By circulating capital is meant, as Adam Smith puts it, any stock of those consumable commodities which, produced by the aid of machinery, the merchant or the store-keeper buys in order to sell them at a profit; and it is called "circulating" because the commodities which are sold to-day are replaced by new ones of an equivalent kind to-morrow.
Now, as to fixed capital, or the endlessly elaborated machinery of the modern world, we have seen already that this is, in its distinctive features, not, as Marx declared it to be, a crystallisation of labour, but a crystallisation of the ability by which labour has been directed; but this revised explanation tells us nothing of the means by which the direction is accomplished.

Still less is any light thrown on the question by the nature of circulating capital, as Adam Smith understands it.
The kind of capital which alone concerns us here is a kind which resembles circulating capital in respect of its material form, and is often indeed in this respect identical with it; but it differs from circulating capital in respect of the use made of it.

Such capital we may call wage-capital.

Wage-capital, although in practice it disguises itself under the form of money, is essentially a stock of goods which are the daily necessaries of life, but which, instead of being sold to the public, like the goods of the store-keeper, at a profit, are distributed by their possessor among a special group of labourers on conditions.

The first of these is naturally that the labourers do work of some sort.