William J. Blake: An American Looks at Karl Marx
The Transformation of Money into Capital
The circulation of commodities is the starting point of capital. It is in commodity production, circulation, world commerce, complex uses of money, and money instruments as these were manifested in the sixteenth century that the foundations of capital are laid. Money is the first form in which capital actually appears. When we speak of capital, we mean, to begin with, that moneyed wealth of the merchant and the usurer, as they are distinguished from the landed gentry. But not only in the sixteenth century, but today, we can clearly see that all new capital comes on the scene—whether as exploiter of labor, seller of commodities, or even of money—by the way of previous money that has to be transformed by a special process into capital.
The difference between money and money as capital is nothing other than a difference in their form of circulation.
At last we are at the threshold of Marx’s edifice, capitalism. First he studied commodities, then exchange, then money, and now capital. Up to now money has been described as a circulator, but not as capital. Even its auxiliary behavior, as in hoarding, still did not make it capital. Although capital begins as merely a different mode of circulation from ordinary money, still it leads to a study of the production process, back again to the commodity, but at an infinitely higher level.
The Use of Moncy to Acquire More Money
Instead of C—M—C, in which we ended with commodities as we began, or we sold in order to buy, we have a totally different form, M—C—M. Here we transform money into commodities in order to acquire money. We buy in order to sell. This money that circulates as M—C—M is potentially capital. Instead of money acting as a medium in circulating commodities, in which money runs from hand to hand ever farther from the first commodity but still always moving a commodity, no matter what form it takes, we now have another motion in which money always returns to the same hand in which it began. What happens when M—C—M takes place? I buy 100 yards of silk for $175. I sell the silk for $200, and I have $25 more than before and no silk. I get down to M—M. In other words, in C—M—C I exchange a non-use-value worth $175 for a use-value of $175. I have what I want and it is all right. But if I exchange M—C—M and I get $175 for the silk for which I paid $175, I am a fool. The notion of equivalence no longer governs. If I can do no better than get $175 for $175 then I might as well hoard the money as risk it. I must hope to get $175 plus, or there is no motive. Not equivalence but profit is my purpose. But whatever my object, if M—C—M is adhered to, win or lose, I am in a different world from the commodity trades of non-use-value for use-value. True, in both cases there is a commodity, a buyer, a seller, and a third medium, money, which circulates the commodity. But one begins with a sale and ends with a purchase and the other process begins with a purchase and ends with a sale. The goal is more money, not more commodities or availability of use.
In C—M—C, the money is spent once and for all and the goods are used. In M—C—M, money is laid out so that it can come back. The money is not spent, it is advanced. In C—M—C the same money is changed twice, once in money, once in sale. In M—C—M it is the commodity that moves twice, for the buyer takes it from a seller to hand to another buyer. The double movement of the commodity returns the money to its origin.
There are further differences. If I sell a fountain pen for five dollars and buy a pair of shoes with the proceeds, my money is spent. The shoe-seller has it. If I sell another fountain pen, true, I have another five dollars, but this is a result of new labor, or new production, and not part of the original sequence. It leaves me again when I buy collars and ties for five dollars. But in C—M—C the sale must take place, I must get back the money I advanced.
Use-Value No Object in Transactions
The movement of commodities aims at consumption and uses money; the movement of money as capital form uses commodities not for consumption but to acquire still more money. It exists for exchange value, not for use-value. There is no difference of quality involved. The fountain pen is unlike the shoes but all money is the same in quality. “Money has no smell,” says the proverb. If there is no difference in quality, there can be only one motive, a difference in quantity. This difference, above the value originally advanced, and which is added to the original amount, which remains intact, is called surplus-value. Thus Money becomes Capital.
Motion of Capital Interminable
The commodity form, selling in order to buy, is limited by the consumption that satisfies very definite wants. But with buying in order to sell the motion is interminable. It can always be renewed so as to obtain a larger quantity of money. If it is withdrawn, it is a hoard, and as a hoard nothing will happen to it; it will be the same forever. The $200 I got for selling the silk I bought at $175 must be used again in the same way, or else it will never be more than $200. As capital it can never stop, for if it stops it is just a hoard, not capital at all.
Every circuit completed by capital, unlike those completed by consumption, must lead to a continuation by way of the new circuit, the M must buy C in order to be M. Neither use-values nor any given profit are the aims of capitalists. The capitalist is a rational miser, says Marx. They are both driven by greed, but the miser tries to gain his ends by a withdrawal from circulation, the capitalist by throwing his money constantly into circulation.
The capitalist changes his money from one use-value to another to get more money or, rather, he could do so. But the same use-value would serve just the same.
Capital Is Alternately Money and Commodity
Here we see the limitations of the definitions capital is money, or capital is commodities. The better formula (though inadequate and formal) would be that values take on the shape of money, then of commodities, then again of money; at the same time this value changes in magnitude, and with this increased magnitude, composed of value and surplus value, it can add automatically to itself, ad infinitum, as value. Somehow (that mystery is the key to all political economy), value “begets” more value, with longer-enduring loins than those with which the patriarchs begat the worthies of the Book of Genesis. It may not be a goose but it lays golden eggs.
The form under which value appears (as the Devil in the shape of a black cat) is money, since in that shape it begins and ends. But money must also take the shape of commodities (say a broomstick) in order to add to value. Unlike the situation created by the hoarder, there is no exclusion between money and commodities. It does not matter to the capitalist what use or non-use any commodity may have. It is a means of converting value into value-plus-surplus-value in order that the combination may act again as value seeking surplus-value. It sells the Bible and the Koran, milk or opium, chewing gum or bread. They are means to surplus-value.
So far we have described merchant’s capital. But the same is true of industrial capital. Mr. Ford’s object in manufacturing automobiles is the same as Marshall Field’s in selling dry goods. He sells the cars to make more money so he can make more cars, to make more money.
He does not want the cars, he has only three in his family (they are thin, too). They cannot use very many. He would not want anyone else to have the cars if he constantly lost money. He is glad to make so many cars, and glad everyone uses them, because he can make money so that he can make more cars to make more money, so that he can never stop. (This is outside the question of his social utility.)
Only little business men really retire. Why? Because they can “invest” their money, that is, turn value into surplus-value without buying any commodity whatever! This is M—M’, with no complicating factors. It is capital plus coupons or plus dividends—or at least that is what they hope for.
The Great Enigma of Capital and Surplus Value
The formula for money capital contradicts every previously described relation. It is the opposite of C—M—C, for it buys to sell. It makes the commodity the medium of circulation, instead of the money being the medium for commodities. The purchase is made with no mind to the utility of any article. The money returns to the same hand instead of going from hand to hand.
The last term of the equation is the same in quality as the first. The quantity of value is not the same, whereas simple commodity equivalence is based on that. Can it be that a mere inversion—M—C—M instead of C—M—C, a mere change in the order of the transaction—can cause this absolute contradiction? What is more, for two of the three people in this transaction, the seller, or the commodity to the money-owner, and the buyer of goods from the money-acquirer, it is the same as any commodity transaction. They are the same as before; it is he who is different. They are producer and consumer, he is something else.
Nor does surplus-value possibly originate in this maneuver of the money-owner. For, in effect, the seller of the commodity and its buyer could have made the commodity exchange themselves. The thing could have been exchanged once, not twice, on a commodity equivalence basis. (We are speaking only of the process of circulation, not of labor, such as transporting merchandise or keeping it in stock ready to fit and serve.)
So we see that the mere inversion of the equation does not get us outside of the commodity exchange, and so the question is open: Is there in the process of circulation anything we have not noticed that can account for surplus value?
Let us make it simple. A fruit farmer and an auto mechanic exchange apples for gasoline. The apples, though, are worth two dollars and the gasoline two dollars. They agree to square accounts later on. The money is money of account but no real money is used. They keep books and cancel them out, as they are even amounts in this trade. As the mechanic would need to take too much trouble to grow apples, the farmer to pipe and store gas, both gain by the exchange in use-values, both get more of each than they would get without the exchange. They gain a greater quantity of use-values as well as different uses, but there is no gain in value, which is the same after the trade as before. Even if real money entered the transaction, making it into two trades, purchase and sale, separately, the effect would be the same. (We are not now discussing sharp trading, but normal exchange, where both goods exchange at their values.) If “supply and demand” balance, then their effect on values is nil.
For the reason that use-values, are exchanged, economists on the whole have treated all trade, including M—C—M, as the same, thereby confusing use-values with values. Now if a sale creates surplus-value, why not also a purchase? Both are relations of money and goods.
Exchange Creates no Surplus-Value
Another thing: whereas in simple exchange unwanted use-value is exchanged for wanted use-value, in the money equation, where a surplus is sought, the seller is not getting rid of goods which are superfluous to him, for he has acquired these goods merely in order to turn them over. That is why the analogy between the exchange of useful articles with no eye to gain, and the exchange of goods beginning with purchase and ending with sale, is a confused identification. To paraphrase the witty remarks of Lasalle:
The owner of the United Shoe Machinery Company first makes complex machines for his family use, the surplus machines he then proceeds to sell. The establishments that sell widows’ clothes and mourning veils stock up in anticipation of a death in their family; what they cannot use, since auntie did not die, they then dispose of in the market. The Western Union Telegraph Company directors have wires sent them to amuse and instruct, and after they are fed up with this occupation they then exchange the surplus messages with the wolves of the Stock Exchange and the editors of newspapers, who compensate these directors with shares of stock they are bored with and surplus news items.
It does not take a Mark Twain touch to dispose of the idea that modern capitalists merely exchange use-values. But this idea takes on another form when it is argued that a commodity has different uses in the hands of a producer and in those of a consumer. But this is a change in use-value here given as availability, and the surplus-value is not found in an exchange of use-values, but in the increase of money over and above the circulation of use-values. If commodities are more cherished by the buyer than is money, money is more cherished by the seller than are commodities. Nothing is added by this sleight-of-hand.
But even the exchange of non-equivalents can produce no surplus-value. This may seem nonsense, but it must be recalled that Marx does not treat of any individual deal, but with social phenomena, with the totality of transactions, in order to discover their social nature.
That one man gets the better of another in business is well known; that is their motive and their dream as they enter into a trade. But the question we have to answer is not how do Smith and Robinson get surplus-value, but how does the total number of exchanges made through money capital yield a surplus-value, or, more exactly, how is the whole mass of value increased by the mere process of purchase and sale?
If Smith sells the value of 100 for 110, then Brown, who bought badly, has paid 10 more than the value. He has 90 in place of 100. It has moved from one to the other but the social mass of value is still 100. If Smith sold badly, the same is true. The actors have changed but the quantity is the same. Even if it be assumed that sellers as a class have the advantage over buyers, then when each seller turns buyer in order to use his money once more, he loses on the next transaction as buyer what he made as seller. All rises of price cancel out each other as social totals; value is unaffected.
In a boom it seems otherwise. Cotton sells for eight cents, then ten, then twelve, then twenty. Everybody is exchanging at increasing prices. But they replace at the higher prices. As buyers and sellers they are equated. That is why, when the balloon bursts, they are all flat on their backs.1
Mark-ups could add to value only if there were a class that consumed without producing, that is, that received money for nothing. If, for example, one country subjugates another, as England does India, then if India sells to England to an advantage, she gets back part of the graft taken from her by Kiplingesque proconsuls of empire. But then, she gets back only part of the swag; she is not richer. This relation is obviously not commercial but is introduced merely to show that even where one social group can sell above value it is only when the other has plundered it to begin with. In trade, in straight business, this is excluded.
A Class Cannot Cheat Itself
Surplus-value is not explained by prices or by one merchant or capitalist cheating another. The class cannot cheat itself.
It is an oft-repeated ethical prejudice that merchants are evil fellows who live by overcharging. But that is nonsense, for even if they raised the price to all consumers, thus raising the level of values, they would have to replace at prices the wholesaler was fully aware could be obtained.
The other idea, that there are overriding rich men who gain by force, can also be dismissed. In the sphere of circulation, at least, capitalists spend their last liver and lights and energy in radio broadcasts, newspaper advertisements, and numberless other forms of adventitious noise and color, peacefully to persuade mankind that Jimjam syrups are better than Hokum syrups. The voices of their announcers are dulcet, their rhetoric in advertisements is sweet and persuasive, their salesmen are eloquent and plausible. There is no question of force; quite the contrary.
Surplus-Value Cannot Arise in Circulation
Well then, no one gives surplus-value to the capitalists for love, no one because he is forced to. Cheating and clever trading are no explanation. Exchanges of use-values are excluded. They can make no money out of exchanging equivalents. There is no gain in social value by exchanging non-equivalents. Gain does not come out of a rise in prices as a totality, and no class can cheat another in circulation. It remains a complete mystery how the money in any country buys commodities for 100 and sells for 110, or even for 101. The secret must lie somewhere, because the world is full of rich people and a great many of them keep on getting richer. Before capitalism, it was easy to tell how people became rich. They owned the land and slugged their serfs, and took away what they required. Or, in slavery, they owned someone and gave him enough merely to survive. But here, they sell. They exchange. These are fair and aboveboard as social acts.
Since circulation of commodities produces no surplus-value, perhaps the merchant strips the producer or the usurer strips the manufacturer and merchant. But these historic explanations are realized in the sphere of circulation, but are not added values; they can exist only if there is a surplus to divide.
But how can surplus-value arise outside of circulation either? For, apart from circulation, a commodity owner simply sits down with his goods. They have value, that is, they contain labor. That labor value can be expressed in a nominal price, which really is money of account, that is, a bookkeeping entry. But although the producer has created value by his labor, he has not produced surplus-value. If value (labor-time) is 10, it is 10, not 11. There can be no value greater than itself. He can increase value only by putting in fresh labor, by making new goods. But unless the producer enters the sphere of circulation he cannot realize value.
Since surplus-value can originate neither in circulation nor apart from circulation, we must solve the apparently complete enigma of how the money capitalists buy commodities at their value, sell them at their value, and at the end withdraw more from this process of circulation than they put in at the beginning. Since no use-value or service explains it, because the embodiment of labor is value, not surplus-value, we must explain how the surplus-value arises both inside circulation and yet outside of it. We must step outside of money itself if we are to discover anything at all.
1. For once a mixed metaphor describes what happens. I have seen arrogant speculators read confirmations of sale, see their loss, and sink unconscious into deep leather chairs. [Author.]