The rotation process of capital is therefore a combination of circulation and production, it includes both. In so far as the two phases M-C and C'-M' are processes of circulation, the rotation of capital is a part of the general circulation of commodities. But in so far as they are definite sections performing a peculiar function in the rotation of capital, which combines the spheres of circulation and production, capital goes through its own circulation in the general circulation of commodities. The general circulation of commodities serves capital in its first stage as a means of assuming that form in which it can perform the function of productive capital; in its second stage, it serves to eliminate the commodity function in which capital cannot renew its circulation; at the same time it enables capital to separate its own circulation from that of the surplus-value created by it.
The circulation of money-capital is therefore the most one-sided, and thus the most convincing and typical form of the circulation of industrial capital. Its aim and compelling motive, the utilization of value, the making and accumulation of money, is thus most clearly revealed. Buying in order to sell dearer is its slogan. The first phase M-C also indicates the origin of the elements of productive capital in the commodity market, or more generally, the dependence of the capitalist mode of production on circulation, on commerce. The circulation of money-capital is not merely the production of commodities; it is itself possible only through circulation of commodities and based on it. This is plain from the fact that the term M belongs to circulation and represents the first and most typical form of advanced capital-value. This is not the case in the other two forms of circulation.
The circulation of money-capital always remains the general expression of industrial capital, because it always implies the utilization of the advanced value. In P...P, the money-character of capital is shown only in the price of the elements of production as a value expressed in money-terms for the purpose of calculation and book-keeping.
M...M' becomes a special form of the circulation of industrial capital when new capital is first advanced in the form of money and then returned in the same form, either in passing from one branch of industry to another, or in the case that industrial capital retires from business. This includes the capital function of the surplus-value first advanced in the form of money, and becomes most evident when surplus-value performs a function in some other business than the one in which it originated. M...M' may be the first circulation of a certain capital; it may be the last; it may be regarded as the form of the total social capital; it is that form of capital which is newly invested, either as a recently accumulated capital in the form of money, or as some old capital which is entirely transformed into money for the purpose of transfer from one branch of industry to another.
Being a form always contained in all circulations, money-capital performs this circulation precisely for that part of capital which produces surplus-value, viz., variable capital. The normal form of an advance in wages is payment in money; this process must be renewed in short intervals, because the laborer lives from hand to mouth. In his relation to the laborer, the capitalist must therefore always be a money-capitalist, and his capital must be money-capital. There can be no direct or indirect balancing of accounts in this case, such as we find in the purchase of means of production or in the sale of productive commodities, where the greater part of the money capital really exists in the form of commodities, while the money is mainly used for purposes of calculation and figures in cash only in the balancing of accounts. On the other hand, a part of the surplus-value arising out of variable capital is spent by the capitalist for his individual consumption, which is a part of the retail trade, and this surplus-value is in the last analysis always expended in the form of money. It does not matter how large or small may be this part of surplus-value. Variable capital always appears anew as money-capital invested in wages (M-L) and m as surplus-value which may be expended for the individual consumption of the capitalist. So that M, capital advanced for wages, and m, its increment, are necessarily held and spent in the form of money.
The formula M-C...P...C'-M', with its result M' equal to M plus m, is, in a certain sense, deceptive, owing to the existence of the advanced and surplus-value in the form of the general equivalent, money. The emphasis in this formula is not on the utilization of value, but on the money-form of this process, on the fact that more money-value is finally drawn out of the circulation than had originally been advanced; in other words, the emphasis is on the multiplication of the amount of gold and silver belonging to the capitalist. The so-called monetary system is merely the expression of the abstract formula M-C-M', a movement which takes place exclusively in the circulation. And this system cannot explain the two phases M-C and C-M' in any other way than by declaring that C is sold above its value in the second phase and thus draws more money out of the circulation than was put into it in its purchase. But if M-C...P...C'-M' becomes the exclusive form of circulation, it is the basis of a more highly developed mercantile system, in which not only the circulation of commodities, but also their production, is recognized as a necessary element.
The illusive character of M-C...P...C'-M' and the resulting illusive interpretation always appear, whenever this form is considered as rigid, not as a flowing and ever renewed movement; in other words, they appear whenever this formula is considered not as one section of circulation, but as the exclusive form of circulation. But it itself points toward other forms.
In the first place, this entire circulation is conditioned on the capitalist character of the process of production, and considers it and the specific social conditions created by it as the basis. M-C is equal to M-C{LPm but M-L assumes the existence of the wage laborer, and regards the means of production as parts of productive capital. It assumes, therefore, that the process of labor and of utilization, the process of production, is a function of capital.
In the second place, if M...M' is repeated, the return to the money-form is just as transient as the money-form in the first phase. M-C disappears and makes room for P. The recurrent advance of money-capital and its equally persistent return in the form of money appear merely as passing moments in the general circulation.
In the third place; the repeated formula has this form: M-C...P...C'-M'. M-C...P...C'-M'. M-C...P...etc.
Beginning with the second repetition of the circulation, the cycle P...C'-M'.M-C...P appears, before the second circulation of M is completed, and all other cycles may be considered under the form of P...C'-M-C...P, so that the first phase of the first circulation is merely the passing introduction for the constantly repeated circulation of the productive capital. And this is indeed the case for the first time in the investment of industrial capital in the form of money.
On the other hand, before the second circulation of P is completed, the first circulation, that of the commodity-capital, as shown in the formula C'-M'. M-C...P...C' (or abridged C'...C') has preceded. Thus the first form already contains the other two, and the money-form disappears, so far as it is a general equivalent and not merely an expression of value used for calculation.
Finally, if we consider some newly invested capital going for the first time through the circulation M-C...P...C'-M', then M-C is the introductory phase, the preparation for the first process of production undertaken by this capital. This phase M-C is not considered as existing, but is caused by the requirements of the process of production. But this applies only to this individual capital. The general form of the circulation of industrial capital is the circulation of money-capital, whenever the capitalist mode of production exists and with it the social conditions corresponding to it. It is therefore the capitalist mode of production which is the first condition for the circulation of money-capital, and if it is not assumed for the first phase of a newly invested industrial capital, it is certainly assumed for all others. The continuous movement of this process of production requires the persistent renewal of the cycle P...P. Even the first stage, M-C{LPm, reveals this basic condition. For it requires on one side the existence of the wage-working class. On the other