Because industrial capital exists in these different forms simultaneously, the circuit of industrial capital is shortened as a result of anything that reduces either the production time or the circulation time. An individual productive-capital, which transfers the function of selling its output to a merchant may appear to reduce the turnover time, because, at the end of its own production period, it sells its output to the merchant, and the proceeds now form the money-capital, which it metamorphoses into productive-capital. It has foreshortened the turnover time of its capital by the equivalent of whatever is the circulation time of its commodity-capital. It would otherwise, have had to advance additional productive-capital to cover the period during which its output was being sold, and the proceeds converted once more into productive-capital.
But, in reality, as far as the industrial capital is concerned, no such foreshortening has occurred. The merchant capital simply represents the externalisation of that function, and transfer to an independent capital. The merchant capitalist merely puts up the equivalent of the productive capital that the producer would have advanced, plus the average profit, the producer would have obtained. Indeed, its on the basis of advancing this capital that the merchant obtains the average profit too. But, the circuit of industrial capital, which is the basis for the determination of the rate of turnover of industrial capital, and thereby of the average annual rate of profit, does not close until the output is bought by the final consumer, be that a productive or personal consumer. If we take yarn, for example, the circuit of industrial capital does not close until the yarn is bought either by a consumer for their personal consumption, or by, say, a weaver, who consumes it productively in the production of cloth. The fact that a merchant buys the yarn from the producer, and, in turn, sells it to the consumer does not change matters.
The productive-capitalist engages the services of the merchant, because the merchant, by specialising in that function, is able to reduce the costs of circulation that the productive-capital would have endured. The merchant enjoys the benefits of economies of scale, and is able to sell the output of several producers. By reducing the costs of circulation, commercial capital increases the amount of realised profit available to industrial capital as a whole. As a result, the amount of profit available that determines the average profit is increased, giving productive-capital an incentive to transfer this function to commercial capital. Commercial capital also reduces the circulation time, so that the overall turnover time of industrial capital is reduced. That means that a given amount of advanced capital now produces a larger amount of surplus value/profit during the year. The average annual rate of profit is thereby increased. Commercial capital, as part of industrial capital, thereby, not only takes part in determining the amount of realised profit, but also, forms part of the denominator in the calculation of the average profit.
The average profit obtained by commercial capital is, thereby, the same as that for productive-capital, and proportional to the capital advanced in both cases.
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