Advanced Capital

Advanced Capital

 

the amount of money invested by the capitalist in an enterprise for the purpose of receiving profit.

Advanced capital is spent for the acquisition of the means of production—constant capital c—and for the purchase of labor power—variable capital v. Constant and variable capital serve as the means to extract surplus value, which is created by the labor of hired workers in the process of production and is embodied in the produced commodities. Different elements of advanced capital have different kinds of turnover: one of them transfers its value to the newly created commodity by degrees and returns gradually to the capitalist in the form of money; the other transfers its value as a whole and returns in full to the capitalist in the form of money at the end of each completed cycle of the capital. Depending on this distinction, the advanced capital is divided into a fixed and a circulating component. The movement of the advanced capital can be expressed by the following formula, which Marx called the general formula for capital: M—C—M’, where M is the initially advanced sum of money, C is the commodity, and M’ — = M + m, the initially advanced sum of money plus the surplus value. The capital owner advances money; that is, as a buyer he invests it in the means of production and in labor power, with the goal of getting it back with a profit in his capacity as a seller of his commodities. His profit represents an increment on the advanced capital.

In the process of its transformations, from the money form to the commodity form and back again, advanced capital appears as a self-increasing, self-propelling substance, with money and commodities representing only forms of its being. Capital as a value is not advanced for the sake of receiving a single profit; the goal of the owner is the ever-growing increase in value. Therefore, the advanced value is constantly being recirculated. Initially the advanced capital represented a form of movement of merchant and usurer capital. With the advent of the capitalist mode of production, advanced capital now manifests itself as a form of movement of any capital, including industrial capital.

I. L. GRIGOR’EVA

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