Capital: A Critique of Political Economy, Vol. III. The Process of Capitalist Production as a Whole

Karl Marx
Marx, Karl
Display paragraphs in this book containing:
Frederick Engels, ed. Ernest Untermann, trans.
First Pub. Date
Chicago: Charles H. Kerr and Co.
Pub. Date
Das Kapital, based on the 1st edition.
20 of 55

Part IV, Chapter XVII


WE have seen in volume II, that the mere functions of capital in the sphere of circulation—the operations which the industrial 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 promote 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, subjectively 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 commodity-capital is promoted, may become the particular business of a special class of capitalists, or the exclusive function of a portion of the money-capital. If selling and buying of commodities —and that is what the metamorphosis of the commodity-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 transferred from the industrial capitalists to other persons. Furthermore, if that portion of the total social capital, which must be continually on hand in order that the process of reproduction, 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 continually thrown into circulation for the performance of its function by some other section of the capitalists than the industrial capitalists. We have already indicated to what extent 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, distributing, arranging, which may be connected with its true function 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. Nevertheless, 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 transform 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 transform itself into industrial capital. No species of capital enjoys 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 it in the shape of average profit must be a portion of the surplus-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 commodities 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, that additional costs (costs of circulation) may enter into the commodities after their purchase and before 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 capitalists, and this again resolves itself into the difference between 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 process of production, in which that portion of their 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 begun by the productive capitalist, and therefore he does not cause them to pass through any intermediate process, in which they can once more absorb new surplus-value. While the industrial capitalist merely realises the previously produced surplus-value or profit by means of the circulation, the merchant 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 grasp. For instance, one yard of linen costs 2 sh. If I want to make 10% profit on my sales, I must add 1/10 to the price, I must sell one yard of linen at 2 sh. 2 2/5d. The difference between its actual price of production and its selling price is then 2 2/5d. 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 1 1/10 yard. Or, what amounts to the same, it is as though I sold to the buyer only 10/11 of one yard for 2 sh. and kept 1/11 for myself. In fact, I might buy back 1/11 of one yard for 2 2/5 d., if the price of one yard is 2 sh. 2 2/5d. 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 surface. And it is indeed a fact that this whole conception of the rise of profit from a nominal raise in the price of commodities, 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 exceptions.) Why do we assume that the dealer in commodities 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 merchant, 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 merchant 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, what was the premise of that assumption? It was that the commercial capital did not share in the 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 capital as such did not exist for us at that time; and secondly, because 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 merchant'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 v = 900 (say million, and that s' = 100%. The product is then valued at 720 c + 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 then 1080, and the rate of profit for the total social capital of 900 is 20%. These 20% constitute, according to our previous 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 composition 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 + 100 commercial = 1,000, so that the commercial capital is 1/10 of the whole. Therefore it participates to the extent of 1/10 in 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 9/10 of 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 720 c + 180 v + 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 1/10 of the total capital is merchant's capital, which implies a reduction of the rate of profit by 1/10.


This requires also a more precise and detailed definition of 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 + variable capital contained in them) + the average profit. But this 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 productive capital were 900, and the profit 180, the average rate of profit would be 180/900 = 20%. It is rather calculated on the total productive + the merchant's capital, so that, if the total capital is 900 productive + 100 merchant's capital, the average rate of profit is 180/1000 = 18%. The price of production is, therefore, equal to k (the costs) + 18, instead of k + 20. In the average rate of profit, the share of the total profit falling to the merchant's capital is included. The actual value, or price of production, of the total commodity-capital is, therefore, k + p + m (where m indicates profits in merchant'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 commodities. 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 commodities. Thus, in the above case, 900 costs + 18% on 900, or 900 + 162 = 1,062.


It follows, then, that the merchant, when selling a commodity 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 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 commodities by the industrial capitalist.*39 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, although 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 always 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 surplus-value of 100%, and a rate of profit of only 20%. And if the merchant's capital is included in the 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 average rate of profit appears to take its departure from the industrial 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. Not until the capitalist mode of production has asserted itself and the producer himself has become a merchant, is the commercial 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 the 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 + ΔM, and this ΔM 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 ΔM 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 capitalist 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 instead of the merchant would. It merely anticipates payment 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 circulating capital during the process of metamorphosis of the commodities, 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, chapter 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 circulation—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 production added within the process of circulation, such as expressage, 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 extent that it consists of fixed capital, it is transferred in proportion 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 entire additional capital participates in the formation of the general rate of profit.


The purely commercial costs of circulation (that is, excepting 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 commodities into money, or from money into commodities, by 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 separately from the merchant's business. In fact, the actual transport industry and shipping may be, and are, lines of occupation 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 commerce 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 "merchants." The costs which we consider here are those of buying 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. (Expressage, 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 commodities, enforced in the process of circulation? 2) How does accumulation represent itself in the case of merchant's capital? 3) How does merchant's capital function in the actual process of reproduction of society as a whole?)


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 transferring 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 operation for the capitalist, 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 promoting 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 required 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 commercial capitalist need not employ any wage workers. If his business 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 production.


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 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, tantièmes) 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 industrial 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 process of circulation, that is, a process, in which it does not produce any value and by which the direct process of production is interrupted. If this process is not to be interrupted, production must either be restricted, or more money-capital must be advanced, in order that the process of production may proceed 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 prolonged time in the process of circulation; instead of the industrial capitalist, the merchant advances additional capital for the circulation; or, what amounts to the same, instead of a 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 remains within the boundaries, in which it is necessary, the only difference is that this division of the functions of capital reduces the time exclusively needed for the process of circulation, 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 otherwise. If in the above example, a capital of 720 c + 180 v + 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, with a surplus-value of 180, would mean a rate of profit of only 16 4/11%.


Now, if the industrial capitalist, who acts as his own merchant, advances not only the additional capital with which he buys new commodities, before his product in process of circulation has been reconverted into money, but also capital (office expenses and wages for commercial laborers) for the realisation 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 the 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 secondary operations, which are no part of the process of creating value, and that this portion of the social capital must be continually 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 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 necessary, 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 together 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 17 1/7%. The industrial capitalists sells his commodities to the merchant at 900 + 154 2/7 = 1,054 2/7, 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 determined 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.


However, we must make the same distinction between the commercial wage worker and the wage workers directly employed by the industrial capital which we found existing between 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 itself 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 wages are determined 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 equivalent, 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 invested 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 merchant's capital, on the other hand, appropriates a portion of 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 merchant'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 individual 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 capital go. This unpaid labor is for him, therefore, a source of profit. Otherwise the mercantile business could never be carried 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 unpaid labor of the commercial wage workers secures a share of this surplus-value for the merchant's capital.


Here is the difficulty: 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 with the variable capital, which he invests in the purchase of commercial labor-power? Must this variable capital be included in the expense account of advanced merchant'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 setting 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 produced by the industrial capital to itself.


(Therefore the following points must be analysed: the variable 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 capital 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 personally able to turn over by his own labor, there would be an infinite dissociation of merchant's capital. This dissociation 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 proportion as capital in the sphere of production would be centralised, it would be decentralised in the sphere of circulation. The purely commercial business of the industrial capitalist, and thus his purely commercial expenses, would be infinitely 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 commercial expenses, but also the other costs of circulation, sorting, expressage, etc., would grow. This applies to the industrial 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 each as it does to make one purchase at 1,000 It costs ten times as much correspondence, paper, postage, to carry on a correspondence with 10 small merchants as it does with one large merchant. A limited division of labor in a commercial office, in which one keeps books, another has charge of the treasury, a third carries on the correspondence, one man buys, another sells, another travels, etc., saves immense quantities of labor time, so that the number of workers employed in wholesale commerce stand in no 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 furthermore the expenses for constant capital. 100 small offices cost incomparably more than one large office, 100 small warehouses more than one large one, etc. The costs of transportation, 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 performance 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 invested in the purchase and sale of commodities by B, and the corresponding variable capital invested in wages of commercial help by b. Then B + 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 + 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 replaces the variable capital from the point of view of the merchant? In this last case, the profit made by the merchant 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 (mathematically speaking) of b. Let us first define the difficulty exactly. Let us designate the capital invested directly in buying and selling 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 represents for the merchant the realised purchase price, the 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 commodities cost 100 The profit on this may be 10%. In that case the commodities are sold at 110. These commodities 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 buying and selling, and which would be an addition to the constant capital invested by him in direct production. However, this portion must be continually recovered by the price of the commodities, or, what amounts to the same, a corresponding portion of the commodities must be continually expended 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 the objective materials of commerce). Its production appears as a specific business, or at least as a part of the business, of some industrial capitalists, who play a similar role as those, who supply the constant capital for the producers of necessities of life. The merchant recovers this constant capital and his profit on it. Both things reduce the profit of the industrial capitalist to that extent. But owing to the economies and concentration which come with a division of labor, he loses less profits than he would, if he had to advance his own capital for this purpose. The reduction of the rate of profit is smaller, because the advanced capital is smaller.


So far, then, the selling price is made up of B + K + profits on B + K. This portion of the selling price offers no further difficulties. But now b, the variable capital advanced by the merchant, enters into this consideration.


The selling price is then made up of B + K + b + profits on B + K + profits on b.


B makes good merely the purchase price and adds nothing to this price but the profit on B. K adds K itself plus a profit on K; but K + profit on K, the circulation cost advanced in the form of constant capital plus a corresponding average profit, would be larger in the hands of the industrial capitalist than it is in those of the merchant. The reduction of the average profit assumes this form: It is as though the full average profit had been calculated, after deducting B + K from the advanced industrial capital, but the deduction from this average profit for B + K paid to the merchant, so that this deduction appears as the profit of a particular class of capital, of merchant's capital.


But it is different with b + profits on b, or in the present case, where we have assumed a rate of profit of 10%, with b + (1/10)b. Here lies the real difficulty.


What the merchant buys with b, is according to our assumption nothing but commercial labor, in other words, labor required for the promotion of the functions of circulating the capital, of performing the acts C—M and M—C. But this commercial labor is that labor, which is generally necessary, in order that any capital may perform the functions of commercial capital, the conversion of commodity-capital into money and money into commodities. It is labor which realises values, but does not create any. And only to the extent that a capital performs this function—that a capitalist performs these operations with his capital—does this capital serve as commercial capital and participate in the regulation of the general rate of profit, that is, draw its dividend out of the total profit. But in b + profit on b, it looks as though labor were being paid, in the first place (for it makes no difference, whether the industrial capitalist pays the merchant for his own labor or the clerk employed by the merchant for his), and in the second place, as though it contained a profit on labor, which the merchant himself has to perform. The merchant's capital gets in the first place its b refunded, and in the second place a profit on it. This arises from the fact that it demands pay, in the first place, for work, which it performs in its capacity as merchant's capital, and that it receives, in the second place, a profit in its capacity of capital, for performing work, which is remunerated in the profit as the function of capital. This, then, is the question which we have to solve.


Let us assume that B = 100, b = 10, and the rate of profit = 10%. We place K = O, in order to leave this element of the purchase price, which does not belong here and has already been accounted for, out of consideration. In that case, the selling price would be B + p + b + p (or B + Bp' + b + bp'); where p' stands for the rate of profit. This means in figures 100 + 10 + 10 + 1 = 121.


Now, if b would not be invested by the merchant in wages—since b is paid only for commercial labor, for labor required for the realisation of the value of commodity-capital thrown on the market by industrial capital—then the condition of the matter would be the following: In order to buy or sell anything for B = 100, the merchant would spend his time, and we will assume, that this is the only time at his disposal. The commercial labor represented by b, or 10, if paid for by a profit instead of wages, would presuppose another commercial capital of 100, which, at 10%, would be equal to b = 10. This second B of 100 would not be added to the price of commodities, but the 10% would. We should then have two operations with 100, making 200, that would buy commodities at 200 + 20 = 220.


Since merchant's capital is nothing but an independent form of a portion of industrial capital engaged in the process of circulation, all questions referring to it must be solved by representing the problem at first in that form, in which the phenomena peculiar to merchant's capital do not yet appear in an independent shape, but still in direct connection with industrial capital as one of its subdivsions. As an office separate from the workshop, the mercantile capital serves continually in the process of circulation. It is here that we must first analyse the b under consideration—in the office of the industrial capitalist himself.


The office is from the outset always infinitesimally small compared to the industrial workshop. For the rest, it is clear that the commercial operations increase to the extent that the scale of production is enlarged. These are operations, which must be continually performed for the circulation of the industrial capital, in order to sell the product existing in the shape of commodities, to convert the money so received once more into means of production, and to keep account of the whole. The calculation of prices, bookkeeping, managing funds, carrying on the correspondence, all these belong under this head. The more developed the scale of production is, the greater, if not in proportion, will be the commercial operations of industrial capital, and consequently the labor and other costs of circulation for the realisation of value and surplus-value. This necessitates the employment of commercial wage workers, who form the office staff. The expenses for these, although incurred for wages, differ from the variable capital invested in the purchase of productive labor. It increases the expenses of the industrial capitalist, the mass of capital to be advanced, without increasing the direct surplus-value. For these expenses are made for labor, which is employed only for the realisation of already created values. Like every expense of this kind, these expenses reduce the rate of profit, because the advanced capital increases, but not the surplus-value. If the surplus-value s remains constant, while the advanced capital C increases to C + ΔC, then the place of the rate of profit s/C is taken by the smaller rate of profit s/(C + ΔC). For this reason, the industrial capitalist endeavors to limit these expenses of circulation to a minimum, just as he does with his expenses for constant capital. Hence industrial capital does not maintain the same relations to its commercial wage laborers that it does to its productive wage laborers. The greater the number of productive wages laborers employed under otherwise equal circumstances, the more voluminous is production, the greater the surplus-value or profit. On the other hand, the larger the scale of production, the greater the quantity of value and surplus-value to be realised, the greater, in other words, the produced commodity-capital, the larger grow the absolute office expenses, even if they do not grow relatively, and give rise to some kind of division of labor. To what extent profit is the first condition for these expenses, is shown among other things by the fact, that with the increase of commercial salaries a part of them is frequently paid by a share in the profits. It is in the nature of things that labor consisting merely of intermediary operations, which are connected either with a calculation of values, or with their realisation, or with the reconversion of the realised money into means of production, a labor whose amount depends on the quantity of produced values about to be realised, should not act as cause of the respective magnitudes and masses of these values, as directly productive labor does, but as their result. The case of the other costs of circulation is similar. In order that plenty may be measured, weighed, wrapped, transported, plenty must be supplied. The amount of labor consumed in packing, transporting, etc., depends on the quantity of the commodities which are the objects of its activity, not vice versa.


The commercial laborer does not produce any surplus-value directly. But the value of his labor is determined by the value of his labor-power, that is, of its costs of production, while the application of this labor-power, its exertion, expression, and consumption, the same as in the case of every other wage laborer, is by no means limited by the value of his labor-power. His wages are therefore not necessarily in proportion to the mass of profits, which he helps the capitalist to realise. What he costs the capitalist and what he makes for him are two different things. He adds to the income of the capitalist, not by creating any direct surplus-value, but by helping him to reduce the costs of the realisation of surplus-value. In so doing, he performs partly unpaid labor. The commercial laborer, in the strict meaning of the term, belongs to the better paid classes of wage workers, he belongs to the class of skilled laborers, which is above the average. However, wages have a tendency to fall, even in proportion to the average labor, with the advance of the capitalist mode of production. This is due to the fact that in the first place, division of labor in the office is introduced; this means that only a onesided development of the laboring capacity is required, and that the cost of this development does not fall entirely on the capitalist, since the ability of the laborer is developed through the exercise of his function and increases so much faster, the more onesidedly the division of labor develops. In the second place, the necessary preparation, such as the learning of commercial details, languages, etc., is more and more rapidly, easily, generally, cheaply reproduced with the progress of science and popular education, to the extent that the capitalist mode of production organises the methods of teaching, etc., in a practical manner. The generalisation of public education makes it possible to recruit this line of laborers from classes that had formerly no access to such education and that were accustomed to a lower scale of living. At the same time this generalisation of education increases the supply and thus competition. With a few exceptions, the labor-power of this line of laborers is therefore depreciated with the progress of capitalist development. Their wages fall, while their ability increases. The capitalist increases the number of these laborers, whenever he has more value and profits to realise. The increase of this labor is always a result, never a cause of the augmentation of surplus-value.*40


We see, then, that a duplication takes place here. On the one hand, the functions of commodity-capital and money-capital (which later become merchant's capital) are general forms assumed by industrial capital. On the other hand, particular capitals, and therefore a particular series of capitalists, are exclusively devoted to these functions. And these functions develop into specific spheres of enhancing the value of capital.


The commercial functions and expenses of circulation become independent only in the case of the mercantile capital. That side of industrial capital, which is devoted to the circulation, exists not only in its continuous shape of commodity-capital and money-capital, but also in the office alongside of the workshop. But it assumes an independent existence in the mercantile capital. For this capital, its office is its only workshop. The portion of capital employed in the form of expenses of circulation appears much larger in the business of the large merchant than in that of the industrial capitalist, because the offices connected with every industrial workshop are concentrated in the hands of a few merchants, and so is at the same time that portion of the capital, which would have to be invested for this purpose by the entire class of industrial capitalists. These merchants take care of the circulation and provide for the expenses incidental to its continuation.


For the industrial capital, the expenses of circulation appear as dead expenses, and so they are. For the merchant they appear as a source of his profit, which is proportional to the level of the average rate of profit, whose existence is assumed. The investment to be made by the mercantile capital for these expenses of circulation is, therefore, a productive investment. And for this reason the commercial labor which it buys is likewise immediately productive for it.

Notes for this chapter

John Bellers.
How well this prognosis of the fate of the commercial proletariat, written in 1865, has stood the test can be corroborated by hundreds of German clerks, who, trained in all commercial operations and acquainted with three or four languages, in vain offer their services in London City at 25 shillings per week, far below the wages of a good machine maker. A blank of two pages in the manuscript indicates, that this point was to be further elaborated. For the rest, we refer the reader to volume II, chapter VI (The Expenses of Circulation), where various things belonging under this head have already been discussed.—F. E.

Part IV, Chapter XVIII.

End of Notes

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