5. The Law of the Tendency of the Rate of Profit to Fall

Assuming a given wage and working-day, a variable capital, for instance of 100, represents a certain number of employed labourers. It is the index of this number. Suppose £100 are the wages of 100 labourers for, say, one week. If these labourers perform equal amounts of necessary and surplus-labour, if they work daily as many hours for themselves, i.e., for the reproduction of their wage, as they do for the capitalist, i.e., for the production of surplus-value, then the value of their total product = £200, and the surplus-value they produce would amount to £100. The rate of surplus-value, s/v, would = 100%. But, as we have seen, this rate of surplus-value would nonetheless express itself in very different rates of profit, depending on the different volumes of constant capital c and consequently of the total capital C, because the rate of profit = s/C. The rate of surplus-value is 100%:

If c = 50, and v = 100, then p' = 100/150 = 66⅔%;

c = 100, and v = 100, then p' = 100/200 = 50%;

c = 200, and v = 100, then p' = 100/300 = 33⅓%;

c = 300, and v = 100, then p' = 100/400 = 25%;

c = 400, and v = 100, then p' = 100/500 = 20%.

This is how the same rate of surplus-value would express itself under the same degree of labour exploitation in a falling rate of profit, because the material growth of the constant capital implies also a growth — albeit not in the same proportion — in its value, and consequently in that of the total capital.

If it is further assumed that this gradual change in the composition of capital is not confined only to individual spheres of production, but that it occurs more or less in all, or at least in the key spheres of production, so that it involves changes in the average organic composition of the total capital of a certain society, then the gradual growth of constant capital in relation to variable capital must necessarily lead to a gradual fall of the general rate of profit, so long as the rate of surplus-value, or the intensity of exploitation of labour by capital, remain the same.

6. Counteracting Influences

There are some counteracting influences at work, which cross and annul the effect of the general law, and which give it merely the characteristic of a tendency, for which reason we have referred to the fall of the general rate of profit as a tendency to fall. The following are the most general counterbalancing forces:

1. INCREASING INTENSITY OF EXPLOITATION

2. II. DEPRESSION OF WAGES BELOW THE VALUE OF LABOUR-POWER

3. III. CHEAPENING OF ELEMENTS OF CONSTANT CAPITAL

IV. RELATIVE OVER-POPULATION

V. FOREIGN TRADE

VI. THE INCREASE OF STOCK CAPITAL

Lecture 12. Commercial Capital and Commercial Profit

1. Commercial Capital as the isolated part of industrial capital.

2. Commercial profit and mechanism of its formation.

1. Commercial Capital as the isolated part of industrial capital.

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.