“First, the profit rates of the different markets for one and the same nation. If Alexandria offered more profit for Venetian goods than Cyprus, Constantinople, or Trebizond, the Venetians would start more capital moving towards Alexandria, withdrawing it from trade with other markets. Then, the gradual equalization of profit rates among the different nations, exporting the same or similar goods to the same markets, had to follow, and some of these nations were very often squeezed to the wall and disappeared from the scene. But this process was being continually interrupted by political events, just as all Levantine trade collapsed owing to the Mongolian and Turkish invasions; the great geographic-commercial discoveries after 1492 only accelerated this decline and then made it final.” (p 902-3)
The improvements in transport and communications that occurred in the 16th and 17th centuries, opened up trade on a much larger scale, into India and North America. The riches that came to merchants allowed them to develop capital, individually on a scale much greater than previously, even the largest corporations such as that in Venice could achieve. These new companies, like the British and Dutch East India Companies, and the Hudson's Bay Company, had state backing, as well as having sufficient capital of their own to back their merchants with private armies. Before India became a part of the British Empire, it was run by the East India Company, and it was the company's private army, under Robert Clive, that made that possible.
“But in the first place, bigger nations stood behind these companies. In trade with America, the whole of great united Spain took the place of the Catalonians trading with the Levant; alongside it, two countries like England and France; and even Holland and Portugal, the smallest, were still at least as large and strong as Venice, the greatest and strongest trading nation of the preceding period. This gave the travelling merchant, the merchant adventurer of the 16th and 17th centuries, a backing that made the company, which protected its companions with arms, also, more and more superfluous, and its expenses an outright burden. Moreover, the wealth in a single hand grew considerably faster, so that single merchants soon could invest as large sums in an enterprise as formerly an entire company. The trading companies, wherever still existent, were usually converted into armed corporations, which conquered and monopolistically exploited whole newly discovered countries under the protection and the sovereignty of the mother country. But the more colonies were founded in the new areas, largely by the state, the more did company trade recede before that of the individual merchant, and the equalization of the profit rate became therewith more and more a matter of competition exclusively.” (p 903)
Engels points out, however, that even up to this period, this equalisation of the rate of profit is only an equalisation of merchant's profit, because industrial capital had not been developed on a significant scale.
“Production was still predominantly in the hands of workers owning their own means of production, whose work therefore yielded no surplus-value to any capital. If they had to surrender a part of the product to third parties without compensation, it was in the form of tribute to feudal lords. Merchant capital, therefore, could only make its profit, at least at the beginning, out of the foreign buyers of domestic products, or the domestic buyers of foreign products; only toward the end of this period — for Italy, that is, with the decline of Levantine trade — were foreign competition and the difficulty of marketing able to compel the handicraft producers of export commodities to sell the commodity under its value to the exporting merchant. And thus we find here that commodities are sold at their value, on the average, in the domestic retail trade of individual producers with one another, but, for the reasons given, not in international trade as a rule.” (p 904)
That is quite different from the current situation, Engels says, whereby competition, at an international level, creates equalised prices, but local variations occur, between the prices paid by an importer/wholesaler and the prices charged by retailers in different cities, who buy from that same importer/wholesaler.
“The instrument that gradually brought about this revolution in price formation was industrial capital. Rudiments of the latter had been formed as early as the Middle Ages, in three fields — shipping, mining, and textiles.” (p 904)
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