But though the circulating capital of every individual makes a part of that of the society to which he belongs, it is not upon that account totally excluded from making a part likewise of their neat revenue. Though the whole goods in a merchant's shop must by no means be placed in his own stock reserved for immediate consumption, they may in that of other people, who, from a revenue derived form other funds, may regularly replace their value to him, together with its profits, without occasioning any diminution either of his capital or of theirs. ( Ibid .)And so we learn hear that:
1) Just as the fixed capital, and the circulating capital required for its reproduction (he forgets the function) and maintenance, are totally excluded from the net revenue of every individual capitalist, which can consist only of his profit, so is the circulating capital employed in the production of articles of consumption. Hence that portion of his commodity-product which replaces his capital cannot resolve itself into constituents of value which form any revenue for him.
2) The circulating capital of each individual capitalist constitutes a part of society's circulating capital the same as every individual fixed capital.
3) The circulating capital of society, while representing only the sum of the individual circulating capitals, has a character different from that of the circulating capital of every individual capitalist. The latter circulating capital can never form a part of his own revenue ; however a portion of the first-named circulating capital (namely that consisting of consumable goods) may at the same time form a portion of the revenue of society or, as he had expressed it above, it must not necessarily reduce the net revenue of society by a portion of the annual product. Indeed, that which Adam Smith here calls circulating capital consists of the annually produced commodity-capital, which is thrown into circulation annually by the capitalists producing articles of consumption. This entire annual commodity product of theirs consists of consumable goods and therefore forms the fund in which the net revenues of society (including wages) are realised or expended. Instead of choosing for his illustration the goods in a merchant's shop, Adam Smith should have selected the masses of goods stored away in the warehouses of the industrial capitalists.
Now if Adam Smith had welded together the snatches of thought which forced themselves upon him at first in the study of the reproduction of that which he calls fixed, and now of that which he calls circulating capital, he would have arrived at the following result:
I. The annual product of society consists of two departments: one of them comprises the means of production, the other the articles of consumption.
Each must be treated separately.
II. The aggregate value of that part of the annual product which consists of means of production is divided as follows: One portion of the value represents only the value of the means of production consumed in the fabrication of these means of production; it is but capital-value re-appearing in a renewed form; another portion is equal to the value of the capital laid out in labour-power, or equal to the sum of wages paid by the capitalists in this sphere of production. Finally, a third portion of value is the source of profits, including ground-rent, of the industrial capitalists in this category.
The first constituent part, according to Adam Smith the reproduced portion of the fixed capital of all the individual capitalists employed in this first section, is "totally excluded from making any part of the "neat revenue,"either of the individual capitalist or of society. It always functions as capital, never as revenue. To that extent the "fixed capital" of every individual capitalist is in no way different from the fixed capital of society. But the other portions of value of the annual product of society consisting of means of production -- portions of value which therefore exist in aliquot parts of this aggregate quantity of means of production -- form indeed simultaneously revenues for all agents engaged in this production , wages for the labourers, profits and ground-rents for the capitalists. But they form capital , not revenue, for society , although the annual product of society consists only of the sums of the products of the individual capitalists who belong to that society. By nature they are generally fit to function only as means of production, and even those which, if need be, might be able to function as articles of consumption are intended for service as raw or auxiliary materials of new production.
But they serve as such -- hence as capital -- not in the hands of their producers, but in those of their users, namely:
III. The capitalists of the second department, the direct producers of articles of consumption . They replace for these capitalists the capital consumed in the production of articles of consumption (so far as this capital is not converted into labour-power, and hence is not the sum of the wages of the labourers of this second department), while this consumed capital, which now exists in the form of articles of the consumption in the hands of the capitalist producing them -- socially speaking -- in its turn forms the consumption-fund in which the capitalists and labourers of the first department realise their revenue .