The People's Marx, Abridged Popular Edition of the the Three Volumes of Capital, Borchardt 1921
(Extracted from vol. Ill, part 1, ch. 20. German ed.)
When examining the question from a strictly scientific point of view, the formation of the general rate of profit appears as having its starting point in productive capital, and in the competition between the various productive capitals; and as having been, at a later period, "corrected", completed, modified by the intervention of commercial capital. But, viewed from a historical point of view, just the contrary is the case.
From what we have already said, it is evident that nothing could be more erroneous than to regard commercial capital as a species of productive capital, like mining, agriculture, cattle-breeding, manufacture, transport, etc. The simple observation that every productive capital performs exactly the same functions as commercial capital when selling its products and buying its raw materials, should alone suffice to render so primitive a conception impossible. Commercial capital is, on the contrary, but a differentiated part of productive capital, which has become independent, which constantly assumes the forms and performs the functions which are necessary to transform commodities into money (and vice-versa).
Up to now we have considered commercial capital from the standpoint, and within the limits, of the capitalist system of production. Not only trade itself, however, but also commercial capital, is older than the capitalist system is, as a matter of fact, historically the oldest free form of existence of capital.
Because commercial capital is continuously and exclusively occupied with the circulation and exchange of commodities, no other conditions are necessary for its existence - apart from undeveloped forms which have their origin in direct barter than are necessary for the simple circulation of commodities and money. Whatever be the organisation of the production which supplies commodities for sale - whether it be based on the primitive community or on slavery, or whether it be peasant production, or plebeian production, or capitalist production; whether all commodities be saleable, or only those produced in excess of the producer's own needs - such commodities must always be sold, be exchanged for others. And the medium of the sale, of the exchange, is commercial capital.
What quantity of products is brought into commerce, and consequently into the hands of the tradespeople, depends on the system of production; that quantity attains its maximum in the fully developed capitalist system of production, in which the product is, in fact, no longer anything else but a commodity, and is no longer produced as a direct means of subsistence. On the other hand, whatever be the system of production, trade gives the impulsion to produce more than the producer requires for his own individual needs, in order to exchange the surplus for treasure or means of enjoyment. There where trade once exists, therefore, it impresses on production a character tending ever more and more towards exchange-value.
However the society, for the exchange of whose commodities the tradesman serves as intermediary, is organised, the tradesman's fortune always' exists in money form, and his money invariably functions as capital, i. e. it functions for the purpose of making more money, or surplus-value. The motive which determines the merchant to lay out his money in bringing about the exchange of commodities, his definitive aim in so doing, are not only in the capitalist, but also in all the earlier forms of society to make, out of money, more money. The various phases of the process of exchange M - C and C- M' appear merely as transitory incidents of the transformation of M into M', i. e. of money into more money. The characteristic movement of commercial capital is M - C - M' (money commodities - more money), and it differs from the trade between the producers themselves, characterised by C - M - C, which has as final aim the exchange of use-values.
The more undeveloped production is, the less money will the producers have, and the greater will be the fortune in the form of money in the hands of the tradespeople; or else that money fortune will appear as a peculiar form of trading capital.
Thus, in all pre-capitalistic times, trade appears as the function par excellence of capital, as the latter's real and only aim. And all the more so, in the measure in which the process of production in itself furnished means of subsistence for the producers. At that time there was no capital other than commercial capital; whereas, as we have seen, capital, in the capitalist epoch, takes possession of production itself, and profoundly modifies its process; so that henceforth commercial capital is but a specific form or function of capital, which coexists alongside of other forms and functions.
We have thus no difficulty in understanding why commercial capital is to be found in history long before capital has taken hold of production. On the contrary, commercial capital must exist, and have attained a certain degree of development, in order that the capitalist system of production may arise - firstly, because it is a condition precedent for the concentration of money; and, secondly, because capitalist production presupposes wholesale distribution (and not distribution to the individual consumer). Capitalist production, therefore, presupposes also the existence of a tradesman, who does not buy in order to satisfy his individual wants, but in his capacity as intermediary for satisfying the wants of many. On the other hand, all development of commercial capital has the effect of impressing on the process of production a character tending ever more and more to exchange-value, i. e. to transform ever more and more products into commodities. But the development of commercial capital in itself is insufficient (as we shall see directly) .to bring about and to explain the transition from one mode of production to another. Within the system of capitalist production, commercial capital is deprived of its former independent existence, and becomes a specific form of capital investment in general; and the equalisation of profits reduces its rate of profit to the level of the average rate. Henceforth it functions only as the agent of productive capital. The particular social conditions which were created along with the development of commercial capital are now no longer decisive; on the contrary, there where commercial capital is still predominant, archaic conditions prevail. This holds good of different places within one and the same country - where, for instance, the purely trading towns offer us far more points for comparison with former times, than do the factory towns. [1]
The independent development, and the predominance, of commercial capital imply that capital has not yet taken hold of production. Thus the independent development of commercial capital stands in inverse ratio to the general economic development of society.
This phenomenon is especially observable in the history of the carrying trade - e. g. in Venice, Genoa, Holland etc. - where the export of their own products by the countries concerned is but a subsidiary source of profit; and where profit is mainly derived from serving as intermediary for the exchange of the products of communities whose trade and general economic life is still undeveloped, and from the exploitation of both producing countries. [2] Here we have commercial capital in its undiluted state, separated from the processes of production between which it serves as intermediary; and this is one of the main sources from whence its origin is derived. But this monopoly of the carrying trade - and consequently the latter itself diminishes in the same measure in which the economic development of the nations progresses, which that monopoly exploited. - A typical example of the way in which commercial capital goes about its business in those countries in which it directly dominates production is, moreover, not only furnished by colonisation in general, but especially by the methods of the old Dutch East India Company.
At first sight, commercial profit appears impossible as long as products are sold at their value. For the law of trade is: buy cheap and sell dear; and not the exchange of equal values. The quantity in which products are exchanged is at first quite fortuitous. But if products are continously exchanged, and therefore regularly produced in view of exchange, this state of things gradually ceases. But, at first, the fortuitous nature of the products exchanged does not cease in so far as producers and consumers are concerned; but only in regard to the intermediary between the two, i. e. the tradesman, who compares the money prices and pockets the difference.
The trade of the first independent, highly developed trading peoples and towns in ancient times was based, as simple carrying trade, on the lack of civilisation of the producing peoples, between whom the former served as intermediaries.
In the preliminary phases of capitalist society - i e. in Western Europe in the Middle Ages - trade dominates industry; the contrary is the case in modern nations. Trade naturally reacts more or less on the communities between which it is carried on; it subordinates production more and more to exchange-value, by rendering the means of enjoyment and subsistence itself dependent on sale rather than on the direct use of the product. It thereby puts an end to the conditions formerly prevailing. It increases the circulation of money. It not only seizes hold of the surplus production; it gradually invades the process of production, and renders one after another whole branches of production dependent on itself. Nevertheless, this 'dissolving influence depends to a large extent on the nature of the producing community.
As long as commercial capital serves as intermediaryfor the exchange of products between undeveloped communities, commercial profit does not only seem to consist of overreaching and fraud; but, as a matter of fact, it derives to a large extent its origin from these sources. When commercial capital occupies a position of unquestioned dency, it everywhere constitutes a system of plunder; even as its development in all trading peoples, both ancient and modern, is bound-up with extortion, piracy, slave stealing, colonial oppression. Thus it was in Carthage and Rome, and thus it was subsequently with the Venetians, Portuguese, Dutch, etc.
The development of trade and commercial capital increases everywhere the tendency of production to evolve in the direction of exchange-value; at the same time it widens the scope of production and its. diversity, cosmopolitises it, developes money into world money. Trade thus exercises everywhere a more or less dissolving influence on those productive organisations which it finds already in existence, and which, in all their various forms, were mainly directed towards use-value. The extent, however, to which this process of dissolution is carried, depends in the first place on the solidity and inner structure of the former system of production. And the final result of the process - i. e. what sort of new system eventually replaces the old one - does not depend on trade, but on the nature of the old system itself. In the ancient world the consequence of trade and of the development of commercial capital was invariably slavery; according to what the starting-point of such development was, sometimes the mere transformation of a patriarchal system of slavery, based on the direct production of means of subsistence, into one based on the production of surplus-value. In modern times, on the contrary, the effect of the development of commercial capital is the capitalist system of production. It follows that these results themselves were also influenced by other circumstances, different from those accompanying the development of commercial capital.
It is in the nature of things that as soon as urban industry, as such, has been separated from agriculture, the products of the former should be, from the beginning, commodities, and that their sale should thus require the medium of trade. In so far, it is evident that trade leans for support on the development of town life, and that, on the other hand, urban development is dependent on trade. Nevertheless, how far industrial development goes hand in hand with such a process depends on entirely different circumstances. Already in the later days of the Republic commercial capital in Rome was more developed than it had ever been before in the ancient world; but there was no accompanying progress of industrial development. Whereas in Corinth and other Greek towns in Europe and Asia Minor, a highly developed industry accompanied the development of trade. On the other hand, quite contrary to the conditions of urban development, what we may call the spirit of trade and the development of commercial capital is often 10 be observed among nomadic peoples.
There can be no doubt - and precisely this fact has given rise to radically wrong views - that the great transformations in the 16th and 17th centuries, which in consequence of the geographic discoveries took place in trade and which greatly accelerated the development of commercial capita], constituted a decisive factor in effecting the transition from the feudal to the capitalist mode of production. The sudden extension of the world market, the diversity of the commodities circulated, the competition between the European nations for the possession of Asiatic products and American treasures, the colonial system: all these contributed in a vast measure to the bursting of the chains placed by feudalism on production. Nevertheless the modern mode of production, in its first phase - the manufacturing period - was only developed there where the conditions for such a development had been engendered during the Middle Ages. Compare, for instance, Holland with Portugal. [3] And if, in the 16th century - and in part, still, in the 17th - the sudden extension of trade and the opening-up of a new world market exerted decisive influence on the downfall of the old and the rise of the capitalist mode of production, this took place, inversely, on the basis of that capitalist mode, once it had come into being. The world market itself constitutes the foundation of this mode of production. On the other hand, the necessity of constantly increasing the scale of production, inherent to the capitalist system, causes a continuous expansion of the world market, so that, in this case, it is not trade which revolutionises industry, but industry which perpetually revolutionises trade. The supremacy of trade is now bound up with the degree of predominance of the conditions of modern industry. We need only compare, for example, England and Holland. The history of the decline of Holland as the leading trading nation is the history of the subordination of commercial capital to industrial capital. The resistance offered to the dissolving influence of trade by the inner cohesion and structure of the national, pre-capitalistic systems of production, is clearly manifested in the relations maintained by England with India and China. Here, the combination of agriculture on a small scale and domestic industry constitutes the broad basis of the mode of production; to this must be added, in India, the village community based on collective property of the soil, which community was likewise the original form of the economic organisation in China. In India, the English applied simultaneously political and economic pressure, alike as rulers and as owners of ground rent, in order to destroy these little economic communities. In this case, if English trade has been able to influence the system of production, it is only in so far as the cheaper prices of English goods succeed in eliminating the native spinning and weaving industries and thus rend the village communities asunder. Even then, this process of dissolution is a very slow and gradual one. In China, where direct political pressure is not available, the English have been even less successful. The great saving of time and labour due to the direct combination of agriculture and manufacture, offers here the stubbornest resistance to the invasion of the products of modern industry, whose prices are increased by the costs of the process of circulation which everywhere breaks through it.
The transition from the feudal mode of production takes place in a twofold manner. Either the producer himself becomes tradesman and capitalist - this is the really revolutionary manner. Or the tradesman takes direct possession of the process of production. However much this last manner of transition may, from a historical point of view, be regarded as such - e. g. as in the case of the English clothier of the 17th century, who sells the wool to, and buys the cloth from, those weavers who have remained independent - it none the less does not bring about by itself the transformation of the old mode of production; rather does it maintain the latter as the condition precedent of its own existence. For instance, up to the middle of the 19th century, in the French silk industry, as in the English stocking and lace industries, the manufacturer is only nominally manufacturer. In reality he is a mere tradesman, who let the weavers continue their work as before, each one for himself in his little workshop; and he did but exercise the functions of a tradesman for whom, as a matter of fact, they performed their labour. The same held good of the ribbon manufacture, lace-trimming and silk-weaving industries on the banks of the Rhine. This system is everywhere an impediment to the capitalist mode of production, properly so called, and disappears in the measure of the latter's development. Without transforming the mode of production, that system does but render the position of the labourer worse, turns him into a mere wagelabourer and proletarian under worse conditions than those prevailing among the labourers working directly under capital, and appropriates his surplus-labour on the basis of the old mode of production. Except for a few points of difference, the same state of affairs prevails (1865) in a section of the London furniture industry. The latter is divided up into a number of business branches quite independent of one another. One branch only manufactures chairs, another tables, a third cupboards, etc. But these various branches are themselves carried-on on a more or less handicraft basis, by a master in a small way and a few apprentices. None the less is the production too extensive from these branches to be able to work direct for private individuals. Their clients are the owners of furniture shops. On Saturdays the master goes to the latter and sells his product; whereby seller and buyer bargain over the price just as people in a pawnshop bargain over the loan to be advanced on a given pledge. These masters must sell their products weekly, if only to be able to buy raw material again for the next week, and to pay out wages. Under these circumstances they are in reality but intermediaries between the tradesman and their own workers. The tradesman is the real capitalist, who pockets the greater part of the surplus value. The position is similar to that when the transition of the branches which had formerly been handicraft-worked, or had been side-branches of rural industry, to the stage of manufacture took place. In the measure of the technical level attained by such a small workshop - there where it already employs itself such machines as admit of a handicraft organisation - the transition to modern industry takes place. Instead of by hand, the machine is propelled by steam, as this has recently (1865) happened in the English stocking industry.
The transition thus takes place in three ways. Firstly, the tradesman becomes, directly, an industrial producer; this is the case with the branches of industry which have developed out of trade especially with the industry of luxury articles, which was imported by the tradespeople from abroad along with the raw materials and labourers, e. g., in the 15 th century, into Italy from Constantinople. Secondly, the tradesman makes of the small master his intermediary, or he buys direct from the self-producer; he lets the latter remain nominally independent, and does not alter his system of production. Thirdly, the industrial producer becomes a tradesman and produces wholesale for the purpose of trade.
In the Middle Ages the tradesman does but set in movement, so to speak, the commodities produced either by the members of the guilds, or by the peasantry. The tradesman becomes an industrial producer, or, rather, lie lets (he handicraft-worked and - especially the small rural - industry perform labour for him. On the other hand, the producer becomes trader. For instance, instead of receiving his wool little by little in small portions from the tradesman, and working with his apprentices for the la tier the clothweaver buys himself wool or yarn, and sells his cloth to the tradesman. And now the clothweaver produces for the trading world, instead for the individual tradesman or for definite clients. The producer is himself a trader. Originally, trade was the condition precedent for transforming the guild-organised and rural domestic branches of industry, and also feudal agriculture, into capitalist undertakings. It creates the market for the product, it supplies new raw and auxiliary materials, and it thus opens out branches of production which are, from the start, founded on trade. As soon as manufacture, and still more modern industry, have developed to a certain extent, they create in turn the market, which they conquer by means of their commodities. Trade now becomes the servant of industrial production, for which the constant extension of the market is indispensable. Mass production on an ever-increasing scale overflows the available market, and prompts thus to a continual widening-out of this market. This mass production is not limited by trade (in so far as the latter is but the expression of existing demand), but by the size of the functioning capital and the degree of development of the productive force of labour. The productive capitalist has the world market continually before him, and compares - and must compare - his own cost prices with the market prices, not only at home, but in the whole world. In the former period, this comparison falls almost entirely upon the shoulders of the merchants and thereby secures for merchants capital the supremacy over industrial capital.
[1] In modem English history, the commercial class properly so called and the trading towns are also politically reactionary, and allied with the landed and financial aristocracies against industrial capital. Compare, for instance, the political role of Liverpool with that of Manchester and Birmingham. English commercial capital and the English financial aristocracy have only recognised the complete supremacy of industrial capital since the repeal of the corn laws, etc.
[2] "The inhabitants of the trading towns imported from richer countries more highly finished manufactured goods and expensive articles of luxury, and thus flattered the vanity of the large landowners, who greedily bought these things and paid for them in the shape of large quantifies of raw produce from their estates. Thus, at that time, the trade of a large part of Europe consisted in exchanging the raw produce of one country for the manufactured goods of industrially more advanced countries. As soon as this taste had become general, and caused a large demand, the merchants began, with a view to saving costs, to introduce similar manufactures into their own countries." (Adam Smith, Wealth of Nations, III, ch. 3.)
[3] How greatly predominant, in the development in Holland, and apart from other circumstances, the basis was which had been formed previously in the shape of fishery, manufacture, and agriculture this fact was already pointed out by writers in the 18th century. Contrary to the views formerly current, and according to which the extent and importance of Asiatic, ancient, and Middle Age trade were underestimated, it has become the fashion to greatly overestimate them. The best cure for this notion is to consider the English exports and imports at the beginning of the 18th century, and to compare them with those at the present time. And yet the former were incomparably larger than any of those of any older trading people.