Capital III, Chapter 17 - Part 4

In the above example, the degree of exploitation, the rate of surplus value, was 100%. Based solely on the rate of profit, of the industrial capital, it was 20%, but, taking into consideration the share of the merchant capitalists it falls to 18%. Under capitalist production, merchant's profit is determined by the laws governing capitalist production, and the formation of the average rate of profit. But, historically things moved in the opposite direction. When primitive tribes first began to trade products with each other, this was done largely upon the basis of surplus production. It is only as this begins to develop into trade that these products become commodities, and that the value of those products becomes manifest as their exchange value, i.e. the value is represented as an equivalent form of value, in the shape of a quantity of some other use value.

Within each tribe, they would be aware of the individual value of each product, i.e. how much social labour-time was required for its production, and could compare that with the value of other products produced by the tribe. But, the task of comparing the values of these products with the same products produced by some other tribe, and particularly when commodity production and exchange becomes a matter of exchange by many individual producers, is one that necessarily falls to specialists.

“It is the commercial capital which first determines the prices of commodities more or less in accordance with their values, and it is the sphere of circulation, the sphere that promotes the process of reproduction, in which a general rate of profit initially takes shape.” (p 287)

In other words, it is the merchants who can determine the value of any commodity in a way that no individual producer can, because the merchant is continually comparing where they can buy from at the lowest price, i.e. which producer is producing at the lowest value, the least expenditure of labour-time. It is that process which transforms values into exchange values, and the same process resulting in competition between merchants themselves, forces an average rate of profit on to them.

But, this process is one that results in commodities being exchanged at their values. As Engels describes, this period, when the Law of Value is manifest in the exchange of commodities at their exchange values, runs from around 6,000 B.C. to around the 15th century. It ends then, as capitalist production commences, as was seen earlier, because, at that point, competition amongst industrial capitals, invading one sphere of production after another, results in the supply of commodities in high profit areas rising, so that their market price falls to their price of production, and below their exchange value. And, because the outputs of these capitalist producers are simultaneously the inputs of other producers – whether they are capitalist producers or not – the prices of commodities produced by these other producers are no longer equal to their exchange value either. But, it is only when capitalist production predominates that an average rate of profit for all production can be formed, which then determines the commercial profit, as set out above.

“It is originally the commercial profit which determines the industrial profit. Not until the capitalist mode of production has asserted itself and the producer himself has become merchant, is commercial profit reduced to that aliquot part of the total surplus-value falling to the share of merchant's capital as an aliquot part of the total capital engaged in the social process of reproduction.” (p 287)

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