Fundamentals of Marx: Three Circuits of Industrial Capital

The Marxist Project
11 min readMay 25, 2021


Capital As a Fluid Process

The concept of capital plays a central role in Marx’s analysis of the capitalist mode of production. Capital is at the same time a social force in itself and a complex nexus of overlapping forces. As Marx saw it, capital is far more than the money invested and extracted from the production process. In this video, we will explore exactly what capital means in Marxist terms, though, as we will see, one video will not be sufficient to cover the extent of this important theoretical element. For that reason, we will focus on what Marx calls “industrial capital” and the three circuits that take part in it.

To begin with, when we use the term “industrial capital” we should not confuse it with a literal interpretation of what is and isn’t industrial. Simply put, for our purposes, industrial capital refers to capital as it relates to the capitalist production process. We are not considering factory work exclusively, but rather all enterprises that produce commodities.

There are in fact other forms of capital that are conceptually distinct but nevertheless wholly integrated with industrial capital. We will leave these forms for future discussion, noting only that they do not exist outside of industrial capital, but are rather one manifestation of capital as a whole as it passes through various spheres of capitalist social production and relations, taking on distinct functions but ultimately playing a key role in the broader objective of self-valorization.

Marx considers three circuits that make up industrial capital: the circuit of money capital, the circuit of productive capital, and the circuit of commodity capital. In Volume 1 of his magnum opus, Marx uses the following formula to illustrate industrial capital:

As it so happens, this is what Marx later refers to as the circuit of money capital. He calls this the circuit of money capital as this particular representation of the cycle of capital begins and ends with “M,” i.e. money capital itself. We begin with money, which is used to buy commodities. Specifically, money buys labor-power, a commodity sold by the working class. Money also buys means of production, which include any commodities that labor employs in the production process. This could be machinery, tools, raw materials, etc. This is why the “C” is noted with an “L” (for labor-power) and an “mp” (for means of production). This transaction is followed by “P,” the actual production process, where labor-power is set to work with the means of production in order to produce commodities. The commodities that come out of this process are noted as “C’,” indicating that new value has been added (by labor). The tail end of this formula is the reverse of the beginning transaction, this time with the capitalist selling commodities to receive money. The new value indicated in “C’” is similarly noted in “M’,” suggesting that by the end of this cycle, the capitalist is left with more money than they started with.

We should also recall that Marx sometimes writes C’ and M’ as C+c and M+m, the lowercase indicating new value added to the old, i.e. surplus-value.

Marx frequently insists on the identity of C’ (C+c) and M’ (M+m), which are distinct only in that they are capital in different forms (commodity and money). This reiteration of capital being the underlying unity between the forms helps demonstrate the dynamics of Marx’s model, which emphasizes a flow where capital takes different forms in order to accomplish different functions. Each element of the circuit M-C … P … C’-M’ (or M-CLmp … P … (C+c)-(M+m)), is really capital moving through stages of self-valorization.

Here we can see a complete diagram of industrial capital as Marx outlines it:

Marx further divides industrial capital into two stages: the circulation stage and the production stage. Simply put, the circulation stage is the portion of the process of capital in which capital moves from either its money form to its commodity form or vice versa. Thus in a “complete” cycle, the circulation stage occurs twice, while the production stage, in which the production actually occurs, only occurs once. Of course, the whole cycle ideally repeats ad nauseam (or ad infinitum, depending on your class perspective), so counting the number of occurrences is purely for the sake of demonstration. The most important point here is that for each production stage, there must necessarily be two circulation stages, one that circulates capital in preparation for production, and one that circulates newly valorized capital after production.

As we are about to see, considering capital, which we now know to be a process, from various perspectives gives us certain insights into the nature of capital. Each perspective reveals something about how capital works and in general helps us build a more comprehensive understanding of industrial capital.

The Circuit of Money Capital

The M-C … P … C’-M’ money capital circuit demonstrates that the “capitalist production process is conditioned by circulation, trade (p.140).” Both at the beginning and end, the existence of trade is presupposed in order for the process to even occur. Observing capital from this lens tells us how crucial circulation is. This condition reveals other conditions as well. If the production stage needs a circulation stage, then the circulation stage needs something to circulate in the first place. The “first” circulation stage thus requires the existence of a labor market, and indeed of markets on a social scale. In other words, the first circulation stage requires capitalist class relations, in which there is a class of people who sell their labor-power on the market as a commodity. Complementarily, there must also be a separation of the means of production from a majority of the population.

As we have already given the circuit of money capital ample consideration, let’s now explore the circuit of productive capital.

The Circuit of Productive Capital

Marx offers the following simple form for the circuit of productive capital:

P … C’- M’-C … P

Notice that the circulation stage in the circuit of productive capital only appears in the form of commodity circulation. Whereas in the circuit of money capital, where the circulation of commodities is interrupted by the production process, in the circuit of productive capital, it is commodity circulation that interrupts the production process.

The productive capital circuit (P … C’- M’-C … P) is not temporally bound and Marx demonstrates this by showing that the M that buys L is actually made from previous labor-power. In other words, you could frame wages simply as past labor, either of other workers or of the worker who is receiving the wage themselves. This is made particularly evident in the circuit of productive capital. The second C, in which the capitalist buys L (labor-power) and mp (means of production), is preceded by C’, which comes directly out of the production process that started this circuit. That C’ already contains within it the labor of the workers who took part in the first production stage, and it is with the money capital that derives from that C’ that labor is renewed or new labor is bought. Hence, Marx contends, that once the circuit has been repeated numerous times, that the value in the wages paid to the workers is made by the workers themselves!

Marx also offers us the expanded form of the circuit of productive capital:

Expanded form of P … C’- M’-C … P:

The diagram is a bit of a punch to the gut at first, but it is nothing more than a reworking of the original formula for the circuit of productive capital.

We begin with production, P, and move into C’, the finished commodities. As we’ve noted already, Marx sometimes wrote out C’ as C + c, and M’ as M + m. The lowercase letters simply take the place of the apostrophe to indicate value added above the original value. What this expanded form takes into account that the simple form does not is the path of “c” and “m”, the surplus resulting from the production process. If we trace only the uppercase letters, we see the usual simple reproduction of capital : P … C — M — C … P. This process can occur indefinitely since we only need the value we began with to restart the process. The bottom of the diagram shows us how surplus-value splits off from the process. In simple reproduction, Marx assumes that the capitalist consumes all the surplus and the cycle continues without expansion of the capital involved. But in expanded reproduction, some of the “m” can be used to buy additional labor-power and means of production, thereby expanding the scale of the enterprise.

Let’s look at this diagram a little differently:

This is only a visualization of the same formula. The red represents the circuit of capital while the white indicates the surplus offshoot. If we start at the production stage as we did for the circuit of productive capital, we can move clockwise to C and c, which together represent C’, or the commodity capital after production. We then move to M and m, which similarly denote the difference between the original value of the capital and the new value created by the production process, now in the money form. At this point m can be consumed entirely by the capitalist by purchasing commodities for personal use. M will move on to acquire labor-power and means of production on the same scale as before, and production will begin again. However, some portion of m could be added to M as it purchases labor-power and means of production. In doing so, the capitalist expands the scale of the enterprise.

Marx points out to us that it is precisely production for the sake of producing surplus-value that defines the capitalist mode of production. Producing commodities and circulating them with money is a necessary but not sufficient condition for capitalist production:

“The transformation of money capital into productive capital is the purchase of commodities for the purpose of commodity production. It is only in so far as consumption is productive consumption of this kind that it falls within the actual circuit of capital; the condition for consumption to occur is that surplus-value is made by means of the commodities thus consumed. And this is something very different from production, even commodity production, whose purpose is the existence of the producers; such replacement of commodity by commodity conditioned by surplus-value production is something quite other than an exchange of products that is simply mediated by money (p.155).”

In other words, production can only be said to take on a capitalist form if it produces surplus-value, that is to say, if it continually expands.

We are now left only with the circuit of commodity capital.

The Circuit of Commodity Capital

Marx expresses the general formula for commodity capital as such:

C’-M’-C … P … C’

And in its expanded form:

C’-M’-C … P … C”

Marx suggests that “both forms of the circuit [of productive and commodity capital] are incomplete, because they do not conclude with M’, with the valorized capital value transformed back into money. Both must thus be continued further, and hence include reproduction (p. 173).”

The productive capital and commodity capital circuits are useful in demonstrating the necessity of reproduction.

Additionally, in the circuit of commodity capital, the commodity capital is the point of departure, the point of transit, and the conclusion of the movement of capital, thereby being a “permanent condition for the reproduction process.”

Form III, which is Marx’s other term for the circuit of commodity capital, is also unique in that the last form of capital (C’) is not just functionally different from the preceding forms (as in I: C’ — M’, and II: M — P), but differs also in the magnitude of its value.

In Form I: The end form M’ = its preceding form C’ in value.

In form II: The end form P = its preceding form M in value.

In form III: The end form C’ > its preceding form P in value.

Hence, in the former two forms, the change is formal, while in the latter the change is “a real transformation which the use form and the value of the commodity components of the productive capital have undergone in the production process (p.175).”


We can summarize the three circuits as follows:

Form I (the circuit of money capital): Valorization

Form II (the circuit of productive capital): Production process as a reproduction process

Form III (the circuit of commodity capital): capitalist commodity production, productive and individual consumption, intertwining of individual capitals to form social capital.

As we stated before, these circuits and forms are merely entry points in Marx’s analysis. In reality, Marx says the boundaries between these concepts are blurred:

“In a constantly rotating orbit, every point is simultaneously a starting-point and a point of return. If we interrupt the rotation, then not every starting-point is a point of return. Thus we have seen that not only does every particular circuit (implicitly) presuppose the others, but also that the repetition of the circuit in one form includes the motions which have to take place in the other forms of the circuit. Thus the entire distinction presents itself as merely one of form, a merely subjective distinction that exists only for the observer (p. 180).”

“As a whole, then, the capital is simultaneously present, and spatially coexistent, in its various phases (p. 184).”

Industrial capital takes all three forms (money, production, commodity) concurrently, in a single continuous flow. What is interesting is the way Marx hints at the liabilities presented by a system in which various points in time and space can cause large ruptures. Even a small delay in C’-M’ (the sale of produced commodities) can create a ripple effect that is multiplied across the whole chain.

Marx also notes that disruptions in the circuit of industrial capital can and do affect production processes that occur outside the circuit of industrial capital, e.g. artisan mode of production. Ultimately, even if commodities are not produced via the capitalist mode of production, they still need to pass through the market and are still affected by global changes of value. Once the capitalist mode of production takes hold on a large, universal scale, it becomes the driving economic paradigm even for the other modes of production. This, perhaps, is an important point to consider in talking about the utility of co-operatives and other worker-owned enterprises which, despite having a radically different internal structure, must adhere to the much more powerful forces of global capital.

We’ve finally arrived at the end of our discussion of the three circuits found within industrial capital. The most important takeaway by far is the passage we reviewed a moment ago, in which Marx insists that these conceptual divisions exist purely for the sake of the observer. As such, there is no true starting and ending point for the circuits and they certainly do not occupy distinct spaces in the process of capital valorization. What they do offer us is a series of diverse analytical lenses from which to peer into the world of capital. And as we saw, each lens allowed us to consider not only the internal frameworks of capital differently, but also revealed for us the overarching social conditions capital depends on to function adequately. The conceptual divisions also indicated links in the chain of capital that could be broken, causing the whole system to veer off course or even come to a grinding halt. Capital is, after all, a fluid process.

All citations refer to Volume 2 of Capital, Penguin edition.