Chapter 5: Contradictions in the General Formula

Colin Capitalist buys a fish from Frankie Fisherman. Colin Capitalist sells it to Consuela Consumer. Frankie and Consuela are both playing a C-M-C game; they are not capitalists. Only Colin in playing an M-C-M game.

At the beginning of the chapter, Marx looks at a fair barter (C-C) and a fair C-M-C, and says they are similar: no value is gained or lost. They are both fair. C-M-C is just more convenient than barter but is not exploitative.

• "The same value, i.e. the same quantity of objectified social labour, remains throughout in the hands of the same commodity-owner, first in the shape of his own commodity, then in the shape of the money into which the commodity has been transformed, and finally in the shape of the commodity into which this money has been re-converted."

One reason to do fair C-M-C is that someone who sews all the time gets more sewing done in an hour than I would (coz they're slicker), so I trade an hour of my time (transformed into money) for an our of their sewing-produce.

• "It is true that commodities may be sold at prices which diverge from their values, but this divergence appears as an infringement of the laws governing the exchange of commodities."
• • "The continual oscillations in prices, their rise and fall, compensate each other, cancel each other out, and carry out their own reduction to an average price which is their internal regulator. This average price is the guiding light of the merchant or the manufacturer in every undertaking of a lengthy nature. The manufacturer knows that if a long period of time is considered, commodities are sold neither over nor under, but at, their average price"

This is pretty questionable in the 21st century; e.g. Beats By Dre headphones cost $20 to make, sell for $200

Marx is eager to show that the exchange of commodities is not the source of surplus-value/profit.

• "If commodities, or commodities and money, of equal exchange-value, and consequently equivalents, are exchanged, it is plain that no one abstracts more value from circulation than he throws into it. The formation of surplus-value does not take place. In its pure form, the circulation process necessitates the exchange of equivalents, but in reality processes do not take place in their pure form."

Marx dismissees the claim that profit comes from selling at (say) 110% of production costs. If everyone overpaid for everything, the producer would overpay for his raw materials, the man who takes his wages to market would have gotten those wages by overcharging: it would all balance out. Everything would be marked up 10% and it would be the same as a fair (equitable) C-M-C.

'The idea of profits being paid by the consumers, is, assuredly, very absurd. Who are the consumers?' (G. Ramsay, An Essay on the Distribution of Wealth)

"The consistent upholders of the mistaken theory that surplus-value has its origin in a nominal rise of prices or in the privilege which the seller has of selling too dear assume therefore that there exists a class of buyers who do not sell, i.e. a class of consumers who do not produce. The existence of such a class is inexplicable"

Profit, in the usual condition of the market, is not made by exchanging. Had it not existed before, neither could it after that transaction' (Ramsay)

There are cases where the seller outsmarts the consumer and charges too much, but these can't explain the origin of profit in the big picture of the economy: the "perplexity may perhaps have arisen from conceiving people merely as personified categories, instead of as individuals."

"However much we twist and tum, the final conclusion remains the same. If equivalents are exchanged, no surplus-value results, and if non-equivalents are exchanged, we still have no surplus-value. Circulation, or the exchange of commodities, creates no value."

Marx considers the profits made by userers and merchants to be a pre-capitalist M-C-M', saying that because circulation can't explain surplus-value.

*"In the course of our investigation, we shall find that both merchants' capital and interest-bearing capital are derivative forms, and at the same time it will become clear why, historically, these two forms appear before the modern primary form of capital." So he's not explaining it yet.

"In usurers' capital the form M-C-M' is reduced to the unmediated extremes M-M'"

Aristotle: "the usurer is most rightly hated, because money itself is the source of his gain, and is not used for the purposes for which it was invented. For it originated for the exchange of commodities, but interest makes out of money, more money."

A producer labouring produces one hour worth of value per hour. So there's no "surplus" there either; he doesn't produce 1.1 value-unit per labour-unit.

The main point of this chapter on 'Contradictions in the General Formula [of Capital]' is: "the formation of capital must be possible even though the price and the value of a commodity be the same, for it cannot be explained by referring to any divergence between price and value"

This quote gives some insight into the labour theory of value and the difference between price and value: "How can we account for the origin of capital on the assumption that prices are regulated by the average price, i.e. ultimately by the value of the commodities? I say 'ultimately' because average prices do not directly coincide with the values of commodities, as Adam Smith, Ricardo, and others believe."

Marx ends the chapter with a problem to be solved: "The money-owner, who is as yet only a capitalist in larval form, must buy his commodities at their value, sell them at their value, and yet at the end of the process withdraw more value from circulation than he threw into it at the beginning. His emergence as a butterfly must, and yet must not, take place in the sphere of circulation. These are the conditions of the problem."