So capital takes the form of money, of commodities, of means of production and labour power, then of commodities again and finally of money. For the system to operate, all these forms have to exist simultaneously. If production is to keep going without a stop, there has to be a supply of money to buy commodities, a supply of commodities to be bought as productive capital and a supply of labour power. The cycle of capitalist production, then, is made up of three interconnected circuits-of money, of productive capital and of commodities. Each circuit fulfils a function for capital accumulation-and does so to some extent according to a dynamic of its own.
In the early stages of capitalism, when the units of production were small, the productive capitalist could operate to some degree independently. He had the possibility of financing the buying of plant and machinery and paying his workers from his own pocket. He also had the possibility of selling his output directly to those who consumed it.
But as the individual enterprises grew bigger, the capitalist often found his own resources were not enough to pay in advance for all the plant, machinery and materials he needed. He had to borrow from others. He came to rely on credit, and on special institutions, banks, ready to lend to people in return for interest on these loans.
At the same time, as the scale of the market grew, he could only sell his goods by relying upon specialists in the wholesale and retail trades, who would not be able to pay him for all those goods until they had, in turn, sold them to the final consumers. The productive capitalist borrowed on the one hand and lent on the other. Credit became an indispensable part of capitalist production. And the greater the extent of capitalist production within a particular economy, the longer and more complex became the chains of credit, of borrowing and lending.
The productive capitalist could also become a large scale lender. His fixed capital-his factory building and machinery-was only renewed every few years. But production provided a more or less constant flow of profits. He could lend these profits to others in the interim before renewing his own fixed capital-and would do so in return for the payment of interest.
62
Understanding the System: Marx and Beyond