Trading capital, or merchant's capital, splits into two forms, or two subspecies: commercial capital and money-dealing capital. We'll now describe each more closely, as far as the analysis of capital in its basic inner structure requires. And that is all the more necessary because modern economics, even its best representatives, throws trading capital directly together with industrial capital and in fact overlooks its characteristic peculiarities entirely.
The movement of commodity capital was analysed in Volume 2. Take the total capital of society: one part of it is always out on the market in commodity form, waiting to become money — though that part is always made up of different elements and its size keeps changing too — while another part is out on the market as money, waiting to become commodities. Capital is always caught up in this passing over, this change of form. To the extent that this function of capital-in-circulation becomes a special function of a special capital in its own right, fixed by the division of labour as the function assigned to one particular kind of capitalist, commodity capital turns into commodity-dealing capital — commercial capital.
In Volume 2, Chapter 6, 'The Costs of Circulation', parts 2 and 3, it was explained how far the transport industry, storage, and the dispersal of goods in a distributable form are to be seen as production processes that carry on inside the circulation process. These episodes in the circulation of commodity capital get confused, in part, with what is peculiar to commercial capital; in part they are tied up in practice with commerce's own specific functions, even though as the social division of labour develops, the function of commercial capital also works itself out in a pure form, that is, separated from those real functions and standing independent of them. For our purpose — pinning down what is specifically different about this special form of capital — we therefore have to abstract from those functions. To the extent that capital which functions purely in circulation, commercial capital in particular, sometimes combines some of those functions with its own, it does not show up in its pure form. Once we strip those functions off and set them aside, we have its pure form.
We have seen how capital existing as commodity capital, and the change of form it goes through as commodity capital in the sphere of circulation, on the market — a change that breaks down into buying and selling, into commodity capital becoming money capital and money capital becoming commodity capital — makes up one phase of industrial capital's reproduction process, and so of its whole production process; but that at the same time, performing this function as circulation capital, it is distinct from itself as productive capital. Here one and the same capital exists in two separate, distinct shapes. Part of the total capital of society is always out on the market in that shape — circulation capital — in the middle of this change of form; even though for any single capital, its being commodity capital and the change of form it goes through as such is only a point it passes through, forever disappearing and forever renewed, one stage in the unbroken run of its production process; and even though the elements of the commodity capital on the market therefore keep changing, forever being taken off the market and just as forever put back on it as fresh output of the production process.
Commercial capital is nothing but the transformed shape of one part of that circulation capital — capital that is always on the market, always in the middle of its change of form, always held inside the circulation sphere. A part, we say, because part of all commodity buying and selling always goes on directly between the industrial capitalists themselves. We leave that part entirely out of account in this investigation: it adds nothing to the definition, to seeing what is specific about commercial capital's nature, and for our purposes it has already been fully dealt with in Volume 2.
Like any other capitalist, the commodity dealer first appears on the market standing for a certain sum of money, which he advances in his capacity as a capitalist — that is, which he wants to turn from x into x + Δx (that sum plus the profit on it). But for him, not just as a capitalist in general but specifically as a commodity dealer, it goes without saying that his capital must first show up on the market in the form of money capital. He produces no commodities; he only deals in them, keeping them moving — and before he can deal in them he has to buy them, so he has to be in possession of money capital.
Say a commodity dealer has £3,000, which he puts to work as trading capital. With this £3,000 he buys, for example, 30,000 yards of linen from a linen manufacturer at 2 shillings a yard. He then sells those 30,000 yards. If the average rate of profit stands at 10 per cent and, after all incidental costs are deducted, he makes 10 per cent profit for the year, then by the end of the year his £3,000 has become £3,300. How he makes that profit is a question we come to only later. Here we want to look first at the bare form of his capital's movement. He keeps buying linen with the £3,000 and keeps selling that linen; over and over he repeats this operation of buying in order to sell, M-C-M', the simple form of capital when it is wholly confined to the circulation process, not interrupted by the production phase, which lies outside its own movement and function.
What then is the relation 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, with the merchant's money he has realized the value of his linen; the first phase of his commodity capital's change of form, its becoming money, has been carried out, and he can now — other circumstances unchanged — turn that money back into yarn, coal, wages and so on, and on the other side into means of subsistence and so on for consuming his revenue; so, apart from spending his revenue, he can carry on the reproduction process.
But although for him, the producer of the linen, its change into money — its sale — has taken place, it has not taken place for the linen itself. The linen is still on the market as commodity capital, with the task of completing its first change of form: of being sold. Nothing has happened to the linen but a change in who owns it. By its own purpose, by its position in the process, it is still commodity capital, a commodity still to be sold; only now it is in the merchant's hands instead of the producer's. The job of selling it, of carrying through the first phase of its change of form, has been taken off the producer's hands by the merchant and turned into the merchant's special business — whereas before, once the producer had finished the job of producing it, this selling was still left for him to do.
Say the merchant fails to sell the 30,000 yards in the time the linen producer needs to bring another 30,000 yards, worth £3,000, onto the market. The merchant cannot buy them again, because those 30,000 yards are still lying unsold in his store and he has not got them back as money capital. So a hold-up sets in, an interruption of reproduction. The linen producer might well have extra money capital at his disposal, which he could turn into productive capital and so carry the production process on, independently of the sale of the 30,000 yards. But assuming that changes nothing in the matter. As far as the capital advanced in those 30,000 yards goes, its reproduction process is and remains interrupted. So here it becomes tangibly clear that the merchant's operations are nothing more than the operations that have to be performed anyway to turn what the producer holds as commodity capital into money — the operations that carry through the functions of commodity capital in the circulation and reproduction process. If the selling, and the buying too, were the exclusive job of a mere agent of the producer instead of an independent merchant, this connection would not be hidden for a moment.
So commercial capital is absolutely nothing other than the producer's commodity capital, which has to go through the process of turning into money and do its job as commodity capital out on the market — except that this job now appears, not as an incidental operation of the producer, but as the exclusive operation of a particular species of capitalist, the commodity dealer, and is made autonomous as the business of a particular capital investment.
Commercial capital's own specific form of circulation shows this too. The merchant buys the commodity and then sells it: M-C-M'.
In plain commodity circulation, or even in the circulation of commodities as it appears within the circuit of industrial capital, C'-M-C, what mediates the circulation is that each coin changes hands twice. The linen producer sells his commodity, the linen, and turns it into money; the buyer's money comes into his hands. Out of that same money he buys yarn, coal, labour and so on, handing it over again so that the value of the linen comes back as the commodities that go into making it. What he buys is not the commodity he sold — not a commodity of the same kind at all. What he sold was products; what he bought was means of production.
But it works differently in the movement of commercial capital. The linen dealer's £3,000 buys him 30,000 yards of linen, and he sells those same 30,000 yards to pull his money capital back out of circulation (£3,000 plus profit). Here the thing that changes place twice is not the same coins but the same commodity: it goes from the seller's hands into the buyer's, and from that buyer — now turned seller — into the hands of another buyer. It gets sold twice, and with a series of merchants inserted in between it may change hands several more times; and it is precisely through this repeated sale, the same commodity changing place twice, that the money advanced by the first buyer to purchase the commodity is drawn back again, his money flowing back to him.
In the one case, C'-M-C, the same money changing hands twice is what lets a commodity be given up in one shape and taken over in another. In the other case, M-C-M', the same commodity changing place twice is what lets the money advanced be drawn back out of circulation. All this shows that the commodity has not been definitively sold at the moment it moves from the producer's hands into the merchant's, and that the merchant is only carrying the sale further — or the carrying through of commodity capital's function. And it shows at the same time how something that for the productive capitalist is C-M, simply one of his capital's functions while it wears the passing shape of commodity capital, is for the merchant M-C-M', a distinct valorization of the money capital he has advanced. One phase of the commodity's change of form shows up here, from the merchant's point of view, as M-C-M' — as the evolution of a sort of capital of its own.
The merchant definitively sells the commodity, the linen, to a consumer — whether that is a productive consumer (a bleacher, say) or an individual who uses the linen for his own private purposes. With that, the capital he advanced comes back to him (plus profit) and he can begin the operation again. If, when he bought the linen, the money had functioned only as means of payment, so that he had to pay six weeks after taking delivery, and if he had sold it before then, he could have paid the linen producer without having advanced any money capital of his own. If he had not sold it, he would have had to advance the £3,000 when it fell due, instead of immediately on delivery; and if falling market prices had made him sell it below the price he paid, he would have had to make up the missing part out of his own capital.
What is it, then, that makes commercial capital count as a capital functioning independently, when in the hands of the producer who sells his own goods it evidently appears only as one particular form his capital takes while he is in the circulation sphere, one particular phase of his reproduction process?
First: the commodity capital gets definitively turned into money — its first metamorphosis, the job that falls to it as commodity capital on the market — in hands other than its producer's, and this function is carried through by the merchant's operation, by his buying and selling, so that the operation shapes itself as a business of its own, split off from industrial capital's other functions and so standing on its own. This is one particular form of the division of labour in society: one part of the function that otherwise has to be performed in a particular phase of capital's reproduction process, here circulation, appears as the exclusive function of a circulation agent of its own, distinct from the producer. But this alone would by no means yet make the special business appear as the function of a special capital, different from the industrial capital caught up in its reproduction process and independent of it — as indeed it does not appear where the commodity trade is carried on by mere travelling salesmen or by other agents working directly for the industrial capitalist. So a second moment has to be added.
Second: this enters in through the independent circulation agent, the merchant, putting money capital — his own or borrowed — into that position. What shows up as simply C-M for industrial capital in its reproduction process — commodity capital becoming money capital, or a plain sale — shows up for the merchant as M-C-M', as buying the same commodity and selling it again, and so as the return flow to him of the money capital that left him when he bought and comes back to him when he sells.
It is always C-M — commodity capital changing into money capital — that shows up to the merchant as M-C-M, so long as it is his capital that pays the producers for the commodity; always the first metamorphosis of the commodity capital, even though that same act may look to a producer, or to industrial capital going through its reproduction process, like M-C — money turning back into commodity (the means of production) — that is, like the second phase of the metamorphosis. For the linen producer, this C-M was the first metamorphosis: his commodity capital turned into money capital. For the merchant, the same act looks like M-C: his money capital turned into commodity capital. If he now sells the linen to the bleacher, for the bleacher that is M-C — money capital turned into productive capital, or the second metamorphosis of his commodity capital — while for the merchant it is C-M, selling the linen he bought.
In fact, the commodity capital the linen manufacturer produced is only now definitively sold; the merchant's M-C-M merely stands for a mediating process for the C-M between two producers. Or take the case where the linen manufacturer buys yarn from a yarn dealer with part of the value of the linen he has sold. For him that is M-C. For the merchant selling the yarn, though, it is C-M, selling the yarn on again; and as for the yarn itself, as commodity capital, it is simply its definitive sale, by which it passes out of the circulation sphere into consumption — C-M, the closing conclusion of its first metamorphosis. So whether the merchant is buying from the industrial capitalist or selling to him, his M-C-M — the circuit of commercial capital — never expresses anything but this: what, for the commodity capital itself, as a passing form of industrial capital busy reproducing itself, is merely C-M, merely its first metamorphosis being completed. The merchant capital's M-C is also C-M for the industrial capitalist, but not for the commodity capital that capitalist produced: it is only the commodity capital passing from the industrialist's hands into those of the circulation agent; only the merchant capital's C-M is the definitive C-M for the commodity capital that is doing its job. M-C-M is only two C-M's of the same commodity capital, two successive sales of it, which between them merely mediate its last and definitive sale.
So commodity capital takes the shape of an independent kind of capital within commercial capital because the merchant advances money capital, and this money works and counts as capital only in one way: by being wholly taken up with carrying through the change of form of commodity capital, its function as commodity capital, that is, its turning into money — and it does this through perpetually buying and selling commodities. This is its exclusive operation; this activity, which carries through the circulation process of industrial capital, is the exclusive function of the money capital the merchant operates with. Through this function his money becomes money capital, his M presents itself as M-C-M', and by that same process he turns commodity capital into commodity-dealing capital.
Commercial capital — to the extent, and for as long as, it takes the form of commodity capital, and looking at the reproduction process of society's total capital — is plainly nothing other than industrial capital's unsold portion, still out on the market and part-way through changing its form. That portion exists and works there as commodity capital. So the only thing left to look at is the money capital the merchant puts up, money meant purely for buying and selling. It never takes any form but commodity capital and money capital, never that of productive capital, and it stays penned inside capital's circulation sphere the whole time. It is this money capital, and only this, that we have to consider now, in relation to the total reproduction process of capital.
The moment the linen manufacturer has the merchant's £3,000 for his 30,000 yards, he buys the means of production he needs with the money he has made, and his capital goes back into the production process. His production carries on without a break. As far as he is concerned, his commodity has already turned into money. But for the linen itself, as we saw, that change has not yet happened. It has not yet turned back into money once and for all, and no one has taken it up as a use-value, either to produce with or to consume. The linen dealer now stands on the market for the same commodity capital that the linen producer once stood there for. For the producer, the change of form has been cut short — but only so that it can carry on in the merchant's hands.
If the linen producer had to wait until his linen had really stopped being a commodity, until it had passed to the last buyer — the producer who works with it or the person who consumes it — his reproduction process would be interrupted. Or, so as not to interrupt it, he would have had to cut back what he does: convert less of his linen into yarn, coal, labour and the rest — the elements of productive capital, in short — and keep a bigger part of it by him as a money reserve. That way, while one part of his capital sat on the market as a commodity, another part could keep production going; and when that second part came onto the market as a commodity, the first would flow back to him in money form. The merchant stepping in does not get rid of this split in his capital. But without the merchant, the part of the circulation capital kept as a money reserve would always have to be bigger relative to the part working as productive capital, and reproduction would run on a smaller scale as a result. Instead, the producer can now keep a bigger part of his capital at work in the actual production process, and a smaller part as a money reserve.
In exchange for that, though, another part of society's capital now sits permanently inside the circulation sphere, in the form of commercial capital. It is always used only to buy goods and to sell them again. So it looks as though nothing has happened but a change in the people who hold this capital in their hands.
If the merchant, rather than spending £3,000 on linen he means to sell on, were to put that £3,000 to productive use himself, society's productive capital would be larger. True, the linen producer would then have to hold a bigger part of his capital as a money reserve — and so would the merchant, now turned into an industrial capitalist. On the other side, as long as the merchant stays a merchant, the producer saves time on selling that he can spend supervising production, while selling takes up the merchant's whole time.
As long as commercial capital does not overstep the proportions it needs, we can assume:
(1) Because the work of selling is divided up, the capital that goes purely into buying and selling comes to less than it would if each industrial capitalist ran that whole side of his business himself. (And this capital takes in, besides the money for buying goods, the money laid out on the labour needed to run a commercial business, and on the merchant's constant capital — warehouses, transport and the like.)
(2) Because the merchant does nothing else, not only does the producer's commodity turn into money sooner, but the commodity capital itself passes through its change of form faster than it would have done in the producer's own hands.
(3) Looking at total commercial capital in proportion to industrial capital, one turnover of commercial capital can stand in for the turnovers of many capitals in one sphere of production, and equally for the turnovers of several capitals in different spheres. The first is the case if, say, the linen dealer uses his £3,000 to buy a linen producer's product and sells it again before that same producer brings the same quantity of goods back to market; he then buys the product of another linen producer, or of several, and sells that too, mediating the turnovers of different capitals in the same sphere. The second is the case if the merchant, having sold the linen, now buys silk, and so mediates the turnover of a capital in a different sphere.
One general point. Industrial capital's turnover is limited not just by circulation time but also by production time. To the extent that commercial capital deals in one particular kind of commodity, what limits its turnover is not the turnover of one industrial capital but the turnover of all the industrial capitals in that branch of production. A merchant who has bought and sold one producer's linen can move on to another's before the first brings fresh goods to market. So the same commercial capital can mediate one after another the different turnovers of the capitals sunk in one branch. Its turnover is therefore not the same as the turnovers of a single industrial capital, and so it does not merely stand in for the one money reserve that this single industrial capitalist would have had to keep by him. Of course the turnover of commercial capital in a branch is limited by that branch's total production. But it is not limited by the production limits or the turnover time of any single capital in that branch, in so far as that turnover time is set by production time. Suppose a producer A whose commodity needs three months to make. Once our merchant has bought it and sold it, say in a month, he can buy and sell the same product from another producer. Or he sells one farmer's corn, then uses the same money to buy and sell a second farmer's, and so on. What limits the turnover of his capital is how much corn he can buy and sell one lot after another in a given stretch, say a year; whereas the turnover of the farmer's capital is limited, leaving circulation time aside, by production time, which runs a whole year.
The same commercial capital can equally well mediate the turnovers of capitals in different branches of production.
In so far as the same commercial capital, in one turnover after another, serves to turn various commodity capitals into money one by one — buying and selling them in a series — then, in its role as money capital over against commodity capital, it does the same job that money in general does for commodities through the number of times it goes round in a given period.
The turnover of commercial capital is not the same thing as the turnover of an equally large industrial capital, nor as that capital's reproduction taken once through. It is instead the turnovers of a whole set of such capitals added together, whether they lie in the same sphere of production or in different ones. The faster commercial capital turns over, the smaller the share of society's total money capital that has to take the commercial form; the slower it turns over, the larger that share. And the more backward production is, the bigger the total of commercial capital next to the total of goods going into circulation at all; but the smaller it is in absolute terms, or set beside more developed conditions. And the reverse holds too. In backward conditions like these, then, the greater part of money capital proper sits in the merchants' hands, and their fortune is accordingly the money-wealth of such a society, set against everyone else's.
How fast the money capital the merchant advances circulates depends on two things: (1) how fast the production process renews itself, and how the different production processes mesh with one another; (2) how fast consumption goes.
The commercial capital does not have to be used only in the way looked at above, with its entire value first buying goods and only then selling them. The merchant performs both movements at the same time. His capital then splits in two. One part consists of commodity capital, the other of money capital. He buys in one market, turning his money into goods. Somewhere else he sells, turning another slice of that commodity capital into money. On one side his capital flows back to him as money capital; on the other side commodity capital flows in to him. The bigger the part in one form, the smaller the part in the other. It shifts back and forth and evens out.
If money's use as means of payment joins its use as means of circulation, and the credit system grows up on that basis, then the money capital part of the commercial capital shrinks still further, relative to the size of the transactions this commercial capital carries out. Say I buy wine worth £1,000 with three months to pay, and I have sold the wine for cash before the three months are up: not one penny has to be put up for this deal. And here it is clear as day that the money capital that appears under the heading of commercial capital is nothing but industrial capital in its own money form, on its way back to itself as money. (That the producer who has sold goods worth £1,000 with three months to pay can get the bill — the promissory note — discounted at the bank makes no difference here and is no concern of commercial capital.)
Suppose prices for that commodity drop by a tenth while this is going on: the merchant would not only make no profit; he would get back just £2,700 in place of £3,000. He would have to throw in another £300 to be able to pay. That extra £300 would serve only as a reserve to cover the price gap. And the producer is in the same position. Had he done the selling himself, with prices falling, he too would have lost £300, and he could not start production up again on the same scale without reserve capital.
The linen dealer buys £3,000 worth of linen from the manufacturer. The manufacturer takes £2,000 of that £3,000, say, and buys yarn with it from the yarn dealer.
The money the manufacturer pays the yarn dealer with is not the linen dealer's money, because the linen dealer got goods worth that amount in return. It is his own capital in its money form. In the yarn dealer's hands, that £2,000 now appears as money capital that has flowed back to him. But how much of that is it, really, as opposed to just the £2,000 passing from the money form the linen had shed into the money form the yarn has now taken on? If the yarn dealer bought on credit and sold for cash before his payment fell due, then not one penny of that £2,000 is commercial capital in its own right — nothing there but the money shape industrial capital itself puts on as it goes round its cycle.
So commercial capital, to the extent that it is not simply industrial capital in a form that happens to sit in the merchant's hands as commodity capital or money capital, is nothing but that part of money capital which is the merchant's own, turned over in buying and selling commodities. On a reduced scale, this part stands in for the part of the capital advanced for production that would otherwise always have to sit in the industrialist's own hands as a money reserve, a means of purchase, circulating as his money capital. That part now sits, reduced, in merchant capitalists' hands, and as such it is constantly at work in the circulation process. It is a slice of the total capital that has to stay in circulation on the market all the time as a means of purchase — setting aside what is spent out of revenue — so that the reproduction process can go on without interruption. The faster reproduction runs, and the more developed money's function as a means of payment, that is, the credit system, the smaller this part is relative to the total capital.
Commercial capital is nothing but capital doing its work inside the sphere of circulation. Circulation is one phase of the whole process of reproduction. But no value is produced in the circulation process, and so no surplus-value either. The same mass of value only changes form. Nothing happens but the metamorphosis of commodities, which in itself has nothing to do with creating or altering value. When a surplus-value gets realized in the sale of the commodity that has been produced, that is because it was already in the commodity; and in the second act, the exchange of money capital back into commodities (elements of production), the buyer realizes no surplus-value either — what happens there is only that the production of surplus-value is set going, by exchanging money for means of production and labour-power. On the contrary. In so far as these metamorphoses cost circulation time — a time in which capital is producing nothing at all, and so certainly produces no surplus-value — that time is a limit on how much value is created, and the surplus-value, expressed as profit rate, will move in the opposite direction to how long circulation takes. Commercial capital therefore creates no value and no surplus-value — not directly, at any rate. In so far as it helps shorten the circulation time, it can indirectly help increase the surplus-value produced by the industrial capitalist. In so far as it helps widen the market and brings about a division of labour among capitals, so that capital can work on a bigger scale, its work raises industrial capital's productivity and helps it accumulate more. In so far as it shortens the turnover time, it raises how much surplus-value there is relative to the capital put forward, that is, the rate of profit. And in so far as it keeps a smaller part of capital tied up in circulation as money capital, it increases the part of capital applied directly in production.
Trading capital, or merchant's capital, splits into two forms, or two subspecies: commercial capital and money-dealing capital. We'll now describe each more closely, as far as the analysis of capital in its basic inner structure requires. And that is all the more necessary because modern economics, even its best representatives, throws trading capital directly together with industrial capital and in fact overlooks its characteristic peculiarities entirely.
The movement of commodity capital was analysed in Volume 2. Take the total capital of society: one part of it is always out on the market in commodity form, waiting to become money — though that part is always made up of different elements and its size keeps changing too — while another part is out on the market as money, waiting to become commodities. Capital is always caught up in this passing over, this change of form. To the extent that this function of capital-in-circulation becomes a special function of a special capital in its own right, fixed by the division of labour as the function assigned to one particular kind of capitalist, commodity capital turns into commodity-dealing capital — commercial capital.
In Volume 2, Chapter 6, 'The Costs of Circulation', parts 2 and 3, it was explained how far the transport industry, storage, and the dispersal of goods in a distributable form are to be seen as production processes that carry on inside the circulation process. These episodes in the circulation of commodity capital get confused, in part, with what is peculiar to commercial capital; in part they are tied up in practice with commerce's own specific functions, even though as the social division of labour develops, the function of commercial capital also works itself out in a pure form, that is, separated from those real functions and standing independent of them. For our purpose — pinning down what is specifically different about this special form of capital — we therefore have to abstract from those functions. To the extent that capital which functions purely in circulation, commercial capital in particular, sometimes combines some of those functions with its own, it does not show up in its pure form. Once we strip those functions off and set them aside, we have its pure form.
We have seen how capital existing as commodity capital, and the change of form it goes through as commodity capital in the sphere of circulation, on the market — a change that breaks down into buying and selling, into commodity capital becoming money capital and money capital becoming commodity capital — makes up one phase of industrial capital's reproduction process, and so of its whole production process; but that at the same time, performing this function as circulation capital, it is distinct from itself as productive capital. Here one and the same capital exists in two separate, distinct shapes. Part of the total capital of society is always out on the market in that shape — circulation capital — in the middle of this change of form; even though for any single capital, its being commodity capital and the change of form it goes through as such is only a point it passes through, forever disappearing and forever renewed, one stage in the unbroken run of its production process; and even though the elements of the commodity capital on the market therefore keep changing, forever being taken off the market and just as forever put back on it as fresh output of the production process.
Commercial capital is nothing but the transformed shape of one part of that circulation capital — capital that is always on the market, always in the middle of its change of form, always held inside the circulation sphere. A part, we say, because part of all commodity buying and selling always goes on directly between the industrial capitalists themselves. We leave that part entirely out of account in this investigation: it adds nothing to the definition, to seeing what is specific about commercial capital's nature, and for our purposes it has already been fully dealt with in Volume 2.
Like any other capitalist, the commodity dealer first appears on the market standing for a certain sum of money, which he advances in his capacity as a capitalist — that is, which he wants to turn from x into x + Δx (that sum plus the profit on it). But for him, not just as a capitalist in general but specifically as a commodity dealer, it goes without saying that his capital must first show up on the market in the form of money capital. He produces no commodities; he only deals in them, keeping them moving — and before he can deal in them he has to buy them, so he has to be in possession of money capital.
Say a commodity dealer has £3,000, which he puts to work as trading capital. With this £3,000 he buys, for example, 30,000 yards of linen from a linen manufacturer at 2 shillings a yard. He then sells those 30,000 yards. If the average rate of profit stands at 10 per cent and, after all incidental costs are deducted, he makes 10 per cent profit for the year, then by the end of the year his £3,000 has become £3,300. How he makes that profit is a question we come to only later. Here we want to look first at the bare form of his capital's movement. He keeps buying linen with the £3,000 and keeps selling that linen; over and over he repeats this operation of buying in order to sell, M-C-M', the simple form of capital when it is wholly confined to the circulation process, not interrupted by the production phase, which lies outside its own movement and function.
What then is the relation 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, with the merchant's money he has realized the value of his linen; the first phase of his commodity capital's change of form, its becoming money, has been carried out, and he can now — other circumstances unchanged — turn that money back into yarn, coal, wages and so on, and on the other side into means of subsistence and so on for consuming his revenue; so, apart from spending his revenue, he can carry on the reproduction process.
But although for him, the producer of the linen, its change into money — its sale — has taken place, it has not taken place for the linen itself. The linen is still on the market as commodity capital, with the task of completing its first change of form: of being sold. Nothing has happened to the linen but a change in who owns it. By its own purpose, by its position in the process, it is still commodity capital, a commodity still to be sold; only now it is in the merchant's hands instead of the producer's. The job of selling it, of carrying through the first phase of its change of form, has been taken off the producer's hands by the merchant and turned into the merchant's special business — whereas before, once the producer had finished the job of producing it, this selling was still left for him to do.
Say the merchant fails to sell the 30,000 yards in the time the linen producer needs to bring another 30,000 yards, worth £3,000, onto the market. The merchant cannot buy them again, because those 30,000 yards are still lying unsold in his store and he has not got them back as money capital. So a hold-up sets in, an interruption of reproduction. The linen producer might well have extra money capital at his disposal, which he could turn into productive capital and so carry the production process on, independently of the sale of the 30,000 yards. But assuming that changes nothing in the matter. As far as the capital advanced in those 30,000 yards goes, its reproduction process is and remains interrupted. So here it becomes tangibly clear that the merchant's operations are nothing more than the operations that have to be performed anyway to turn what the producer holds as commodity capital into money — the operations that carry through the functions of commodity capital in the circulation and reproduction process. If the selling, and the buying too, were the exclusive job of a mere agent of the producer instead of an independent merchant, this connection would not be hidden for a moment.
So commercial capital is absolutely nothing other than the producer's commodity capital, which has to go through the process of turning into money and do its job as commodity capital out on the market — except that this job now appears, not as an incidental operation of the producer, but as the exclusive operation of a particular species of capitalist, the commodity dealer, and is made autonomous as the business of a particular capital investment.
Commercial capital's own specific form of circulation shows this too. The merchant buys the commodity and then sells it: M-C-M'.
In plain commodity circulation, or even in the circulation of commodities as it appears within the circuit of industrial capital, C'-M-C, what mediates the circulation is that each coin changes hands twice. The linen producer sells his commodity, the linen, and turns it into money; the buyer's money comes into his hands. Out of that same money he buys yarn, coal, labour and so on, handing it over again so that the value of the linen comes back as the commodities that go into making it. What he buys is not the commodity he sold — not a commodity of the same kind at all. What he sold was products; what he bought was means of production.
But it works differently in the movement of commercial capital. The linen dealer's £3,000 buys him 30,000 yards of linen, and he sells those same 30,000 yards to pull his money capital back out of circulation (£3,000 plus profit). Here the thing that changes place twice is not the same coins but the same commodity: it goes from the seller's hands into the buyer's, and from that buyer — now turned seller — into the hands of another buyer. It gets sold twice, and with a series of merchants inserted in between it may change hands several more times; and it is precisely through this repeated sale, the same commodity changing place twice, that the money advanced by the first buyer to purchase the commodity is drawn back again, his money flowing back to him.
In the one case, C'-M-C, the same money changing hands twice is what lets a commodity be given up in one shape and taken over in another. In the other case, M-C-M', the same commodity changing place twice is what lets the money advanced be drawn back out of circulation. All this shows that the commodity has not been definitively sold at the moment it moves from the producer's hands into the merchant's, and that the merchant is only carrying the sale further — or the carrying through of commodity capital's function. And it shows at the same time how something that for the productive capitalist is C-M, simply one of his capital's functions while it wears the passing shape of commodity capital, is for the merchant M-C-M', a distinct valorization of the money capital he has advanced. One phase of the commodity's change of form shows up here, from the merchant's point of view, as M-C-M' — as the evolution of a sort of capital of its own.
The merchant definitively sells the commodity, the linen, to a consumer — whether that is a productive consumer (a bleacher, say) or an individual who uses the linen for his own private purposes. With that, the capital he advanced comes back to him (plus profit) and he can begin the operation again. If, when he bought the linen, the money had functioned only as means of payment, so that he had to pay six weeks after taking delivery, and if he had sold it before then, he could have paid the linen producer without having advanced any money capital of his own. If he had not sold it, he would have had to advance the £3,000 when it fell due, instead of immediately on delivery; and if falling market prices had made him sell it below the price he paid, he would have had to make up the missing part out of his own capital.
What is it, then, that makes commercial capital count as a capital functioning independently, when in the hands of the producer who sells his own goods it evidently appears only as one particular form his capital takes while he is in the circulation sphere, one particular phase of his reproduction process?
First: the commodity capital gets definitively turned into money — its first metamorphosis, the job that falls to it as commodity capital on the market — in hands other than its producer's, and this function is carried through by the merchant's operation, by his buying and selling, so that the operation shapes itself as a business of its own, split off from industrial capital's other functions and so standing on its own. This is one particular form of the division of labour in society: one part of the function that otherwise has to be performed in a particular phase of capital's reproduction process, here circulation, appears as the exclusive function of a circulation agent of its own, distinct from the producer. But this alone would by no means yet make the special business appear as the function of a special capital, different from the industrial capital caught up in its reproduction process and independent of it — as indeed it does not appear where the commodity trade is carried on by mere travelling salesmen or by other agents working directly for the industrial capitalist. So a second moment has to be added.
Second: this enters in through the independent circulation agent, the merchant, putting money capital — his own or borrowed — into that position. What shows up as simply C-M for industrial capital in its reproduction process — commodity capital becoming money capital, or a plain sale — shows up for the merchant as M-C-M', as buying the same commodity and selling it again, and so as the return flow to him of the money capital that left him when he bought and comes back to him when he sells.
It is always C-M — commodity capital changing into money capital — that shows up to the merchant as M-C-M, so long as it is his capital that pays the producers for the commodity; always the first metamorphosis of the commodity capital, even though that same act may look to a producer, or to industrial capital going through its reproduction process, like M-C — money turning back into commodity (the means of production) — that is, like the second phase of the metamorphosis. For the linen producer, this C-M was the first metamorphosis: his commodity capital turned into money capital. For the merchant, the same act looks like M-C: his money capital turned into commodity capital. If he now sells the linen to the bleacher, for the bleacher that is M-C — money capital turned into productive capital, or the second metamorphosis of his commodity capital — while for the merchant it is C-M, selling the linen he bought.
In fact, the commodity capital the linen manufacturer produced is only now definitively sold; the merchant's M-C-M merely stands for a mediating process for the C-M between two producers. Or take the case where the linen manufacturer buys yarn from a yarn dealer with part of the value of the linen he has sold. For him that is M-C. For the merchant selling the yarn, though, it is C-M, selling the yarn on again; and as for the yarn itself, as commodity capital, it is simply its definitive sale, by which it passes out of the circulation sphere into consumption — C-M, the closing conclusion of its first metamorphosis. So whether the merchant is buying from the industrial capitalist or selling to him, his M-C-M — the circuit of commercial capital — never expresses anything but this: what, for the commodity capital itself, as a passing form of industrial capital busy reproducing itself, is merely C-M, merely its first metamorphosis being completed. The merchant capital's M-C is also C-M for the industrial capitalist, but not for the commodity capital that capitalist produced: it is only the commodity capital passing from the industrialist's hands into those of the circulation agent; only the merchant capital's C-M is the definitive C-M for the commodity capital that is doing its job. M-C-M is only two C-M's of the same commodity capital, two successive sales of it, which between them merely mediate its last and definitive sale.
So commodity capital takes the shape of an independent kind of capital within commercial capital because the merchant advances money capital, and this money works and counts as capital only in one way: by being wholly taken up with carrying through the change of form of commodity capital, its function as commodity capital, that is, its turning into money — and it does this through perpetually buying and selling commodities. This is its exclusive operation; this activity, which carries through the circulation process of industrial capital, is the exclusive function of the money capital the merchant operates with. Through this function his money becomes money capital, his M presents itself as M-C-M', and by that same process he turns commodity capital into commodity-dealing capital.
Commercial capital — to the extent, and for as long as, it takes the form of commodity capital, and looking at the reproduction process of society's total capital — is plainly nothing other than industrial capital's unsold portion, still out on the market and part-way through changing its form. That portion exists and works there as commodity capital. So the only thing left to look at is the money capital the merchant puts up, money meant purely for buying and selling. It never takes any form but commodity capital and money capital, never that of productive capital, and it stays penned inside capital's circulation sphere the whole time. It is this money capital, and only this, that we have to consider now, in relation to the total reproduction process of capital.
The moment the linen manufacturer has the merchant's £3,000 for his 30,000 yards, he buys the means of production he needs with the money he has made, and his capital goes back into the production process. His production carries on without a break. As far as he is concerned, his commodity has already turned into money. But for the linen itself, as we saw, that change has not yet happened. It has not yet turned back into money once and for all, and no one has taken it up as a use-value, either to produce with or to consume. The linen dealer now stands on the market for the same commodity capital that the linen producer once stood there for. For the producer, the change of form has been cut short — but only so that it can carry on in the merchant's hands.
If the linen producer had to wait until his linen had really stopped being a commodity, until it had passed to the last buyer — the producer who works with it or the person who consumes it — his reproduction process would be interrupted. Or, so as not to interrupt it, he would have had to cut back what he does: convert less of his linen into yarn, coal, labour and the rest — the elements of productive capital, in short — and keep a bigger part of it by him as a money reserve. That way, while one part of his capital sat on the market as a commodity, another part could keep production going; and when that second part came onto the market as a commodity, the first would flow back to him in money form. The merchant stepping in does not get rid of this split in his capital. But without the merchant, the part of the circulation capital kept as a money reserve would always have to be bigger relative to the part working as productive capital, and reproduction would run on a smaller scale as a result. Instead, the producer can now keep a bigger part of his capital at work in the actual production process, and a smaller part as a money reserve.
In exchange for that, though, another part of society's capital now sits permanently inside the circulation sphere, in the form of commercial capital. It is always used only to buy goods and to sell them again. So it looks as though nothing has happened but a change in the people who hold this capital in their hands.
If the merchant, rather than spending £3,000 on linen he means to sell on, were to put that £3,000 to productive use himself, society's productive capital would be larger. True, the linen producer would then have to hold a bigger part of his capital as a money reserve — and so would the merchant, now turned into an industrial capitalist. On the other side, as long as the merchant stays a merchant, the producer saves time on selling that he can spend supervising production, while selling takes up the merchant's whole time.
As long as commercial capital does not overstep the proportions it needs, we can assume:
(1) Because the work of selling is divided up, the capital that goes purely into buying and selling comes to less than it would if each industrial capitalist ran that whole side of his business himself. (And this capital takes in, besides the money for buying goods, the money laid out on the labour needed to run a commercial business, and on the merchant's constant capital — warehouses, transport and the like.)
(2) Because the merchant does nothing else, not only does the producer's commodity turn into money sooner, but the commodity capital itself passes through its change of form faster than it would have done in the producer's own hands.
(3) Looking at total commercial capital in proportion to industrial capital, one turnover of commercial capital can stand in for the turnovers of many capitals in one sphere of production, and equally for the turnovers of several capitals in different spheres. The first is the case if, say, the linen dealer uses his £3,000 to buy a linen producer's product and sells it again before that same producer brings the same quantity of goods back to market; he then buys the product of another linen producer, or of several, and sells that too, mediating the turnovers of different capitals in the same sphere. The second is the case if the merchant, having sold the linen, now buys silk, and so mediates the turnover of a capital in a different sphere.
One general point. Industrial capital's turnover is limited not just by circulation time but also by production time. To the extent that commercial capital deals in one particular kind of commodity, what limits its turnover is not the turnover of one industrial capital but the turnover of all the industrial capitals in that branch of production. A merchant who has bought and sold one producer's linen can move on to another's before the first brings fresh goods to market. So the same commercial capital can mediate one after another the different turnovers of the capitals sunk in one branch. Its turnover is therefore not the same as the turnovers of a single industrial capital, and so it does not merely stand in for the one money reserve that this single industrial capitalist would have had to keep by him. Of course the turnover of commercial capital in a branch is limited by that branch's total production. But it is not limited by the production limits or the turnover time of any single capital in that branch, in so far as that turnover time is set by production time. Suppose a producer A whose commodity needs three months to make. Once our merchant has bought it and sold it, say in a month, he can buy and sell the same product from another producer. Or he sells one farmer's corn, then uses the same money to buy and sell a second farmer's, and so on. What limits the turnover of his capital is how much corn he can buy and sell one lot after another in a given stretch, say a year; whereas the turnover of the farmer's capital is limited, leaving circulation time aside, by production time, which runs a whole year.
The same commercial capital can equally well mediate the turnovers of capitals in different branches of production.
In so far as the same commercial capital, in one turnover after another, serves to turn various commodity capitals into money one by one — buying and selling them in a series — then, in its role as money capital over against commodity capital, it does the same job that money in general does for commodities through the number of times it goes round in a given period.
The turnover of commercial capital is not the same thing as the turnover of an equally large industrial capital, nor as that capital's reproduction taken once through. It is instead the turnovers of a whole set of such capitals added together, whether they lie in the same sphere of production or in different ones. The faster commercial capital turns over, the smaller the share of society's total money capital that has to take the commercial form; the slower it turns over, the larger that share. And the more backward production is, the bigger the total of commercial capital next to the total of goods going into circulation at all; but the smaller it is in absolute terms, or set beside more developed conditions. And the reverse holds too. In backward conditions like these, then, the greater part of money capital proper sits in the merchants' hands, and their fortune is accordingly the money-wealth of such a society, set against everyone else's.
How fast the money capital the merchant advances circulates depends on two things: (1) how fast the production process renews itself, and how the different production processes mesh with one another; (2) how fast consumption goes.
The commercial capital does not have to be used only in the way looked at above, with its entire value first buying goods and only then selling them. The merchant performs both movements at the same time. His capital then splits in two. One part consists of commodity capital, the other of money capital. He buys in one market, turning his money into goods. Somewhere else he sells, turning another slice of that commodity capital into money. On one side his capital flows back to him as money capital; on the other side commodity capital flows in to him. The bigger the part in one form, the smaller the part in the other. It shifts back and forth and evens out.
If money's use as means of payment joins its use as means of circulation, and the credit system grows up on that basis, then the money capital part of the commercial capital shrinks still further, relative to the size of the transactions this commercial capital carries out. Say I buy wine worth £1,000 with three months to pay, and I have sold the wine for cash before the three months are up: not one penny has to be put up for this deal. And here it is clear as day that the money capital that appears under the heading of commercial capital is nothing but industrial capital in its own money form, on its way back to itself as money. (That the producer who has sold goods worth £1,000 with three months to pay can get the bill — the promissory note — discounted at the bank makes no difference here and is no concern of commercial capital.)
Suppose prices for that commodity drop by a tenth while this is going on: the merchant would not only make no profit; he would get back just £2,700 in place of £3,000. He would have to throw in another £300 to be able to pay. That extra £300 would serve only as a reserve to cover the price gap. And the producer is in the same position. Had he done the selling himself, with prices falling, he too would have lost £300, and he could not start production up again on the same scale without reserve capital.
The linen dealer buys £3,000 worth of linen from the manufacturer. The manufacturer takes £2,000 of that £3,000, say, and buys yarn with it from the yarn dealer.
The money the manufacturer pays the yarn dealer with is not the linen dealer's money, because the linen dealer got goods worth that amount in return. It is his own capital in its money form. In the yarn dealer's hands, that £2,000 now appears as money capital that has flowed back to him. But how much of that is it, really, as opposed to just the £2,000 passing from the money form the linen had shed into the money form the yarn has now taken on? If the yarn dealer bought on credit and sold for cash before his payment fell due, then not one penny of that £2,000 is commercial capital in its own right — nothing there but the money shape industrial capital itself puts on as it goes round its cycle.
So commercial capital, to the extent that it is not simply industrial capital in a form that happens to sit in the merchant's hands as commodity capital or money capital, is nothing but that part of money capital which is the merchant's own, turned over in buying and selling commodities. On a reduced scale, this part stands in for the part of the capital advanced for production that would otherwise always have to sit in the industrialist's own hands as a money reserve, a means of purchase, circulating as his money capital. That part now sits, reduced, in merchant capitalists' hands, and as such it is constantly at work in the circulation process. It is a slice of the total capital that has to stay in circulation on the market all the time as a means of purchase — setting aside what is spent out of revenue — so that the reproduction process can go on without interruption. The faster reproduction runs, and the more developed money's function as a means of payment, that is, the credit system, the smaller this part is relative to the total capital.
Commercial capital is nothing but capital doing its work inside the sphere of circulation. Circulation is one phase of the whole process of reproduction. But no value is produced in the circulation process, and so no surplus-value either. The same mass of value only changes form. Nothing happens but the metamorphosis of commodities, which in itself has nothing to do with creating or altering value. When a surplus-value gets realized in the sale of the commodity that has been produced, that is because it was already in the commodity; and in the second act, the exchange of money capital back into commodities (elements of production), the buyer realizes no surplus-value either — what happens there is only that the production of surplus-value is set going, by exchanging money for means of production and labour-power. On the contrary. In so far as these metamorphoses cost circulation time — a time in which capital is producing nothing at all, and so certainly produces no surplus-value — that time is a limit on how much value is created, and the surplus-value, expressed as profit rate, will move in the opposite direction to how long circulation takes. Commercial capital therefore creates no value and no surplus-value — not directly, at any rate. In so far as it helps shorten the circulation time, it can indirectly help increase the surplus-value produced by the industrial capitalist. In so far as it helps widen the market and brings about a division of labour among capitals, so that capital can work on a bigger scale, its work raises industrial capital's productivity and helps it accumulate more. In so far as it shortens the turnover time, it raises how much surplus-value there is relative to the capital put forward, that is, the rate of profit. And in so far as it keeps a smaller part of capital tied up in circulation as money capital, it increases the part of capital applied directly in production.