As Marx describes, in Capital, the role of merchants arose with the development of commodities from products, as the different communities appointed such representatives to act on their behalf in trading with other communities. When these primitive communes dissolve, and commodity production and exchange then extends from being between communities to also within the community, the role of the merchant is also extended. To perform this function, the merchant must first have money, because their function, in this process, is to buy in order to sell, M – C – M, and there is no point, or basis, for them doing that unless they obtain a surplus value from their function. They must, after all, eat and so on themselves. It implies not M – C – M, but M – C` - M`.
In other words, there must be unequal exchange. The value of the money they spend must be lower than the value of the commodities they buy to sell. The basis upon which they can do this has already been mentioned. The weaver does not create new value by taking their cloth to market, but only realises the value they have already created. If a merchant buys cloth from them, at a price that is lower than its selling price, but saves them the time and expense of taking it to market, this may be worthwhile.
For example, if a day's labour produces £1 of new value, and it requires a day to take £10 of cloth to market, the weaver might sell this cloth to a merchant for £9.50, because now they can spend this day producing £1 of new value, leaving them with £0.50 of additional profit. The merchant sells the cloth for £10, making a commercial profit of £0.50, but the merchant, specialising in this one activity of buying and selling, buys from many producers, not only making it more worthwhile to take this large volume of materials to market, but also to take them to more distant markets where higher prices may be obtained.
As Engels also describes in his Supplement to Capital III, these merchants, now, as monopoly buyers and sellers of commodities, form their own guilds that act as cartels, setting minimum prices, and rates of profit to be charged by merchants in the sale of these commodities.
As Lenin describes, in relation to the development of commodity production and exchange in Russia, it is not only existing merchants that engage in such activity. As the process of differentiation amongst the small commodity producers gets underway, some of the larger households amongst these producers, able, on the basis of their larger output and resources, to take their own production to market, also become “buyers-up”, buying the production of their neighbours, below its value, and taking it to market for them, where they can sell it at higher prices, and, thereby, obtain commercial profit from it.
Already, therefore, this suspension of currency, and creation from it, of money reserves and hoards, from which then arises the possibility of buying solely in order to sell, M – C` - M`, transforms a portion of money into commercial capital. But, also, one means by which the problem of needing to buy without first selling is resolved is this commercial credit. Its basis, in fact, also arises with money tokens. The printed strips of leather that represented a quantity of furs and hides, and which were only to be obtained at some future point in exchange for them, required trust/credit.
The weaver, who buys material, whether from a farmer or merchant, may also do so on the basis of paying for it later, i.e. they buy using commercial credit. As Marx says, when commodity production is conducted by a plethora of small, independent producers, the potential for overproduction of these commodities already exists, for the reasons previously outlined, but, any crisis arising from it remains at the level of the individual producer. Many such producers fail, as Marx describes, but, in the earlier modes of production, there is no mechanism for them to become wage labourers, because there is no capitalist production. Instead, they become debt slaves, serfs, servants or paupers.
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