Productive Capital

a functional form constituting the second stage of the circulation of industrial capital (seeCIRCULATION OF CAPITAL).

Unlike monetary capital and commodity capital, which are involved in the sphere of circulation, productive capital is involved in the sphere of production. The main function of productive capital is the creation of value and surplus value. Monetary capital and commodity capital modify the form of value.

In its natural form, productive capital consists of the means of production and labor power, which play unequal roles in the growth of value—a fact that underlies the division of productive capital into constant capital and variable capital. The real source of new value, including surplus value, is human labor, and in this sense, variable capital (payment for labor power). Variable capital increases in value in the process of production; constant capital (represented by the means of production) does not increase in value. From the standpoint of the character of the circulation of its various elements, productive capital may be divided into fixed capital and circulating capital (see).

Labor power and the means of production are the necessary factors in any social form of production. Productive capital reflects the capitalist mode of combining labor power and the means of production. K. Marx wrote: “The various economic epochs through which society has passed are differentiated by the special character of this combination and by the mode of achieving it” (in K. Marx and F. Engels, Soch., 2nd. ed., vol. 24, pp. 43–44).

Under capitalism, labor power and the means of production are characteristically combined through the purchase of both by the capitalist for productive consumption. By purchasing the means of production, the capitalist acquires property rights over the material conditions of production. By purchasing labor power, the capitalist acquires the right to use it and to extract surplus labor for the duration of the contract. The means of production and labor power become the material carriers of advanced capital and a form of existence of industrial capital.

Capitalist production creates new commodities with a higher value than the originally advanced capital. The difference between the advanced capital and the value of the newly produced commodities is the surplus value. Productive capital is transformed into commodity capital. Thus, the capitalist production of commodities is simultaneously the process of exploiting wage laborers.