Turnover of Constant and Variable Capital

the periodically repeating process of circulation of advanced capital (c + v). The various parts of constant capital (c) participate in the process of turnover of capital in different ways. That part which consists of the value of buildings, structures, machinery, and equipment turns over in the course of a few periods of production, preserving its physical form. It transfers its value by parts to the finished product and returns to the capitalist in monetary form upon sale of the finished goods. This part of capital forms the fixed capital.

The other part of capital, which is spent to purchase raw and processed materials and so on, turns over in the course of one period of production and transfers its value fully to the finished product. It forms the circulating capital, and its full value returns to the capitalist in monetary form after sale of the finished product. Variable capital (v) may be spent by the capitalist after sale of the finished product to purchase labor. It has the same kind of turnover as the other part of circulating capital.

Thus a common form of turnover distinguishes both parts of circulating capital from fixed capital. But there is also a difference between them: “The constant circulating and variable circulating capital have the first phase of circulation, C′-M′, in common. In the second phase they separate” (K. Marx, in K. Marx and F. Engels, Soch., 2nd ed., vol. 24, p. 331). The capitalist spends part of the money to purchase raw and processed materials and the like at different times, but eventually all this money is converted into production materials. The other part of the money continues to serve as a monetary reserve and is spent regularly to pay for the labor that participates in the production process. This latter part of the money forms the variable circulating capital.

The turnover of variable capital has its own special characteristics that distinguish it from constant circulating capital. In the first place, the value of variable capital is not transferred to the product in the process of production, but is reproduced by the labor of the workers. Therefore, all the newly created value that compensates for the advanced variable capital is realized in the stage of circulation. In the second place, variable capital produces not only its own equivalent but also surplus value, from which advanced variable capital is replaced. Hence the value of the advanced variable capital returns to the capitalist simultaneously with newly created surplus value.

Acceleration of the turnover of variable capital also signifies an increase in the production of surplus value. The more rapidly variable capital turns over, the greater the number of wage workers who will be exploited by capital, the more frequently variable capital will bring in surplus value, and the greater the amount of surplus value appropriated by the capitalist. In this way, accelerating the turnover of variable capital makes it possible to raise the annual rate of surplus value and, consequently, the degree of exploitation of wage workers by the capitalists.