Lenin provides a table which illustrates the point made previously about the better pay and conditions of workers in the factories compared to those employed in domestic production, including that of the independent handicraftsmen themselves.
“We find that the wages of hired workers in the assembly workshops are higher than the incomes of the dependent handicraftsmen (100 rubles and 89 rubles respectively), notwithstanding the fact that the latter exploit wage-workers in their turn. But the wages of these latter are less than half those of the workers in the assembly workshops. Why, then, should our employers not prefer “handicraft” industry to factory industry, when the former yields them such substantial “advantages”!” (p 433)
Of course, those advantages only existed up to a point. As Marx demonstrates in Capital I and III, when productivity rises, due to large-scale technological development, the rate of surplus value rises, as a consequence of the production of relative surplus value, even though wages and living standards rise. Marx points out that wages in Britain were 50% higher than in Europe, and yet the rate of surplus value was higher in Britain, and Britain's output prices lower, because of the much greater productivity of British labour. In Capital III, the same point is made that, where productivity is low, even a poor standard of living requires a large part of the day to be taken up as necessary labour. That is why the exploitation of labour in developed economies is always higher than that in developing economies, despite the higher living standards of workers in the former.
Similarly, Engels pointed out that, by the end of the 19th century, in Britain, many of the former petty means of cheating the workers had disappeared, at least in respect of the larger employers.
“We find a fully analogous organisation of production for the buyers-up in the vehicle-building industry (Sketch, p. 308, et. Seq.; Handicraft Industries, I, p. 42, et. seq.)—the same assembly workshops, whose owners are “buyers-up” (and work-distributors, work-givers) in relation to the handicraftsmen who make the parts, and the earnings of the wage-worker in the workshop are again higher than the income of the dependent handicraftsman (not to mention his wage-worker). These higher wages are recorded for both agriculturists (Group I) and non-agriculturists (Group II). In the cabinet-making industry, the buyers-up are the furniture shops in the city of Perm (Sketch, 133; Handicraft Industries, II, 11) that supply the handicraftsmen with models when placing orders, and in this way, incidentally, have “gradually improved the technique of production.”” (p 433)
As far as tailoring was concerned, it was the shops selling off-the-peg clothing that acted as buyers-up, giving out materials to handicraftsmen, and taking in the finished product. Lenin notes that similar arrangements existed in Western Europe and N. America.
“The difference between the “capitalist” West and Russia, with her “people’s industry,” is that this state of affairs is called the Schwitz-system in the West and means are sought to combat this worst of all systems of exploitation; the German tailors, for example, demand that the masters should build factories (that is, are “artificially implanting capitalism,” as the Russian Narodnik would put it)—whereas in our country this “sweating system” is benignly called “handicraft industry” and its superiority to capitalism is argued and discussed.” (p 434)
But, to return to the point made above, at a certain point, the productive-capital turns the tables on merchant-capital. When productive-capital is able to produce on a scale large enough to employ machinery and other fixed capital on a scale that its productivity is such that its prices undercut those of the handicraft producers, however low their wages, the merchants are forced, by the laws of capitalist competition, to buy from them. On the one hand, any merchant who does so undercuts other merchants, thereby, fracturing the old merchant, guild monopolies, but, if such monopolies hold out, the larger producers can take on the function of merchant themselves. As Marx points out, in Capital III, therefore, the merchant capital becomes subordinated to the productive-capital, subsumed within the overall circuit of industrial capital. This same dynamic exists in industrialising economies so that even if, initially, it is merchant capital, in the form of a colonial power, which acts to promote generalised commodity production and exchange, that very fact of generalised commodity production, and the competition it necessitates, leads to the development of productive-capital in the industrialising economy, and, thereby, to the concentration and centralisation of that capital.
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