Ben Fine & Alfredo Saad-Filho on the Marxian notion of “merchant’s capital”

One of the themes running through Marx’s treatment of capital in exchange is that there is a crucial distinction to be made between money as money and money as capital (see Chapters 4 and 12). Money functions as money when it acts as a means of exchange between two agents /…/ Hence, the role of money as money is understood by reference to simple commodity circulation, C – M – C. By contrast, money as capital is understood by reference to the circuit of capital, M – C … P … C’ – M’, where money is employed for the specific purpose of producing surplus value.
There is a definite relation between the two functions of money in capitalism, since simple commodity circulation and industrial production are closely connected. /…/
Marx’s treatment of merchant’s capital is an abstract one. Although capitalist production and trade are closely intermingled, they are structurally distinct, and Marx identifies a tendency towards the separation of these activities in the economy. /…/
Apart from distinguishing between industrial capital, which produces surplus value, and merchant’s capital, which circulates it and facilitates the transition between the commodity and money forms of capital (indirectly increasing the mass of surplus value produced by industrial capital), Marx points out that merchant’s capital itself tends to be divided into two forms: commercial capital (buying and selling of commodities) and money-dealing capital, or MDC (the handling of money).
With the development of production, the acts of buying and selling become the specialised tasks of particular capitalists (for example, transport, storage, wholesale and retailing). Industrial capitalists increasingly rely upon specialised merchant capitalists to undertake the realisation of (surplus) value. /…/
Marx adds that merchant’s capital is subject to competitive mobility between itself and industrial capital (industrial capitalists can move into trading, as is currently shown by the ubiquity of direct sales on the internet, and vice versa, for example, when large retailers contract manufacturers to produce ‘own brand’ goods). Consequently, the rate of return on merchant’s capital tends to become equal to the rate of profit on industrial capital, even though the former does not itself produce surplus value, which can only be created by productive labour engaged by industrial capital (see Chapter 3).
From the point of view of the commercial capitalists, the labour power purchased by them seems to be productive, because it is bought with variable capital with the intention of valorising the capital advanced. However, what it creates is not surplus value, but merely the ability of the commercial capitalists to appropriate part of the surplus value produced by industrial capital.
The theoretical distinction between industrial and merchant’s capital is simple enough in principle, once we accept the distinction between the spheres of production and exchange in the circuits of industrial capital. But matters are not so simple in practice. For historically, and continuing to the present day, there are what might be termed ‘hybrids’ cutting across these distinctions.
Perhaps an analogy will help. Take the self-employed. What is their status? They do not appear to be exploited wage workers. But what if their earnings are equivalent to those of a skilled (or even unskilled) wage earner, and they work just as long hours, and, possibly, for the same company, often without job security, pensions and other contractual rights? In this case, the self- employed are wage workers in disguise and are likely to be highly exploited, despite their apparent ‘autonomy’. There might also be self-employed whose earnings exceed value produced (for example, top accountants and lawyers whose income and status are similar to those of managers or small capitalists).
This latter example indicates that classification problems and the presence of hybrid categories do not invalidate abstract analysis. Indeed, they make it even more essential, to avoid a descent into ever more refined description. However, in order to proceed further the limits to abstract analysis must also be acknowledged, and reference must be made to empirical realities. In this relationship, the abstract categories provide the basis on which increasingly complex empirical outcomes can be understood. Exactly the same principle applies to the distinctions between the spheres of production and exchange, and between industrial and merchant’s capital.

Excerpt from Ben Fine & Alfredo Saad-Filho, Marx’s ‘Capital’, 6th ed., Chapter 11.


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