The turn-over of merchant's capital is not identical with the turn-over or with one single reproduction of one industrial capital of the same size; it is rather equal to the sum of the turn-overs of a number of such capitals, either in the same, or in different spheres of production. The quicker mer- chant's capital is turned over, the smaller is that portion of the total money-capital, which serves as merchant's capital; the slower it is turned over, the larger is that same portion. The more undeveloped production is, the larger is the sum of merchant's capital as compared to the sum of the commodities thrown into circulation; but so much smaller is it absolutely, or compared with more developed conditions. Vice versa, the opposite holds good. In such undeveloped conditions the greater part of the strict money-capital is in the hands of the merchants, whose wealth constitutes the money wealth as com- pared to the wealth of others.
The velocity of the circulation of the money-capital ad- vanced by the merchant depends: 1) on the velocity with which the process of production is renewed and the different Commercial Capital. 327 processes of production are linked together; 2) on the ve- locity of consumption.
It is not necessary that merchant's capital should pass merely through the above mentioned turn-over, by first buy- ing commodities to its full amount and then selling them. The merchant may make both movements at the same time. His capital is then divided into two parts. One of them con- sists of commodity-capital, the other of money-capital. Here he buys and converts his money into commodities. There he sells and converts another part of his commodity-capital into money. On one side, his capital returns in the shape of money-capital, on the other it returns in the shape of commod- ity-capital. The larger the portion assuming one shape, the smaller the portion assuming another. This alternates and bal- ances itself. If money is not employed merely as a medium of circulation, but also as a means of payment and in conjunction with the credit system, which develops along with it, then the money portion of the merchant's capital is reduced still more in proportion to the volume of the transactions promoted by the merchant's capital. If I buy 1,000 p.st.'s worth of wine on three months' credit, and sell all the wine for cash before the expiration of the three months, then I do not need to ad- vance one penny for these transactions. In this case it is quite obvious that the money-capital, which here serves as merchant's capital, is nothing but industrial capital itself in the shape of money-capital, in process of reflux to itself in the shape of money. (The fact that the producer who sold 1,000 p.st.'s worth of wine on three months' credit may dis- count his note, which is a certificate of indebtedness of the buyer, at some bank does not alter the matter and has nothing to do with the capital of the merchant.) If market-prices should fall in the mean time by y^-q, the merchant would not only make no profit, but would recover only 2,700 p.st. in- stead of 3,000 p.st. He would then have to put up 300 p.st. out of his own pocket. These 300 p.st. serve merely as a re- serve for balancing the difference in price. But the same ap- plies to the producer. If he had sold at falling prices, he 328 Capitalist Production.
"would likewise have lost 300 p.st., and could not begin pro- duction on the same scale without reserve capital.
The linen merchant buys 3,000 p.st.'s worth of linen from the manufacturer. The manufacturer uses 2,000 p.st. of the 3,000 to buy yarn. He buys this yarn from a yarn dealer. The money with which the manufacturer pays the yarn dealer does not belong to the linen dealer. For the latter has received commodities to this amount. It is the money- form of the manufacturer's own capital. In the hands of the yarn dealer these 2,000 p.st. now appear as returned money- capital. But to what extent are they so, in what respect do they differ from the 2,000 p.st. representing the discarded money-form of the linen and the assumed money-form of the yarn? If the yarn dealer bought on credit and sold for cash before the expiration of his time, then these 2,000 p.st. do not contain one penny of merchant's capital as distinguished from the money-form, which the industrial capital itself assumes in the course of its circulation. The commercial capital then, so far as it is not a mere form of industrial capital, held in the hands of the merchant in the shape of commodity-capital or money-capital, is nothing but that portion of the money- capital which belongs to the merchant himself and is circu- lated by the purchase and sale of commodities. This portion represents on a reduced scale that part of the capital advanced for production, which must always be in the hands of the in- dustrial as a money reserve, medium of purchase, and which would always have to circulate as money-capital. This por- tion, in a reduced scale, is now in the hands of capitalist mer- chants, and performs its functions only in the process of cir- culation. It is that portion of the total capital which, aside from expenditures of revenue, must continually circulate on the market as a medium of purchase in order to maintain the continuity of the process of reproduction. This portion is so much smaller in comparison to the total capital, the more rap- idly the process of reproduction takes place, and the more de- veloped the function of money as a means of payment, that is, of the credit-system.^^ '' Jn order to be able to classify merchant's capital as a productive capital.
Commercial Capital. 329 Merchant's capital is simply capital performing its func- tions in the sphere of circulation. The process of circulation is a phase of the total process of reproduction. But no value is joroduced in the process of circulation, and, therefore, no surplus-value. [N^othing takes place there but changes of form of the same mass of values. In fact, nothing occurs there but the metamorphosis of commodities, and this has nothing to do either with the creation or with the transformation of values. If surplus-value is realised by the sale of the produced com- modities, it is only because that surplus-value already existed in them. In the second act, the reconversion of money-capital into commodities (elements of production), the buyer does not realise any surplus-value. He merely inaugurates the production of surplus-value by the exchange of his money for means of production and labor-jDower. So far as these meta- morphoses cost time of circulation — a time, during which capital is not producing at all, least of all surplus-value — they limit the creation of values, and the surplus-value will express itself through the rate of jDrofit precisely in an inverse ratio to the duration of the time of circulation. Merchant's capital, therefore, does not create any value or surplus-value, Ramsay confounds it with the transportation industry and calls commerce " the transport of commodities from one place to another." (,An Essay on the Distribu- tion of Wealth, p. 19.) The same mistake was committed by Verri in his Medi- tasionisuW Economic Politico, § 4, and by Say in his Traite d'Economie Politique, I, 14, 15. In his Elements of Political Economy, J. P. Newman says: " In the existing economical arrangements of society, the very act which is performed by the merchant of standing between the producer and the consumer, advancing to the former capital and receiving products in return, and handing over these products to the latter, receiving back capital in return, is a transaction which both facilitates the economical process of the community, and adds value to the products in rela- tion to which it is performed (P. 174)." The producer and the consumer thus save time and money through the intervention of the merchant. This service requires an advance of capital and labor, and must be rewarded, " since it adds value to the products, for the same products, in the hands of the consumers, are worth more than in the hands of the producers." And so commerce appears to him, as it does to Mr. Say, as " strictly an act of production " (P. 175). This view of Newman is fundamentally wrong. The M.j^-value of a commodity is greater in the hands of the consumer than in those of the producer, because it is realised by the consumer. For the use-value of a commodity does not serve its end until this commodity enters the sphere of consumption. So long as it is in the hands of the producer, it exists only potentially. But one does not pay twice for a commodity, one does not pay first for its exchange value, and then an extra price for its use-value. By paying for its exchange-value, I appropriate its use-value. And its exchange value is not in the least increased by transferring it from the hand of the producer or middleman to that of the consumer.
330 Capitalist Production.
at least not directly. If it contributes toward shortening the time of circulation, it may help indirectly to increase the sur- plus-value produced by the industrial capitalists. To the ex- tent that it helps to expand the market and promotes the di- vision of labor between capitals, thereby enabling capital to work on a larger scale, its function enhances the productivity of the industrial capital and the accumulation of this capital. Inasmuch as it may shorten the time of circulation, it raises the ratio of surj^lus-value to the advanced capital, that is, the rate of profit. And to the extent that it confines a smaller portion of capital in the form of money-capital to the sphere of circulation, it increases that portion of capital which is en- gaged directly in production.
CIIAPTEE XVII.
COMMERCIAL PROFIT.
We have seen in volume II, that the mere functions of capital in the sphere of circulation — the operations which the in- dustrial capitalist must perform, first, in order to realise the value of his commodities, and secondly, in order to reconvert this value into elements of production, operations which pro- mote the metamorphosis of the commodity-capital C — M — C, the acts of selling and buying — produce neither value nor surplus-value. It was rather seen that the time required for this purpose, objectively so far as the commodities, sub- jectively so far as the capitalist is concerned, creates barriers to the production of value and surplus-value. What is true of the metamorphosis of commodity-capital in general, is, as a matter of course, not in the least altered by the fact that a part of it may assume the shape of commercial capital, or that the operations, by which the metamorphosis of commod- ity-capital is promoted, may become the particular business of a special class of capitalists, or the exclusive function of a por- tion of the money-capital. If selling and buying of com- Commercial Profit. 331 modities — and that is what the metamorphosis of the com- modity-capital C — M — C amounts to — by the industrial capitalists themselves do not create any value or surplus-value, they will certainly not become creators of value by being trans- ferred from the industrial capitalists to other persons. Fur- thermore, if that portion of the total social capital, which must be continually on hand in order that the process of reproduc- tion, instead of being interrupted, may proceed continuously — if this money-capital does not create any value or surplus- value, then it cannot acquire the faculty to do so by being con- tinually thrown into circulation for the performance of its function by some other section of the capitalists than the in- dustrial capitalists. We have already indicated to wdiat ex- tent merchant's capital may be indirectly productive, and we shall discuss this point more at length later on.
Commercial capital, then — stripped of all heterogeneous functions, such as storing, expressing, transporting, distrib- uting, arranging, which may be connected with its true func- tion of buying in order to sell — creates neither value nor surplus-value, but promotes only their realisation and thereby the actual exchange of commodities,»their transfer from one hand to the other, the social circulation of matter. Never- theless, since the circulating phase of industrial capital is as much a phase of the process of reproduction as production is, the capital performing its functions independently in the process of circulation must yield the average annual profit just as well as the capital performing its functions in the different lines of production. If merchant's capital were to yield a higher percentage of average profit than industrial capital, then a portion of the industrial capital would trans- form itself into merchant's capital. If this capital were to yield a lower average profit, then the opposite process would take place. A portion of the merchant's capital would trans- form itself into industrial capital. ISTo species of capital en- joys a greater facility to change its occupation than merchant's capital.
Seeing that merchant's capital itself does not produce any surplus-value, it is evident that surplus-value appropriated by 332 Capitalist Production.
it in the shape of average profit must be a portion of the sur- plus-value produced by the total productive capital. But the question is now: How does the merchant's capital manage to appropriate its share of the surplus-value or profit produced by the productive capital?
It is only outward semblance that commercial profit is a mere addition to, a nominal raise of the prices of com- modities above their value.
It is evident that the merchant can draw his profit only out of the price of the commodities sold by him, more even, that this profit, which he makes by the sale of his commodities, must be equal to the difference between his purchase price and his selling price, equal to the excess of the latter over the former.
It is possible, tliat additional costs (costs of circulation) may enter into the commodities after their purchase and be- fore their sale, and it is also possible, that this may not happen. If such costs should be added, it is evident that the excess of the selling price over the purchase price does not represent merely profit. In order to simplify the analysis, we assume first, that no such costs are added.
For the industrial capitalist, the difference between the selling price and the purchase price of his commodities is equal to the difference between their price of production and their cost-price, or, looking upon the matter from the point of view of the total social capital, equal to the difference between the value of the commodities and their cost-price for the cap- italists, and this again resolves itself into the difference be- tween the total quantity of labor incorporated in them and the quantity of the paid labor incorporated in them. Before the commodities bought by the industrial capitalist are taken back to market as saleable commodities, they pass through the proc- ess of production, in which that portion of tlieir price which shall be realised as profit must be created. But it is different with the trading merchant. The commodities are in his hands only so long as they are in the process of circulation. He merely continues their sale, the realisation of their price be- gun by the productive capitalist, and therefore he does not Commercial Profit. 333 cause them to pass through any intermediate process, in which they can once more absorb new surplus-value. While the in- dustrial capitalist merely realises the previously produced surplus-value or profit by means of the circulation, the mer- chant must not only realise his profit in and by the circulation, but he must first make it there. This seems possible in no other way than that of selling the commodities bought by him from the industrial capitalist at their prices of production, or, from the point of view of the total commodity-capital, their values, above their prices of production, by making a nominal addition to these prices, in other words by selling the total commodity-capital above its value and pocketing this excess of their nominal value over their real value. In short, it seems that he would be selling them for more than they are worth.
This method of raising prices seems easy to gTasp. For in- stance, one yard of linen costs 2 sh. If I want to make 10% profit on my sales, I must add y-g- to the price, I must sell one yard of linen at 2 sh. 2fd. The difference between its actual price of production and its selling price is then 2fd. and this represents a profit of 10% on 2 sh. This amounts to my selling one yard of linen to the buyer at a price which is in reality the price of l-^^ yard. Or, what amounts to the same, it is as though I sold to the buyer only yy of one yard for 2 sh. and kept yj- for myself. In fact, I might buy back y^ of one yard for 2f d., if the price of one yard is 2 sh. 2f d. This would be but a round-about way of sharing in the surplus- value and surplus-product by a nominal raise in the price of commodities.
This is the realisation of commercial profit by raising the price of commodities, as it appears at first glance on the sur- face. And it is indeed a fact that this whole conception of the rise of profit from a nominal raise in the price of com- modities, or from their sale above their value, has its origin in the point of view of commercial capital.
But on closer inspection it is quickly seen that this is a mere semblance, and that, assuming capitalist production to be the prevailing mode, commercial profit cannot be realised in this manner. (It is here always a question of averages, not of 6X- 334 Capitalist Production.
ceptions.) Why do we assume that the dealer in commodi- ties can realise his profit of 10% on his commodities only by selling them 10% above their price of production? Because we had assumed that the producer of these commodities, the industrial capitalist (who impersonates The producer before the outside world as the personification of industrial capital), had sold them to the dealer at their prices of production. If the prices paid by the dealer for commodities are equal to their prices of production, so that the price of production, or in the last instance the value, represents the cost-price for the mer- chant, then the excess of the latter's selling price over his purchase price — and only this difference constitutes his profit — must indeed be an excess of their commercial price over their price of production, so that in the last analysis the mer- chant would be selling all commodities above their values. But why did we assume that the industrial capitalist sells his commodities to the merchant at their prices of production? Or rather, w^hat was the premise of that assumption? It was that the commercial capital did not share in tlie formation of the average rate of profit (and as yet we are dealing with merchant's capital only in so far as it is commercial capital.)
We started necessarily from this premise in the discussion of the average rate of profit, first, because the commercial capi- tal as such did not exist for us at that time; and secondly, be- cause the average profit, and thus the average rate of profit, had to be first developed out of a mutual leveling of profits, or surplus-values, actually produced by the industrial capitals of the different spheres of production. But in the case of mer- chant's capital we are dealing with a capital which shares in the profit without participating in its production. Hence it now becomes necessary, to supplement our former presentation at this point.
Let us suppose that the total industrial capital advanced for one year is 720 c + 180 ^ = ^00 (say million p.st.), and that s':^100%. The product is then valued at 720 c -f 180 V + 180 s. Now let us call this product, the produced commodity-capital, C. Its value, or its price of production (both are identical for the total social commodity-capital), is Commercial Profit. 335 then 1080, and the rate of profit for the total social capital of 900 is 20%. These 20% constitute, according to our pre- vious analyses, the average rate of profit, since the surplus- value is not calculated in this instance on this or that capital of some particular composition, but on the average composi- tion of the total industrial capital. In short, C = 1,080, and the rate of profit =20%. Now let us further assume that aside from these 900 of industrial capital, there are invested 100 of merchant's capital, which share in the profit, just as the industrial capital does, in proportion to their magnitude. According to our assumption, the total capital consists of 900 industrial -f- 100 commercial ^. 1,000, so that the commercial capital is ^g- of the whole. Therefore it participates to the extent of -j-V ^^ the total surplus-value of 180, and by this means secures a profit at the rate of 18%. Actually, then, the profit remaining to be distributed among the other ^o ^f the total capital is only 162, which amounts likewise to 18% on the total capital of 900. In other words, the price at which C is sold by the owners of the industrial capital of 900 to the dealers is Y20 c + 180 v -f 162 s = 1,062. Now, if the dealer adds his average profit of 18% on his capital of 100, he sells the commodities at 1,062 + 18 = 1,080, which is their price of production, or, from the point of view of the total commodity-capital, their value, although he makes his profit only in and by the circulation, and only by an excess of his selling price over his purchase price. But nevertheless he does not sell the commodities above their value, nor above their price of production, just because he had bought them from the industrial capitalist below their value, or below their price of production.
The merchant's capital, then, plays a determining role in the formation of the average rate of profit in proportion to its pro rata magnitude in the total capital. Hence if we say in the cited case that the average rate of profit is 18%, it would be 20%, were it not for the fact that yo" of the total capital is merchant's capital, which implies a reduction of the rate of profit by -jlg-.
This requires also a more precise and detailed definition of 33^ Capitalist Production.
the price of production. By price of production we mean, now as before, that price of the commodities, which is equal to their cost (the value of the constant -f- variable capital con- tained in them) + the average profit. But tliis average profit is now differently determined. It is determined by the total profit produced by the total productive capital, but it is not calculated merely on this total productive capital. It is not calculated, as first assumed, so that, if the total produc- tive capital were 900, and the profit 180, the average rate of profit would be \^ =20%. It is rather calculated on the total productive -f- the merchant's capital, so that, if the total capital is 900 productive + 100 merchant's capital, the aver- age rate of profit is -f^-^ =18%. The price of production is, therefore, equal to k (the costs) -f- 18, instead of k -]- 20. In the average rate of profit, the share of the total profit fall- ing to the merchant's capital is included. The actual value, or price of production, of the total commodity-capital is, therefore, k -|- p -j- m (where m indicates profits in mer- chant's capital). The price of production, or the price at which the industrial capitalist as such sells his commodities, is thus smaller than the actual price of production of commodi- ties. Or, looking upon the matter from the point of view of the total commodity-capital, the prices at which the class of industrial capitalists sell are lower than the values of com- modities. Thus, in the above case, 900 costs -f- 18% on It follows, then, that the merchant, when selling a commod- ity at 118 for which he paid 100 does indeed raise the price by 18%. But since this commodity, for which he paid 100, is really worth 118, he does not sell it above its value. We shall retain the price of production as more closely defined above. Then it is evident, that the profit of the industrial capitalist is equal to the excess of the price of production of his commodities over their cost-price, and that the commercial profit, as distinguished from this industrial profit, is equal to the excess of the selling price over the price of production of the commodities, which is their cost-price for the merchant; but that the actual price of the commodities is equal to their Commercial Profit. 2>Z7 price of production plus the commercial profit. Just as the industrial capital realises only such profits as exist previously in the commodities as surplus-value, so the merchant's capital realises profits only because the entire surplus-value, or profit, has not yet been realised in the price charged for the commodi- ties by the industrial capitalist.^ ^ The selling price of the merchant, then, stands above his purchase price, not because the former stands above the total value^ but because the purchase price stands below this value.
The merchant's capital participates in the compensation of the surplus-value to an average profit, altliough it does not take part in its production. So the average rate of profit implies that general deduction from surplus-value which falls to the share of merchant's capital, a deduction from the profit of the industrial capital.
From the foregoing it follows: 1) The larger the merchant's capital in proportion to the industrial capital, the smaller is the rate of industrial profit, and vice versa.
2) It was seen in the first part, that the rate of profit is al- ways lower than the rate of the actual surplus-value, that it always expresses the intensity of exploitation too low. In the above case, 720 c -\- 180 v -|- 180 s means a rate of sur- plus-value of 100%, and a rate of profit of only 20%. And if the merchant's capital is included in tlie calculation, then the difference between the rate of surplus-value and the rate of profit becomes still greater, the latter being only 18% in the present case. In that case, the average rate of profit of the direct exploiter of labor expresses the rate of profit in lower figures than it actually represents.
Assuming all other circumstances to remain the same, the relative volume of the merchant's capital (excepting the small dealer, who represents a hermaphrodite form) will be in a reverse ratio to the velocity of its turn-over, or in a reverse ratio to the energy of the process of reproduction in general. In the process of scientific analysis, the formation of an aver- age rate of profit appears to take its departure from the in- 2»John Bellers.
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