2»John Bellers.
V 338 Capitalist Production.
dustrial capitals and their competition, and only later on does it seem to be corrected, supplemented, and modified by the intervention of merchant's capital. But in the course of historical events, the process is reversed. It is the commercial capital, which first determines the prices of commodities more or less by their values, and it is the sphere of circulation, while promoting the process of reproduction, which first affords an opportunity for the formation of an average rate of profit. The commercial profit originally determines the industrial profit. ]^ot until the capitalist mode of production has asserted itself and the producer himself has become a merchant, is the com- mercial profit reduced to that aliquot part of the total surplus- value, which falls to the share of the merchant's capital as an aliquot part of the total capital engaged in the social process of reproduction.
In the analysis of the supplementary compensation of profit through the intervention of the merchant's capital it was found that no additional element for the advanced money- capital entered into the value of commodities, and that the addition to the price, by which the merchant makes his profit, was merely equal to that portion of the value of commodities, which the productive capital did not calculate, but rather left out of calculation in the price of production. The case of this money-capital is similar to that of the fixed capital of tlie industrial capitalist, which is not all consumed and does not pass as an element into the value of commodities. By the purchase price which the merchant pays for the commodity- capital, he replaces its price of production, M, in money. His own selling price, as we have previously shown, is equal to M + -^ M, and this A M stands for the addition to the price of commodities determined by the average rate of profit. By selling these commodities, he recovers together with this A M his original money-capital, which he advanced for their purchase. Here, then, we see once more that his money-capital is nothing else but the commodity-capital of the industrial cap- italist transformed into money-capital, and this change does not affect the magnitude of the volume of this commodity- capital any more than a direct sale to the ultimate consumer Commercial Profit. 339 instead of the merchant would. It merely anticipates pay- ment by the consumer. However, this is correct only on the condition, which we had hitherto assumed, that the merchant has no expenses, or that he need not advance any fixed or circu- lating capital during the process of metamorphosis of the com- modities, of buying and selling, aside from the money-capital which he must advance for the purchase of the commodities from the producer. But this is not so in reality, as we have seen in the analysis of the costs of circulation, volume II, chap- ter VI. These costs of circulation represent either expenses, which the merchant has to reclaim from the other agents of the circulation, or expenses, which are due directly to his specific business.
No matter what may be the character of these costs of cir- culation — whether they arise from the purely mercantile nature of the business, or whether they belong to the specific costs of circulation of the merchant, or whether they represent items, which are charges for subsequent processes of produc- tion added within the process of circulation, such as express- age, transportation, storage, etc. — they always require that the merchant should have, aside from his advanced money-capital, some additional capital for the purchase and payment of such means of circulation. To the extent that this element of cost consists of circulating capital, it passes wholly as an additional element into the selling price of the commodities; to the ex- tent that it consists of fixed capital, it is transferred in pro- portion to its wear and tear. It is, however, an element, which forms a nominal value, even if it does not add any real value to the commodities. Such nominal values, which do not add any real value to the commodities, are the purely mercantile costs of circulation. But whether fixed or circulating, the en- tire additional capital participates in the formation of the general rate of profit.
The purely commercial costs of circulation (that is, except- ing the costs of transportation, shipping, storage, etc.) resolve themselves into the costs required for the purpose of realising the value of commodities, by transforming it either from com- mocTiiies into money, or from money into commodities, by 340 Capitalist Production.
means of exchange. We leave entirely out of consideration any processes of production, which may eventually continue during the process of circulation, and which may exist sepa- rately from the merchant's business. In fact^ the actual transport industry and shipping may be, and are, lines of occu- pation entirely separated from the merchant's business, and the purchaseable or saleable commodities may be stored in warehouses or other public sheds, and the cost of storage, so far as it has to be advanced by the merchant, may be charged up to him by other people. All this becomes apparent in com- merce on a large scale, in which the merchant's capital assumes its purest form, unalloyed by other functions. The express owner, the railroad director, the ship owner, are not " mer- chants." The costs which we consider here are those of buy- ing and selling. We- have already remarked in another place that these resolve themselves into accounting^ bookkeeping, marketing, correspondence, etc. The constant capital required for this purpose consists of offices, paper, postage, etc. The other costs resolve themselves into variable capital advanced for the employment of mercantile wage workers. (Express- age, cost of transportation, advances for duties, etc., may be considered as being advances made by the merchant for the purchase of commodities and entering into the purchase price to be paid by him.)
All these costs are not incurred in the production of the use-value of the commodities, but in the realisation of their exchange value. They are pure costs of circulation. They do not enter into the strict process of production, but since they enter into the process of circulation they are part of the total process of reproduction.
The only portion of these costs that interests us here is that advanced as variable capital. (Furthermore the following questions remain to be analysed: 1) How is the law, that only socially necessary labor enters into the value of commodi- ties, enforced in the process of circulation? 2) How does accumulation represent itself in the case of merchant's cap- ital? 3) How does merchant's capital function in the actual process of reproduction of society as a whole?)
Commercial Profit. 341 These costs are due to the economic form of the product, that of a commodity.
Seeing that the labor time lost by the industrial capitalists themselves while directly selling commodities to one another, in other words, the circulation time of the commodities, does not add any value to these commodities, it is evident that this labor time is not endowed with any other character by trans- ferring it from the industrial capitalist to the merchant. The conversion of commodities (products) into money, and of money into commodities (means of production) is a necessary function of industrial capital and, therefore, a necessary oper- ation for the caj)italist, who is but personified capital endowed with his consciousness and will. But these functions do not create any value, nor do they produce any surplus-value. The merchant, by performing these operations, by further promot- ing the functions of capital in the sphere of circulation after the productive capitalist has ceased to do so, merely steps into the shoes of the industrial capitalist. The labor time re- quired for these operations is devoted to certain necessary operations in the process of reproduction of capital, but it adds no value to it. If the merchant did not perform these operations (did not expend the labor time required for them), he would not be using his capital as a circulation agent of industrial capital; he would not be continuing the interrupted function of the industrial capitalist, and consequently he could not participate as a capitalist, in proportion to his advanced capital, in the mass of profit produced by the class of industrial capitalists. In order to share in the mass of surplus-value, in order to expand the value of his advanced capital, the commer- cial capitalist need not employ any wage workers. If his busi- ness is small, he may be the only worker in it. But his wages are derived from that portion of the social profit which falls to his share through the difference between the purchase price paid by him for commodities and their actual price of produc- tion.
Under these circumstances, and assuming the merchant's advanced capital to be small, the profit realised by him may not be a bit larger, or may even be smaller, than the wages of 342 Capitalist Production.
one of the better paid skilled wage workers. In fact, there are employed, side by side with him, many commercial agents of the industrial capitalist, such as buyers, sellers, travelers, who receive the same or a higher income than he, either in the form of wages, or in the form of a check upon the profit (percentages, tantiemes) made by each sale. In the first case, the merchant pockets the mercantile profit as an independent capitalist; in the other case, the salesman, the wage laborer of the industrial capitalist, receives a portion of the profit, either in the form of wages, or in the form of a proportional share in the profit of the industrial capitalist, whose direct agent he is, while his principal pockets both the industrial and the commercial profit. But in all these cases the income of the circulation agent is derived from the merchant's profit, even though he may regard it merely as wages paid to him for the performance of his labor, or, where it does not appear in this light, though his profit may not be any larger than the wages of a better paid wage laborer. This follows from the fact that his labor is not labor producing any values.
The prolongation of the act of circulation implies for the in- dustrial capitalist 1) a personal loss of time, to the extent that it prevents him from performing his own function as a manager of the productive process; 2) a prolonged stay of his product, in the form of money or commodities, in the proc- ess of circulation, that is, a process, in which it does not pro- duce any value and by which the direct process of production is interrupted. If this process is not to be interrupted, pro- duction must either be restricted, or more money-capital must be advanced, in order that the process of production may pro- ceed on the same scale. This means every time that either a smaller profit is made by the capital hitherto invested, or that additional money-capital must be advanced in order to make the same profit. All this remains unchanged, when the merchant takes the place of the industrial capitalist. Instead of the industrial capitalist, the merchant then spends this pro- longed time in the process of circulation; instead of the indus- trial capitalist, the merchant advances additional capital for the circulation; or, what amounts to the same, instead of a Commercial Profit. 343 large portion of the industrial capital straying off continually into the process of circulation, the capital of the merchant is wholly tied up in it; and instead of the industrial capitalist making a smaller profit, he must yield a portion of his profit wholly to the merchant. So long as merchant's capital re- mains within the boundaries, in which it is necessary, the only difference is that this division of the functions of capital re- duces the time exclusively needed for the process of circula- tion, that less additional capital is advanced for this purpose, and that the loss of the total profits represented by the profits of merchant's capital is smaller than it would have been other- wise. If in the above example, a capital of 720 c -|- 180 v -j- 180 s, assisted by a merchant's capital of 100, leaves a profit of 162, or 18% for the industrial capitalist, or, in other words, implies a deduction of 18, then the additional capital required without the assistance of this independent merchant's capital would probably be 200, and the total advance to be made by the industrial capitalist would be 1,100 instead of 900, which, wnth a surplus-value of 180, would mean a rate of profit of only 16^*^70.
]^ow, if the industrial capitalist, who acts as his own mer- chant, advances not only the additional capital with which he buys new commodities, before his product in process of circu- lation has been reconverted into money, but also capital (office expenses and w^ages for commercial laborers) for the realisa- tion of the value of his commodity-capital, or, in other words, for the process of circulation, then these costs form additional capital, but they produce no surplus-value. They must be made good out of the value of tlie commodities. For a portion of the value of these commodities must once more be converted into these circulation costs; and no additional surplus-value is created thereby. So far as this concerns the total capital of society, it means that a portion of it must be set aside for sec- ondary operations, which are no part of the process of creating value, and that this portion of the social capital must be con- tinually reproduced for this purpose. This reduces the rate of profit for the individual capitalist and for the entire class of industrial capitalists, a result, which follows from every 344 Capitalist Production.
addition of auxiliary capital, whenever such capital is required for the purpose of setting in motion the same mass of variable capital.
To the extent that these additional costs connected with the business of circulating are transferred from the shoulders of the industrial to those of the commercial capitalist, the same reduction in the rate of profit takes place, only to a smaller extent and in another way. The matter now assumes the form that the merchant advances more capital than would be neces- sary, if these costs did not exist, and that the profit on this additional capital increases the amount of the commercial profit, so that the merchant's capital shares with the industrial capital to a greater extent in the leveling of the average rate of profit, thereby lowering the average profit. If in our above examply 50 additional capital are advanced for those costs to- gether with a merchant's capital of 100, then the total surplus- value of 180 is distributed over a productive capital of 900 plus a merchant's capital of 150, a total of 1,050. The average rate of profit then falls to l^jfo. The industrial capitalists sells his commodities to the merchant at 900 + 154|- = l,054f, and the merchant sells them at 1,130, namely 1080 -|- 50 for costs which he must recover. For the rest it must be assumed that the division between merchant's and industrial capital is accompanied by a centralisation of the expenses of commerce and, consequently, by their reduction.
The question is now: How is it with the commercial wage workers employed by the commercial capitalist, in this case by the merchant?
In one respect, such a commercial laborer is a wage laborer like others. For, in the first place, his labor-power is bought with the variable capital of the merchant, not with the money spent by him as revenue, and consequently this labor-power is not bought for private service, but for the creation of value by means of the capital advanced for it. In the second place, the value of this labor-power, and thus his wages, are deter- ' mined in the same way as those of other wage workers, namely by the cost of production and reproduction of his specific labor- power, not by the product of his labor.
11 Commercial Profit. 345 However, we must make the same distinction between the commercial wage worker and the wage workers directly em- ployed by the industrial capital which we found existing be- tween the industrial capital and merchant's capital, and thus between the industrial capitalist and the commercial capitalist. Since the merchant, as a mere agent of circulation, produces neither value nor surplus-value (for the additional value, which he adds to the commodities by his expenses, resolves it- self into an addition of previously existing values, although the question here poses itself: How does he preserve the value of his constant capital?) it follows that the mercantile laborers employed in these same functions cannot very well create any direct surplus-value for him. Here, as in the case of the productive laborers, we assume that Avages are deter- mined by the value of labor-power, and that the merchant does not make money by depressing wages, so that he does not allow in his accounts for any advance of wages which he paid only in part, in other words, that he does not make money by cheating his clerks.
The difficulty in the case of the mercantile wage workers is by no means that of explaining the way in which they produce any direct profits for their employer, even though they do not create any direct surplus-value (of which profit is but a changed form.) This part of the question has already been solved by the general analysis of commercial profits. Just as the industrial capital makes profits by selling labor embodied and realised in commodities for which it has not paid any equiv- alent, so the merchants' capital makes profits by not paying the productive capital for all the unpaid labor incorporated in the commodities (that is, commodities in so far as the capital in- vested in their production functions as an aliquot part of the total industrial capital), while in selling it demands payment for this unpaid portion still contained in the commodities and not paid for by itself. The relation of the merchant's capital to the surplus-value is different from that of the industrial capital. The industrial capital produces surplus-value by the direct appropriation of the unpaid labor of others. The mer- chant's capital, on the other hand, appropriates a portion of 346 Capitalist Production. | this surplus-value by having this portion transferred from the industrial capital to itself.
It is only by its function of realising values that the mer- chant's capital serves in the process of reproduction as capital and in this capacity gets a share of the surplus-value produced by the total capital. The mass of profits depends for the in- dividual merchant on the mass of capital, which he can invest in this process, and he can use so much more of it in buying and selling, the more unpaid labor his clerks perform. The function itself, by virtue of which the money of the merchant capitalist is capital, is largely performed by his employes. The unpaid labor of his clerks, while it does not create any surplus-value, at least appropriates surplus-value for him, which amounts to the same thing so far as results on his capi- tal go. This unpaid labor is for him, therefore, a source of profit. Otherwise the mercantile business could never be car- ried on capitalistically, on a large scale.
Just as the unpaid labor of the laborer of the productive capital creates surplus-value for it in a direct way, so the un- paid labor of the commercial wage workers secures a share of this surplus-value for the merchant's capital.
Here is the difiiculty: Seeing that the labor time and the labor of the merchant himself do not create any value, but only secure for him a share of already produced surplus-value, how is it wath the variable capital, which he invests in the purchase of commercial labor-power? Must this variable cap- ital be included in the expense account of advanced mer- chant's capital? If not, then it seems to be in contradiction with the law of the compensation of the average rate of profit; for where is there a capitalist who would advance 150, if he could place only 100 in account? If yes, it seems to be in contradiction with the nature of merchant's capital, since this class of capital does not act in the capacity of capital by set- ting in motion the labor of others, as the industrial capital does, but rather by performing its own work, that is, the process of buying and selling, and only for this and by this means does it transfer a portion of the surplus-value pro- duced by the industrial capital to itself.
I Commercial Profit. 347 (Therefore the following points must be analysed: the va- riable capital of the merchant; the law of necessary labor in circulation; the way in which the merchant's labor preserves the value of his constant capital; the role of merchant's cap- ital in the total process of reproduction; and finally, the two- fold materialisation in commodity-capital and money-capital on one side, and in commercial capital and financial capital on the other.)
If every merchant had only as much money as he is per- sonally able to turn over by his own labor, there would be an infinite dissociation of merchant's capital. This dissocia- tion would increase to the extent that productive capital, in the forward march of the capitalist mode of production, would produce and operate on a larger scale. The disproportion between the two classes of capital would increase. In pro- portion as capital in the sphere of production would be cen- tralised, it would be decentralised in the sphere of circula- tion. The purely commercial business of the industrial capi- talist, and thus his purely commercial expenses, would be in- finitely expanded thereby, for he would have dealings with 1,000 capitalists at a time instead of 100. In this way, a large part of the advantage of the independent organisation of merchant's capital would be lost. Not only the purely com- mercial expenses, but also the other costs of circulation, sort- ing, expressage, etc., would grow. This applies to the indus- trial capital. 'Now let us consider the merchant's capital. In the first place, let us look at the purely commercial labors. It does not require more time to figure with large than with small numbers. But it costs ten times as much time to make 10 purchases at 100 p.st. each as it does to make one purchase at 1,000 p.st. It costs ten times as much correspondence, paper, postage, to carry on a correspondence with 10 small mer- chants as it does with one large merchant. A limited division of labor in a commercial office, in which one keeps books, an- other has charge of the treasury, a third carries on the cor- respondence, one man buys, another sells, another travels, etc., saves immense quantities of labor time, so that the num- ber of workers employed in wholesale commerce stand in no 348 Capitalist Production.
proportion to the comparative size of the business. This is so, because in commerce much more than in industry the same function, whether performed on a large or a small scale, costs the same labor time. For this reason, concentration appears historically in the merchant's business before it shows itself in the industrial workshop. There are further- more the expenses for constant capital. 100 small offices cost incomparably more than one large office, 100 small ware- houses more than one large one, etc. The costs of transporta- tion, which enter into the accounts of commercial business at least as advances, grow with this dissociation.
The industrial capitalist would have to spend more for labor and circulation in the commercial part of his business. The same merchant's capital, when distributed among many small capitalists would require more laborers for the per- formance of its functions, on account of this dissociation, and, besides, more merchant's capital would be needed in order to turn over the same commodity-capital.
Let us designate the entire merchant's capital directly in- vested in the purchase and sale of commodities by B, and the corresponding variable capital invested in wages of conuner- cial help by b. Then B -f- b is smaller than it would be, if every merchant had to worry along without any assistance and without investing any capital in b. However, we have not yet overcome all difficulties.
The selling price of the commodities must suffice, 1) to pay the average profit on B -|- b. This explains itself by virtue of the fact that B -f" b represents a reduction of the original B and a smaller merchant's capital than would be required without b. But this selling price must also suffice, 2) to cover not only the additional profit on b, but to recover also the paid wages, the variable capital of the merchant. There is the difficulty. Does b form a new constituent of the price, or is it merely a part of the profit made by means of B + b, which takes on the appearance of wages only so' far as the mercantile wage worker is concerned, and simply re- places the variable capital from the point of view of the mer- chant? In this last case, the profit made by the merchant Commercial Profit. 349 on his advanced capital B + b would be only equal to the profit due to B according to the general rate, plus b, which he pays out in the form of wages without getting a profit on it.
The crux of the matter is, indeed, to find the limits (math- ematically speaking) of b. Let us first define the difficulty exactly. Let us designate the capital invested directly in buying and seling commodities by B, the constant capital (expenses of objective materials of commerce) consumed in this function by K, and the variable capital invested by the merchant by b.
The recovery of B offers no difficulties. It simply repre- sents for the merchant the realised purchase price, tlie price of production for the manufacturer. The merchant pays this price and in reselling he recovers B as a part of his selling price. Apart from this B, he also receives a profit on B, as we have previously explained. For instance, let the com- modities cost 100 p.st. The profit on this may be 10%. In that case the commodities are sold at 110. These commodi- ties cost previously 100, and the merchant's capital of 100 merely makes an additional 10 out of them.
Now let us look at K. It will at most be as large as, but in fact smaller, than that portion of the constant capital, which the producer would have to invest in the department of buy- ing and selling, and which would be an addition to the con- stant capital invested by him in direct production. How- ever, this portion must be continually recovered by the price of the commodities, or, what amounts to the same, a corres- ponding portion of the commodities must be continually ex- pended in this form, must, from the point of view of the total capital of society, be continually reproduced in this form. This portion of the advanced constant capital would reduce the rate of profit just as well as the entire mass of it invested in production itself. To the extent that the industrial capitalist gives up the commercial part of his business to the merchant, he is no longer compelled to advance this part of the capital. The merchant advances it in his stead. In a way he does this but nominally, since a merchant neither produces nor reproduces the constant capital consumed by him (the cost of 350 Capitalist Production.