Merchants Capital Capital Vol III Ch 20 (Abridged)

... nothing could be more absurd than to regard merchants capital as a particular variety of industrial capital. ... merchants capital, is older than the capitalist mode of production, is, in fact, historically the oldest free state of existence of capital. Since we have already seen that money-dealing and the capital advanced for it require nothing more for their development than the existence of wholesale commerce, and further of commercial capital, it is only the latter which we must occupy ourselves with here. Since merchants capital is penned(If people or animals are penned somewhere or are penned up, they are forced to remain in a very small area) in the sphere of circulation, and since its function consists exclusively of promoting the exchange of commodities, it requires no other conditions for its existence aside from the undeveloped forms arising from direct barter outside those necessary for the simple circulation of commodities and money. No matter what the basis on which products are produced, which are thrown into circulation as commodities whether the basis of the primitive community, of slave production, of small peasant and petty bourgeois, or the capitalist basis, the character of products as commodities is not altered, and as commodities they must pass through the process of exchange and its attendant (You use attendant to describe something that results from a thing already mentioned or that is connected with it) changes of form. # The extent to which products enter trade and go through the merchants hands depends on the mode of production, and reaches its maximum in the ultimate development of capitalist production. Merchants capital promotes only the movements of these extremes, of these commodities, which are preconditions of its own existence. The metamorphosis of commodities, their movement, consists 1) materially, of the exchange of different commodities for one another, and 2) formally, of the conversion of commodities into money by sale, and of money into commodities by purchase. And the function of merchants capital resolves itself into these very acts of buying and selling commodities. It therefore merely promotes the exchange of commodities; yet this exchange is not to he conceived at the outset as a bare exchange of commodities between direct producers. Under slavery, feudalism and vassalage (so far as primitive communities are concerned) it is the slave-owner, the feudal lord, the tribute-collecting state, who are the owners, hence sellers, of the products. The merchant buys and sells for many. Purchases and sales are concentrated in his hands and consequently are no longer bound to the direct requirements of the buyer (as merchant). # The less developed the production, the more wealth in money is concentrated in the hands of merchants or appears in the specific form of merchants wealth.

There is, therefore, not the least difficulty in understanding why merchants capital appears as the historical form of capital long before capital established its own domination over production. Its existence and development to a certain level are in themselves historical premises for the development of capitalist production 1) as premises for the concentration of money wealth, and 2) because the capitalist mode of production presupposes production for trade, selling on a large scale, and not to the individual customer, hence also a merchant who does not buy to satisfy his personal wants but concentrates the purchases of many buyers in his one purchase. On the other hand, all development of merchants capital tends to give production more and more the character of production for exchange-value and to turn products more and more into commodities. Yet its development, as we shall presently see, is incapable by itself of promoting and explaining the transition from one mode of production to another. Within capitalist production merchants capital is reduced from its former independent existence to a special phase in the investment of capital, and the levelling of profits reduces its rate of profit to the general average. It functions only as an agent of productive capital. The special social conditions that take shape with the development of merchants capital, are here no longer paramount( Something that is paramount or of paramount importance is more important than anything else). On the contrary, wherever merchants capital still predominates we find backward conditions. The independent and predominant development of capital as merchants capital is tantamount to the non-subjection of production to capital, and hence to capital developing on the basis of an alien social mode of production which is also independent of it. The independent development of merchants capital, therefore, stands in inverse proportion to the general economic development of society. The product becomes a commodity by way of commerce. It is commerce which here turns products into commodities, not the produced commodity which by its movements gives rise to commerce. Thus, capital appears here first as capital in the process of circulation. Money and commodity circulation can mediate between spheres of production of widely different organisation, whose internal structure is still chiefly adjusted to the output of use-values. This individualisation(discriminating the individual from the generic group) of the circulation process, in which spheres of production are interconnected by means of a third, has a two-fold significance: (1) that circulation has not as yet established a hold on production, but is related to it as to a given premise. (2) that the production process has not as yet absorbed circulation as a mere phase of production. [Both, however, are the case in capitalist production] The law that the independent development of merchants capital is inversely proportional to the degree of development of capitalist production is particularly evident in the history of the carrying trade... where the principal gains were made by the exchange of products of commercially and otherwise economically undeveloped societies, and by exploiting both producing countries.

So long as merchants capital promotes the exchange of products between undeveloped societies, commercial profit not only appears as out-bargaining and cheating, but also largely originates from them. Aside from the fact that it exploits the difference between the prices of production of various countries (and in this respect it tends to level and fix the values of commodities), those modes of production bring it about( cause) that merchants capital appropriates an overwhelming portion of the surplus-product partly as a mediator between communities which still substantially produce for use-value, and for whose economic organisation the sale of the portion of their product entering circulation, or for that matter any sale of products at their value, is of secondary importance; and partly, because under those earlier modes of production the principal owners of the surplus-product with whom the merchant dealt, namely, the slave-owner the feudal lord, and the state (for instance, the oriental despot) represent the consuming wealth and luxury which the merchant seeks to trap. Merchants capital, when it holds a position of dominance, stands everywhere for a system of robbery... To what extent it brings about a dissolution of the old mode of production depends on its solidity and internal structure. And whither this process of dissolution will lead, in other words, what new mode of production will replace the old, does not depend on commerce, but on the character of the old mode of production itself. There is no doubt that in the 16th and 17th centuries the great revolutions, which took place in commerce with the geographical discoveries and speeded the development of merchants capital, constitute one of the principal elements in furthering the transition from feudal to capitalist mode of production. The sudden expansion of the world-market, the multiplication of circulating commodities, the competitive zeal of the European nations to possess themselves of the products of Asia and the treasures of America, and the colonial system all contributed materially toward destroying the feudal fetters on production. The history of the decline of Holland as the ruling trading nation is the history of the subordination of merchants capital to industrial capital. The obstacles presented by the internal solidity and organisation of pre-capitalistic, national modes of production to the corrosive( damaging) influence of commerce are strikingly illustrated in the intercourse of the English with India and China. The broad basis of the mode of production here is formed by the unity of small-scale agriculture and home industry, to which in India we should add the form of village communities built upon the common ownership of land, which, incidentally, was the original form in China as well. In India the English lost no time in exercising their direct political and economic power, as rulers and landlords, to disrupt these small economic communities. English commerce exerted a revolutionary influence on these communities and tore them apart only in so far as the low prices of its goods served to destroy the spinning and weaving industries, which were an ancient integrating element of this unity of industrial and agricultural production. And even so this work of dissolution proceeds very gradually. And still more slowly in China, where it is not reinforced by direct political power. The substantial economy and saving in time afforded by the association of agriculture with manufacture put up a stubborn resistance to the products of the big industries, whose prices include the faux frais(incidental operating expenses) of the circulation process which pervades(If something pervades a place or thing, it is a noticeable feature throughout it) them. Unlike the English, Russian commerce, on the other hand, leaves the economic groundwork of Asiatic production untouched. The transition from the feudal mode of production is two-fold. -3

The producer becomes merchant and capitalist, in contrast to the natural agricultural economy and the guild-bound handicrafts of the medieval urban industries. This is the really revolutionising path. Or else, the merchant establishes direct sway over production. However much this serves historically as a stepping-stone it cannot by itself contribute to the overthrow of the old mode of production, but tends rather to preserve and retain it as its precondition. The manufacturer in the French silk industry and in the English hosiery and lace industries was mostly but nominally a manufacturer until the middle of the 19th century. In point of fact, he was merely a merchant, who let the weavers carry on in their old unorganised way and exerted only a merchants control, for that was for whom they really worked. This system presents everywhere an obstacle to the real capitalist mode of production and goes under with its development. Without revolutionising the mode of production, it only worsens the condition of the direct producers, turns them into mere wage-workers and proletarians under conditions worse than those under the immediate control of capital, and appropriates their surplus-labour on the basis of the old mode of production. The same conditions exist in somewhat modified form in part of the London handicraft furniture industry. It is practised notably in the Tower Hamlets on a very large scale. The whole production is divided into very numerous separate branches of business independent of one another. One establishment makes only chairs, another only tables, a third only bureaus, etc. These establishments themselves are run more or less like handicrafts by a single minor master and a few journeymen. Nevertheless, production is too large to work directly for private persons. The buyers are the owners of furniture stores. On Saturdays the master visits them and sells his product, the transaction being closed with as much haggling as in a pawnshop over a loan. The masters depend on this weekly sale, if for no other reason than to be able to buy raw materials for the following week and to pay out wages. Under these circumstances, they are really only middlemen between the merchant and their own labourers. The merchant is the actual capitalist who pockets the lions share of the surplus-value. Almost the same applies in the transition to manufacture of branches formerly carried on as handicrafts or side lines to rural industries. The transition to large-scale industry depends on the technical development of these small owneroperated establishments. There is, consequently, a three-fold transition. First, the merchant becomes directly an industrial capitalist. This is true in crafts based on trade, especially crafts producing luxuries and imported by merchants together with the raw materials and labourers from foreign lands, as in Italy from Constantinople in the 15th century. Second, the merchant turns the small masters into his middlemen, or buys directly from the independent producer, leaving him nominally independent and his mode of production unchanged. Third, the industrialist becomes merchant and produces directly for the wholesale market.