Part II, "The Transformation of Money into Capital," is where things begin to get really interesting for me. As we saw in the previous post, money appears first in the circulation of commodities through the process C-M-C. Here, use-value (or consumption) is the final goal that removes a particular commodity from circulation. Money as capital, however, emerges as the inverse form of circulation: M-C-M, or, the transformation of money into commodities and their "re-conversion" back into money. Because money does not terminate in consumption its circulation functions, more or less, like a closed circuit. Its movement is driven not by use-value, but by exchange. While the exchange relations of commodities rely on qualitative differences wherein labour adds value (e.g. between corn and clothes), the cycle M-C-M looks like a simple tautology: the extremes (at either end) have the same economic form. This means that this circuit somehow encompasses a quantitative transformation. Marx denotes "the complete form of this process" as M-C-M', where M' equals "the original sum plus an increment" (surplus-value). While there is an external "end" for the simple circulation of commodities, the circulation of money as capital is an end in itself and its movement is therefore limitless. Here we re-enter the mysterious terrain of value.
The independent form, i.e. the monetary form, which the value of commodities assumes in simple circulation, does nothing but mediate the exchange of commodities, and it vanishes in the final result of movement. On the other hand, in the circulation M-C-M both the money and the commodity function only as different modes of existence of value itself, the money as its general mode of existence, the money as its particular or, so to speak, disguised mode. It is constantly changing from one form into the other, without becoming lost in this movement; it thus becomes transformed into an automatic subject. If we pin down the specific forms of appearance assumed in turn by self-valorizing value in the course of its life, we reach the following elucidation: capital is money, capital is commodities. In truth, however, value is here the subject of a process in which, while constantly assuming the form in turn of money and commodities, it changes its own magnitude, throws off surplus-value from itself considered as original value, and thus valorizes itself independently. For the movement in the course of which it adds surplus-value is its own movement, its vaporization is therefore self-valorization. By virtue of being value, it has acquired the occult ability to add value to itself. It brings forth living offspring, or at least lays golden eggs. (255)Marx's playful analogy is of course deeply ironic, for as he explains in his next chapter, "Capital cannot . . . arise from circulation, and it is equally impossible for it to arise apart from circulation. It must have its origin both in circulation and not in circulation" (268). The circuit of M-C-M' is familiar territory for usurers (the accumulation of interest skips the commodity altogether and occurs between the extremes M-M') and merchants capital (buying in order to sell dearer). But both are derivative forms that appear before the modern form of capital (Marx frequently quotes Aristotle's condemnation of usury and up-selling as running contrary to Nature). We're left without any further explanation as to why these modes of surplus persist, and what "derivative forms" actually mean. However, it becomes immediately obvious what's at stake in the contradiction of M-C-M' when we arrive at Chapter 6.
In order to extract value out of the consumption of a commodity, our friend the money-owner must be lucky enough to find within the sphere of circulation, on market, a commodity whose use-value possesses the peculiar property of being a source of value, whose actual consumption is hence a creation of value. The possessor of money does find such a special commodity on the market: the capacity for labour, in other words labour-power. (270)