This reduction of the total quantity of labor incorporated in a certain commodity seems to be the essential mark of an increase in the productive power of labor, no matter under what sort of social conditions production is carried on. There is no doubt that the productivity of labor would be measured by this standard in a society, in which the pro- Internal Contradictions. 307 diicers would regulate their production according to a preconceived plan, or even under a simple production of commodities. But how is this under capitalist production?
Take it, for instance, that a certain line of capitalist industry produces an average normal commodity of its sphere under the following conditions: The wear and tear of fixed capital amounts to | shilling per piece; raw and auxiliary materials are transferred into it at the rate of 17^ shillings per piece; in wages, 2 shillings, and surplus-value 2 shillings, the rate of surplus-value heing 100%. Total value 22 shillings. We assume for the sake of simplicity that the capital in this line of production has the composition of the average social capital, so that the price of production of the commodities is identical with the value and the profit of the capitalist with the created surplus-value. In that case the cost-price of the commodity is ^ + 17| -f 2 = 20 sh., the average rate of profit -^-^ = 10%, and the price of production of one individual commodity 22 sh., equal to its value.
ISTow let us assume that a machine is invented, which reduces the living labor required for each individual commodity by one-half, but at the same time trebles that portion of the commodity's value which is due to the wear and tear of fixed capital. In that case, the calculation is modified in this way: Wear and tear 1^ sh., raw and auxiliary materials the same as before, 17| sh., wages 1 sh., surplus-value 1 sh., together 21 sh. The commodity has then fallen 1 sh. in value: The new machine has certainly increased the productivity of labor. From the point of view of the capitalist, the matter has now the following aspect: His cost-price is now 1^ sh. for wear, 17| sh. for raw and auxiliary materials, 1 sh. for wages, total 20 sh., as before. Since the rate of profit is not at once altered by the new machine, he will receive 10% more than his cost-price, that is, 2 sh. The price of production, then, remains unaltered at 22 sh., as before, but it is 1 sh. above the value of these commodities. So far as a society producing under capitalist conditions is concerned, the commodity has not become any cheaper, the new machine signifies no improvement. The capitalist is therefore not interested in the 3o8 Capitalist Production.
introduction of this new machine. And since its introduction would make his present and not yet worn-out machinery simply worthless, would make old iron of it, Avould mean a positive loss for him, he takes good care not to commit such a Utopian mistake.
The law of increased productive power, then, does not apply absolutely to capital. So far as capital is concerned, the productive power is not increased by the enhancement of productive labor in general, but only by saving more in the unpaid portion of living labor than is expended in past labor, as we have already indicated in volume I, chapter XV, 2. Here the capitalist mode of production falls into another contradiction. Its historical mission is the ruthless development in geometrical progression, of the productivity of human labor. It becomes disloyal to its mission, whenever it puts a check upon the development of productivity, as it does here. Thus it demonstrates once again that it is becoming weak with age and more and more outliving its usefulness. ]^^ Under competition, the increase in the minimum of capital required for the successful operation of an independent industrial establishment in keeping with the increase in productivity assumes the following aspect: As soon as the new and more expensive equipment has become universally established, smaller capitals are henceforth excluded from these enterprises. Smaller capitals can carry on an independent activity in such lines only during the incipient stage of mechanical inventions. On the other hand, very large enterprises, such as railroads, with an extraordinarily high relative proportion of constant capital, do not yield any average rate of profit, but only a portion of it, interest. Otherwise the rate of profit would fall still lower. At the same time, this offers direct employment to large aggregations of capital in the form of stocks.
An increase of capital, or accumulation of capital, does not imply a fall in the rate of profit, unless this growth is accompanied by the aforementioned alterations in the proportions " The foregoing is placed between brackets, because it passes in some points beyond the scope of the original material, which I found in a note of the original manuscript, a revision of which I undertook.
I Internal Contradictions. 309 of the organic constituents of capital. IS'ow it so happens that in spite of the continual and daily revolutions in the mode of production, now this, now that, greater or smaller portion of the total capital continues for certain periods to accumulate on the basis of a given average proportion of those constituents, so that its growth does not imply any organic change, and consequently no fall in the rate of profit. This continual expansion of capital, and consequently expansion of production on the basis of the old method of production, which proceeds quietly while the new methods are already developing by its side, is another reason, why the rate of profit does not decrease in the same degree in which the total capital of society grows.
The increase of the absolute number of laborers, in spite of the relative decrease of the variable as compared to the constant capital, does not take place in all lines of production, and not uniformly in those in which it does proceed. In agriculture, the decrease of the element of living labor may be absolute.
By the way, it is but a requirement of the capitalist mode of production that the number of wage workers should increase absolutely, in spite of its relative decrease. Under this mode, labor-powers become superfluous as soon as it is no longer compelled to employ them for 12 to 15 hours per day. A development of the productive forces which would diminish the absolute number of laborers, that is, which would enable the entire nation to accomplish its total production in a shorter time, would cause a revolution, because it would put the majority of the population upon the shelf. In this the specific barrier of capitalist production shows itself once more, proving that capitalist production is not an absolute form for the development of the productive powers and creation of wealth, but rather comes in collision with this development at a certain point. This collision expresses itself partly through periodical crises, which arise from the circumstance that now this, now that, portion of the laboring population is rendered superfluous in its old mode of employment. The barrier of capitalist production is the superfluous time of the laborers. The absolute spare time gained by society does not concern 3IO Capitalist Production.
Capitalism. The development of the productive powers concerns it only to the extent that it increases the surplus labor time of the working class, not to the extent that it decreases the labor time for material production in general. Thus capitalist production moves in contradictions.
We have seen that the growing accumulation of capital implies its growing concentration. Thus the power of capital, the personification of the conditions of social production in the capitalist, grows over the heads of the real producers. Capital shows itself more and more as a social power, w^hose agent the capitalist is, and which stands no longer in any possible relation to the things which the labor of any single individual can create. Capital becomes a strange, independent, social power, which stands opposed to society as a thing, and as the power of capitalists by means of this thing. The contradiction betw^een capital as a general social power and as a power of private capitalists over the social conditions of production develops into an ever more irreconcilable clash, which implies the dissolution of these relations and the elaboration of the conditions of production into universal, common, social conditions. This elaboration is performed by the development of the productive powers under capitalist production, and by the course which this development pursues.
No capitalist voluntarily introduces a new method of production, no matter how much more productive it may be, and how much it may increase the rate of surplus-value, so long as it reduces the rate of profit. But every new method of production of this sort cheapens the commodities. Hence the capitalist sells them originally above their prices of production, or, perhaps, above their value. He pockets the difference, which exists between these prices of production and the market-prices of the other commodities produced at higher prices of production. He can do this, because the average labor time required socially for the production of these other commodities is higher than the labor time required under the new methods of production. His method of production is above the social average. But competition generalises it and subjects it to the Internal Contradictions, 311 general law. Then follows a fall in the rate of profit — perhaps first in this sphere of production, which gradually brings the others to its level — which is, therefore, wholly independent of the will of the capitalist It must be noted here, that this same law rules also those spheres of production, whose product passes neither directly nor indirectly into the consumption of the laborers or into the conditions under which their necessities are produced; it applies, therefore, also to those spheres of production, in which no cheapening of commodities can increase the relative surplus-value or cheapen labor-power. (It is true that a cheapening of constant capital may increase the rate of profit in all these lines while the exploitation of the laborer remains the same.) As soon as the new mode of production begins to expand, and thereby to furnish the tangible proof that these commodities can actually be produced more cheaply, the capitalists working under the old methods of production must sell their product below their full prices of production, because the value of these commodities has fallen, because the labor time required by these capitalists for the production of these commodities is longer than the social average. In one word — this appears as the effect of competition — these capitalists are compelled to introduce the new method of production, under which the proportion of the variable to the constant capital has been reduced.
All circumstances, which bring about the cheapening of commodities by the employment of improved machinery amount in the last analysis to a reduction of the quantity of labor absorbed by the individual commodities; in the second place, to a reduction of the wear and tear portion of machinery transferred to the value of the individual commodity. To the extent that the wear and tear of machinery is less rapid, it is distributed over more commodities and displaces more living labor during its period of reproduction. In both cases the quantity and value of the fixed constant capital are increased over those of the variable capital.
" All other things being equal, the power of a nation to save from its profits varies with the rate of profits, is great 312 Capitalist Production.
when they are high, less, when low; but as the rate of profit declines, all otlier things do not remain equal...A low rate of profit is ordinarily accompanied by a rapid rate of accumulation, relatively to the numbers of the people, as in England...a high rate of profit by a slower rate of accumulation, relatively to the numbers of the people." Examples: Poland, Russia, India, etc. (Richard Jones, An Introductory Lecture on Political Economy, London, 1833, p. 50ff.) Jones emphasises correctly that in spite of the falling rate of profit the inducements and faculties to accumulate are augmented; first, on account of the growing relative overpopulation; secondly, because the growing productivity of labor is accompanied by an increase in the mass of use-values produced by the same exchange value, that is, an increase in the material elements of capital, thirdly, because the lines of production become more varied; fourthly, because the credit system, stock companies, etc., are developed, and with them the facility of converting money into capital without becoming an industrial capitalist; fifthly, because the wants and the greed for wealth increase; sixthly, because the mass of investments in fixed capital grows; etc.
The following three principal facts of capitalist production must be kept in mind: 1) Concentration of means of production in a few hands, whereby they cease to appear as the property of the immediate laborers and transform themselves into social powers of production. It is true, they first become the private property of capitalists. These are the trustees of bourgeois society, but they pocket the proceeds of their trusteeship.
2) Organisation of labor itself into social labor, by social co-operation, division of labor, and combination of labor witli natural sciences.
In both directions, the capitalist mode of production abolishes private property and private labor, even though it does so in contradictory forms.
3) Creation of the world market.
The stupendous productive power developing under the cap- Internal Contradictions. 313 italist mode of production relatively to population, and the increase, though not in the same proportion, of capital values (not their material substance), which grow much more rapidly than the population, contradict the basis, which, compared to the expanding wealth, is ever narrowing and for which this immense productive power works, and the conditions, under which capital augments its value. This is the cause of crises.
PART IV.
TEAXSFORMATIOlNr OF COMMODITY-CAPITAL AXD MONEY-CAPITAL INTO COMMEECIAL CAPITAL AND FINANCIAL CAPITAL (MER- CHANT'S CAPITAL).
CHAPTER XVL COMMERCIAL CAPITAL.
Merchant's capital, or trading capital, consists of two subdivisions, namely commercial capital and financial capital, which we shall now proceed to define more in detail, so far as is necessary for the analysis of capital in its innermost structure. This is so much the more needed, as modern political economy, even in its best representatives, indiscriminately mixes trading capital with industrial capital and wholly overlooks the characteristic peculiarities of the former.
The movements of commodity-capital have been analysed in volume II. The total capital of society exists always in part in commodities on the market about to be converted into money, and this part is naturally made up of ever changing elements and is continually changing in quantity. Another part exists as money on the market, ready to be converted into commodities. These portions of the total capital are perpetually passing through these metamorphoses. To the extent that this function of capital in the process of circulation becomes a special function of independent capital and becomes an established service assigned by division of labor to some particular species of capitalists, the commodity-capital becomes commercial or financial cajiital.
Commercial Capital. 315 In volume II, chapter VI, under the head of cost of circulation, 2 and 3, we have explained to what extent the transportation industry, the storage and distribution of commodities in a distributable form, may be regarded as processes of production continuing within the process of circulation. These incidents in the cifculation of commodity-capital are sometimes confounded with the peculiar functions of commercial or financial capital. It is true that the peculiar functions of these last-named forms of capital are sometimes practically combined with those incidental ones, but with the advancing development of social division of labor the functions of merchant's capital evolve into a distinct type and are separated from those real functions connected with those incidents in circulation. For our present purpose, which is to define the specific difference of this special form of capital, we must leave aside those other functions as irrelevant. So far as capital employed only in the process of circulation, such as commercial capital, combines at times those other functions with its specific ones, it does not appear in its typical form. We do not get its pure type, until we strip it of all incidental functions.
We have seen that the existence of capital in the shape of commodity-capital and tlie metamorphoses through which it passes within the sphere of circulation in its capacity as commodity-capital on the market — a series of metamorphoses expressed by buying and selling, conversion of commodity-capital into money-capital and money-capital into commoditycapital — form a phase in the process of reproduction of industrial capital, that is, a phase in its process of production as a whole. But we have also seen at the same time that it is distinguished in its function as capital of circulation from its function as productive capital. These are two different and separate forms of existence of the same capital. One portion of the total social capital is continually on the market in the form of capital of circulation, passing through those metamorphoses. For each individual capital, however, its existence as commodity-capital, and its metamorphoses in this form, represent merely ever vanishing and ever renewed points 3i6 Capitalist Production.
of transition, stages of transition in the continuity of its process of production. And the elements of commodity-capital on the market vary continually, being perpetually withdrawn from the market and just as perpetually returned to it as new products of tlie process of production.
Commercial capital is nothing else but a changed form of a portion of this capital of circulation, which exists continually on the market in the process of its metamorphoses within the sphere of circulation. We say explicitly, a portion, because a portion of the selling and buying of commodities takes place between the industrial capitalists themselves. We leave this portion entirely out of consideration in this analysis, because it contributes nothing to the definition of the concept, or to the understanding of the specific nature, of merchant's capital. Moreover, it has been exhaustively treated in volume II.
The dealer in commodities, as a capitalist, appears first on the market as the representative of a certain sum of money, which he advances in his capacity as a capitalist. lie desires to transform this sum of money from its original value X into X -j- &x, that is, the original sum plus his profit. But it is evident that his capital must first enter the market in the shape of money, not only on account of his capacity as a cajntalist in general, but also as a trader in commodities in particular. For he does not produce any commodities. He merely trades in them, he acts as middleman in their movements, and in order to be able to trade in them, he must first buy them, must be the owner of money-capital.
Take it that a trader in commodities owns 3,000 p.st., which he invests as a trading capital. He bu}S with these 3,000 p.st., say, 30,000 yards of linen from some linen manufacturer, at 2 sh. per yard. Then he sells his 30,000 yards. If the annual average rate of profit is 10%, and if he makes a profit of 10% after deducting all incidental expenses, then he has converted his 3,000 p.st. into 3,300 p.st. at the end of one year. How he makes this profit is a question which we shall discuss later. At this place we merely intend to observe the form, which the movements of his capital take. He con- Commercial Capital. 317 tinually buys with his 3,000 p.st. linen and sells this linen; he continually repeats this operation of buying for the purpose of selling, M — C — M', the simple form of capital confined entirely to the sphere of circulation and not interrupted by the intervention of the process of production, which lies outside of its own movement and function.
What, then, is the relation of this commercial capital to the commodity-capital representing a mere passing phase of industrial capital? So far as the linen manufacturer is concerned, he has realised the value of his linen with the money of the merchant. He has thereby completed the first phase in the metamorphosis of commodity-capital, its conversion into money, and lie can now, provided that circumstances remain the same, proceed to reconvert this money into yarn, coal, wages, etc., or into means of existence, etc., for the consumption of his revenue. Leaving aside the spending of his revenue, he can continue his process of production.
But while the sale of the linen, its metamorphosis into money, has taken place so far as its direct producer is concerned, it has not yet taken place so far as the linen itself is concerned. It is still on the market as a commodity-capital and awaits the completion of its first metamorphosis, awaits its sale. Nothing has happened to this linen but a change in the person of its owner. From the point of view of its own destination, of its position in the process, it is still a commodity-capital, a saleable commodity; only, it is now in the hands of the merchant instead of those of the manufacturer. The function of selling it, of serving as an agent in the first phase of its metamorphosis, has been transferred from the manufacturer to the merchant, has been converted into the particular business of the merchant, while it used to be a function, which the producer had to perform after completing the process of its production.
'Now let us assume that tlie merchant would not succeed in disposing of those 30,000 yards of linen during the interval, which the linen manufacturer requires for the production of another lot of 30,000 yards and its marketing at 3,000 p.st. In that case, the merchant cannot buy this new lot, because 3i8 Capitalist Production.
he still has the old stock of 30,000 yards on hand, which he has not yet reconverted into money-capital. A stagnation then ensues, an interruption of reproduction. Of course, the linen manufacturer might have some additional money-capital in reserve, which he might convert into productive capital independently of the sale of those 30,000 yards of linen, in order to continue his process of production. But this assumption would not alter the matter. So far as the capital tied up in the 30,000 yards of linen is concerned, its process of reproduction is and remains interrupted. Here we see indeed very clearly, that the operations of the merchant are really nothing but operations which must be performed under all circumstances in order to convert the commodity-capital of the producer into money-capital, operations, which promote the functions of the commodity-capital in the process of circulation and reproduction. If a clerk of the producer were to attend exclusively to the sale, and also with the purchase, instead of an independent merchant, this connection would not be obscured for a moment.
Commercial capital, then, is nothing but the commoditycapital of the producer, which has to pass through its transformation into money and to perform its function of commodity-capital on the market. The difference is only that this incidental function of the producer is now established as the exclusive business of a special kind of capitalists, of merchants, and becomes the independent business of a special investment of capital.
This is furthermore shown in the specific fonn of the circulation of commercial capital. The merchant buys a commodity and then sells it: M — C — M'. In the simple circulation of commodities, or even in tlie circulation of commodities as it appears when a process of circulation of industrial capital, C — M — C, circulation is promoted by the circumstance that every piece of money changes hands twice. The linen manufacturer sells his commodity, the linen, converts it into money; the money of the buyer passes into his hands. With this money he buys yarn, coal, labor, etc., he spends the same money for the purpose of reconverting the value of linen Commercial Capital. 319 into those commodities which form the elements of production of linen. The commodity which he buys is not the same kind of commodity which he sells. He has sold products and bought means of production. But it is different with the movements of commercial capital. With his 3,000 p.st., the linen merchant buys 30,000 yards of li*nen. He sells the same linen for the purpose of recovering his money-capital (increased by profits) from the circulation. It is not the same pieces of money which here change places twice, but the same commodities; the linen passes from the seller into the hands of the buyer, and from the hands of the buyer, who becomes a seller, into those of another buyer. It is sold twice, and it may be sold still oftener, if a series of other merchants intervenes.
And it is precisely through this repeated sale, this twofold change of place of the same commodity^ that the money advanced by its first buyer for its purchase is recovered, its retiax to him promoted. In the case of C^ — M — C the twofold change of place of the same money assists in the sale of one form of commodities and the purchase of another form. In the other case, M — C — M', the twofold change of place of the same commodity assists in the recovery of the advanced money from the circulation. This shows that the commodity has not been definitely sold, when it has passed from the hands of the producer into those of the merchant, and that the latter merely continues the operation of selling — or promotes the functions of commodity-capital. But it shows at the same time that the operation C — M, which represents for the productive capitalist a mere function of his capital in its transient form of commodity-capital, constitutes for the merchant the movement M — C — M', that is, a specific utilisation of his advanced money-capital. A phase in the metamorphosis of commodities here shows itself, with reference to the merchant, in the form of M — C — M', that is, as the evolution of a separate kind of capital.
The merchant sells his commodity, in this case the linen, definitely to the consumer, whether it be a productive consumer (for instance, a bleacher), or an individual consumer who uses the linen for his private needs. By this means the 320 Capitalist Production.
merchant recovers his advanced capital (with a profit), and he can then repeat his operation. If the money had served merely as a means of payment, when the merchant bought the linen from the manufacturer, for instance, if the merchant would not have had to make payment until after six weeks, he might be able to pay the manufacturer without even advancing any money-capital of his own. But if he should not have sold the goods at the end of six weeks, he would have to advance his 3,000 p.st. on the date of the expiration, instead of advancing them on delivery of the linen. And if a fall in the market-price should have compelled him to sell below his purchase price, he would have to make good the loss out of his own capital.
N^ow, what is it that lends to commercial capital the character of an independently operating capital, while in the hands of the producer who does his own selling, it is obviously merelv a special forai of his capital in some particular phase of his process of reproduction, during its sojourn in the sphere of circulation?
1) It is, in the first place, the fact that the commoditycapital completes its definite conversion into money, its first metamorphosis, its function on the market in its capacity as commodity-capital, in the hands of another agent than the producer, and that this function of commedity-capital is promoted by the operations of the merchant, by his buying and selling, so that these transactions constitute themselves into a separate and independent business distinct from the other functions of industrial capital. Through it a portion of a function, which used to be performed in circulation as a special phase of the process of reproduction, is molded into the exclusive function of an independent agent of the circulation distinct from the producer. But this alone ^vould not be enough to give to this special business the aspect of a function of an independent capital distinct from the industrial capital in process of self-expansion. In fact, it does not assume this aspect in cases Avhere the trade in commodities is carried on by traveling agents, or by other direct agents of the industrial cap- Commercial Capital. 321 italist. Another element is necessary to complete its special character.
2) This second element is introduced by the fact that the independent agent of circulation, the merchant, advances money-capital (his own or borrowed) in this position. The transaction which amounts for the industrial capital in process of reproduction merely to C — M, to a conversion of commodity-capital into money-capital, to a mere sale, assumes for the merchant the form M — C — M', purchase and sale of the same commodity, and thus to a reflux, by means of a sale, of the money-capital expended in a purchase.
It is always C — M, the conversion of commodity-capital into money, which assumes for the merchant the form of M — C — M, whenever he advances money for the purchase of commodities from their producers; it is always the first metamorphosis of commodity-capital, although the same transaction may amount for a producer, or for industrial capital in process of reproduction, to M — C, a reconversion of money into commodities (means of production), the second phase of this metamorphosis. For the linen producer, the first metamorphosis was C — M, the conversion of commodity-capital into money-capital. This transaction amounts for the merchant to M — C, the conversion of his money-capital into commodity-capital.!N^ow^, if he sells this linen to a bleacher, it means M — C, conversion of money-capital into productive capital, for the bleacher, which represents the second metamorphosis of his commodity-capital; while it means C — M, the sale of the linen, for the merchant. Actually the commodity-capital manufactured by the producer has now been definitely sold. This transaction, M — C — M, on the part of the merchant represents but the action of a middleman for the transaction C — M between two producers. Or let us assume, that the linen manufacturer buys wdth a portion of the value of the sold linen some yarn from a yarn dealer. This is M — C for him. For the merchant selling the yarn it is C — M, resale of the yarn. So far as the yarn itself is concerned, in its capacity of commodity-capital, it amounts to 2^22 Capitalist Production.
its definite sale, its transition from the sphere of circulation into the sphere of production by means of C — M, the definite conclusion of its first metamorphosis. Whether the merchant buys from the industrial capitalist, or sells to him, the circulation of his merchant's capital, M — C — M, always expresses but the same thing, which constitutes, from the point of view of the commodity-capital itself, a form of transition of the industrial capital in process of reproduction, C — M, the mere completion of its first metamorphosis. The M — C of the merchant's capital amounts only for the industrial capitalist to C — M, but not for the commodity-capital produced by him. It is but the transfer of the commodity-capital from the hands of the industrial capitalist to those of the agent of circulation; Kot until the merchant's capital closes the transaction C — M does commodity-capital as such perform its final C — M. M — C — M amounts merely to two times C — M on the part of the same commodity-capital, two successive sales of it, which promote its last and final sale.
It is evident, then, that commodity-capital assumes in commercial capital the form of an independent class of capital through the fact that the merchant advances money-capital. This money-capital serves its purpose as capital only by attending exclusively to the conversion of commodity-capital into money-capital, and it accomplishes tliis by the continual purchase and sale of commodities. This is its exclusive work. This promotion of the process of circulation of industrial capital is the exclusive function of the money-capital with which the merchant operates. By means of this function he converts his money into money-capital, molds his M into M — C — M', and by the same process he converts commodity-capital into commercial capital.
So long and so far as commercial capital exists in the form of commodity-capital, from the point of view of the process of reproduction of the total social capital, it is obviously nothing else but that portion of the industrial capital in process of metamorphosis, which is still on the market and serves as commodity-capital. It is therefore only the money-capital advanced by the merchant, which is exclusively destined for Couimercial Capital. 323 purchase and sale and for this reason never assumes any other form but that of commodity-capital and money-capital, always remaining confined to the sphere of circulation. It is only this money-capital which is now to be analysed wath reference to the entire process of reproduction of capital.