Merchant’s or trading capital is divided into two forms or subspecies, commercial capital and money-dealing capital, which we shall go on to distinguish in such detail as is needed in order to analyse capital in its basic inner structure. And this is all the more necessary in so far as modern economics, and even its best representatives, lump trading capital and industrial capital directly together and in fact completely overlook trading capital’s characteristic peculiarities.
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The movement of commodity capital has been analysed in Volume 2 [Chapter 3]. Taking the social capital as a whole, one part of this is always on the market as a commodity, waiting to pass over into money, even though this part is always composed of different elements, as well as changing in magnitude; another part is on the market as money, waiting to pass over into commodities. Capital is always involved in this movement of transition, this metamorphosis of form. In as much as this function acquires independent life as a special function of a special capital and is fixed by the division of labour as a function that falls to a particular species of capitalists, commodity capital becomes commodity-dealing capital or commercial capital.
We have already explained (Volume 2, Chapter 6, ‘The Costs of Circulation’, 2 and 3) the extent to which the transport industry, storage and the dispersal of goods in a distributable form should be viewed as production processes that continue within the process of circulation. These incidents in the circulation of the commodity capital are sometimes confused with the functions peculiar to commercial capital; they are sometimes linked in practice with the specific functions peculiar to this capital, although as the social division of labour develops, so the function of commercial capital also evolves in a pure form, i.e. separately from these real functions and independent of them. For our purpose, where what matters is to define the specific difference of this special form of capital, we can therefore ignore these functions. In so far as capital that functions exclusively in the circulation process, and especially commercial capital, sometimes combines part of these functions with its own, it does not appear in its pure form. We only have this pure form once those functions are discarded and removed.
We have seen how the existence of capital as commodity capital, and the metamorphosis that it undergoes as commodity capital within the sphere of circulation, on the market – a metamorphosis that breaks down into buying and selling, the transformation of commodity capital into money capital and of money capital into commodity capital – forms a phase in industrial capital’s reproduction process and thus in its production process as a whole; but that at the same time, in this function as circulation capital, it is distinguished from its own existence as productive capital. These are two separate and distinct forms of existence of the same capital. One part of the overall social capital is always to be found in this form as circulation capital on the market, in the course of this metamorphosis, although for any individual capital its existence as commodity capital and its metamorphosis as such forms only a point of transition, ever vanishing and ever repeated, a transition stage in the continuity of its production process; although, accordingly, the elements of commodity capital to be found on the market are constantly changing, since they are constantly being withdrawn from the commodity market and just as constantly returned to it as the new product of the production process.
Commercial capital, then, is nothing but the transformed form of a portion of this circulation capital which is always to be found on the market, in the course of its metamorphosis, and perpetually confined to the circulation sphere. We refer here to a portion only, because another part of the buying and selling of commodities always takes place directly between the industrial capitalists themselves. We shall ignore this other portion of the circulation capital completely in the present investigation, since it contributes nothing to the theoretical definition, to our understanding of the specific nature of commercial capital, and has moreover been exhaustively dealt with, for our purposes, in Volume 2.
The dealer in commodities, like any other capitalist, first appears on the market as the representative of a certain sum of money that he advances as a capitalist, i.e. which he seeks to transform from x (the original value) into x + Δx (this sum plus the profit on it). As he is not just a capitalist, but a commodity dealer at that, it goes without saying that his capital has to appear on the market originally in the form of money capital, since he does not produce any commodities himself but simply deals in them, facilitating their movement; and in order to deal in them, he must first buy them, and be therefore the possessor of money capital.
Let us assume that a commodity dealer has £3,000 that he valorizes as trading capital. Say that he uses this £3,000 to buy, for example, 30,000 yards of linen from a linen manufacturer, at 2 shillings per yard. He later sells this 30,000 yards again. If the average rate of profit is 10 per cent and after deducting all his incidental expenses he makes an annual profit of 10 per cent, by the end of the year he has transformed his £3,000 into £3,300. How he makes this profit is a question we shall go into only later. Here we want first of all to consider just the form of his capital’s movement. He keeps buying linen for £3,000 and keeps selling it again; and he constantly repeats this operation of buying in order to sell, M–C–M¢, the simple form of capital, when it is completely restricted to the circulation process and not interrupted by the interval of the production process that lies outside its own movement and function.
What then is the relationship between this commodity-dealing capital and commodity capital as a mere form of existence of industrial capital? As far as the linen manufacturer is concerned, he has realized the value of his linen with the merchant’s money, thus completing the first phase in the metamorphosis of his commodity capital, its transformation into money; and if other circumstances remain the same he can now transform this money back into yarn, coal, wages and so on, as well as into means of subsistence, etc., in consuming his revenue. Leaving his expenditure of revenue aside, therefore, he can now continue the reproduction process.
But although the metamorphosis of the linen into money, its sale, has already taken place as far as its producer is concerned, this has not yet happened for the linen itself. This is still on the market as commodity capital as before, with the allotted role of completing its first metamorphosis and being sold. Nothing has happened to the linen except a change in the person of its owner. As far as its own function is concerned, its position in the process, it is still commodity capital as before, a saleable commodity; but now it is in the hands of the merchant instead of in those of the producer. The function of selling the linen, of facilitating the first phase in its metamorphosis, has been taken over from the producer by the merchant and transformed into his special business, whereas it was formerly a function that remained for the producer himself to perform, after he had completed the function of producing it.
Let us assume that the merchant does not succeed in selling his 30,000 yards in the interval that the linen producer takes before putting a further 30,000 yards on the market, at a value of £3,000 as before. The merchant cannot buy this again, since he still has the 30,000 unsold yards in stock and has not yet transformed that back into money capital. There is now a hold-up, an interruption in the reproduction. The linen producer may well have additional money capital at his disposal, which he could transform into productive capital and thus continue the process, independently of the sale of this 30,000 yards. But to make this assumption would not alter things at all. As far as the capital advanced in the 30,000 yards is concerned, its reproduction process is and remains interrupted. Here we thus have palpable evidence that the operations of the merchant are nothing more than those operations that must always be performed to transform the producer’s commodity capital into money, operations which accomplish the functions of commodity capital in the circulation and reproduction process. If selling were the exclusive business of a mere agent of the producer, instead of being performed by an independent merchant, and purchase likewise, this connection would not be obscured for one moment.
Commercial capital, therefore, is absolutely nothing more than the commodity capital of the producer which has to go through the process of transformation into money, to perform its function as commodity capital on the market; only instead of being an incidental operation carried out by the producer himself, this function now appears as the exclusive operation of a particular species of capitalist, the merchant, and acquires independence as the business of a particular capital investment.
This is evident even in the specific form of circulation of this commercial capital. The merchant buys a commodity and later sells it: M–C–M¢. In simple commodity circulation, or even in commodity circulation as this appears as a circulation process of industrial capital, C¢–M–C, the circulation is effected in such a way that each piece of money changes hands twice. The linen producer sells his commodity, the linen, transforming it into money; the buyer’s money passes into his hands. With this same money he buys yarn, coal, labour, etc., parting with this money once again in order to transform the value of the linen back into the commodities that form its elements of production. The commodity he buys is not the same as the commodity he sells, it is not a commodity of the same kind. He has sold products and bought means of production. But it is a different matter with the movement of commercial capital. With his £3,000 the linen dealer buys 30,000 yards of linen; he sells the same 30,000 yards in order to recover his money capital from the circulation sphere (£3,000 plus profit). Here it is not the same pieces of money that change place twice, but rather the same commodity; it passes from the hands of the seller into those of the buyer, and from the hands of this buyer, who has now become a seller, into those of another buyer. It is sold twice and can still be sold several more times, given the interposition of a series of further merchants; and it is precisely through this repeated sale, the double change of place of the same commodity, that the money advanced by the first buyer for the purchase of the commodity effects its return to him. In the case C ¢–M–C, the same money’s double change of place makes it possible for the commodity to be alienated in one shape and appropriated again in another. In the case M–C–M¢, the double change of place of the same commodity makes it possible for the money advanced to be withdrawn from circulation again. All this shows precisely that the commodity has not yet been definitively sold when it passes from the hands of the producer into those of the merchant, and that the latter is only continuing the operation of sale – or the facilitation of the commodity capital’s function. It also shows at the same time how what was for the productive capitalist C–M, simply a function of his capital in its transient shape of commodity capital, is for the merchant M–C–M¢, a particular valorization of the money capital he has advanced. One phase of the commodity’s metamorphosis now exhibits itself, with respect to the merchant, as M–C–M¢, i.e. as the evolution of a specific kind of capital.
The merchant definitively sells the commodity, i.e. the linen, to the consumer, whether this is a productive consumer (e.g. a bleacher) or an individual who uses the linen for his own private purpose. In this way the capital he has advanced returns to him (with a profit), and he can begin the operation afresh. If his money had functioned merely as means of payment when he bought the linen, he would only have needed to pay six weeks later, and if he had sold before this time, he could have paid the linen producer without himself having to advance any money capital. If he had not sold the linen, he would have had to advance the £3,000 when it fell due instead of immediately the linen was delivered to him; and if he had sold the linen below the price he bought it at, because of a fall in its market price, he would have had to replace the missing amount from his own capital.
What then gives commercial capital the character of an independently functioning capital, whereas in the hands of the producer who makes his own sales it obviously appears as no more than a particular form of his capital at a particular phase in its reproduction process, during its stay in the circulation sphere?
Firstly, the fact that the commodity capital achieves its definitive transformation into money, and thus its first metamorphosis, its function on the market that falls to it as commodity capital, in the hands of an agent distinct from the producer, and that this function of commodity capital is facilitated by the operation of the merchant, by his buying and selling, this operation thereby taking the form of a specific business of its own, separate from the other functions of industrial capital and hence autonomous. It is a particular form of the social division of labour, such that one part of the function which has to be performed in a particular phase of the capital’s reproduction process, here the phase of circulation, appears as the exclusive function of a specific agent of circulation distinct from the producer. But this does not mean that this special business necessarily appears as the function of a special capital, different from industrial capital which is going through its reproduction process and independent of it; it does not appear like this in practice when trading is pursued simply by travelling salesmen or other direct agents of the industrial capitalist. A second aspect must also be involved.
The second aspect enters the scene in this way. The independent circulation agent, the merchant, advances money capital (whether his own or borrowed) in this position. What is simply C–M as far as an industrial capital involved in its reproduction process is concerned, the transformation of commodity capital into money capital or a simple sale, presents itself for the merchant as M–C–M¢, as the purchase and sale of the same commodity, so that the money capital that he parts with on the purchase returns to him through the sale.
It continues to be C–M, the transformation of commodity capital into money capital, that presents itself for the merchant as M–C–M, in so far as he advances capital for purchasing the commodity from the producers; it continues to be the first metamorphosis of the commodity capital, even though the same act may present itself for a producer or for the industrial capital in the course of its reproduction process as M–C, the transformation of money back into commodity (the means of production), i.e. as the second phase in the metamorphosis. For the linen producer, C–M was the first metamorphosis, the transformation of his commodity capital into money capital. For the merchant, however, this act takes the form M–C, the transformation of his money capital into commodity capital. If he now sells the linen to the bleacher, this in turn represents M–C for the bleacher, the transformation of money capital into productive capital, or the second metamorphosis of his commodity capital; but for the merchant it is C–M, the sale of the linen that he had bought. In point of fact, it is only now that the commodity capital that the linen manufacturer has produced is finally sold; the merchant’s M-C-M, in other words, simply represents a mediatory process for the C–M between two producers. Let us assume, alternatively, that the linen manufacturer buys yarn from a yarn dealer with part of the value of the linen he sold. For him, therefore, this is M–C. But for the merchant who sells the yarn, it is C–M, the resale of the yarn; and with regard to the yarn itself as commodity capital, it is simply its definitive sale, with which it passes from the circulation sphere into that of consumption, C–M, the decisive conclusion of its first metamorphosis. Thus whether the merchant buys from the industrial capitalist or sells to him, his M-C-M, the circuit of commercial capital, only ever expresses what with respect to the commodity capital itself, as a transitional form of the industrial capital being reproduced, is simply C–M, simply the completion of its first metamorphosis. The M–C of the commercial capital is for the industrial capitalist simply C–M, but it is not so for the commodity capital he produced. It is only a transition of the commodity capital from the hands of the industrialist into those of the agent of circulation; and it is only the commercial capital’s C–M that is the decisive C–M for the functioning commodity capital. M-C-M is only two C-M’s performed by the same commodity capital, it consists simply of two successive sales, which between them simply make possible its final and definitive sale.
Thus the way that commodity capital assumes in commercial capital the form of an independent variety of capital is by the merchant advancing money capital that is valorized as capital, and functions as capital, only because it is exclusively engaged in facilitating the metamorphosis of commodity capital, in making it fulfil its function as commodity capital, i.e. its transformation into money. Money capital does this through perpetually buying and selling commodities. This is its exclusive operation; this activity that facilitates the circulation process of industrial capital is the exclusive function of the money capital with which the merchant operates. By way of this function he transforms his money into money capital, puts his M forward as M–C–M¢, and by this same process he transforms commodity capital into commercial, commodity-dealing capital.
Commercial capital, in so far and as long as it exists in the form of commodity capital – and what we are considering here is the reproduction process of the entire social capital – is evidently nothing more than the part of industrial capital that is still on the market and engaged in its process of metamorphosis. This now exists and functions as commodity capital. Thus it is only the money capital advanced by the merchant, the money capital exclusively designed for buying and selling, which never assumes any other form than that of commodity capital and money capital, never assumes that of productive capital, and remains for ever penned into capital’s circulation sphere – it is only this money capital that has now to be considered with regard to the overall reproduction process of capital.
Once the producer, the linen manufacturer, has sold his 30,000 yards to the merchant for £3,000, he uses the money thus released to buy the means of production he needs, and his capital goes back again into the production process. His production process continues, it goes forward without a break. As far as he is concerned, the transformation of his commodity into money has already taken place. But this transformation has not taken place for the linen itself, as we have seen already. It has not yet been decisively transformed back into money, not yet gone into either productive or individual consumption as a use-value. The linen dealer now represents the same commodity capital on the market as the linen producer originally represented there. For the latter, the process of metamorphosis has been shortened, but only to continue on its way in the hands of the merchant.
If the linen producer had to wait until his linen really had ceased to be a commodity, until it had passed to its final buyer, the productive or individual consumer, then his reproduction process would be interrupted. Or, in order not to interrupt it, he would have to restrict his operations, transform a smaller part of his linen into yarn, coal, labour, etc., in short into the elements of productive capital, and retain a greater part of this as a monetary reserve. This would make it possible for one part of his capital to be present on the market as a commodity, while another part carried on the production process, so that when this latter part entered the market as a commodity, the other part would flow back in the money form. This division of his capital is not abolished by the intervention of the merchant. But without the latter, the part of the circulation capital that exists in the form of a money reserve would always have to be greater in proportion to the part employed in the form of productive capital, and the scale of reproduction would be accordingly restricted. Instead of this, the producer can now regularly apply a greater part of his capital in the actual production process, leaving a smaller part as a money reserve.
This is why another part of the social capital, in the form of commercial capital, is always to be found in the circulation sphere. It is regularly applied simply to buying and selling commodities. There thus seems to be only a change in the persons that have this capital in their hands.
If, instead of buying linen for £3,000 with the intention of selling it again, the merchant were himself to apply this £3,000 productively, the society’s productive capital would be that much greater. However, the linen producer would then have to keep a larger part of his capital as a money reserve, and so would the merchant now turned industrial capitalist. If the merchant remains a merchant, on the other hand, the producer saves time in selling which he can apply to supervising the production process, while the merchant has to spend his entire time selling.
Given that commercial capital does not overstep its necessary proportions, we can assume the following.
(1) As a result of the division of labour, the capital that is exclusively concerned with buying and selling is smaller than it would be if the industrial capitalist had to conduct the entire commercial part of his business himself. (And besides the money that has to be laid out on the purchase of commodities, this capital also includes the money laid out for the labour needed to pursue the merchant’s business, as well as for the merchant’s constant capital, warehouses, transport, etc.)
(2) Because the merchant is exclusively concerned with this business, not only is the producer’s commodity converted into money sooner, but the commodity capital itself goes through its metamorphosis more quickly than it would in the hands of the producer.
(3) Taking commercial capital as a whole in relation to industrial capital, a single turnover of commercial capital can correspond not only to the turnovers of several capitals in one sphere of production, but also to the turnovers of a number of capitals in different spheres. The former is the case if the linen dealer, for example, after he has used his £3,000 to buy the product of a linen producer and sold this again before the producer in question puts the same quantity of goods on the market once more, buys the product of another linen producer, or several other linen producers, and sells this also, thus facilitating the turnovers of various capitals in the same sphere of production. The latter is the case if the merchant, after selling the linen, now buys silk, for example, and thus facilitates the turnover of a capital in another sphere.
The following general point should be noted. The turnover of industrial capital is restricted not just by the circulation time, but also by the production time. The turnover of commercial capital, in so far as it deals with just one particular kind of commodity, is not restricted by the turnover of a single industrial capital but rather by the turnover of all industrial capitals in the same branch of production. After the merchant has bought and sold one producer’s linen, he can buy and sell that of another, before the first puts his commodity on the market again. The same commercial capital can thus successively facilitate the different turnovers of various capitals invested in a branch of production, so that its turnover is not identical with the turnovers of one individual industrial capital and hence does not replace only the monetary reserve that this particular industrial capitalist had to keep to himself. Naturally, the turnover of commercial capital in one sphere of production is restricted by the overall production in this sphere. But it is not restricted by the limits of production or the turnover time of an individual capital in this sphere, in as much as this turnover time is determined by the production time. Let us assume that A supplies a commodity that takes three months to produce. After the merchant has bought and sold it, say in one month, he can buy and sell the same product as supplied by another producer. Or after he has sold one farmer’s corn, for example, he can buy and sell a second farmer’s with the same money, and so on. The turnover of his capital is limited by the amount of corn that he can successively buy and sell in a given time, e.g. a year, but the turnover of the farmer’s capital, quite apart from its circulation time, is restricted also by its production time, which covers a whole year.
The turnover of the same commercial capital can just as easily mediate the turnovers of capitals in various branches of production.
To the extent that the same commercial capital serves in different turnovers to transform various commodity capitals successively into money, and thus buys and sells them in a series, it performs the same function, as money capital in relation to commodity capital, that money does in general vis-à-vis commodities as a result of the number of times it circulates in a given period.
The turnover of commercial capital is not identical with the turnover or the reproduction, once only, of an equally large industrial capital; it is equal, rather, to the sum of the turnovers of a number of such capitals, whether in the same sphere of production or in different ones. The more quickly the commercial capital turns over, the smaller is the part of the total money capital that figures as commercial capital, and vice versa. The less developed production is, the greater is the sum of commercial capital in proportion to the amount of commodities put into circulation in general; the smaller, however, it is in absolute terms or compared with more developed conditions. And conversely. In undeveloped conditions of this kind, therefore, the greater part of money capital proper is in the hands of merchants, so that their wealth constitutes monetary wealth as far as others are concerned.
The velocity of circulation of the money capital advanced by the merchant depends (1) on the speed with which the production process is repeated and the various production processes are linked together; (2) on the speed of consumption.
The turnover described above does not require the entire commercial capital to be used to its full extent in buying commodities and then re-selling them. The merchant rather performs both movements at the same time. His capital is then divided into two parts, the first consisting of commodity capital and the second of money capital. He buys in one place, and transforms his money into commodities. He sells somewhere else, and transforms another part of the commodity capital into money. On the one hand his capital flows back to him as money capital, while on the other hand he receives back commodity capital. The greater the part existing in one form, the smaller that existing in the other. This fluctuates and is balanced out. If the use of money as means of circulation is combined with its use as means of payment and the credit system that grows up on this basis, there is still a further reduction in the money capital portion of the commercial capital in relation to the volume of transactions that this commercial capital performs. If I buy £1,000 worth of wine on three months’ credit and I sell this wine for cash before the three-month period expires, not a single penny has to be advanced for the transaction. In this case, moreover, it is as clear as day that the money capital that figures here as commercial capital is nothing more than industrial capital itself in its form of money capital, in its own reflux in the money form. (If the producer who has sold commodities on three months’ credit for £1,000 can get his promissory note discounted at the bank, this in no way alters the matter and has nothing to do with commercial capital.) If the market price of the commodity were to fall in the meantime by a tenth, say, not only would the merchant not receive any profit, but he would get only £2,700 back instead of £3,000. He would have to put up a further £300 in order to pay. This £300 functions simply as a reserve for settling the difference in price. But the same thing holds for the producer. If he had himself sold while prices were falling, he would also have lost £300 and could not begin production again on the same scale without a reserve capital.
The linen dealer buys linen from the manufacturer for £3,000; the latter spends, say, £2,000 out of this £3,000 on buying yarn; he buys this yarn from the yarn dealer. The money with which the manufacturer pays the yarn dealer is not the linen dealer’s money, for the latter has received commodities to this amount in exchange. It is the money form of his own capital. In the hands of the yarn dealer, this £2,000 seems to be money capital on its reflux; but how far is it really money capital, as distinct from simply £2,000 as the money form shed by the linen and assumed by the yarn? If the yarn dealer has bought on credit and sells for cash before his payment period expires, this £2,000 does not contain a single penny of commercial capital as distinct from the money form that industrial capital itself assumes in the course of its cycle. Commercial capital, therefore, in so far as it is not simply a form of industrial capital that happens to be found, in the shape of commodity capital or money capital, in the hands of the merchant, is nothing but the portion of money capital that belongs to the merchant himself, and is circulated in the purchase and sale of commodities. This portion represents, on a reduced scale, the portion of the capital advanced for production that always had to exist as a money reserve, a means of purchase, in the hands of the industrialist, and circulate as his money capital. This portion is now to be found, reduced, in the hands of merchant capitalists; and as such it functions exclusively in the circulation process. It is a part of the total capital which, leaving aside the expenditure of revenue, has to keep circulating on the market as a means of purchase, in order to keep the continuity of the reproduction process going. It is all the smaller in relation to the total capital, the quicker the reproduction process and the more developed the function of money as means of payment, i.e. the credit system.38
Commercial capital is nothing more than capital functioning within the circulation sphere. The circulation process is one phase in the reproduction process as a whole. But in the process of circulation, no value is produced, and thus also no surplus-value. The same value simply undergoes changes of form. Nothing at all happens except the metamorphosis of commodities, which by its very nature has nothing to do with the creation or alteration of value. If a surplus-value is realized on the sale of the commodity produced, this is because it already existed in the commodity. Nor does the buyer realize any surplus-value with the second act, the exchange of the money capital back into commodities (elements of production). What happens here is rather that the production of surplus-value is begun, by the exchange of money for means of production and labour-power. In fact, in as much as these metamorphoses cost circulation time – a time during which capital produces nothing at all, and therefore certainly does not produce any surplus-value – there is a restriction on the creation of value, and the surplus-value, as expressed in the profit rate, will actually vary inversely with the length of the circulation time. Commercial capital thus creates neither value nor surplus-value, at least not directly. In so far as it contributes towards shortening the circulation time, it can indirectly help the industrial capitalist to increase the surplus-value he produces. In so far as it helps to extend the market and facilitates the division of labour between capitals, thus enabling capital to operate on a bigger scale, its functioning promotes the productivity of industrial capital and its accumulation. In so far as it cuts down the turnover time, it increases the ratio of surplus-value to the capital advanced, i.e. the rate of profit. And in so far as a smaller part of capital is confined to the circulation sphere as money capital, it increases the portion of capital directly applied in production.