To this different behaviour of material elements corresponds however the transmission of value to the product, and to this in turn corresponds the replacement of value by the sale of the product. That and that alone is what constitutes the difference in question. Hence capital is not called fixed because it is fixed in the instruments of labour but because a part of its value laid out in instruments of labour remains fixed in them, while the other part circulates as a component part of the value of the product.
"If it (the stock is employed in procuring future profit, it must procure this profit either by staying with him (the employer), or by going from him. In the one case it is a fixed, in the other it is a circulating capital." (P. 189.)What strikes one here above all is that the crudely empirical conception of profit derived from the outlook of the ordinary capitalist, which wholly contradicts the better esoteric understanding of Adam Smith.
Not only the price of materials and that of the labour-power is replaced in the price of the product, but also that part of value which is transferred by wear and tear from the instruments of labour to the product. Under no circumstances does this replacement yield profit. Whether a value advanced for the production of a commodity is replaced entirely or piecemeal, at one time or gradually, by the sale of that commodity, cannot change anything except the manner and time of replacement. But in no event can it transform that which is common to both, the replacement of value, into a creation of surplus-value. At the bottom of it all lies the commonly held idea that, because surplus-value is not realised until the product is sold, until it circulates, it originates only from sales, from the circulation. Indeed the different manner of origination of profit is in this case but a wrong way of expressing the fact that the different elements of productive capital serve differently, that as productive elements they act differently in the labour-process. In the end, the difference is not derived from the process of labour or self-expansion, not from the function of productive capital itself, but it is supposed to apply only subjectively to the individual capitalist, to whom one part of capital serves a useful purpose in one way, while another part does so in another way.
Quesnay, on the other hand, had derived these differences from the process of reproduction and its necessities. In order that this process may be continuous, the value of the annual advances must annually be replaced in full out of the value of the annual product, while the value of the investment capital need be replaced only piecemeal, so that it requires complete replacement and therefore complete reproduction only in a period of, say, ten years (by a new material of the same kind). Consequently Adam Smith falls far below Quesnay.
So there is therefore absolutely nothing left to Adam Smith for a definition of fixed capital except that it is instruments of labour which do not change their shape in the process of production and continue to serve in production until they are worn out, as opposed to the products in the formation of which they assist. He forgets that all elements of productive capital continually confront in their bodily form (as instruments of labour, materials, and labour-power) the product and the product circulating as a commodity, and that the difference between the part consisting of materials and labour-power and that consisting of instruments of labour is only this: with regard to labour-power, that it is always purchased afresh (not bought for the time it lasts, as are the instruments of labour);with regard to the materials, that it is not the same identical materials that function in the labour-process throughout, but always new materials of the same kind. At the same time the false impression is created that the value of the fixed capital does not participate in the circulation, although of course Adam Smith previously explained the wear and tear of fixed capital as a part of the price of the product.
In opposing circulating capital to fixed, no emphasis is placed on the fact that this opposition exists solely because it is that constituent part of productive capital which must be wholly replaced out of the value of the product and must therefore fully share in its metamorphoses, while this is not so in the case of the fixed capital. Instead the circulating capital is jumbled together with those forms which capital assumes on passing from the sphere of production to that of circulation, as commodity-capital and money-capital. But both forms, commodity-capital as well as money-capital, are carriers of the value of both the fixed and the circulating component parts of productive capital. Both of them are capital of circulation, as distinguished from productive capital, but not circulating (fluent) capital as distinguished from fixed capital.
Finally, owing to the wholly erroneous explanation that profit is made by fixed capital staying in the process of production, and by circulating capital leaving it and being circulated, and also on account of the identity of form assumed in the turnover by the variable capital and the circulating constituent of the constant capital, their essential difference in the process of self-expansion and of the formation of surplus-value is hidden, so that the entire secret of capitalist production is obscured still more. The common designation "circulating capital" abolishes this essential difference. Political Economy subsequently went still farther by holding fast not to the antithesis between variable and constant capital but to the antithesis between fixed and circulating capital as the essential and sole delimitation.