For the rest, it is a matter of course, that this law of turn- overs of merchants' capital holds good in each line of com- merce only for the average of turn-overs made by the entire merchants' capital invested in each particular line, and always without a consideration of any succession of alternating and mutually compensating turn-overs of longer or shorter dura- tion. The cajDital of A, who deals in the same line as B, may make more or less than the average number of turn-overs. This does not alter the turn-over of the total mass of mer- chants' capital invested in this line. But this is of decisive moment for the individual merchant or shopkeeper. He makes in this case an extra profit, just as the industrial cap- italists make extra profits, if they produce under conditions more favorable than the average. If competition compels him, he can sell cheaper than his competitors without lower- ing his profit below the average. If the conditions, which would enable him to turn his capital over more rapidly, are themselves for sale, such as a favorable location of the shop, he can pay extra rent for it, that is to say, a portion of his surplus-profit is converted into ground rent.
CHAPTER XIX.
FINANCIAL CAPITAL.
The purely technical movements performed by money in the process of circulation of industrial capital, and, as we may now add, of commercial capital, which assumes a part of the circulation movement of industrial capital as its own peculiar movement, — these movements, if individualised into an inde- pendent function of some particular capital that performs nothing but just this service, convert a capital into financial capital. In that case, one portion of the industrial capital, and of commercial capital, persists not only in the form of money, of money capital in general, but as money-capital, which performs only these technical functions. A definite part of the total social capital separates from the rest and in- dividualises itself in the form of money-capital, whose capi- talist function consists exclusively in performing the financial operations for the entire class of industrial and commercial capitalists. As in the case of the commercial capital, so in that of financial capital a portion of the industrial capital in process of function in circulation separates from the rest and 372 Capitalist Production.
performs these operations of the process of reproduction for all the other capital. These movements of such money-capi- tal, then, are once more merely movements of an individual- ised part of industrial cajjital in the process of reproduction.
Capital appears as the first and last point of this movement only to the extent that capital is newly invested, as happens in accumulation. But for every capital, which is already in process, this first and last point appear merely as points of transit. To the extent that industrial capital, from the mo- ment of its exit from the sphere of production to that of its re- turn to it, passes through the metamorphosis C — M — C, M represents merely the final result of one phase of this met- amorphosis and becomes at once the starting point of its sup- plementing second phase, as we have already seen in the dis- cussion of the simple circulation of commodities. And al- though the C — M of industrial capital signifies always M — C — M for the commercial capital, nevertheless the ac- tual process for this last named capital, once that it has be- come engaged, is also C — M — C. But the commercial cap- ital passes continually through and simultaneously through the acts C — M and M — C, that is to say, there is not only one capital in the stage C — M, while another is in the stage M — C, but the same capital buys continually and sells con- tinually at the saniti time, on account of the continuity of the process of production. It is continually and simultaneously in both stages. While one of its parts is converted into money, to be reconverted later into commodities, another is simultaneously converted into commodities, to be reconverted into money.
Whether the money serves here as a means of circulation or of payment, depends on the form of the exchange of commod- ities. In both cases, the capitalist has to pay out money con- tinually to many persons, and to receive money continually from many persons. This purely technical labor of paying money and receiving money constitutes an employment by it- self, which necessitates the making of balances, the balancing of accounts, so far as money serves as a means of payment. This labor belongs to the expenses of circulation, it does not Financial Capital. 373 create any values. It is abbreviated by being organised as a special department of agents, or capitalists, who perform this work for all the rest of the capitalist class.
A definite portion of the capital must be continually avail- able as a hoard, as potential money-capital. It constitutes a reserve of means of purchase, a reserve of means of pay- ment, unemployed capital in the form of money waiting to be put to work. And one portion of the capital continually re- turns in this form. This requires not only the collecting, paying, and bookkeeping operations, but also the storing of a hoard, which constitutes an operation by itself. This work consists indeed in a continual conversion of a hoard into means of circulation and means of payment, and its restora- tion to the form of a hoard by means of money secured through sales and due payments. This continuous movement of that part of capital, which exists in the form of money, separated from the function of capital itself, this purely technical func- tion causes its own labors and expenses, which belong to the expenses of circulation.
The division of labor brings it about, that these technical operations, which are conditioned on the functions of capital, should be performed as much as possible for the entire capital- ist class by one class of agents, or capitalists, into whose hands it is concentrated as their exclusive function. We have here, as in the case of commercial capital, a division of labor in a twofold sense. It becomes a special business, and be- cause it is performed as a special business for the money- mechanism of the whole class, it is concentrated and performed on a large scale. And then a further division of labor takes place within this special business, on one hand by a separa- tion into various independent lines, on the other by a seg- mentation of tlie work within each office of these special lines. Large offices, many bookkeepers and cashiers, far going di- vision of labor, disbursing of money, receiving of money, bal- ancing of accounts, keeping of current accounts, storing of money, etc., all these things, separated from the acts that necessitate these technical operations, make of the capital advanced for these functions a financial capital 374 Capitalist Production.
The various operations, whose individualisation gives rise to special lines of financial business, follow from the different capacities of money itself and from its different functions, through which capital in its money-form must likewise pass.
I have pointed out on a previous occasion, that the money business in general developed originally from an exchange of products between different communes. ^^ The financial business, the trade with money as a commod- ity, developed first out of international commerce. As soon as different national coins exist, the merchants buying in for- eign countries must exchange their national coins into foreign coins, and vice versa, or exchange different coins for uncoined pure silver or gold as international money. This gives rise to the business of money-exchange, which is one of the primitive foundations of modern financial business.^-* Out of it de- veloped the modern banks of exchange, in which silver (or gold) serve as world money — now called bank money or commercial money — as distinguished from current money.
*^ Critique of Political Economy, p. 53.
" " The great differences of coins themselves, as concerns their grain, and their coinage by many privileged princes and towns, necessitated the establishment of a business, which should enable merchants to use local money wherever any com- pensation between different coins was necessary. In order to be able to make cash pay- ments, merchants who traveled to a foreign market provided themselves with uncoined pure silver, or perhaps with gold. In the same way they exchanged the money received by them in local markets for uncoined silver or gold, when they prepared to return home. The business of exchanging money, the exchange of uncoined precious metals for local coins, and vice versa, thus became a wide- spread and paying business." (Hiillmann, Stadteivesen des Mittelalters. Bonn, 1826-29, I, p. 4.37.) " Banks of exchange do not owe their name to the fact that they issue bills of exchange,...but to the fact that they used to exchange coins. Long before the establishment of the Amsterdam Bank of Exchange in 1609, there existed in the Dutch merchant towns money changers and exchange houses, even exchange banks...The business of these money changers consisted in exchanging the numerous varieties of coin, that were brought into the country by foreign traders, for the current coin of the realm. Gradually their circle of activity extended...They became the bankers and cashiers of modern times. But the government of Amsterdam saw a danger in the combi- nation of the cashier business with the exchange business, and in order to meet this danger, it was resolved to establish a large institution, which should be able to perform both the cashier and the exchange operations. This institution was the famous Amsterdam Bank of Exchange of 1609. In like manner, the exchange banks of Venice, Genoa, Stockholm, Hamburg, owe their origin to the continual necessity of changing money. Of all these, the Hamburg Exchange is the only one that is still doing business, because the need of such an institution is still felt m that merchants' town, which has no Mint of its own. Etc." (S. Vissering, Handboek van Praktische Staathuishoudkunde. Amsterdam, 1860, I, 247.)
Financial Capital. 375 The business of money-exchange, so far as it consists merely of notes of payment to travelers from one money-ex- changer in one country to another in another country, devel- oped as early as Roman and Grecian times out of thci simple money-exchange.
The trade with gold and silver as commodities (raw mate- rials for the making of articles of luxury) forms the primi- tive basis of bullion trade, or of that trade, which promotes the functions of money as world money. These, functions, as previously explained (Volume I, chapter III, 3c), are two- fold: A currency back and forth between the various na- tional spheres of circulation for the purpose of balancing the international payments and for performing the migrations of capital in quest of interest; simultaneously with this move- ment, there is a movement of precious metals from their sources of production across the world market and a distri- bution of their supply over the various national spheres of cir- culation. In England, the goldsmiths still served as bankers during the gi-eater part of the iTtli century. The way in which the balancing of international accounts in the money trade is further developed, is not discussed here, any more than any points referring to the business of dealing in val- uable papers, in short, we leave out of consideration all special forms of the credit system, since this does not yet concern us here.
In the shape of world money, national money strips off its local character; one national money is expressed in another, and thus all of them are finally reduced to their contents in gold or silver, while these two metals, being the two commodi- ties circulating as world money, are simultaneously reduced to their mutual ratios, which change continually. The money trader makes this intermediate business his special occupation. Money changing and bullion trading are thus the primitive forms of the money trade, and they arise from the twofold functions of money as national money and world money.
The capitalist process of production, and commerce in gen- eral, even under precapitalist methods, imply: 1 ) The accumulation of money in the shape of a hoard, that 376 Capitalist Production.
is, in the present case, the accumulation of that part of capi- tal, which must always be on hand in the form of money, as a reserve fund of means of payment and means of purchase. This is the first form of a hoard, such as it reappears under the capitalist mode of production, and as it forms in general with the development of merchants' capital, at least for the purposes of this capital. These remarks apply to national as well as international circulation. This hoard is in continu- ous flux, pours ceaselessly into circulation, and returns unin- terruptedly from it. The second form of a hoard is now that of fallow, unemployed, capital in the form of money, including newly accumulated and not yet invested money-capital. The functions first required by this fonnation of a hoard are those of safekeeping, bookkeeping, etc.
2) This is connected by an expenditure of money in buying, its reception on selling, making and receiving of payments, balancing of payments, etc. The money dealer performs all these services at first as a simple cashier of the merchants and industrial capitalists."^^ " " The institution of cashiers has probably nowhere preserved its original and inde- pendent character so pure as in the Dutch merchant towns (see on the origin of the cashier business in Amsterdam, E. Lusac, Hollands Rykdom, part III). Its functions partly coincide with those of the old Amsterdam Bank of Exchange. The cashier receives from the merchants, who employ his services, a certain amount of money, for which he opens a ' credit ' for them in his books. Further- more they send him their due bills, which he collects for them and credits to their account. On the other hand, he makes payments on their notes {Kassiers briefjes) and charges their accounts with their current bills. He charges a small provision for these credits and debits, which yields him a corresponding remunera- tion for his labor only by the amount of business, which he can turn over be- tween them. If payments are to be balanced between two merchants, who both deal with the same cashier, then such payments are simply settled by booking them mutually, while the cashiers balance their mutual claims from day to day. The cashier's business, then, consists at bottom of this promotion of payments. Therefore it excludes industrial enterprises, speculations, and the opening of blank credits; for it must be a rule in this business that the cashier makes no payment to any one keeping an account with him above his credit." (Vissering, 1. c, p. 134.) On the banking associations of Venice: "The requirements and locality of Venice, where the carrying of cash is more inconvenient than in other places, induced the large merchants of that town to found banking associations under due safeguards, supervision, and management. The members of such an association deposited certain sums, on which they drew checks for their creditors, whereupon the paid sum was deducted on the page of the debtor in the book kept for that purpose and added to the sum, which was credited in the same book to the creditor. This is the first beginning of the socalled giro banks. These asso- ciations are indeed old. But if they are attributed to the 12th century, they are Financial Capital. 377 Dealing in money is fully developed, even in its first stages, as soon as its ordinary functions of lending and borrowing are supplemented by the credit business. Of this more in the fol- lowing part, which deals with interest-bearing capital.
The bullion trade itself, the transfer of gold or silver from one country to another, is merely the result of the trade in com- modities. It is determined by the quotations of bills of ex- change, which express the stand of the international payments and of the rate of interest on the different markets. The bullion trader as such acts but as an intermediary between re- sults.
In discussing the way, in which the movements and forms of money develop out of the simple circulation of commodi- ties, we have seen (Vol. I, chap. Ill), that the movements of the mass of money circulating as a means of purchase and payment are determined by the metamorphosis of commodi- ties, by the volume and velocity of this metamorphosis. And we know now, that this metamor|3hosis is itself but a phase in the entire process of reproduction. As for the movement of the raw materials of money — gold and silver — from their places of production, it resolves itself in a direct exchange of commodities, an exchange of gold and silver as commodities for other commodities. Hence it is as much a phase of the exchange of commodities as the securing of iron or other metals by means of exchange. And so far as the movements of precious metals on the world-market are concerned (we leave aside at this point the consideration of their movements to the extent that they express the transfer of capital by loans, a transfer, which takes place also in the shape of commodity- capital), they are quite as much determined by the interna- tional exchange of commodities as the movements of money as a national means of purchase and payment are determined by the exchange of commodities on the home market. The emigrations and immigrations of precious metals from one na- tional sphere to another, which are caused by a depreciation of national coins, or by a double standard, are extraneous to confounded with the State Loan Institute, which was established in 1171." (Hiill- 2y8 Capitalist Production.
the circulation of money as such and represent merely correc- tions of deviations brought about arbitrarily by state de- crees. And finally, as concerns the formation of hoards, which constitute reserve funds for means of purchase and ])ayment, either for the home trade or for foreign trade, and likewise of hoards, which represent merely a form of capital tempora- rily unemployed, they are both necessary precij)itates of the process of circulation.
Just as the entire circulation of money, in its volume, its forms, and movements, is purely a result of the circulation of commodities which in its turn represents from the capital- ist point of view only the process of circulation of capital (in- cluding the exchange of capital for revenue, and of revenue for revenue, so far as the expenditure of revenue is realised in retail trade), so it is a matter of course, that the trade in money does not promote merely the circulation of money, a mere result and phenomenon of the circulation of commodi- ties. This circulation of money itself, as a phase in the circu- lation of commodities, is a fundamental requisite for the trade in money. This trade promotes merely the technical opera- tions of money-circulation, concentrating, abbreviating, sim- plifying them. The trade in money does not form the hoards, but supplies the technical means by which the formation of hoards may be reduced to its economical minimum (so far as it is voluntary, that is, so far as it is not an expression of un- employed capital or of disturbances of the process of reproduc- tion). For if the reserve funds of means of purchase and payment are managed for the capitalist class as a whole, they need not be so large as they would have to be, did each capitalist manage his own. The trade in money does not buy the precious metals, but merely promotes their distribution, as soon as the trade in commodities has bought them. The trade in money facilitates the squaring of balances, so far as money serves as a means of payment, and reduces by the artificial mechanism of these compensations the amount of money re- quired for this purpose. But it determines neither the con- nections, nor the volume, of the mutual payments. For in- stance, the bills of exchange and checks, which are exchanged; Financial Capital. 379 for one another in banks and clearing houses, reflect quite in- dependent transactions and are the results of real operations. It is merely a question of a better technical compensation of these results. So far as money serves as a means of purchase, the volume and number of purchases and sales are quite inde- pendent of the money trade. This trade cannot do anything but abbreviate the technical operations that go with buying and selling, and by this means it is enabled to reduce the amount of cash money required to turn the commodities over.
The money trade in its pure form, which we consider here, that is, the money trade not complicated by the credit system, is concerned only with the technique of a certain phase of the circulation of commodities, namely with the circulation of money and the different functions of money following from its circulation.
This distinguishes the money trade essentially from the trade in commodities, which promotes the metamorphosis of commodities and their exchange, or which gives even to this process the aspect of a process of a certain capital separated from the industrial capital. While, therefore, the commer- cial capital has its own form of circulation, M — C — M, in which the commodity changes hands twice and thereby re- covers the money, in distinction from C — M — C, in which the money changes hands twice and thereby promotes the ex- change of commodities, there is no such special form of circu- lation, which can be demonstrated in the case of financial cap- ital.
To the extent that money-capital is advanced by a separate class of capitalists for the technical promotion of the circula- tion of money — a capital representing on a reduced scale the additional capital, which the merchants and industrial capital- ists must otherwise advance themselves for these purposes — the general form of capital, M — M', is found also here. By the advance of M, the advancing capitalist secures M -|- ^ M- But the promotion of the transaction M — M' does not con- cern itself in this case with the objective materials, but only with the technical processes of this metamorphosis.
It is evident, that the mass of money-capital, with which the 380 Capitalist Production.
money dealers have to operate, is the money-c&pJt&l of tlie mer- chants and industrial capitalists in process of circulation, and that the operations of the money dealers aro merely those orig- inally performed by the merchants and industrial capitalist.
It is equally evident, that the profit of the money dealers is nothing but a deduction from the surplus-value, since they are operating merely with already realised values (even when they have been realised in the form of creditors' claims).
As in the trade with commodities, so in that with mone;y a duplication of functions takes place. For a portion of the technical operations connected with the circulation of money must be carried out by the dealers and producers of commodi- ties themselves.
CHAPTER XX.
HISTORICAL DATA CONCEENING MERCHANTS CAPITAL, The particular fonn^, in which tlie commercial capital and financial capital accumulate money, will be discussed in the next part of this volume.
From what has gone before it follows as a matter of course that nothing can be more absurd than to consider merchants' capital, whether in the shape of commercial or of financial capital, as some particular kind of industrial capital, such as that invested in mining, agriculture, stock raising, manufac- ture, transportation, etc., which constitute side lines of indus- trial capital formed by division of social labor and thus differ- ent spheres for its investment. The simple observation, that every industrial capital, when in the circulation phase of its process of reproduction, performs in the shape of commodity- capital and money-capital the very same functions, wdiich ap- pear as exclusive functions of the two forms of merchants' capital, should make such a crude conception impossible. On the other hand, in commercial and financial capital the differ- ences between the productive nature of industrial capital and its functions in the sphere of circulation are independently in- Historical Data. 381 dividualised, by transferring definite fonns and functions as- sumed momentarily by industrial capital into independent forms and functions of separate portions of capital perma- nently tied up in circulation. A changed form of industrial capital is Avidely different from distinctions between produc- tive capitals following from the nature of the various lines of industry.
Aside from the brutality with which the economist ordi- narily handles distinctions of form, in which he is interested only so far as their material side is concerned, the vulgar econ- omist is influenced by two other reasons in his violation of distinctions. There is, in the first place, his incapability to explain the peculiar nature of mercantile profit. In the second place, he writes for the apologetic purpose of proclaim- ing his opinion, that the process of production by its very na- ture, is the source of such forms as commodity-capital and money -capital, or later of merchants' capital and financial capital, instead of showing that they are due to the specific form of capitalist production, which is conditioned above all on the circulation of commodities and therefore of money.
If commercial capital and financial capital do not differ from the production of grain any more than this differs from stock raising and manufacture, then it is evident that produc- tion and capitalist production are one and the same thing, and that especially the distribution of the social products among the members of society for the purpose of productive or individual consumption need no more be promoted by mer- chants and bankers than the consumption of meat by stock raising or that of clotlies by their manufacture."**^ *" Smart Mr. Roscher has figured out that, since certain people designate trade as a mediation between producers and consumers, "one" might just as well designate production itself as a mediation of consumption (between whom?), and this implies, of course, that the merchants' capital is as much a part of the productive capital as agricultural and industrial capital. In other words, because I can say, that man can mediate his consumption only by means of production (and he has to do this even without getting his education at Leipsic), or that labor is required for the appropriation of the products of nature (which might be called a mediation), it follows, that a mediation arising from a specific form of production — a real mediation — has the same absolute character and rank of a necessity. The word mediation settles everything. Moreover, the merchants are not mediators between producers and consumers (leaving out of consideration con- sumers which do not produce), but mediators of the exchange of products of 382 Capitalist Production.