". . . The third and last of the three portions into which the general stock of the society naturally divides itself, is the circulating capital, of which the characteristic is, that it affords a revenue only by circulating or changing masters. It is composed likewise of four parts:
first of the money . . ." (but money is never a form of productive capital, of capital functioning in the productive process; it is always only one of the forms assumed by capital within its process of circulation); "secondly, of the stock of provisions which are in the possession of the butcher, the grazier, the farmer . . . from the sale of which they expect to derive a profit . . . Fourthly and lastly, of the work which is made up and completed, but which is still in the hands of the merchant and manufacturer. And, thirdly, of the materials, whether altogether rude, or more or less manufactured, of clothes, furniture, and buildings, which are not yet made up into any of those three shapes, but which remain in the hands of the growers, the manufacturers, the mercers and drapers, the timber-merchants, the carpenters and jointers, the brick-makers, etc."Nos. 2 and 4 contain nothing but products which have been thrust out as such from the process of production and must be sold, in short, which now function as commodities, hence as commodity-capital, and which therefore have a form and occupy a place in the process in which they are not elements of productive capital, no matter what may be their eventual destination, i.e., whether, in order to answer their purpose (use-value), they should finally be allotted to individual or productive consumption.
The products mentioned in 2 are foodstuffs, in 4 all other finished products, which in turn consist only of finished instruments of labour or finished articles of consumption (foodstuffs other than those mentioned under 2).
The fact that Smith at the same time speaks of the merchant shows his confusion. Once the producer sells his product to the merchant, it no longer constitutes any form of his capital. From the point of view of society, it is indeed still commodity-capital, although in other hands than those of its producer; but for the very reason that it is a commodity-capital it is neither fixed nor circulating capital.
In every kind of production not meant for the satisfaction of the producer's direct needs, the product must circulate as a commodity, i.e., it must be sold, not in order to make a profit on it, but that the producer may be able to live at all. Under capitalist production, there is to be added the circumstance that when a commodity is sold the surplus-value embodied in it is also realised. The product emerges as a commodity from the process of production and is therefore neither a fixed nor a circulating element of this process.
Incidentally, Smith here argues against himself. The finished products, whatever their material form or their use-value, their useful effect, are all commodity-capital here, hence capital in a form characteristic of the process of circulation. Being in this form, they are not constituent parts of any productive capital their owner may have. This does not in the least prevent them from becoming, right after their sale, in the hands of their purchaser, constituent parts of productive capital, either fixed or circulating. Here it is evident that things which for a certain time appear in the market as commodity-capital, as opposed to productive capital, may or may not function as circulating or fixed constituents of productive capital after they have been removed from the market.
The product of the cotton spinner, yarn, is the commodity-form of his capital, is commodity-capital as far as he is concerned. t cannot function again as a constituent part of his productive capital, neither as material of labour nor as an instrument of labour. But in the hands of the weaver who buys it it is incorporated in the productive capital of the latter as one of its circulating constituent parts. For the spinner, however, the yarn is the depository of the value of part of his fixed as well as circulating capital (apart from the surplus-value). In the same way a machine, the product of a machine-manufacturer, is the commodity-form of his capital, is commodity-capital to him. And so long as it stays in this form it is neither circulating nor fixed capital. But if sold to a manufacturer for use it becomes a fixed component part of a productive capital. Even if by virtue of its use-form the product can partly re-enter as means of production into the process from which it originated, e.g., coal into coal production, precisely that part of the output of coal which is intended for sale represents neither circulating nor fixed capital but commodity-capital.
On the other hand a product, due to its use-form, may be wholly incapable of forming any element of productive capital, either as material of labour or as an instrument of labour. For instance any means of subsistence.
Nevertheless it is commodity-capital for its producer, is the carrier of the value of his fixed as well as circulating capital; and of the one or the other according to whether the capital employed in its production has to be replaced in whole or in part, has transferred its value to the product in whole or in part.