Capital III, Chapter 18 - Part 10

The merchant's capital, counted in the total social capital, is the advanced money-capital used for one turnover. If the general rate of profit is then 15%, the merchant capitalist like the industrial capitalist, will make 15% on the capital they advance, not on the total capital they then turn over. If they advance £100 just once for the year, they will sell the commodities bought with this £100 for £115. However, if they turn this £100 over five times in the year, they will sell each quantity of commodities at £103, so that in a year, they will have turned over £515.

The £15 profit will be only 3% on the total turned over capital, but will be 15% on the £100 of capital they actually advanced.

“If this were not so, merchant's capital would yield a much higher profit, proportionate to the number of its turnovers, than industrial capital, which would be in conflict with the law of the general rate of profit.” (p 311)

For this reason, the rate of turnover of the merchant capital affects the prices of commodities. The higher the rate of turnover, the lower the profit margin per unit sold. That is why, as mentioned earlier, a large merchant capital, may take a lower profit margin, in order to turn over its capital more frequently.

“The amount added to the mercantile price, the aliquot part of mercantile profit of a given capital, which falls upon the price of production of a commodity, is in inverse proportion to the number of turnovers, or the velocity of turnover, of merchants' capitals in the various lines of commerce. If a certain merchant's capital is turned over five times a year, it will add to a commodity-capital of equal value but 1/5 of what another merchant's capital, which turns over just once a year, adds to a commodity-capital of equal value.” (p 311)

As with industrial capital, therefore, the advantage of size is apparent. The larger capital may turn over a given commodity-capital in a shorter period, by accepting a smaller profit margin, and yet make a higher annual rate of profit, precisely because it turns over this capital more frequently.

“Hence, the number of turnovers of merchant's capital in the various branches of commerce has a direct influence on the mercantile prices of commodities. The amount added to the mercantile price, the aliquot part of mercantile profit of a given capital, which falls upon the price of production of a commodity, is in inverse proportion to the number of turnovers, or the velocity of turnover, of merchants' capitals in the various lines of commerce.” (p 311)

Because different types of commodities naturally turn over at different rates, the amount added to their price of production, i.e. the merchant's profit margin, will be different in each case. If the general rate of profit is 15%, then those types of commodity that merchant's capital turns over only once a year, will have a 15% profit margin, but those that are turned over on average five times a year will have only a 3% profit margin.

“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.” (p 312)

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