If we leave out of consideration, as we do in this chapter, K, the expenses of circulation, in other words, if we leave aside that portion of capital which the merchant advances apart from the money required for the purchase of commodi- ties, it follows that A K, the additional profit made on this additional capital, will likewise be left out. This is the strictly logical and mathematically correct mode of analysis, if we wish to study the way in which the profits and turn-over of merchant's capital affect prices.
If the price of production of 1 lb. of sugar is 1 p. St., the merchant can buy 100 lbs. of sugar with 100 p.st. If he buys and sells this quantity in the course of one year, and if the annual rate of average profit is 15% he would add 15 p.st. to 100 p.st., and 3 sh. to the price of production of 1 lb. of sugar, 1 p.st. That is, he would sell one pound of sugar at 1 p.st. 3 sh. But if the price of production of 1 lb. of sugar should fall to 1 sh., then the merchant could buy 2,000 lbs. of sugar with 100 p.st., and he could sell the sugar at 1 The Prices. 361 sh. If d. per lb. The annual profit on capital invested in the sugar business would still be 15 p.st, on each 100 p.st. Only he has to sell 100 lbs. in the first case, while he must sell 2,000 lbs. in the second place. The high or low level of the price of production would not have anything to do with the rate of profit. But it would have a great deal, or even a decisive deal, to do with that aliquot part of the selling price of each lb. of sugar which resolves itself in mercantile profit; in other words, it would have a great deal to do with the addi- tion to the price which the merchant makes on a certain quan- tity of commodities, or products. If the price of production of a certain commodity is small, then the amount advanced by the merchant for tlie purchase of a certain quantity of that commodity is also small, and so is the amount of profit made by him on this quantity of cheap commodities. Or, what amounts to the same, he can buy with a certain amount of cap- ital, for instance with 100, a large quantity of these commod- ities, and the total profit of 15, which he makes on 100, will be distributed in small fractions over each individual portion of this mass of commodities. The opposite takes place in the opposite case. This depends entirely on the greater or smaller productivity of the industrial capital, with whose products he trades. If we except the cases, in which the merchant is a monopolist and monopolises at the same time the production of certain goods, as did the Dutch East India Company once upon a time, we must say that there is nothing more ridiculous than the current idea that it depends on the merchant whether he wants to sell many commodities at a small profit or few commodities at a large profit on the individual commodities. The two limits of his selling price are: On one hand, the price of production of commodities, over which he has no con- trol; on the other hand, the average rate of profit, over which he has also no control. The only thing which he has to de- cide is whether he wants to deal in cheap or in dear commod- ities, and even here the size of his available capital and other circumstances have something to say. Therefore it de- pends wholly on the degree of development of the capitalist mode of production, not on the good will of the merchant, 362 Capitalist Production.
what course lie shall follow in this. A purely commercial company like the old Dutch East India Company, which had a monopoly of production, could imagine that it would he able to continue a method, adapted at best to the beginnings of capitalist production, under entirely changed conditions. ^^ The following circumstances, among others, help to main- tain that popular prejudice, which, like all wrong conceptions of profit, etc., arise out of the views of pure commerce: 1) Phenomena of competition, which, however, concern merely the distribution of mercantile profit among the indi- vidual merchants in their capacity as shareholders in the total merchant's capital; such as the underselling of other mer- chants by one of them for the purpose of beating his competi- tors.
2) An economist of the caliber of Professor Roscher of Leipsic may still imagine that a change in the selling prices may be brought about by considerations of '' prudence and humanity," instead of being due to a revolution in the mode of production itself.
3) If the prices of production fall on account of an in- creased productivity of labor, and if consequently the selling prices also fall, then the demand, and with it the market prices, often rise even faster than the supply, so that the sell- ing prices yield more than the average profit.
4) A merchant may reduce his selling price (which amounts after all to no more than a reduction of the current profit which he adds to the price) in order to turn over a large capital more rapidly in his business.
All these things concern only competition between mer- chants themselves.
We have already shown in volume I, that the high or low **" Profit, on the general principle, is always the same, whatever be price; keeping its place like an incumbent body on the swelling or sinking trade. As, therefore, prices rise, a tradesman raises prices; as prices fall, a tradesman lowers price." (Corbet, An Inquiry into the Causes, etc., of the Wealth of Individuals. London, 1845, p. 15.) Here, as in the text of our work generally, we speak only of ordinary commerce, not of speculation. The analysis of speculation, as well as everything else pertaining to the division of mercantile capital, falls outside of the circle of our inquiry. " The profit of trade is a value added to capital which is independent of price, the second (speculation) is founded on the variation in the value of capital or in price itself." (L. c, p. 12.)
The Prices. 363 level of the prices of commodities determines neither the mass of surplus-value 2:)roduced bj a certain capital nor the rate of surplus-value; it is merely true that, according to the rel- ative quantity of commodities produced by a certain quan- tity of labor, the price of the individual commodity, and with it the share of surplus-value falling upon this price, is greater or smaller. The prices of every quantity of commodities are determined, so far as they correspond to their values, by the total quantity of labor incorporated in these commodities. If much labor is incorporated in few commodities, then the price of the individual commodities is low and the surplus- value contained in them is small. No matter in what propor- tion the labor incorporated in a commodity is divided into paid and unpaid labor, and no matter what portion of its price may represent surplus-value, it has nothing to do with the total quantity of this labor, nor, consequently, with its price. On the other hand, the rate of surplus-value does not depend on the absolute magnitude of the surplus-value con- tained in the price of the individual commodity, but on its relative magnitude, on its proportion to the wages contained in the same commodity. The rate of surplus-value may therefore be large, while the absolute magnitude of the sui'plus- value in each individual commodity may be small. This ab- solute magnitude of the surplus-value in each commodity de- pends in the first place on the productivity of labor, and only in the second place on its division into paid and unpaid labor.
Moreover, in the case of the commercial selling price, the price of production is a condition determined by external cir- cumstances.
The high prices of commerce in former times were due 1) to the dearness of the prices of production, in other words, to the unproductivity of labor; 2) to the absence of an aver- age rate of profit, which enabled the merchant's capital to ab- sorb a much larger quantity of the surplus-value than would have fallen to its share, had the capitals enjoyed a greater general mobility. The cessation of this condition, in both of its aspects, is due to the development of the capitalist mode of production.
364 Capitalist Production.
The turn-overs of merchant's capital vary in length, their numbers consequently are greater or smaller, in different lines of commerce. Within the same line of commerce, the turn- over is more or less rapid in different phases of the economic cycle. However, an average number of turn-overs, which is found by experience, takes place.
We have already noted, that the turn-over of merchant's capital differs from that of industrial capital. This follows from the nature of the case; one single phase in the turn- over of industrial capital appears as a complete turn-over of some independently constituted merchant's capital, or of a part of some such merchant's capital. This turn-over has also a different relation to the determination of profit and prices.
In the case of the industrial capital, its turn-over expresses on one hand tlie periodicity of reproduction, and on it de- pends the mass of commodities, which may be thrown on the market in a certain period. On the other hand, its time of circulation forms a barrier, which is elastic and exerts more or less of a restraint on the creation of value and surplus- value, because it exerts a pressure on the volume of the proc- ess of production. The turn-over therefore acts as a deter- mining element on the mass of annually produced surplus- value, and thus helps to determine the average rate of profit, but it acts as a negative, not as a positive element. For the merchant's capital, however, the average rate of profit exists as a given magnitude. The merchant's capital does not di- rectly participate in the creation of value or surplus-value, and it participates in the formation of an average rate of profit only to the extent that draws a dividend, in propor- tion to its size in the total social capital, out of the mass of profit produced by the industrial capital.
The greater the number of turn-overs of a certain industrial capital is under the conditions described in Volume II, Part II, the greater is the mass of profits created by it. ^ow, the formation of an average rate of profit distributes the total profit among the different capitals, not in proportion to their actual participation in its direct production, but in proportion to the aliquot parts which they constitute in the total capital, that is, in proportion to their magnitudes. But this does not alter the essence of the matter. The greater the number of turnovers of the industrial capital as a whole is, the greater is the mass of profits, the mass of annually produced surplus- value, and therefore the rate of profit, always assuming other circumstances to remain unchanged. It is different with mer- chant's capital. For it, the rate of profit is a given magnitude, determined on one hand by the mass of profit produced by the industrial capital, on the other hand by the relative magTiitude of the total merchant's capital, by its quantitative relation to the sum of capital advanced in the processes of production and circulation. The number of its turn-overs does indeed exert a determining influence on its relation to the total social capital, or on the relative magnitude of the total merchant's capital required for the circulation. For it is evident that the absolute magnitude of the total merchant's capital and the velocity of its turn-over are inversely proportioned to one another. But, all other circumstances remaining the same, the relative magnitude of the merchant's capital, or its aliquot proportion in the total social capital, is determined by its ab- solute magnitude. If the total social capital is 10,000, and the merchant's capital 1,000, then it is yg" of the total; if the total capital is 1,000, and the merchant's capital 100, it is again j-^. To that extent, the absolute magnitude of the mer- chant's capital may vary, while its relative magnitude in the total social capital remains the same. But in the present case, we assume that its relative magnitude of yq- of the total social capital is given. This relative magnitude, again, is de- termined by its turn-over. If it is turned over rapidly, its absolute magnitude will be 1,000 in the first case, and 100 in the second, so that its relative magnitude will be -^-q. But if it is turned over more slowly, then its absolute magnitude may be 2,000 in the first case, and 200 in the second case. Then its relative magnitude will have increased from -^^ to i of the total social capital. Circumstances which reduce the average turn-over of merchant's capital, for instance, the de- velopment of means of transportation, reduce to that extent the 366 Capitalist Production.
absolute magnitude of merchants' capital and thereby in- crease the average rate of profit. The opposite takes place, if things are reversed. A developed mode of capitalist pro- duction, compared to previous conditions, exerts a twofold in- fluence on merchants' capital. In the first place, the same quantity of commodities is turned over with a smaller mass of actually functioning merchants' capital; for the proportion of the mcrcliants' capital to industrial capital is reduced by the more rapid turn-over of merchants' capital and the greater ve- locity, of the process of reproduction that is its basis. On the other hand, the development of the capitalist mode of produc- tion turns all production into a production of commodities, which puts all products into the hands of the agents of circu- lation. This is so much more notable, as under previous modes of production, wliich produced things on a small scale, a large portion of the producers sold their goods directly to the consumers or worked for their personal orders, leaving out of consideration that mass of products, which were im- mediately consumed by the producer himself, and that mass of services, which were performed in natura. While, there- fore, under former methods of production, commercial capital represented proportionately a larger share of the commod- ity-capital which it turned over, it was.
1) absolutely smaller, because a disproportionately smaller part of the total product was produced in the shape of com- modities, passed as commodity-capital into circulation, and fell into the hands of merchants. It was smaller, because the commodity-capital was smaller. But it was proportionately larger, not only because its turn-over was slower, and because it constituted a larger portion of the mass of commodities turned over by it, but also because the price of this mass of commodities, and consequently the merchants' capital to be ad- vanced for it, were greater than under capitalist production on account of a lower productivity of labor, so that the same value was incorporated in a smaller mass of commodities.
2) T^ot alone is a larger mass of commodities produced on the basis of capitalist production (taking account also of the reduced value of these commodities), but the same mass of products, for instance, of corn, also becomes to a greater ex- tent commodity, that is, more and more of the product be- comes an object of commerce. As a consequence, not only tlie mass of the merchants' capital, but of all capital invested in the circulation, increases, such as capital invested in marine shipping, railroading, telegraph business, etc.; 3) However, there is one point of view, which belongs in the discussion of " competition among capitals," namely: The merchants' capital, which is not serving in any function, or serving only in part, grows with the progress of the capital- ist mode of production, with the facility of its investment in retail trade, with the increase of speculation, and with the superfluity of released capital.
But, assuming the relative magnitude of the merchants' capital in proportion to the social capital to be given, the difference of the turn-overs in the various lines of commerce does not affect the magnitude of the total profit falling to the share of the total merchants' caj)ital, nor the general rate of profit. The profit of the merchant is determined, not by the mass of the commodity-capital turned over by him, but by the magnitude of the money-capital advanced by him for the pro- motion of this turn-over. If the yearly general rate of profit is 15%, and the merchant advances 100 p.st., which he turns over once a year, then he will sell his commodities at 115. If his capital is turned over five times per year, then he will sell a commodity-capital of 100 purchase price five times per year at 103, which will amount in one year to a commodity- capital of 500 sold 515. This constitutes the same annual profit of 15% on his advanced capital of 100 as before. If this were not so, then the merchants' capital would yield a much higher profit in proportion to the number of its turn- overs than the industrial capital, and this would be a con- tradiction to the law of the average rate of profit.
It follows, then, that the number of turn-overs of mer- chants' capital in the various lines of commerce affects the mercantile prices of commodities directly. The amount of the mercantile addition to the price, the addition of that aliquot part of the mercantile profit of a given capital which 368 Capitalist Production.
falls upon the price of i^roduction of the individual commodi- ties, stands in an inverse ratio to the number of turn-overs, or the velocity of turn-over, of the merchants' capitals in the va- rious lines of commerce. If a certain merchants' capital is turned over five times per year, it will add to a commodity- capital of its own value but one-fifth of the profit, Avhich an- other merchants' capital of the same value, which is turned over but once per year, will add to a commodity-capital of the same value.
This modification of selling prices by the average time of turn-over of the capitals in different lines of commerce amounts to this: In proportion to the velocity of turn-over, the same mass of profits, which is determined by the annual rate of average profit for any given magnitude of merchants' capital, independently of the specific commercial character of the operations of this capital, is differently distributed over masses of commodities of the same value. For instance, if the merchants' capital is turned over five times per year, it will add ^ = 3% to the price of commodities, and if turned over once per year, it will add 15% to their price.
The same percentage of the commercial profit in different lines of industry, according to the proportions of their times of turn-over, increases the selling prices of commodities by differ- ent percentages calculated on their values.
On the other hand, in the case of industrial capital, the time of turn-over does not affect in any way the magnitude of the v^alue of the individual commodities produced during that time, although it does affect the mass of value and surplus- value produced in a given time, because it affects the mass of exploited labor. This is indeed concealed and seems to be otherwise, as soon as one has an eye only to the prices of production. But this is due solely to the fact that, according to the previously analysed laws, the prices of production of the various commodities deviate from their values. As soon as we look upon the process of production in its totality, upon the mass of commodities produced by the entire industrial capital of society, we shall find the general law vindicated.
We see then, that a closer inspection of the influence of the time of turn-over on the formation of the values leads us back, in the case of the industrial capital, to the general law and to the basis of political economy, to-wit, the law that the values of commodities are determined by the labor time contained in them. But the influence of the turn-overs of merchants' capital on the mercantile prices reveals phenomena, which, without a very lengthy analysis of the connecting links, seem to point to a purely arbitrary fixing of prices. They seem to be fixed purely on the intention that a certain capital should make a definite quantity of profits in one year. Particularly it looks, on account of this influence of the turn-overs, as though the process of circulation determined by itself the prices of commodities, independently, within certain limits, of the process of production. All superficial and false con- ceptions of the process of reproduction as a whole arise from the point of view of merchants' capital and from the concep- tions, which its peculiar movements call forth in the minds of the agents of circulation.
If it is realised — and the reader will have realised it to his great dismay — that the analysis of the actual internal interconnections of the capitalist process of production is a very complicated matter and a very protracted work; if it is a work of science to resolve the visible and external movement into the internal actual movement, then it is understood as a matter of course, that the conceptions formed about the laws of production in the heads of the agents of production and cir- culation will differ widely from these real laws and will be merely the conscious expression of the apparent movements. The conceptions of a merchant, a stock gambler, a banker, are necessarily quite perverted. Those of the manufacturer are vitiated by the acts of circulation, to which their capital is sub- ject, and by the compensation of the general rate of profit.'*- Competition likewise plays a completely perverted role in these heads. If the limits of value and surplus-value are *^ It is a very naive, but also very correct remark that " Surely the fact that one and the same commodity may be had from different sellers at considerably different prices is frequently due to mistakes of calculation." (Feller and Older- mann. Das Ganze der kaufmannischen of Arithmetik, 7. Aufl., 1859.) This shows how purely theoretical, that is abstract, the determination oi prices becomes.
X 370 Capitalist Production.
given, then it is easy to understand, in what manner the com- petition of capitals will transform values into prices of pro- duction and further into mercantile prices, and surplus-value into average profit. But without these limits, w^e cannot see any reason at all, why competition should reduce the average rate of profit to such and such a level instead of some other, should make it 15% instead of 1,500%. Competition at best can only reduce the rate of profit to one and the same level. But it does not contain any element, by which this level could be determined.
From the point of view of merchants' capital, the turn-over itself takes on the guise of a determining element of prices. On the other hand, while the velocity of the turn-over of in- dustrial capital, in so far as it enables a certain industrial capital to exploit more or less labor, exerts a determining and limiting influence on the mass of j)rofit and thus on the aver- age rate of profit, this rate of profit exists as an external fact for the merchants' capital, and the internal connection of this rate with the production of surplus-value is entirely obliter- ated. If the same industrial capital, under otherwise equal circumstances, particularly with the same organic composi- tion, is turned over four times per year instead of twice, it produces twice as much surplus-value and, consequently, profit. And this becomes palpable, as soon and so long as this capital has the monopoly of that improved mode of production, to which it owes its accelerated turn-over. Vice versa, differ- ences in the times of turn-over in different lines of commerce manifest themselves in such a way that the profit made on the turn-over of some given commodity-capital is in an inverse ra- tio to the number of turn-overs of the money-capital which turns this commodity-capital over. Small profits and quick returns appears particularly to the shopkeeper as a principle, which he follow^s on principle.