Capital (Das Kapital) | Study Guide

Karl Marx

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Capital (Das Kapital) | Vol. 1, Part 2, Chapter 5 : The Transformation of Money into Capital (Contradictions in the General Formula) | Summary



In this chapter, Marx points out a crucial contradiction. If surplus-value cannot arise from the basic exchange of commodities, how is capital created? The author comes to the conclusion that "something must take place in the background which is not visible in the circulation itself." He points out that logically, "capital cannot ... arise from circulation, and it is equally impossible for it to arise apart from circulation." His conclusion is that capital therefore "must have its origin both in circulation and not in circulation."

Marx opens his discussion on this contradiction by informing his readers that the way in which money and capital circulate contradicts all the previous rules of "commodities, value, money, and even circulation itself." The cycle of capitalism includes the seller, the capitalist, and the buyer. The capitalist purchases a commodity from the seller and then sells it for a higher price to a buyer. In this transaction the cycle is still the same for the buyer and the seller, who are doing the same actions as in the regular commodity cycle. The only person for whom the cycle is different is the capitalist.

Marx points out that some economists mistakenly think an unequal exchange is happening in the simple C-M-C exchange. They see this circulation of commodities "as a source of surplus-value," but Marx insists this is simply "a confusion of use-value and exchange-value." In the C-M-C exchange, both the buyer and seller are mutually dependent on one another, giving neither more power over the other. It is implied that the capitalist system gives the person making a surplus-value more power over others. Marx frames the M-C-Mʹ type of exchange as "merchant's capital" and likens the capitalist to "the merchant who parasitically inserts himself between" the seller and buyer of a commodity. He uses the phrase usurer's capital to describe the type of capital where money is loaned/borrowed or "exchanged for more money." In this case, money is made from the interest on a debt.


Chapter 5 begins with Marx pointing out the existence of the contradiction that arises within the cycle of capitalism, and this chapter exists much as a transitional chapter. The main new piece of information with which Marx presents the reader is the additional detail on the cycle of capitalism. The cycle of M–C–Mʹ is explained with a focus on the seller, capitalist, and buyer relationships.

Throughout this chapter, Marx shows that surplus value can't originate in the exchange/circulation process. This raises the question of "where does the capital then come from?" This builds toward the material that he will introduce next in his text, which focuses on what actually does create the surplus value in the capitalist system.

Also within his commentary on capitalism, which he has organized into the two categories "usurer's capital" and "merchant's capital," "merchant's capital" seems to be the lesser of the two evils, as there is still some sort of commodity exchange occurring. "Usurer's capital," on the other hand, Marx paints as a sort of cheating method for gaining profit, because money is made by the loaner from the interest on the debts of others. Ultimately, the main issue at hand—where capital originates—is clearly not via the basic exchange of commodities, as this generates no surplus value.

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