Primary Accumulation

Primary Accumulation is the process Marx describes by which capital is initially formed.  It comprises a number of elements.  Firstly, before Capitalism proper arises, "capital" is accumulated in the form of Money Capital and Merchant Capital.  Using Marx's definition of what Capital is - a social relation based on Capital and Wage Labour, where these two appear as two sides of the same coin - these two types of "capital" are not capital at all.

Capital can only exist as one part of a social relation with wage labour.  Wage Labour creates surplus value, which is then accumulated to form new capital.  But, neither Money Capital, nor Merchant Capital employ Wage Labour to create Surplus Value.  In their original form both these types of "capital" obtain a profit by a process of unequal exchange.  The Money Capitalist lends out money, and receives back a larger sum of money, which includes a payment of interest.  The Merchant Capitalist buys commodities from a producer, at a price below their exchange value, and sells them at a price at or even above their exchange value.  The value of commodities always includes an amount of surplus value, because the commodity producer undertakes labour over and above necessary labour, in producing them.  Its out of this surplus value that the interest and commercial profit is appropriated, along with rent, and taxes. In fact, Marx says that the dominance of these  "antediluvian forms" of capital precludes the existence of capitalism, even though they form a necessary element of its development.

That is because these forms are one means by which large hoards of money can be accumulated, which, in turn, can be turned into capital i.e. can be used to employ Wage Labour.  That is one form in which Primary Accumulation can occur.  Another form is that some of those forces that become the Merchant or Money Capitalists, can themselves accumulate hoards of money - perhaps to set up in these businesses - by other activities.  So, for example, many merchants began as pirates and privateers, often with Royal approval for their activities.  People like Drake and Raleigh, and their Spanish and other European counterparts, were pirates who both stole booty from ships on the high seas, as well as acquiring, by various means, commodities from the Americas and elsewhere that could be sold back in Europe at high prices.

One of these commodities was, of course, slaves.  One of the main sources of Primary Accumulation in Britain, was indeed the so called Triangle Trade, whereby British merchant ships would pick up slaves from Africa, deposit them in the Caribbean, where they were set to work, by British Landlords, who had transferred their feudal activities abroad, producing sugar and other high value crops, which the merchant ships then brought back to Liverpool, where they were sold.  This was the basis of the Tate and Lyle Sugar Empire.  But, the huge funds derived from this trade also provided the initial Capital for the establishment of most of Britain's commercial banks.

The Merchant Capitalists applied the same principles in Britain, buying from British independent producers commodities below their value, and selling those commodities in nearby markets at prices above their values.  It was a simple step from this process to provide those producers with the materials required for their production, and then to bring those producers together in a manufactory.

In addition to this process, however, as Marx points out, many of the actual industrial capitalists, the capitalists proper, were themselves small independent producers, like Wedgwood, who accumulated capital by saving from the surplus value they produced, i.e. the labour undertaken in excess of necessary labour.  Marx notes that, in this initial period, these industrial capitalists were indistinguishable from their workers.  If anything they may have appeared more miserable, precisely because they were saving a proportion of their revenue rather than consuming it.

However, the capital created by this primary accumulation rapidly becomes something of an anomaly, and irrelevant.  Once, this capital is put into operation, it extracts surplus value from the workers employed, which is then accumulated, as new capital.  Very quickly, it is this capital created from the exploitation of the workers, from their unpaid labour, which constitutes the vast bulk of capital employed.  On this basis, the surplus value created also rises exponentially so that the capitalists are able both to accumulate further capital from it, and to increase their own unproductive consumption to heights never before seen in history.