Suppose the total capital in the economy is represented by 1,000. This is divided into 900 for industrial capital and 100 for commercial capital. It is only the industrial capital which produces surplus value. The industrial capital is made up 720 c + 180 v, and so with a 100% rate of surplus value, produces 180 of surplus value. Measured solely against the industrial capital, this would represent an average rate of profit of 20%, but measured against the total capital, it is a rate of profit of 18%.
If we then calculate the price of commodities sold by the industrial capital, on this basis, it is k (cost-price) + 18%, or 720 c + 180 v = 900 +18% = 900 + 162 = 1,062.
However, if we look at the value of the commodities produced by the industrial capital it is 720 c + 180 v + 180 s = 1,080. It is clear that, in selling these commodities at their price of production, the industrial capital sells them below their value. The merchant capitalist buys them for 1,062, from the industrial capitalist, and sells them at their value of 1,080, thereby making a profit of 18, equal to the average profit of 18% on their capital of 100.
So, its true then that the merchant capitalist does add an additional amount for profit on to the price they pay for the commodities they sell, but this additional amount is not an amount over and above the value of the commodities. Overall, the total of commodities are sold at their value. The merchant capitalist is only able to add this additional sum because the commodities are sold to them by industrial capital below their value.
The industrial capitalist, however, is not defrauded by this transaction, because they sell their commodities at their price of production. What also distinguishes the merchant's profit here is that it is no longer some arbitrary amount, determined only by the extent of the individual merchant's ability to buy low and sell high, dependent upon the conditions existing in different markets. The merchant's profit is now determined by the average rate of profit, determined by capitalist production.
As Marx outlined earlier, as with production itself, if merchant capital obtains a higher than average profit, capitals will migrate from the industrial sphere, increasing competition and depressing prices and vice versa. Commercial capital will affect the average rate of profit to the extent that the greater the proportion of merchant capital to industrial capital, the lower the average rate will tend to be, for the simple reason that it does not produce surplus value, but shares in its distribution.
The other consequence of this is that the degree of exploitation of labour by the industrial capitalist, reflected in the industrial rate of profit, is further understated compared to what it really is. In Capital I, it was shown that this exploitation is already understated by the rate of profit compared with the rate of surplus value, but because merchant's profit is deducted from the actual profit, extracted from workers by industrial capital, this makes the degree of exploitation appear even less than it is. When the share of the surplus purloined by the other exploiters – the landlords, the money-capitalists and the capitalist state – is taken into account, the extent to which the rate of profit misrepresents the extent of workers exploitation can begin to be grasped.
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