M - C - M'

The person who wrote the editorial in the Times of 17 September must have had their dictionary of quotations handy. At the end of the editorial, entitled “Crisis and Capitalism” and which argued that “the Lehman collapse shows, paradoxically, that the mechanisms of the market are working. What is not needed now is government intervention”, they tagged on a quote from Marx:

“Capital is money, capital is commodities . . . By virtue of it being value, it has acquired the occult ability to add value to itself. It brings forth living offspring, or, at least, lays golden eggs”.

The relevance of this quote is not clear but the editorialist seems to see it as a justification for leaving the capitalists – described as “rational actors in the marketplace” – alone in case they stop creating new value, stop laying golden eggs. Marx of course never held that it was capitalists who create new value. He identified the source of capital’s “occult ability” to increase itself as the exploitation of the unpaid labour of the workers capitalists employed. It was their labour that added value to the original money capital. They were the ones that laid the golden eggs.

The quotation is taken from Chapter IV of Volume I of Capital on “The General Formula of Capital”. The formula for the simple exchange of commodities, Marx explained, is C - M - C. A person starts with a particular commodity (C), sells it, i.e. converts it into money (M), which they then use to buy a different commodity, some use-value they need. In other words, they sell in order to buy.

Under capitalism, Marx went on, the aim is rather to buy in order to sell, M - C - M, but this is pretty pointless if you are just going to end up with the same amount of money as you started with. So, in fact, the aim under capitalism is not just to buy in order to sell, but to buy in order to sell at a higher price, to end up with more money than you originally had, or M - C- M':

“More money is withdrawn from circulation at the finish than was thrown into it at the start. The cotton that was bought for £100 is perhaps resold for £100 + £10 or £110. The exact form of this process is therefore M-C-M', where M' = M + ⌂M = the original sum advanced, plus an increment. This increment or excess over the original value I call ‘surplus-value.’ The value originally advanced, therefore, not only remains intact while in circulation, but adds to itself a surplus-value or expands itself. It is this movement that converts it into capital.”

Marx commented in a passage the Times could have quoted more relevantly:

“As the conscious representative of this movement, the possessor of money becomes a capitalist. His person, or rather his pocket, is the point from which the money starts and to which it returns. The expansion of value, which is the objective basis or main-spring of the circulation M-C-M, becomes his subjective aim, and it is only in so far as the appropriation of ever more and more wealth in the abstract becomes the sole motive of his operations, that he functions as a capitalist, that is, as capital personified and endowed with consciousness and a will. Use-values must therefore never be looked upon as the real aim of the capitalist, neither must the profit on any single transaction. The restless never-ending process of profit-making alone is what he aims at. This boundless greed after riches, this passionate chase after exchange-value, is common to the capitalist and the miser; but while the miser is merely a capitalist gone mad, the capitalist is a rational miser. The never-ending augmentation of exchange-value, which the miser strives after, by seeking to save his money from circulation, is attained by the more acute capitalist, by constantly throwing it afresh into circulation.”

So, the capitalist – or whoever personifies capital, these days, the top executives of capitalist firms – is more a “rational miser” rather than a “rational actor in the marketplace” (who, presumably, would go for C - M - C). Not that “the appropriation of more and more wealth in the abstract” can be described as rational. Doubly irrational is the behaviour of finance traders who think that golden eggs can be laid independently of the “occult” activity of production.