Sunday, 20 December 2015

Capital III, Chapter 20 - Part 12

Commerce, by drawing more and more production into circulation transforms agriculture and the associated rural industries. Farms become capitalist farms, and the attendant cottage industries that previously were a means of peasants producing to meet their own direct needs, with a few products left over to be exchanged, increasingly become industries in their own right, carried on separately, with their products now produced solely as commodities for the purpose of exchange.

“It develops the product into a commodity, partly by creating a market for it, and partly by introducing new commodity equivalents and supplying production with new raw and auxiliary materials, thereby opening new branches of production based from the first upon commerce, both as concerns production for the home and world-market, and as concerns conditions of production originating in the world-market. As soon as manufacture gains sufficient strength, and particularly large-scale industry, it creates in its turn a market for itself, by capturing it through its commodities. At this point commerce becomes the servant of industrial production, for which continued expansion of the market becomes a vital necessity.” (p 336)

At this stage, the limit for this mass production is only set by the quantity of the capital employed, and the productivity of labour. In the past, it was the merchant that had the monopoly of knowledge over market prices, and exercised predominance as a result. But now, it is industrial capital that continually compares its cost-price against its competitors, and continually seeks to reduce it, in order to increase its market share, or its profit margin.

The fact that merchant capital predominated for so long, explains why, when the first attempts at systematic economic theory arise, with Mercantilism, its starting point is exchange, the circulation of commodities, a belief that profits arise from it.

“Partly because merchant's capital is the first free state of existence of capital in general. And partly because of the overwhelming influence which it exerted during the first revolutionising period of feudal production — the genesis of modern production. The real science of modern economy only begins when the theoretical analysis passes from the process of circulation to the process of production. Interest-bearing capital is, indeed, likewise a very old form of capital. But we shall see later why mercantilism does not take it as its point of departure, but rather carries on a polemic against it.” (p 337)

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