The Rise In The Rate of Turnover (8)
“The modification of selling prices by the average period of turnover of capitals in different branches of commerce amounts to this: The same mass of profits, determined for any given magnitude of merchant's capital by the general annual rate of profit, hence determined independently of the specific character of the commercial operations of this capital, is differently distributed — proportionately to the rate of turnover — over masses of commodities of equal value, so that, for instance, if a merchant's capital is turned over five times a year, 15/5 = 3% if once a year, 15%, is added to the price of the commodities.
The same percentage of commercial profit in different branches of commerce, therefore, increases the selling prices of commodities by quite different percentages of their values, all depending on their periods of turnover.”
(Capital III, Chapter 18)
This explains, therefore, Marx says, why it is that in those areas, where the prices of commodities are low per unit, and they are sold in large quantities, on a frequent basis, the profit margin per unit is low, whereas for more expensive commodities, that are sold more infrequently, the profit margin per unit is higher. This doesn't mean that merchant capitalists, engaged in the former line of business, obtain less mass of profit, nor a lower rate of profit, than those engaged in the latter. The mass of profit is a function not just of the profit margin, but also of the mass of commodities sold. A huge mass of commodities sold at a low profit margin could produce a greater mass of profit than a small mass of commodities sold with a high profit margin. The general annual rate of profit, meanwhile is not a function of the amount of capital laid out, but only of the capital advanced. Precisely, because the former buys commodities that are cheap, and which sell rapidly in volume, the amount of capital they have to advance, as opposed to lay out is much smaller than is the case for the latter.
But, as Marx says, this is also not irrelevant from the perspective of the industrial capital, capital in general, or the general annual rate of profit. Precisely, because the general annual rate of profit, as now defined by Marx is the total ADVANCED capital of both the productive-capital, and the merchant capital, the lower the profit margin levied by the merchant capital, as a result of turning over their capital more frequently, the lower the selling prices of commodities on the market, which in itself acts to stimulate demand. The more demand is stimulated, and the market expands, the greater the potential for productive-capital to expand production.
Moreover, the faster merchant capital turns over its capital, the less capital it must advance to circulate any given quantity of commodities in a year. But, if the amount of merchant capital advanced declines, then this means that the total of capital advanced itself declines, which means that the general annual rate of profit rises. This, in fact, is one reason for merchant capital developing as an independent form of capital. There has to be a reason that productive-capital would sell its commodities to merchant capital, and allow it to obtain a share of the surplus value, rather than sell its own commodities, and retain all of the surplus value itself. The reason is that just in terms of the capital advanced for the purchase of the commodity-capital, that is before we consider the capital that must be advanced for all of the costs of circulation, merchant capital offers the potential for the advance of a smaller quantity of capital to effect the circulation of commodities, and thereby to increase the general annual rate of profit. It does that, precisely by being able to increase the rate of turnover of capital.
I will examine how that occurs in Part 44.
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