Capital III, Chapter 18 - Part 12

The difference between the role of turnover of capital on values for industrial capital and on selling prices for merchant capital, acts to obscure the real relations. Taken solely on its own, and from the perspective of the total social capital, the value of commodities can be seen to be determined by the labour-time required for their production. But, when it comes to selling prices of commodities sold by merchants, these seem arbitrary, the price being a function of the profit margin charged by the merchant, which in turn seems an arbitrary figure, chosen by the merchant, dependent on whether they want to maximise their profits by selling a lot on a low margin, or a little on a high margin.

Because commerce preceded capitalist production, and because a great deal of economic analysis is concerned with trade, with buying and selling, rather than with production, and the creation of value, it is no wonder that these deceptive appearances, in the realm of circulation, result in faulty conceptions. Even for the industrial capitalist, they must be also concerned with buying commodities – means of production and labour-power – as well as selling them in the shape of the end product. So, it is no wonder that even they can be taken in by these faulty theories and misconceptions.

“All superficial and false conceptions of the process of reproduction as a whole are derived from examinations of merchant's capital and from the conceptions which its peculiar movements call forth in the minds of circulation agents...

The conceptions of the merchant, stockbroker, and banker, are necessarily quite distorted. Those of the manufacturers are vitiated by the acts of circulation to which their capital is subject, and by the levelling of the general rate of profit.” (p 312-3)

So, the connection between the average rate of profit, determined in production, becomes completely separated from the commercial profit, at the superficial level of competition, even though, in reality, the latter is determined by the former. For the industrial capitalist, a high level of productivity that facilitates a more rapid turnover of capital results in a greater quantity of surplus value and profit produced, for any quantity of capital advanced, and consequently, a higher rate of profit. Yet, for the merchant capitalist, a higher rate of turnover appears as the concomitant of a lower profit margin.

“Small profits and quick returns appear to the shopkeeper to be the principle which he follows out of sheer principle.” (p 314)

As described earlier, in any branch of commerce, what is described above refers to the average rate of turnover, for that branch, but, the bigger, more efficient merchants, like their industrial counterparts will be able to turn over their capital faster and, thereby make a higher than average profit.

“If competition compels him, he can sell cheaper than his competitors without lowering his profit below the average. If the conditions which would enable him to turn over his capital more rapidly, are themselves for sale, such as a favourable shop location, he can pay extra rent for it, i.e., convert a portion of his surplus-profit into ground-rent.” (p 314)

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