Commercial capital, therefore — stripped of all heterogeneous functions, such as storing, expressing, transporting, distributing, retailing, which may be connected with it, and confined to its true function of buying in order to sell — creates neither value nor surplus-value, but acts as middleman in their realization and thereby simultaneously in the actual exchange of commodities, i.e., in their transfer from hand to hand, in the social metabolism. Nevertheless, since the circulation phase of industrial capital is just as much a phase of the reproduction process as production is, the capital operating independently in the process of circulation must yield the average annual profit just as well as capital operating in the various branches of production. Should merchant's capital yield a higher percentage of average profit than industrial capital, then a portion of the latter would transform itself into merchant's capital. Should it yield a lower average profit, then the converse would result. A portion of the merchant's capital would then be transformed into industrial capital. No species of capital changes its purpose, or function, with greater ease than merchant's capital.
Since merchant's capital does not itself produce surplus-value, it is evident that the surplus-value which it pockets in the form of average profit must be a portion of the surplus-value produced by the total productive capital. But now the question arises: How does merchant's capital attract its share of the surplus-value or profit produced by the productive capital?
It is just an illusion that commercial profit is a mere addition to, or a nominal rise of, the prices of commodities in excess of their value.
Suppose, the total industrial capital advanced in the course of the year = 720c + 180v = 900 (say million £), and that s' = 100%. The product therefore = 720c + 180v + 180s. Let us call this product or the produced commodity-capital, C, whose value, or price of production (since both are identical for the totality of commodities) = 1,080, and the rate of profit for the total social capital of 900 = 20%. These 20% are, according to our earlier analyses, the average rate of profit, since the surplus-value is not calculated here on this or that capital of any particular composition, but on the total industrial capital of average composition. Thus, C = 1,080, and the rate of profit = 20%. Let us now assume, however, that aside from these £900 of industrial capital, there are still £100 of merchant's capital, which shares in the profit pro rata to its magnitude just as the former. According to our assumption, it is 1/10 of the total capital of 1,000. Therefore, it participates to the extent of 1/10 in the total surplus-value of 180, and thus secures a profit of 18%. Actually, then, the profit to be distributed among the other 1/10 of the total capital is only = 162, or on the capital of 900 likewise = 18%. Hence, the price at which C is sold by the owners of the industrial capital of 900 to the merchants = 720c + 180v + 162s = 1,062. If the dealer then adds the average profit of 18% to his capital of 100, he sells the commodities at 1,062 + 18 = 1,080, i.e., at their price of production, or, from the standpoint of the total commodity-capital, at their value, although he makes his profit only during and through the circulation process, and only from an excess of his selling price over his purchase price. Yet he does not sell the commodities above their value, or above their price of production, precisely because he has bought them from the industrial capitalist below their value, or below their price of production.
Thus, merchant's capital enters the formation of the general rate of profit as a determinant pro rata to its part in the total capital. Hence, if we say in the given case that the average rate of profit = 18%, it would = 20%, if it were not that 1/10 of the total capital was merchant's capital and the general rate of profit thereby lowered by 1/10. This leads to a closer and more comprehensive definition of the price of production.
By price of production we mean, just as before, the price of a commodity = its costs (the value of the constant + variable capital contained in it) + the average profit.But this average profit is now determined differently. It is determined by the total profit produced by the total productive capital; but not as calculated on the total productive capital alone, so that if this = 900, as assumed above, and the profit = 180, then the average rate of profit = 180/900 = 20%. But, rather, as calculated on the total productive + merchant's capital, so that with 900 productive and 100 merchant's capital, the average rate of profit = 180/1,000 = 18%. The price of production is, therefore = k (the costs) + 18, instead of k + 20. The share of the total profit falling to merchant's capital is thus included in the average rate of profit. The actual value, or price of production, of the total commodity-capital is therefore = k + p + m (where m is commercial profit). The price of production, or the price at which the industrial capitalist as such sells his commodities, is thus smaller than the actual price of production of the commodity; or in terms of all commodities taken together, the prices at which the class of industrial capitalists sell their commodities are lower than their value. Hence, in the above case, 900 (costs) + 18% on 900, or 900 + 162= 1,062. It follows, then, that in selling a commodity at 118 for which he paid 100 the merchant does, indeed, add 18% to the price. But since this commodity, for which he paid 100, is really worth 118, he does not sell it above its value. We shall henceforth use the term price of production in this, its more precise, sense.
It is evident, therefore, that the profit of the industrial capitalist equals the excess of the price of production of the commodity over its cost-price, and that commercial profit, as distinct from this industrial profit, equals the excess of the selling price over the price of production of the commodity which, for the merchant, is its purchase price; but that the actual price of the commodity = its price of production + the commercial profit. Just as industrial capital realizes only such profits as already exist in the value of commodities as surplus-value, so merchant's capital realizes profits only because the entire surplus-value, or profit, has not as yet been fully realized in the price charged for the commodities by the industrial capitalist. The merchant's selling price thus exceeds the purchase price not because the former exceeds the total value, but because the latter is below this value.
Merchant's capital, therefore, participates in leveling surplus-value to average profit, although it does not take part in its production. Thus, the general rate of profit contains a deduction from surplus-value due to merchant's capital, hence a deduction from the profit of industrial capital.
