Labour–Wages), which represents the three main classes of bourgeois society and their respective sources of revenue as naturally arising from three independent factors of production. This formula, Marx argues, is the consummate expression of the mystification inherent in the capitalist mode of production. It presents capital, land, and labor as coequal, independent sources of wealth, obscuring the fact that profit and rent are derived from the surplus-value created by labor. It reifies social relations, making it appear as if things (capital, land) have the inherent power to produce value, while labor is merely one factor among others. This "bewitched, distorted and upside-down world" is the basis of everyday consciousness and the categories of vulgar political economy.

Marx concludes Volume III, and effectively as a whole (as he left it), with a very brief, unfinished chapter on "Classes", where he begins to define classes based on their ownership of the means of production and their sources of revenue before the manuscript breaks off.

Themes

explores a wide range of themes central to the critique of political economy. These themes are interwoven throughout the three volumes, often introduced in one context and then further developed or re-examined in others.

Commodity, value, and money

Marx's analysis begins with the commodity as the "elementary form" of wealth in capitalist societies. A commodity possesses a dual character: it is a use-value, satisfying a human need or want, and an exchange-value, the quantitative proportion in which it exchanges for other commodities. Marx argues that underlying exchange-value is value, an immaterial social substance representing "congealed" abstract human labor. The magnitude of value is determined by the socially necessary labour time required for a commodity's production under average social conditions of skill and intensity. This labor theory of value is foundational to Marx's critique, though it differs significantly from classical formulations by emphasizing the historically specific, social character of value-producing labor in capitalism. Labor itself, as the expenditure of human labor-power, creates value but does not itself possess value.

The exchange of commodities necessitates a money commodity (historically gold or silver) to serve as a universal equivalent, expressing the values of all other commodities. Money functions as a measure of value (allowing values to be expressed as prices), a medium of circulation (facilitating C-M-C), a hoard (store of value), a means of payment (settling debts), and world money. Marx's theory of value is thus a monetary theory of value; value cannot be expressed or realized without money. The development of the money form, including credit money, is crucial for the circulation of capital.

Capital and surplus-value

Capital is not a thing (like money or machines) but a process: "value in motion", specifically "self-valorizing value". It follows the circuit M-C-M', where money (M) is advanced to purchase commodities (C – labor-power and means of production) in order to produce new commodities which are sold for a greater sum of money (M'). The increment (ΔM) is surplus value. The capitalist, as the "conscious bearer" of this movement, is driven by the relentless pursuit of surplus-value and accumulation.

Surplus-value originates from the exploitation of labor power, the unique commodity whose use-value is the capacity to create more value than it itself costs. The capitalist purchases labor-power at its value (determined by the socially necessary labor-time required for its reproduction) and, in the production process, compels the laborer to work for a longer period than is necessary to reproduce the value of their labor-power. This unpaid surplus labor is the source of surplus-value. The rate of surplus-value (s/v, the ratio of surplus labor to necessary labor) is the measure of this exploitation.

Marx distinguishes between absolute surplus-value (produced by prolonging the working day) and relative surplus-value (produced by shortening necessary labor-time, typically through increases in productivity that cheapen wage goods).

Fetishism and mystification

A pervasive theme in is the concept of fetishism, which describes how, under capitalism, social relations between people appear as relations between things. The products of labor, as commodities, seem to possess intrinsic value, and market exchanges appear to be governed by objective properties of these things, rather than by the underlying social relations of production between private producers. This "enchanted, distorted and upside-down world" is not merely a subjective illusion or " false consciousness" but an objective appearance that arises from the very structure of commodity production and exchange.

This fetishism extends to money (the "money fetish", where money appears to have its own inherent power to create more money) and to capital itself (the "capital fetish", where capital appears as an automatic, self-expanding entity, and machines seem to be productive of value). The wage form, for example, mystifies exploitation by making it appear that the worker is paid for all their labor, concealing the distinction between paid (necessary) and unpaid (surplus) labor. The trinity formula (Capital–Profit, Land–Rent, Labour–Wages) represents the ultimate mystification, presenting the sources of revenue as naturally arising from independent factors of production, obscuring their common origin in surplus-value extracted from labor. Marx's critique aims to penetrate these fetishized appearances to reveal the underlying social relations and contradictions of capitalism.

Process of accumulation and its contradictions

Capitalism is driven by the "historical mission" of accumulation for accumulation's sake, production for production's sake. Surplus-value is reconverted into new capital, leading to production on an ever-expanding scale. This process, however, is fraught with contradictions.

The "general law of capitalist accumulation" posits that accumulation, by fostering a rising organic composition of capital (more machinery relative to labor), tends to create a relative surplus population (unemployment). This reserve army serves to depress wages and discipline the employed working class, but it also leads to the "accumulation of misery" at one pole corresponding to the accumulation of wealth at the other.

Marx also identifies a tendency of the rate of profit to fall (TRPF) in Volume III. As the organic composition of capital rises with technological progress, and since only living labor (variable capital) produces surplus-value, the rate of profit (s/ +v tends to decline, even if the rate of surplus-value (s/v) increases. Marx outlines several counteracting tendencies, making the law's actual manifestation complex and a source of crises.

The reproduction of the total social capital, examined through Marx's reproduction schemas in Volume II, reveals the complex interdependencies between Department I (producing means of production) and Department II (producing means of consumption). Maintaining equilibrium (proportionality) between these departments is crucial for smooth accumulation, but the "anarchic" nature of capitalist production and the separation of sale and purchase mean that crises of disproportionality ( overproduction or underconsumption) are constant possibilities. The credit system becomes essential to mediate these flows and overcome temporal and spatial gaps in circulation, but it also introduces new forms of instability and the potential for financial crises.

Class struggle and historical transformation

While is primarily a theoretical analysis of the economic laws of motion of capitalism, class struggle is an immanent and recurring theme. The capital-labor relation is inherently antagonistic, centered on the extraction of surplus-value. The length of the working day, the intensity of labor, the level of wages (value of labor-power), and the introduction of machinery are all sites of ongoing struggle between the capitalist class and the working class. The Factory Acts, for example, are presented as a product of this struggle, a "modest Magna Carta" for the working class.

Marx views capitalism as a historically specific and transitory mode of production. Its internal contradictions – between the social character of production and private appropriation, between the development of productive forces and existing relations of production, between use-value and exchange-value – create the conditions for its eventual supersession. The process of accumulation itself, by concentrating capital and socializing labor, creates the material prerequisites and the social agent (the proletariat) for a revolutionary transformation towards a "higher form of society", an "association of free men" where production is consciously regulated by the associated producers. While Marx offers few details about the nature of communist society, he emphasizes the abolition of private property in the means of production, commodity exchange, money, and the state, and the overcoming of fetishism and alienation.

Publication and translation

Marx delivered the German manuscript for Volume I to his publisher Otto Meissner in Hamburg in April 1867, and it was published in September. Meissner expected the next two volumes before the end of that year, a timeline Marx was initially optimistic about, though his meticulous approach often led to delays that frustrated his associates, including his lifelong collaborator and friend Friedrich Engels

HOME


Content is Copyleft
Website design, code, and AI is Copyrighted (c) 2014-2017 by Stephen Payne


Consider donating to Wikimedia



As an Amazon Associate I earn from qualifying purchases