Financial Capital. 375 The business of money-exchange, so far as it consists merely of notes of payment to travelers from one money-exchanger in one country to another in another country, developed as early as Roman and Grecian times out of thci simple money-exchange.
The trade with gold and silver as commodities (raw materials for the making of articles of luxury) forms the primitive basis of bullion trade, or of that trade, which promotes the functions of money as world money. These, functions, as previously explained (Volume I, chapter III, 3c), are twofold: A currency back and forth between the various national spheres of circulation for the purpose of balancing the international payments and for performing the migrations of capital in quest of interest; simultaneously with this movement, there is a movement of precious metals from their sources of production across the world market and a distribution of their supply over the various national spheres of circulation. In England, the goldsmiths still served as bankers during the gi-eater part of the iTtli century. The way in which the balancing of international accounts in the money trade is further developed, is not discussed here, any more than any points referring to the business of dealing in valuable papers, in short, we leave out of consideration all special forms of the credit system, since this does not yet concern us here.
In the shape of world money, national money strips off its local character; one national money is expressed in another, and thus all of them are finally reduced to their contents in gold or silver, while these two metals, being the two commodities circulating as world money, are simultaneously reduced to their mutual ratios, which change continually. The money trader makes this intermediate business his special occupation. Money changing and bullion trading are thus the primitive forms of the money trade, and they arise from the twofold functions of money as national money and world money.
The capitalist process of production, and commerce in general, even under precapitalist methods, imply: 1 ) The accumulation of money in the shape of a hoard, that 376 Capitalist Production.
is, in the present case, the accumulation of that part of capital, which must always be on hand in the form of money, as a reserve fund of means of payment and means of purchase. This is the first form of a hoard, such as it reappears under the capitalist mode of production, and as it forms in general with the development of merchants' capital, at least for the purposes of this capital. These remarks apply to national as well as international circulation. This hoard is in continuous flux, pours ceaselessly into circulation, and returns uninterruptedly from it. The second form of a hoard is now that of fallow, unemployed, capital in the form of money, including newly accumulated and not yet invested money-capital. The functions first required by this fonnation of a hoard are those of safekeeping, bookkeeping, etc.
2) This is connected by an expenditure of money in buying, its reception on selling, making and receiving of payments, balancing of payments, etc. The money dealer performs all these services at first as a simple cashier of the merchants and industrial capitalists."^^ " " The institution of cashiers has probably nowhere preserved its original and independent character so pure as in the Dutch merchant towns (see on the origin of the cashier business in Amsterdam, E. Lusac, Hollands Rykdom, part III). Its functions partly coincide with those of the old Amsterdam Bank of Exchange. The cashier receives from the merchants, who employ his services, a certain amount of money, for which he opens a ' credit ' for them in his books. Furthermore they send him their due bills, which he collects for them and credits to their account. On the other hand, he makes payments on their notes {Kassiers briefjes) and charges their accounts with their current bills. He charges a small provision for these credits and debits, which yields him a corresponding remuneration for his labor only by the amount of business, which he can turn over between them. If payments are to be balanced between two merchants, who both deal with the same cashier, then such payments are simply settled by booking them mutually, while the cashiers balance their mutual claims from day to day. The cashier's business, then, consists at bottom of this promotion of payments.
Therefore it excludes industrial enterprises, speculations, and the opening of blank credits; for it must be a rule in this business that the cashier makes no payment to any one keeping an account with him above his credit." (Vissering, 1. c, p. 134.) On the banking associations of Venice: "The requirements and locality of Venice, where the carrying of cash is more inconvenient than in other places, induced the large merchants of that town to found banking associations under due safeguards, supervision, and management. The members of such an association deposited certain sums, on which they drew checks for their creditors, whereupon the paid sum was deducted on the page of the debtor in the book kept for that purpose and added to the sum, which was credited in the same book to the creditor. This is the first beginning of the socalled giro banks. These associations are indeed old. But if they are attributed to the 12th century, they are Financial Capital. 377 Dealing in money is fully developed, even in its first stages, as soon as its ordinary functions of lending and borrowing are supplemented by the credit business. Of this more in the following part, which deals with interest-bearing capital.
The bullion trade itself, the transfer of gold or silver from one country to another, is merely the result of the trade in commodities. It is determined by the quotations of bills of exchange, which express the stand of the international payments and of the rate of interest on the different markets. The bullion trader as such acts but as an intermediary between results.
In discussing the way, in which the movements and forms of money develop out of the simple circulation of commodities, we have seen (Vol. I, chap. Ill), that the movements of the mass of money circulating as a means of purchase and payment are determined by the metamorphosis of commodities, by the volume and velocity of this metamorphosis. And we know now, that this metamor|3hosis is itself but a phase in the entire process of reproduction. As for the movement of the raw materials of money — gold and silver — from their places of production, it resolves itself in a direct exchange of commodities, an exchange of gold and silver as commodities for other commodities. Hence it is as much a phase of the exchange of commodities as the securing of iron or other metals by means of exchange. And so far as the movements of precious metals on the world-market are concerned (we leave aside at this point the consideration of their movements to the extent that they express the transfer of capital by loans, a transfer, which takes place also in the shape of commoditycapital), they are quite as much determined by the international exchange of commodities as the movements of money as a national means of purchase and payment are determined by the exchange of commodities on the home market. The emigrations and immigrations of precious metals from one national sphere to another, which are caused by a depreciation of national coins, or by a double standard, are extraneous to confounded with the State Loan Institute, which was established in 1171." (Hiill- 2y8 Capitalist Production.
the circulation of money as such and represent merely corrections of deviations brought about arbitrarily by state decrees. And finally, as concerns the formation of hoards, which constitute reserve funds for means of purchase and ])ayment, either for the home trade or for foreign trade, and likewise of hoards, which represent merely a form of capital temporarily unemployed, they are both necessary precij)itates of the process of circulation.
Just as the entire circulation of money, in its volume, its forms, and movements, is purely a result of the circulation of commodities which in its turn represents from the capitalist point of view only the process of circulation of capital (including the exchange of capital for revenue, and of revenue for revenue, so far as the expenditure of revenue is realised in retail trade), so it is a matter of course, that the trade in money does not promote merely the circulation of money, a mere result and phenomenon of the circulation of commodities. This circulation of money itself, as a phase in the circulation of commodities, is a fundamental requisite for the trade in money. This trade promotes merely the technical operations of money-circulation, concentrating, abbreviating, simplifying them. The trade in money does not form the hoards, but supplies the technical means by which the formation of hoards may be reduced to its economical minimum (so far as it is voluntary, that is, so far as it is not an expression of unemployed capital or of disturbances of the process of reproduction). For if the reserve funds of means of purchase and payment are managed for the capitalist class as a whole, they need not be so large as they would have to be, did each capitalist manage his own. The trade in money does not buy the precious metals, but merely promotes their distribution, as soon as the trade in commodities has bought them. The trade in money facilitates the squaring of balances, so far as money serves as a means of payment, and reduces by the artificial mechanism of these compensations the amount of money required for this purpose. But it determines neither the connections, nor the volume, of the mutual payments. For instance, the bills of exchange and checks, which are exchanged; Financial Capital. 379 for one another in banks and clearing houses, reflect quite independent transactions and are the results of real operations. It is merely a question of a better technical compensation of these results. So far as money serves as a means of purchase, the volume and number of purchases and sales are quite independent of the money trade. This trade cannot do anything but abbreviate the technical operations that go with buying and selling, and by this means it is enabled to reduce the amount of cash money required to turn the commodities over.
The money trade in its pure form, which we consider here, that is, the money trade not complicated by the credit system, is concerned only with the technique of a certain phase of the circulation of commodities, namely with the circulation of money and the different functions of money following from its circulation.
This distinguishes the money trade essentially from the trade in commodities, which promotes the metamorphosis of commodities and their exchange, or which gives even to this process the aspect of a process of a certain capital separated from the industrial capital. While, therefore, the commercial capital has its own form of circulation, M — C — M, in which the commodity changes hands twice and thereby recovers the money, in distinction from C — M — C, in which the money changes hands twice and thereby promotes the exchange of commodities, there is no such special form of circulation, which can be demonstrated in the case of financial capital.
To the extent that money-capital is advanced by a separate class of capitalists for the technical promotion of the circulation of money — a capital representing on a reduced scale the additional capital, which the merchants and industrial capitalists must otherwise advance themselves for these purposes — the general form of capital, M — M', is found also here. By the advance of M, the advancing capitalist secures M -|- ^ M-But the promotion of the transaction M — M' does not concern itself in this case with the objective materials, but only with the technical processes of this metamorphosis.
It is evident, that the mass of money-capital, with which the 380 Capitalist Production.
money dealers have to operate, is the money-c&pJt&l of tlie merchants and industrial capitalists in process of circulation, and that the operations of the money dealers aro merely those originally performed by the merchants and industrial capitalist.
It is equally evident, that the profit of the money dealers is nothing but a deduction from the surplus-value, since they are operating merely with already realised values (even when they have been realised in the form of creditors' claims).
As in the trade with commodities, so in that with mone;y a duplication of functions takes place. For a portion of the technical operations connected with the circulation of money must be carried out by the dealers and producers of commodities themselves.
CHAPTER XX.
HISTORICAL DATA CONCEENING MERCHANTS CAPITAL, The particular fonn^, in which tlie commercial capital and financial capital accumulate money, will be discussed in the next part of this volume.
From what has gone before it follows as a matter of course that nothing can be more absurd than to consider merchants' capital, whether in the shape of commercial or of financial capital, as some particular kind of industrial capital, such as that invested in mining, agriculture, stock raising, manufacture, transportation, etc., which constitute side lines of industrial capital formed by division of social labor and thus different spheres for its investment. The simple observation, that every industrial capital, when in the circulation phase of its process of reproduction, performs in the shape of commoditycapital and money-capital the very same functions, wdiich appear as exclusive functions of the two forms of merchants' capital, should make such a crude conception impossible. On the other hand, in commercial and financial capital the differences between the productive nature of industrial capital and its functions in the sphere of circulation are independently in- Historical Data. 381 dividualised, by transferring definite fonns and functions assumed momentarily by industrial capital into independent forms and functions of separate portions of capital permanently tied up in circulation. A changed form of industrial capital is Avidely different from distinctions between productive capitals following from the nature of the various lines of industry.
Aside from the brutality with which the economist ordinarily handles distinctions of form, in which he is interested only so far as their material side is concerned, the vulgar economist is influenced by two other reasons in his violation of distinctions. There is, in the first place, his incapability to explain the peculiar nature of mercantile profit. In the second place, he writes for the apologetic purpose of proclaiming his opinion, that the process of production by its very nature, is the source of such forms as commodity-capital and money -capital, or later of merchants' capital and financial capital, instead of showing that they are due to the specific form of capitalist production, which is conditioned above all on the circulation of commodities and therefore of money.
If commercial capital and financial capital do not differ from the production of grain any more than this differs from stock raising and manufacture, then it is evident that production and capitalist production are one and the same thing, and that especially the distribution of the social products among the members of society for the purpose of productive or individual consumption need no more be promoted by merchants and bankers than the consumption of meat by stock raising or that of clotlies by their manufacture."**^ *" Smart Mr. Roscher has figured out that, since certain people designate trade as a mediation between producers and consumers, "one" might just as well designate production itself as a mediation of consumption (between whom?), and this implies, of course, that the merchants' capital is as much a part of the productive capital as agricultural and industrial capital. In other words, because I can say, that man can mediate his consumption only by means of production (and he has to do this even without getting his education at Leipsic), or that labor is required for the appropriation of the products of nature (which might be called a mediation), it follows, that a mediation arising from a specific form of production — a real mediation — has the same absolute character and rank of a necessity. The word mediation settles everything. Moreover, the merchants are not mediators between producers and consumers (leaving out of consideration consumers which do not produce), but mediators of the exchange of products of 382 Capitalist Production.
The great economists, such as Smith, Eicardo, etc., are embarrassed over mercantile capital as a special kind, since they analyse the basic form of capital, industrial capital, and take liotice of capital of circulation (commodity-capital and moneyjapital) only to the extent that it is a phase in the process of ♦eproduction of all capital. The rules concerning the formation of value, profit, etc., which are directly deduced from an analysis of industrial capital, do not fit merchants' capital directly. Therefore these economists leave merchants' capital entirely out of consideration and mention it only as a kind of industrial capital. Whenever they treat of it particularly, as Eicardo does in dealing with foreign commerce, they seek to demonstrate that it does not create any value (and consequently no surplus-value). But Avhatever is true of foreign commerce, applies also to home commerce.
Hitherto we have considered merchants' capital merely from the point of view of the capitalist mode of production, and within its limits. However, not only commerce, but also merchants' capital, is older than the capitalist mode of production. In fact, it represents historically the oldest free existence of capital.
As we have already seen that the money trade and the capital advanced for it require nothing for their existence but the presence of commerce on a large scale, and further of commercial capital, it is only the latter, which we have to consider here.
Since commercial capital is tied up in the circulation, and since its function consists exclusively in promoting the exchange of commodities, it follows that it requires no other condition for its existence — aside from undeveloped forms arising from direct barter — but those indispensable for the /simple circulation of money and commodities. Or rather, tlie circulation of money is the condition of its existence. iNc matter what may be the basis on which production is carried on, which throws its products into circulation as commodiproducers among themselves. They are but middle men in an exchange, which in a thousand cases takes place without them.
Historical Data. 383 ties • — ■'.vhetlier it be the basis of a primitive commune, or of slave production, or of small agricultural, small bourgeois, or capitalist — the character of the products as commodities is not altered, and as commodities they have to pass through the process of exchange and through the forms incidental to it. The extremes, between which merchants' capital acts as a mediator, exist for it as given propositions, just as they do for money and its movements. The only requisite is that these extremes should be present as commodities, regardless of whether production is wholly a production of commodities, or whether only the surplus of the independent producers over the immediate needs satisfied by their production is thrown on the market. The merchants' capital promotes only the movements of these extremes, these commodities, which are premises of its own existence.
The extent to which j^roduction ministers to commerce and supplies the merchants, depends on the mode of production. It reaches its maximum under a fully developed capitalist production, in w^hich the product is primarily produced as a commodity, not for direct subsistence. On the other hand, on the basis of every mode of production, commerce promotes the production of surplus products destined for exchange, for the purpose of increasing the enjoyments of wealth of the producers (who are here understood to be the owners of the products). Commerce impregnates production more and more with the character of a production for exchange.
The metamorphosis of commodities, their movements, consist, 1) materially, of an exchange of different commodities for one another; 2) formally, of a conversion of commodities into money by sale, and a conversion of money into commodities by purchase. And the functions of merchants' capital resolve themselves into these functions of buying and selling commodities. It promotes merely the exchange of commodities, which must be conceived at the outset as being something more than a bare exchange of commodities between direct producers. Under slavery, feudalism, vassalage, so far as primitive organisations are concerned, it is the slave holder, the feudal lord, the tribute collecting state, who are the owners 384 Capitalist Production.
and sellers of the products. The merchant buys and sells for many. In his hands are concentrated purchases and sales, and purchase and sale cease consequently to be dependent on a direct necessity of the buyer (as a merchant).
But whatever may be the social organisation of the spheres of production, whose exchange of commodities the merchant promotes, his wealth exists always in the form of money and his money always serves as capital. Its form is always M — C — M'. Money, the independent form of exchange value, is his starting point, expansion of the exchange value his independent purpose. He occupies himself with the exchange of commodities and the operations incidental to it, which are separated from production and performed by a nonproducer, and this is merely a means to increase wealth and at that wealth in its most general social form, exchange value. His compelling motive and compelling end are the conversion of M into M + A M. The transactions M — C and C — M, which promote the act M — M', appear merely as stages of transition in this conversion of M into M -f" A M. This M — C — M' is the characteristic movement of merchants' capital which distinguishes it from C — M — C, the exchange of commodities between the producers themselves, which has for its ultimate end the exchange of use-valueg.
To the extent that production is undeveloped, the money wealth Avill be concentrated in the hands of merchants, will appear in the specific form of merchants' wealth.
Within the capitalist mode of production — that is, as soon as capital has seized hold of production and given to it a wholly changed and specific form — merchants' capital a]> pears merely as a capital with a specific function. But in all previous modes of production, and so much the more production ministers to the direct wants of the producers themselves, merchants' capital appears as the capital which performs the function of capital.
There is, then, no difficulty in understanding how it is that ' that merchants' capital is the historical form of capital long before capital has subjected production to its control. Its existence and development to a certain level are themselves I Historical Data. 385 historical premises for the development of capitalist production. For they are, 1), premises for the concentration of moneyed wealth, and 2), the capitalist mode of production is conditioned on production for exchange, commerce on a large scale instead of with a few individual customers, and this requires also a merchant, who does not buy for the satisfaction of his own individual wants, but concentrates the transactions of many buyers in one commercial transaction. On the other hand, all development of merchants' capital tends to give to production more and more the character of a production for exchange and to impregnate the products more and more with the character of commodities. But the development of merchants' capital by itself is incapable of bringing about and explaining the transition from one mode of production to another, as we shall presently see.
Within capitalist production, the merchants' capital is reduced from its former independent existence to a special phase in the investment of capital in general, and the compensation of profits reduces its rate of profits to the general average.. Then it serves only as an agent of productive capital. The particular social conditions, which formed together with the development of merchants' capital, are then no longer paramount. On the contrary, where merchants' capital still predominates, we find backward conditions. TJiis is true even of one and the same country, in which, for instance, the pure merchants' towns form far better analogies with past conditions than the manufacturing towns.^''' An independent and prevailing development of capital in the shape of merchants' capital signifies that production is not subject to capital, in other words, it means that capital devel- "Mr. W. Kiesselbach (in his Dcr Gang (Jes Welthandels im Mittelalter, 1860) is indeed still living in the conceptions of a world, in which the merchants' capital is the general form of capital. He has not the least inkling of the modern meaning of capital, any more than Mommsen has, when he speaks in^^s history of Rome of "capital" and "the rule of capital." In modern Englisli history, the commercial estate proper and the merchant towns are also political reactionaries and in league with the landed and financial aristocracy against industrial capital. Compare, for instance, the political role of Liverpool as against Manchester and Birmingham. The complete rule of industrial capital was not acknowledged by English merchants' capital and moneyed interests until after the abolition of the duties on corn, etc.
y 386 Capitalist Production ops on the basis of a mode of jDroduction independent and outside of it. The independent development of merchants' capital stands therefore in an inverse ratio to the general economic development of society.
The independent mercantile wealth, as a prevailing form of capital represents the independent establishment of the process of circulation as against its extremes, and these extremes are the exchanging producers themselves. These extremes remain independent of the process of circulation, just as this circulation remains independent of them. The product becomes a commodity in this case by way of commerce. It is commerce which, under such conditions, develops products into commodities; it is not the produced commodity itself which, by its movements, gives rise to commerce. Capital in the capacity of capital appears here first in the process of circulation. In the process of circulation money first develops into capital.
In the circulation, the products first assume the character of exchange values, of commodities and money. Capital can and must form in the process of circulation, before it learns to control the extremes, that is, the various spheres of production between which circulation intervenes as a mediator. The circulation of money and commodities may act as an intermediary between spheres of production of widely different organisation, whose internal structure is still, predominantely adjusted to the production of use-values. This independent status of the process of circulation, by which various spheres of production are connected by means of a third link, expresses two facts. On tlie one hand it shows that the circulation has not yet seized hold of production, but as yet regards it as an existing fact. On the other hand, it shows that the process of production has not yet absorbed circulation and made a phase of production of it. But in capitalist production, both of these things are accomplished. The process of production rests wholly upon the circulation, and the circulation is a mere phase of transition of production, in which the product, having been created as a commodity, is realised in money and its elements of production replaced by products, which have likewise been created in the shape of commodities.
I Historical Data. 387 That form of capital, which developed directly in circulation, the merchants' capital, appears here merely as one of the forms of capital in its process of reproduction.
The rule, that the independent development of merchantsN capital is inversely proportioned to the degree of development/ of capitalist production, becomes particularly manifest in the history of the carrying trade, for instance, among the Venetians, Genoese, Dutch, etc., where the principal gains were not made by the exportation of the products of the home industries, but by the promotion of the exchange of products of commercially and otherwise economically undeveloped societies and by the exploitation of both spheres of production.^^ Here the merchants' capital is pure, separated from the extremes, the spheres of production, between which it intervenes. This is one of the main sources of its formation. But this monopoly of the carrying trade disintegrates, and with it this trade itself, in proportion as the economic development of peoples advances, whom it exploits at each end of its course, and whose backward development formed the basis of this trade. In the carrying trade, this appears not only as the disintegration of a special line of commerce, but also as the disintegration of the supremacy of jDurely commercial nations and of their commercial wealth in general, which rested upon this carrying trade. This is but one of the special forms, which expresses the subordination of the commercial capital to the industrial capital with the advance of cajDitalist production. The manner in which merchants' capital behaves wherever it rules over production is drastically illustrated, not only by the colonial economy (the colonial system) in general, but particularly by the methods of the old Dutch East India Company.
Since the movement of merchants' capital is M — C — M',