Chapter 4: The General Formula for Capital

Outline of Marx's Analysis


Money, Marx says, is the first form of appearance of capital, understood in the limited sense as money being used to make money. Historically, it first appears in the form of merchants' capital (buying goods to sell at a higher price), usurers' capital (loaning money at interest) and monetary wealth. For example, merchant capitalists launch their enterprises with money, M, which they use to buy commodities, C, hoping to sell them for more money, M', where M' > M, or M' = M + ΔM, to achieve M – C – M'. He points out that M – C – M "would be absurd and empty if the intention were, by using this roundabout route, to exchange two equal sums of money." (1) The problem therefore is to analyze this form to discover its logic.

He begins by highlighting a series of formal differences between the two forms. Below, I follow his analysis, step by step, but whereas Marx concretizes his abstract analysis of C – M – C with the example of farmers selling corn to obtain money to buy cloth, which they need to live, I examine the case of workers selling their labor-power, LP, in exchange for a money wage, M, which they then spend on the means of subsistence, C(MS), i.e., LP – M – C(MS). As this is the subject of chapter 6 I don't go into detail here, but I choose this case because it is by far the most important form of C – M – C in capitalism. This also helps us see how these two forms represent two class perspectives on exchange.

Phase Inversion

1. The order of the phases in M – C – M is inverted in comparison with the order of the phases in the circuit of the commodity. We have M – C, C – M, instead of C – M, M – C. When we take LP – M – C(MS) as our example of C – M – C, we know that while workers begin by selling their labor-power LP – M, to get money, capitalists begin by investing part of their money to purchase labor-power M – C(LP). The second phase for workers involves the expenditure of the wage, M, on the means of subsistence M – C(MS), while for the capitalists the sale of C(MS) to the workers constitutes C – M', the second part of their circuit M – C – M.

Different Mediations

2. In C – M – C, or LP – M – C(MS), money mediates, whereas in M – C – M commodities mediate. In the case of LP – M – C(MS) the money mediator is usually the money wage although it might be some other form of income paid in exchange for labor- power. For workers money is only a means to an end; it is not an end in itself. Generally speaking, when workers hold on to money, the objective is merely the redistribution of income, from good times to bad, or from working years to retirement.(2) Even those such as Eli Chinoy's autoworkers, who saved as much of their wage as possible to set up some small business, were mostly buying freedom from the assembly line rather than becoming insipient capitalists.(3) For many capitalists, buying commodities, whether LP or the means of production, MP, is merely a means to the objective of making more money. Socially, of course, whether they recognize it or not, investment in labor-power serves to keep people under control by putting them to work.

Spending money versus Advancing It

3. In C – M – C, or LP – M – C(MS) money is irreversibly spent, but in M – C – M, it is only advanced. While workers spend their money to get what they really want (the means of life), the capitalists expect to get their money back (augmented, of course).

Different Displacements

4. Money is displaced twice in M – C – M, but the commodity is displaced twice in C – M – C. For the capitalist, money flows out and back; for the worker, one commodity, LP, is traded away and another, C(MS), which is consumed.

Loss versus Reflux

5. In the case of C – M – C, or LP – M – C(MS), money spent is money lost, as it passes from one set of hands to another. Whereas in M – C – M, money flows back to the original owner as revenue, in a reflux completed as soon as C is sold. This reflux is "conditioned by the very manner in which it is expended", i.e., as an investment.(4)

Different Objectives

6. In C – M – C, or LP – M – C(MS), use-value is the final goal; in M – C – M, exchange-value is the determining purpose. As I argued in my commentary on Chapter 1, workers are mainly interested in the use-values of commodities, C(MS), and only concerned with their exchange values because they must pay for them. In the case of capital, money is the beginning and the end, the alpha and the omega, the means and the goal. Capital is only concerned with use-value (the quality of its wares) because it has to sell them. In the case of merchant capital, which buys goods to resell at a higher price, the mediating C is any old commodity for which there is a market demand. When we turn to industrial capital —the quintessential form of capital for Marx—investigating what happens to this C will take us (in Chapter 7) into the dark heart of production.(5)

Quality versus Quantity

7. In C – M – C, or LP – M – C(MS), the two extremes are qualitatively different use-values. In M – C – M the two extremes are qualitatively identical; therefore M – C – M cannot draw its meaning from any qualitative change, but only from a quantitative one. Therefore "the complete form of this process is M – C – M'", and the increment of M' over M, or ΔM = surplus-value. As Ben Fowkes notes, this is the first time this key concept appears in the book.(6) surplus-value.

Goals: Limited versus Infinite

8. The final goal of C – M – C, or LP – M – C(MS) is the consumption of use-value whose realization lies outside of circulation in the realization of people's lives. The final goal of M – C – M' is the circulationof capital—"an end in itself"—and thus potentially limitless. (Remember the infinity of the expanded, general and money forms of value.)

As the "conscious bearer of this movement" Marx says, the capitalist has this "boundless drive for enrichment, this passionate chase after value."(7) Thus, the objective content of M – C – M' is the "valorization of value" as increase in magnitude. The subjective content of the capitalist is just this objective movement, so the capitalist acts as "capital personified and endowed with consciousness and a will."(8)

This is pretty much the way Marx treats capitalists throughout the book. He is not interested in them as individuals but as personifications or functionaries of capital. In this volume, which sets out the logic of the class relations of capital, he rarely mentions any behavior on their part that might violate that logic, e.g., an individual's prediliction for consumption over investment. Unlike many anti-capitalists, he does not constantly inveigh against "fat cats" and rarely points his finger at capitalist wealth and ostenstatious consumption.(9) His interest is elsewhere: their behavior as they act as capitalists per se: as the agents of investment and the endless imposition of work. We saw this in Part VIII, Chapter 27 where he drew our attention to the Duchess of Sutherland. In her case, he was not concerned with her wealth but with her role in betraying her clanspeople by expropriating and enclosing their lands. (10)

However, despite his general lack of interest in the capitalist qua individual, Marx does comment here on the conscious mind-set of many capitalists: avarice, a passion for money-making. This is the kind of individual capitalist often portrayed and mocked in literature. Such was the greedy and egotistical Mr. Bounderby caricaturized in Charles Dicken's Hard Times, evoked in my commentary on Chapter 26. Some capitalists, however, rise above mere greed to positions of policy making and political responsibility. Those who can see through the money fetish understand that investment organizes society by shaping the lives of most people around jobs and work. Capitalists who come to understand this sometimes acquire a sense of "noblesse oblige", i.e., a sense of responsibility for the general social welfare. Thus, when David Rockefeller said "profits are the measure of our [business'] contribution to society", we can interpret him as meaning: profits are invested, investment creates jobs, jobs make it possible for people to live, thus business "contributes" to ' society with their profits. No matter that, from a workers' point of view, he has conveniently presented a process of exploitation as a kind of benevolence; he has grasped his profit making activity M – C – M' in social terms and understood that what is really at stake is the organization of society through work. In their own peculiar, class-biased way, they achieve something of what Marx's theory provides: an understanding of the social meaning of such fetishized categories as money and profit.(11)

We can now see how the metamorphosis of capital is interwoven with the metamorphosis of the commodity analyzed in Chapter Three. Money and commodities now appear only as "different modes of existence" of capital, or "capital is money, capital is commodities."(12) Because Marx sees value as the substance and subject of this movement and its magnitude increasing via changes in form, he writes "valorization is therefore self-valorization". (13) Here Marx falls back into a Hegelian language in which value, if we fail to remember what it is, appears as a reified (thing-in-itself) relationship that acts independently. But that value which expands itself, we know to be the real social content of the capitalist–worker relationship: work, its imposition and struggle against it. So it is this work-for-capital that finds money as its independent expression, and it is this struggle over the imposition of work which is constantly expanding. The capital/labor relation finds the motive of its own expansion within itself—within the antagonism and resultant class struggle.

Because M – C – M' is the form peculiar to merchant's capital, industrial capital and in the abridged form M – M', to interest-bearing capital, Marx concludes that M – C – M' is the general formula for capital in the sphere of circulation. This formula, or representation, is not adequate to express capital once we have examined its substance in the sphere of production. Then we must have M – C . . . P . . . C' – M', in which we discover in C . . . P . . . C' the origin of the prime in M'.

Concepts For Review

    merchants capital
    M - C - M
    M - C - M'
    metamorphosis of capital
    industrial capital

Questions For Review

(An * indicates that one possible answer to the question can be found at the end of the study guide.)

1. Explain the purpose of Chapter Four. How does it relate to what comes before and what comes afterwards?

2. What is the theoretical origin of M – C – M and why is it absurd as it stands?

3. What can one deduce from the fact that the point of departure and the goal of M – C – M' are qualitatively identical?

4. Explain the ways in which C – M – C represents the viewpoint of the working class and M – C – M represents the viewpoint of capital.

5. What does the general formula for capital suggest about business attitudes toward the commodities they produce? How does this jive with their professed purpose of acting in the interests of consumers?

6. Given that there have been merchant capitalists around for thousands of years, why do we date the emergence of capitalism from only the 16th or 17th Centuries?


1 Capital, Vol. I, p. 248.

2 As noted in my commentary on Chapter 3, the depositing of workers’ extra income in savings accounts, while delaying their personal M – C(MS), does not rupture the flow of money because banks loan those savings to borrowers who then spend it.

3 See Eli Chinoy, Automobile Workers and the American Dream, Garden City, NY: Doubleday, 1955; 2nd edn., Urbana: University of Illinois Press, 1992. As his study demonstrated, even when such workers did have entrepreneurial dreams, most of their small businesses failed and they were forced back into the labor market.

4 Capital, Vol. I, p. 250.

5 Ibid. This characterization, of course, ignores the social role of profit, ΔM, which is to expand the imposition of work. The fetishism of this chapter is overcome in Chapter 7 where Marx brings work back to the fore and analyzes it directly.

6 Capital, Vol. I, p. 251, 252.

7 Ibid., p. 254.

8 Ibid.

9 Unlike, say, Thorstein Veblen (1857–1929), who penned an acerbic critique of “conspicuous consumption” in his Theory of the Leisure Class, New York: Macmillan, 1899.

10 See also his article “The Duchess of Sutherland and Slavery”, The New York Daily Tribune, no. 3687, February 8, 1853, MECW, Vol. 11, pp. 486–494.

11 [this new footnote to cite recent declaration of "social responsibiity by some 200]

12 This simple way of putting the relationship holds a profound truth: not only are money and commodities moments of capital, but all the elements of the relationships Marx investigates in this book are moments of capital.

13 Capital, Vol.I, p 255.