“The law that the independent development of merchant's capital is inversely proportional to the degree of development of capitalist production is particularly evident in the history of the carrying trade, as among the Venetians, Genoese, Dutch, etc., where the principal gains were not thus made by exporting domestic products, but by promoting the exchange of products of commercially and otherwise economically undeveloped societies, and by exploiting both producing countries. Here, merchant's capital is in its pure form, separated from the extremes — the spheres of production between which it mediates. This is the main source of its development. But this monopoly of the carrying trade disintegrates, and with it this trade itself, proportionately to the economic development of the peoples, whom it exploits at both ends of its course, and whose lack of development was the basis of its existence.” (p 328-9)
It necessarily becomes the case that where some particular product offers the opportunity of large profits, if it can be produced close to markets, rather than having to be shipped from large distances, producers, including some merchants, with the money-capital to do so, will themselves engage in such production. In this way, the development of production is encouraged, and the role of the carry-trade is diminished.
“In the case of the carrying trade this appears not only as the decline of a special branch of commerce, but also that of the predominance of the purely trading nations, and of their commercial wealth in general, which rested upon the carrying trade. This is but a special form, in which is expressed the subordination of merchants to industrial capital with the advance of capitalist production. The behaviour of merchant's capital wherever it rules over production is strikingly illustrated not only by the colonial economy (the so-called colonial system) in general, but quite specifically by the methods of the old Dutch East India Company.” (p 329)
The clearest manifestation of that, as Marx describes here, is the decline of Holland, as the pre-eminent capitalist economy, based on the strength of its merchant capital, and its replacement by Britain, based on its rising industrial power. The development of merchant capital then represents a typically contradictory, dialectical historical process. On the one hand, it is capital, which is not really capital, but only capital in the process of becoming; it fulfils a progressive historical role in creating the conditions in which capitalist production can develop, and yet in the way it dissolves existing modes of production it promotes reaction; it acts to make value manifest, and to establish exchange value as a consequence of regularising trade and competition, and yet the basis of the exchange it engages in is unequal exchange.
“Since the movement of merchant's capital is M — C — M', the merchant's profit is made, first, in acts which occur only within the circulation process, hence in the two acts of buying and selling; and, secondly, it is realised in the last act, the sale. It is therefore profit upon alienation. Prima facie, a pure and independent commercial profit seems impossible so long as products are sold at their value. To buy cheap in order to sell dear is the rule of trade. Hence, not the exchange of equivalents. The conception of value is included in it in so far as the various commodities are all values, and therefore money. In respect to quality they are all expressions of social labour. But they are not values of equal magnitude. The quantitative ratio in which products are exchanged is at first quite arbitrary. They assume the form of commodities inasmuch as they are exchangeables, i.e., expressions of one and the same third. Continued exchange and more regular reproduction for exchange reduces this arbitrariness more and more. But at first not for the producer and consumer, but for their go-between, the merchant, who compares money-prices and pockets the difference. It is through his own movements that he establishes equivalence.” (p 329-30)
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