The Rise In The Rate of Turnover (9)
The merchant capital that is being considered here is comprised only of the capital advanced by the merchant to buy commodities from the industrial capitalist. It does not include the capital required for shops, shop staff and so on. That will be considered later. How can it be then that the merchant capital can offer a saving, and facilitate a rise in the general annual rate of profit, if all they do is to buy commodities, and sell them? The answer is that the merchant is able to buy and sell more frequently, and so needs to advance a smaller quantity of capital to circulate any given value of commodities.
One reason that the merchant is able to buy and sell more frequently, is because they specialise in that function. As with any form of division of labour, the specialisation that derives from it brings savings in time and productivity. But, there is another reason. Any given productive-capital if they take on the task of selling their own commodities, has to tie up capital in the form of those commodities until such time as they are sold. But, equally they cannot sell commodities until they have produced them.
A merchant has no such restriction, because merchants sell the commodities of many different producers. If producer A, requires 4 weeks as the production time for their commodities, at the end of this period, they sell them to the merchant, for £1000. At the end of the next week, the merchant has sold these commodities for £1,002. They have turned over their £1,000 of capital with a profit margin of 0.2%. A is still 3 weeks away from being able to complete their production period, and so during this period would have no commodities to sell. But, the merchant with no such restriction, uses their £1,000 of advanced capital that has now returned to them, to buy £1,000 of commodities from producer B. They sell these by the end of the following week for £1,002, and so on.
The productive-capitalist could only advance their commodity capital 12 times during the year, because they can only advance it when it has been produced, i.e. completed its production period. Or put another way, for the four productive-capitals to circulate their capitals, on successive weeks, would require £4,000 of circulation capital. But, the merchant capitalist because they can buy from a whole range of producers, can turn over their capital 50 times during the year. £1,000 of merchant capital then circulates as many commodities here as would require £4,000 of capital to be advanced by individual productive-capitalists.
At the end of the year, the merchant has accumulated 50 lots of profit of £2 = £100, giving them the general annual rate of profit. But, had their capital only turned over at the same rate as the productive capital, four times as much would have been required. But, because the general annual rate of profit is calculated on the basis of the total capital advanced by both merchants and productive-capitalists, this greater amount of advanced capital would mean that the general annual rate of profit would fall. Its on this basis, described by Marx, that although merchant capital, does not directly produce additional surplus value, it does act to release capital for additional accumulation, and also thereby raises the general annual rate of profit.
It can be seen then why the increasing concentration of merchant capital into larger agglomerations, with an ability to turn over advanced capital at an ever increasing rate, particularly as a result of the rises in productivity that modern logistics, stock control systems, and overall revolution in ICT has brought about, is able to reduce considerably the quantity of capital that must be advanced to circulate a growing mass of commodities, and thereby to sell this mass of commodities at ever lower profit margins, whilst simultaneously bringing about a rise in the general annual rate of profit.
But, this is simply looking at how this is achieved on the basis of the capital advanced to buy those commodities. In reality, capital faces costs of circulation too, be they for the transport of commodities to markets, which increases the value of commodities, or the costs of storing, handling and selling those commodities, which does not add additional value, but is nevertheless a cost that must be recovered.
I will examine the role of merchant capital, and the transport industry in that respect next.