ADDENDUM please read as it provides an additional proof for Warburtons confirming the accuracy of the turnover formula

UK economy part 2 PDF

worksheet for article on Brexit. (spreadsheet)


  1. Boffy says:

    The method calculating the rate of turnover here is wrong. The rate of turnover is that for the circulating capital alone, not the aggregate advanced capital. Using inventories as a proxy also leads to error.

    The simple fact is that the turnover time for a baker is the production time plus the circulation time. The production time for a baker is the working period, plus the time for the bread etc. to bake in the ovens. This is often done several times a day, both by the large bakeries, as well as by local bakers, and by the bakers based in Sainsbury’s, Tesco etc.

    They base their production batch on the amount they believe they can sell. Large bakeries generally sell their bread to supermarkets etc. on the basis of commercial credit, but as set out elsewhere, this is really irrelevant for calculating the rate of turnover of the capital. Discounting commercial credit, the baker is paid by the shops they supply each day, or more frequently. The baker in Sainsbury’s etc. gets paid as their cakes and so on are bought by customers.

    In other words, taking Marx’s circuit of industrial capital, we have P an amount is advanced for labour-power to bake the bread let’s say for a day, but large bakeries produce several batches a day, using shift working. An amount of circulating constant capital is advanced as flour, yeast, and so on, together with auxiliary materials for heat and light. The bread is baked and now forms commodity-capital C`. It goes to the shops, and is sold. The money realised in the sale, is transferred, nowadays largely electronically and instantaneously into its account, M`. If the capital operates on the basis of simple reproduction so that m is consumed unproductively. M is then once more converted into the elements of productive capital C (MP + LP) and Production continues. The circuit is complete, within 24 hours.

    The labour-power is usually already employed, and the materials will be regularly delivered, for large bakeries on the principle of Just in Time, so that the aspect of circulation time comprised of converting M into C…P is instantaneous. At the least, therefore, this circulating capital turns over around 300 times a year, and it is the turnover of the circulating capital, not the aggregate capital including the fixed capital that is the basis of the rate of turnover used by marx and Engels for the calculation of the annual rate of surplus value and annual rate of profit.

    • Boffy theory is derived from the real world. As someone who has visited these bakeries I can assure you they hold stocks of flour, yeast, packaging etc. Further the bulk of their bread is sold to the supermarkets not ma and pa shops. Suggest you look at their accounts. I cannot and will not argue in the abstract. Its like playing ping pong without a ball.

      • Boffy says:


        I never disputed they hold stocks, and certainly never disputed they sold to supermarkets. I am writing a more comprehensive response, but here let me just make these points.

        Firstly, it is precisely because they hold stocks – what Marx calls productive supply – that means use of inventories is misleading, because stocks are not the same as the circulating constant capital advanced to production. As Marx says in his analysis of fixed and circulating capital in the first chapters of TOSV fixed capital also circulates eventually, and circulating capital is fixed in the very short term.

        A firm that buys 20 tons of coal to use as auxiliary material in firing its boilers, does not use all that coal in one go. It is not fixed capital, but circulating capital. But for each day the stock of coal it has is not used, it is fixed. But, the portion of this circulating capital advanced to production is only that which is uses during the production time. If it produces the required amount of output to send to market each day, and ignoring circulation time, it advances only 1 day’s supply of coal to production, and it is turned over thereby each day. If 20 tons is sufficient to last 20 days, having reproduced the value of the 1 day’s coal in the same of its output it is turned over. It does not need to take the value of this coal that has been turned over, and use it to buy coal to reproduce that consumed, because it simply takes it from its productive-supply.

        In other words, in this instance, the inventory of coal is 20 times the amount of coal as circulating constant capital that is turned over. And that is true of all inventories or productive supply. They always constitute multiples of the actual turned over circulating constant capital.

        I don’t need to argue in the abstract because besides running my own businesses, I have also worked in a variety of industries, and understand the difference between inventories as a stock, and turnover as a flow. Its rather like a lake, it may never vary in its size, and quantity of water in it, but that tells you absolutely nothing about the quantity of water flowing into it at one end, and out of it at the other, or the frequency and rapidity of those flows. In general, as marx says, the size of such “lakes”/productive supply increase as output increases, but not in the same proportion.

        The sale of bread through supermarkets increases the rate of turnover of the capital. The problem is that because you have based your analysis on the circuit of money-capital rather than the circuit of industrial capital, you have allowed yourself to get confused by questions of credit, which lie outside the circuit of industrial capital entirely. As soon as the supermarket sells the bread, and the money goes into its till, or more likely electronically goes into its bank account, the circuit for the bread is effectively closed, whether or not the supermarket pays Warburtons immediately or not. The capital-value has been metamorphosed into money-capital. If Warburton’s give Tesco commercial credit for 30 days, or if they pay late, that does not change the actual turnover of the capital.

        Warburton’s do not cease production waiting to the supermarket to pay up. If they have given the supermarket 30 days commercial credit, they either cover this from their own money-reserves, or they must themselves obtain bank credit to cover it. It essentially amounts to Warburton’s giving the supermarket interest free credit for 30 days. But, the fact of the 30 days free credit means that the realised money-capital is reproduced on Day 1, and is used to metamorphose into productive-capital, which because its workers are already employed, and because it has a productive supply, is simultaneously metamorphosed from the money-capital.

        Introducing credit, as Marx says simply obscures the actual metamorphosis of the capital in its different forms, and thereby obscures the process and time of turnover. That was the mistake made by Scrope, which Marx addresses in Capital II, Chapter 9.

        “Scrope confuses here the difference in the flow of certain parts of the circulating capital, brought about for the individual capitalist by terms of payment and conditions of credit, with the difference in the turnovers due to the nature of capital. He says that wages must be paid weekly out of the weekly receipts from paid sales or bills. It must be noted here in the first place that certain differences occur relative to wages themselves, depending on the length of the term of payment, that is, the length of time for which the labourer must give credit to the capitalist, whether wages are payable every week, month, three months, six months, etc. In this case, the law expounded before, holds good, to the effect that “the quantity of the means of payment required for all periodical payments” (hence of the money-capital to be advanced at one time) “is in inverse [This is evidently a slip of the pen, the proportion being direct and not inverse. — Ed.] proportion to the length of their periods.” (Buch I, Kap. III, 3b, Seite 124.) [English edition: Ch. III, 3b, p. 141. — Ed.]”

  2. Boffy says:

    Introducing the question of credit only confuses the issue, as Marx sets out in his analysis of the rate of turnover. The capital is only actually turned over when the commodity is bought by the final consumer. In the case of bread sold to a supermarket, its turned over when the customer buys it. The fact that this money sits in Sainsbury’s bank account, rather than Warburton’s doesn’t change the turnover time of the actual capital.

    Sainsbury’s here only represents the commodity-capital of Warburton’s that has taken on an independent existence as a commercial capital, as Marx sets out in Capital III. This really affects the role of interest in sharing in the realised profit. If we were to take an independent baker the situation in relation to the circulation of the capital would be much clearer. That removes all the confusion in relation to credit given and credit received, and the use of inventories as proxies for turnover, and it would simply be illustrated that the baker sell the bread they produced earlier that day, and the money received for it thereby provides the circulating capital, they need to lay out for the following day to cover the purchase of materials and labour-power.

  3. Boffy says:

    One final comment here in relation to credit and the confusion it introduces to your analysis. If we take the situation of the supermarket that buys the Warburton’s bread and does not pay for it until some much later time due to paying for it on credit etc. Think about the consequence in relation to your methodology of calculating the rate of turnover on the basis of money payments rather than the physical advance of productive-capital. Sainsbury’s takes in £100,000 of Warburton’s bread, does not pay for it for 3 months, or say even a month. Its monetary advance, therefore, is zero, it also pays its workers a month in arrears, so its advance of variable-capital is zero – you would have to take that as being credit taken, also, just as Warburton’s takes a month’s credit from its workers – but Sainsbury’s sells the bread for £200,000. Its profit is say £50,000 taking into consideration wages, and other costs.

    So, what is the rate of profit here. It is £50,000 on zero money-capital actually advanced or a rate of profit of infinity. And what is its rate of turnover? After all it turned over this capital, even before it had been advanced!!!

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