CHAPTER XX.

The Influence of Commercial Capital on Prices.
(I MnicU'il from vol. III. n;irt. I, ill. IS. (HTIIKIM
If the price of production of 1 Ih. of sugar be i the tradesman -could for i' 100 buy 100 Ibs. of that article. If he buys and sells this quantity in the course of a year, and if the yearly average rate of profit be 15 "«, he would 15 to the sum of £ 100, and to the sum of £ 1 the price of production of 1 lb., 3 shillings. He would thus sell the lb. of sugar for £ \ 3 s. But if the price
THE INbLUENCL Of COMMERCIAL CAPITAL ON PRICES. 225
of production of 1 Ib. of sugar were to fall to 1 s. the tradesman could buy for £ ICO 2000 Ibs., and sell the Ib. for 1 s. l4/s d. The yearly profit, after as before, on the capital of £ 100 invested in the sugar trade would be £ 15. Only in the one case he must sell 100 Ibs., in the other 2000 Ibs.
(We make abstraction here of the costs of circulation, such as storage, forwarding, etc. Only the actual buying and selling are the objects of our investigation).
The high or low level of the price of production would have nothing to do with the rate of profit; but it would play an important, nay decisive, part in determining the size of that fraction of the selling price of every Ib. of sugar, which dissolves itself in commercial profit -- /. e. the supplementary price added by the tradesman to a defi- nite quantity of commodities.
If we except the cases in which the tradesman has a commercial monopoly, and simultaneously monopolises pro- duction, as e. g. in former days the Dutch East India Com- pany; then can nothing be sillier than the common belief that it depends on the tradesman to sell, at his option, a large quantity of commodities at a small profit on each one, or else a small quantity of commodities at a large profit on each one. The limits to his selling price are two in number: on the one hand, the price of production of the commodity, which he does not control; on the other, the average rate of profit, which he does not control either. (It is question here only of commerce in the ordinary sense, not of speculation).
Consequently the difference between productive and commercial capital is the following: the more frequently productive capital rotates, the greater the amount of profit formed by it. True, through the medium of the general rate of profit, the total profit is not distributed among the various capitals in the proportion in which they participate in the process of production, but in proportion to their size. But the greater the number of rotations of the total pro- ductive capital, the greater will be the total quantity of pro- fit, and hence also -- other circumstances remaining the same — the greater will be the rate of profit.
With commercial capital the case is different. For commercial capital the rate of profit is a given magnitude,
226 \ -V
determined on the one hand by the quantity of profit yielded by productive capital, on the other by the relative size of the total commercial capital. The number of its rotations, it is true, exerts a decisive influence on its relation to the totality of capital, since it is evident tint, the more rapid the rotation of commercial capital is, the smaller its abso- lute size will be — and therefore the smaller will be also its relative size (proportionately to the total capital avail- able in a society).
But -- assuming the relative size of commercial capi- tal proportionately to the totality of capital to be given - the difference in the number of rotations in the various branches of trade does not affect either the amount of the total profit due to commercial capital, or the general rate of profit. The tradesman's profit is determined, not by the amount of his commodities-capital in rotation, but by the amount of money capital advanced by him in order to bring about this rotation. If the general yearly rate of profit be 15 %, and if the tradesman advances £ 100 - then, if his capital rotate once in the year, he will sell his commodities for £ 115. If his capital rotate five times in the year, he will sell the commodities (purchased for £ 100) five times in the course of the year for i' HH /. e. in the whole year a commodities-capital of £ 500 for £ 515. But this amounts, after as before, to a yearly profit of 15 on a capital advanced of 100. If this were not the case, commercial capital would yield, proportionately to the num- ber of its rotations, much larger profit than industrial ca- pital — which would be incompatible with the law govern- ing the general rate of profit.
The number of rotations of commei al in the
various branches of trade thus directly affects the selling price of the commodities. The more frequently commercial capital rotates during the year, and the smaller will he the addition made to the commodities capital sold each time
The same percentage of commercial profit in difiV branches of trade thus increases, according to the times of rotation in those branches, the selling ; :he commo-
dities by varying percen Iculaled according to the
value of such commodities, lor instance, if the yearly pro-
THE INFLUENCE Of COMMERCIAL CAPITAL ON PRICES. 227
fit be 15 %: in the event of one rotation the increase will be 15 %, in the event of five rotations 3 %.
In the case of industrial capital, on the other hand, the time of rotation does not affect in any way the quantity of value in individual commodities, although it affects the quantity of values and surplus-values produced by a given capital in a given time, because it affects the quantity of labour exploited. This phenomenon, it is true, is concealed, and matters would seem to be different as soon as we con- sider the prices of production; but this is only because the prices of production of the different commodities (accor- ding to laws we have already explained) differ from their values. If we consider the process of production in its to- tality, /. e. the quantity of commodities produced by the en- tire industrial capital, we shall immediately find the general law confirmed.
Thus a closer scrutiny of the influence exerted, in in- dustrial capital, by the time of rotation on the formation of value, brings us back to the general law and to the fun- dament of political economy — /. e. that the value of com- modities is determined by the labour-time contained in them; in commercial capital, on the other hand, the influence exerted by the rotations on commercial profit produces cer- tain manifestations which (without a very intensive study of the middle terms) would appear to presuppose a purely arbitrary determination of prices. Prices would seem to be determined merely by the fact that capital is resolved to make a certain quantity of profit in the year. (For in- stance, it wishes to make 15 % profit yearly; the supple- ment added to the purchase price of its commodities is fixed accordingly, e. g, each time 3 %, so that 15 %, all told, shall be made during the year). Owing to this influence exerted by the -rotations it would seem as if the process of circulation per se determines the prices of the commo- dities, independently - - within certain limits - - of pro- duction.
Hence the notions entertained by a tradesman, a Stock Exchange speculator, or banker concerning the mechanism of the capitalist system of' production, are necessarily quite wrong. The notions of the manufacturer, on the other hand, are falsified owing to the nature of the process of circu-
228 Ct/APILR A A
lation which his capital undergoes, and owing to the equa- lisation of the general rate of profit. His view of the part played by competition is a wholly erroneous one. Once given the limits ot value and surplus-value, and it is easy to perceive how the competition of the various capitals transforms values into prices of production and, further still, into trading prices; and how it transforms surplus- value into average profit. But without these limits it is absolutely impossible to see why competition reduces the general rate of profit to one level rather than to another, to 15 % instead of to 1500 %. Competition can, at the most, reduce it to a single level. But it is absolutely un- able to determine this level itself.
Therefore, from the point of view of commercial capi- tal, the rotation itself appears to determine prices.
If the same industrial capital (other circumstances, and notably its own organic composition, remaining identical) rotate four times in a year instead of twice, it produces twice as much surplus-value, and hence profit. This is manifestly clear so soon and so long as this capital pos- sesses the monopoly of the improved method of production, which enables it to accelerate the process of rotation. The difference in the time of rotation in different branches of trade manifests itself, on the contrary, in the fact that the profit yielded by the rotation of a given commodities-capi- tal stands in inverse ratio to the number of rotations of the money capital of the tradespeople. «A large turnover and small profits» - this maxim appears, notably to the small retail tradesman, as one which he must follow on principle.
It is evident that this law holds good only for Ilie average of the rotations made by the total commercial capi- tal invested in a given branch. The capital belonging to A, who is in the same branch as B, may make more or less rotations than the average number. In this case, the others make less or more. This fact alters nothing in the rotation of the totality of commercial capital invested in the branch. Bui it has decisive importance for the individual tradesman. In this case he makes surplus profit. If com- petition compel him to do so, he can sell cheaper than his competitors, without his profit sinking below the average.
THE INFLUENCE OF COMMERCIAL CAPITAL ON PRICES. 229
If the conditions, which enable him to accelerate rotation, be themselves purchasable — e. g. the position of the buil- ding where the sales take place --he can pay an extra rent for this, /. e. part of his surplus profit is converted into ground- rent.