Circuit of Capital

The movement of industrial capital goes through the three stages of purchase, production and sale, and accordingly adopts the three functional forms of money-capital, productive capital and commodity-capital in order to increase its value, so as to increase its value and finally return to the original starting point of the whole process of movement.

The circuit of industrial capital is a continuous and endless process of movement. Each stage of the movement may be either the starting point, the intermediate link or the end of the circuit, and each functional form of industrial capital has to go through three stages of the circuit and return to its original starting point. Therefore, the circuit of industrial capital has three different forms of circuit: the circuit of money-capital, the circuit of productive capital and the circuit of commodity-capital, which are expressed by the following equation. Circuit of money-capital: M–C... P...M’–C’; circuit of productive capital: P...C’–M’–C...P; circuit of commodity-capital: C’–M’–C...P...C’. The circuit of industrial capital is the unity of these three different forms of circuit.

The circuit of industrial capital has two important characteristics: First, the circuit of industrial capital is the unity of three stages and three functional forms. The movement of industrial capital must shift from one stage to another, from the execution of one functional form to another, without a pause, and a pause at any stage of the cycle of industrial capital will result in an obstacle. Second, the circuit of industrial capital is the unity of the processes of production and circulation. The first and the third stage of the circuit of industrial capital are the process of circulation of capital, and the second stage is the process of production of capital. The circuit of capital is the uninterrupted transition from the process of circulation to the process of production, and from the process of production to the process of circulation. In addition, the continuous circuit of industrial capital requires two conditions: firstly, the entire capital must be divided into three parts in a certain proportion, namely, money-capital, productive capital and commodity-capital parts. At the same time, there are three functional forms, i.e., money-capital function, productive capital function and commodity-capital function form. Only in this way will the three functional forms of industrial capital be successively replaced, the three stages of the circuit of industrial capital will not be interrupted, and the whole circuit of industrial capital can be carried out continuously. Secondly, it is necessary to make each functional form of industrial capital go through the three stages continuously, carry out transformations successively, change its functional form in turn and return to its original form. Only the continuous movement of each functional form of capital can ensure the successive appearance of the other two functional forms of capital, and the whole circuit of industrial capital can proceed normally.

Given the anarchy of capitalist production and the cyclical outbreak of economic crises, the continuity of the circuit of capital will often be interrupted and the circular process of capital will often be disrupted.