2. CONTRADICTIONS IN THE GENERAL FORMULA 

The form of circulation by which money becomes capital 
contradicts all previous laws bearing on the nature of commodities, 
of value, of money and of circulation itself. Can the purely formal 
difference of inverted sequence cause this? 

What is more, this inversion exists only for one of the three 
transacting persons. As a capitalist I buy commodities from A and 
sell them in turn to B..A and B appear merely as simple buyer 
and seller of commodities. In each of the two cases I confront 
them merely as a simple owner of money or owner of 
commodities, confronting one as buyer or money, the other as 
seller or commodity, but neither of them as a capitalist or a 
representative of something that is more than money or commodi- 
ty. For A the transaction began with a sale; for B it ended with a 

purchase, hence, just as in commodity circulation. Moreover, if I 
base the right to surplus-value upon the inverted sequence, A 
could sell to B directly and the chance of surplus-value would be 
eliminated. 

Assume that A and B buy commodities from each other 
directly. As far as use-value is concerned, both may profit; A may 
even produce more of his commodity than B could produce in the 
same time, and vice versa, whereby both would profit again. But 
otherwise with exchange-value. Here equal values are exchanged for 
each other, even if money, as the medium of circulation, 
intervenes. (P. 119.) 

Abstractly considered, only a change in form of the commodity 
takes place in simple commodity circulation, if we except the 
substitution of one use-value for another. So far as it involves only 
a change in form of its exchange-value, it involves the exchange of 
equivalents, if the phenomenon proceeds in a pure form. Com- 
modities can, indeed, be sold at prices differing from their values, 
but only when the law of commodity exchange is violated. In its 
pure form it is an exchange of equivalents, hence no medium for 
enriching oneself. (P. 120.) 

Hence the error of all endeavours to derive surplus-value from 
commodity circulation. Condillac* (p. 121), Newman” (p. 122). 

But let us assume that the exchange does not take place in a 
pure form, that non-equivalents are exchanged. Let us assume that 
each seller sells his commodity at 10 per cent above its value. 
Everything remains the same; what each one gains as a seller, he 
loses in turn as a buyer. Just as if the value of money had changed 
by 10 per cent. Likewise if the buyers bought everything at 10 per 
cent below value. (P. 123, Torrens.‘) 

The assumption that surplus-value arises from a rise in prices 
presupposes that a class exists which buys and does not sell, i.e., 
consumes and does not produce, which constantly receives money 
gratis. To sell commodities above their value to this class means 
merely to get back, by cheating, part of the money given away 
gratis (Asia Minor and Rome). Yet the seller always remains the 
cheated one and cannot grow richer, cannot form surplus-value 
thereby. 

Let us take the case of cheating. A sells to B wine worth £40 in 
exchange for grain worth £50. A has gained £10. But A and B 
together have only 90. A has 50 and B only 40; value has been 
transferred but not created. The capitalist class, as a whole, in any 
country cannot cheat itself. (P. 126.) 

Hence: if equivalents are exchanged, no surplus-value results; 
and if non-equivalents are exchanged, still no surplus-value 
results. Commodity circulation creates no new value. 

That is why the oldest and most popular forms of capital, 
merchant capital and usurers’ capital, are not considered here. If 
the expansion of merchant capital is not to be explained by mere 
cheating, many intermediate factors, lacking here as yet, are 
required. Even more so for usurers’ and interest-bearing capital. It 
will later be seen that both are derived forms, and why they occur 
historically before modern capital. 

Hence surplus-value cannot originate in circulation. But outside 
it? Outside it the commodity owner is the simple producer of his 
commodity, the value of which depends upon the quantity of his 
own labour contained in it, measured according to a definite social 
law; this value is expressed in money of account, e.g., in a price of 
£10. But this value is not at the same time a value of £11; his 
labour creates values, but not self-expanding values. It can add 
more value to existing value, but this occurs only through the 
addition of more labour. Thus the commodity producer cannot 
produce surplus-value outside the sphere of circulation without coming 
in contact with other commodity owners. 

Hence capital must originate in commodity circulation and yet 
not in it. (P. 128.) 

Thus: the transformation of money into capital has to be 
explained on the basis of the laws inherent in the exchange of 
commodities, the exchange of equivalents forming the starting 
point. Our owner of money as yet the mere chrysalis of a 
capitalist, has to buy his commodities at their value, to sell them at 
their value, and yet at the end of this process to extract more 
value than he put into it. His development into a butterfly must 
take place in the sphere of circulation and yet not in it. These are 
the conditions of the problem. Hic Rhodus, hic salta!* (P. 129.) 

3. THE BUYING AND SELLING OF LABOUR-POWER 

The change in value of money that is to be converted into 
capital cannot take place in money itself, for in buying, it merely 
realises the price of the commodity, and on the other hand, as 
long as it remains money, it does not change the magnitude of its 
value; and in selling, too, it merely converts the commodity from 
its natural form into its money-form. The change must, therefore, 
take place in the commodity of M—C—M; but not in its 
exchange-value, since equivalents are exchanged; it can only arise 
from its use-value as such, that is, from its consumption. For that 
purpose a commodity is required whose use-value possesses the 
property of being the source of exchange-value—and this does 
exist—labour-power. (P. 130.) 

But for the owner of money to find labour-power in the market 
as a commodity, it must be sold by its own possessor, that is, it must 
be free labour-power. Since buyer and seller as contracting parties 
are both juridically equal persons, labour-power must be sold only 
temporarily, since in a sale en bloc the seller no longer remains the 
seller, but becomes a commodity himself. But then the owner, 
instead of being able to sell commodities in which his labour is 
embodied, must rather be in a position where he has to sell his 
labour-power itself as a commodity. (P. 131.) 

For the conversion of his money into capital, therefore, the 
owner of money must find in the commodity market the free 
labourer, free in the double sense that as a free man he can 
dispose of his labour-power as his commodity and that, on the 
other hand, he has no other commodities to sell, has got rid of, is free 
of all things necessary for the realisation of his labour-power. 
(P. 132.) 

Parenthetically, the relation between money owner and labour- 
power owner is not a natural one, or a social one common to all 
ages, but a historical one, the product of many economic 
revolutions. So, too, do the economic categories considered up to 
now bear their historical stamp. To become a commodity, a 
product must no longer be produced as the immediate means of 
subsistence. The mass of products can assume commodity-form 
only within a specific mode of production, the capitalist mode, although 
commodity production and circulation can take place even where 
the mass of products never become commodities. Likewise, money 
can exist in all periods that have attained a certain level of 
commodity circulation; the specific money-forms, from mere 
equivalent to world money, presuppose various stages of develop- 

ment; nevertheless, a very slightly developed circulation of 
commodities can give rise to all of them. Capital, on the other 
hand, arises only under the above condition, and this one 
condition comprises a world’s history. (P. 133.) 

Labour-power has an exchange-value which is determined, like 
that of all other commodities, by the labour-time required for its 
production, and hence for its reproduction as well. The value of 
labour-power is the value of the means of subsistence necessary 
for the maintenance of its owner, that is, his maintenance in a 
state of normal capacity for work. This depends upon climate, 
natural conditions, etc., and also on the given historical stanparp oF 
tire in each country. These vary, but they are given for each 
particular country and for each particular epoch. Moreover, his 
maintenance includes the means of subsistence for his substitutes, 
i.e., his children, in order that the race of these peculiar commodity 
owners may perpetuate itself. Furthermore, for skilled labour, the 
cost of education. (P. 135.) 

The minimum limit of the value of labour-power is the value of 
the physically indispensable means of subsistence. If the price of 
labour-power falls to this minimum, it falls below its value, since 
the latter presupposes normal, not stunted, quality of labour- 
power. (P. 136.) 

The nature of labour implies that labour-power is consumed 
only after conclusion of the contract, and, as money is usually the 
means of payment for such commodities in all countries with the 
capitalist mode of production, the labour-power is paid for only 
after it is consumed. Everywhere, therefore, the labourer gives credit 
to the capitalist. (Pp. 137, 138.) 

The process of consuming labour-power is at the same time the 
process of producing commodities and surplus-value and this consump- 
tion takes place outside the sphere of circulation. (P. 140.)