Merchant's, or trading, capital breaks up into two forms or sub-divisions, namely, commercial capital and money-dealing capital.
Commercial capital is nothing but a transmuted form of a part of this capital of circulation constantly to be found in the market, ever in the process of its metamorphosis, and always encompassed by the sphere of circulation.
The dealer in commodities, as a capitalist generally, appears on the market primarily as the representative of a certain sum of money, which be advances as a capitalist, i.e., which he wants to turn from x (its original value) into x + Dx (the original sum plus profit). But it is evident to him — not being just a capitalist in general, but rather a special dealer in commodities — that his capital must first enter the market in the form of money-capital, for he does not produce commodities. He merely trades in them, expedites their movement, and to operate with them he must first buy them, and, therefore, must be in possession of money-capital.
Commercial capital is, therefore, nothing but the producer's commodity — capital which has to undergo the process of conversion into money — to perform its function of commodity-capital on the market — the only difference being that instead of representing an incidental function of the producer, it is now the exclusive operation of a special kind of capitalist, the merchant, and is set apart as the business of a special investment of capital.
What is it, then, that lends to commercial capital the character of an independently operating capital, whereas in the hands of the producer who does his own selling it is obviously merely a special form of his capital in a specific phase of the reproduction process during its sojourn in the sphere of circulation?
First: The fact that commodity-capital is finally converted into money, that it performs its initial metamorphosis, i.e., its appropriate function on the market qua commodity-capital while in the hands of an agent other than the producer, and that this function of commodity-capital is effected by the merchant in his operations, his buying and selling, so that these operations assume the appearance of a separate undertaking distinct from the other functions of industrial capital — and hence of an independent undertaking. It is a distinct form of the social division of labour, so that part of the function ordinarily performed as a special phase of the reproduction process of capital, in this case — circulation, appears as the exclusive function of specific circulation agent distinct from the producer. But this alone would by no means give this particular business the aspect of a function of a specific capital distinct from, and independent of, industrial capital engaged in the process of reproduction; indeed, it does not so appear in cases where trade is carried on by travelling salesmen or other direct agents of the industrial capitalist. Therefore, there must be a second element involved.
Second: This arises from the fact that in his capacity as an independent circulation agent, the merchant advances money-capital (his own or borrowed). The transaction which for industrial capital in the reproduction process amounts merely to C — M, i.e., converting commodity-capital into money-capital, or mere sale, assumes for the merchant the form of M — C — M', or purchase and sale of the same commodity, and thus of a reflux of money-capital which leaves him in the purchase, and returns to him in the sale.
Thus, commodity-capital assumes in commercial capital the form of an independent type of capital because the merchant advances money-capital, which is realized and functions as capital only by serving exclusively to mediate the metamorphosis of commodity-capital, its function as commodity-capital, i.e., its conversion into money, and it accomplishes this by the continual purchase and sale of commodities. This is its exclusive operation. This activity of effecting the circulation process 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, moulds his M into M — C — M, and by the same process converts commodity-capital into commercial capital.
