The struggle to eliminate commercial profit

Commercial profit has the same impact on the breakdown of capitalism as groundrent Earlier we assumed that merchant’s capital does not intervene in the formation of the general rate of profit. Again, this assumption has a purely methodological value; it has to be modified. Marx says that ‘in the case of merchant’s capital we are dealing with a capital which shares in the profit without participating in its production. Hence, it is now necessary to supplement our earlier exposition’ (1959, p. 284). Commercial profit is a ‘deduction from the profit of industrial capital. It follows [that] the larger the merchant’s capital in proportion to the industrial capital, the smaller the rate of industrial profit, and vice versa’ (p. 286). Clearly this will intensify and speed up the breakdown of capitalism.

In periods of crisis this struggle against traders is a means of improving the conditions of valorisation capital. In his report on the American crisis, Professor Hirsch has shown that in America the elimination of large-scale traders by rural cooperatives in grain, fruit and milk has assumed massive proportions, with cooperative sales accounting for as much as 20 per cent of the total sales of US agricultural produce. The cotton farmers of the north are likewise engaged in a struggle to eliminate intermediaries and supply the spinners directly.

This movement acquires its most powerful expression in the drive by the modern cartels and trusts to increase profitability by reducing the costs of sales and import transactions through a centralisation and elimination of intermediary trade. According to Hilferding its capacity to wipe out the trader is one of the basic reasons for the superiority of the combined enterprise. With the rapid advance of cartelisation in the iron and steel industry, the significance of commercial capital has declined. There is a striking tendency to wipe out intermediary trade as the mining and production stages are integrated vertically into a single enterprise, so that no profit is diverted to commercial capital at any single stage of the process. This is the realisation of Rockefeller’s maxim; ‘pay a profit to nobody’. Commercial capital is either left to supplying small customers or forced into a position of dependence on industrial capital. ‘The development of large-scale industrial concerns, or the formation of monopolies’, says T Vogelstein:

has dethroned the princely merchant and transformed him into a pure agent or stipendiary of the monopolies ... This world of monopolies is ridding itself of every vestige of commerce ... By transferring sales transactions to the syndicates ... the industrial concern reduces purely commercial activity to a minimum and leaves this to a few people in the head office or to individual trading concerns affiliated to itself. (1914, p. 243)

The formation of their own export organisations by the larger associations and concerns is yet another example of the tendency to wipe out independent large-scale trade. In copper a system of trading survives but no longer as an independent function; the system is intricately connected with the producers. Dyestuffs and electricals are two industries with their own sales organisations abroad. According to the calculations made by E Rosenbaum of Germany’s total imports in 1926, around 48.3 per cent were direct, that is, transacted without the mediation of any trading concerns. In the case of textile raw materials the figure was 50 per cent and in ores and metals as high as 90 per cent (1928, pp. 130 and 146).

The squeeze on commercial profit to enhance the average rate of profit on industrial capital is a product of the growing barriers to valorisation that arise in the course of capital accumulation. Therefore as the level of accumulation advances, the tendency to eliminate commercial capital intensifies.

However the squeeze on commercial profit is not tantamount to a cessation of commercial activity. The latter cannot be done away with under capitalism because commercial agents fulfil basic functions of industrial capital in the process of its circulation, namely, its function of realising values. In this respect they are simply representatives of the industrial capitalist. Marx says that:

In the production of commodities, circulation is just as necessary as production itself, so that circulation agents are just as much needed as production agents. The process of reproduction includes both functions of capital, therefore it includes the necessity of having representatives of these functions, either in the person of the capitalist himself or of wage labourers, his agents. (1956, pp. 129—30)

Despite the tendency for commercial profit to be eliminated, commercial functions gain in importance as capitalism develops. This is regardless of whether they are represented by individual merchants, trade organisations, cooperatives or industrial trusts and concerns. Prior to capitalism there was no large-scale commercialisation of the product of labour: ‘The extent to which products enter trade and go through the merchants’ hands depends on the mode of production, and reaches its maximum in the ultimate development of capitalist production, where the product is produced solely as a commodity’ (Marx, 1959, p. 325). It follows that the share of commerce in the overall occupational structure must expand. There is a growing number of commercial businesses and commercial employees. A new middle stratum of commercial agents, commercial employees, secretaries, accountants, cashiers emerges.

The question arises — what impact does the existence of this new middle stratum have on the course of the capitalist reproduction process? Can it reduce the severity of capitalist crises and weaken the breakdown tendency, as the reformists have argued ever since Bernstein? Marx points to the different character of this middle stratum which arises on the foundations of capitalist production:

The outlay for these [commercial wage-workers], although made in the form of wages, differs from the variable capital laid out in purchasing productive labour. It increases the outlay of the industrial capitalist, the mass of the capital to be advanced, without directly increasing surplus value. Because it is an outlay for labour employed solely in realising value already created. Like every other outlay of this kind, it reduces the rate of profit because the advanced capital increases, but not the surplus value. (1959, p. 299)

Due to the variable capital expended on these commercial wage workers, the accumulation fund available for the employment of more productive workers is reduced.

A part of the variable capital must be laid out in the purchase of this labour power functioning only in circulation. This advance of capital creates neither product nor value. It proportionately reduces the dimensions in which the advanced capital functions productively. (Marx, 1956, p. 136)

The rate of valorisation of the total social capital is thereby diminished and the breakdown tendency intensified, quite regardless of the fact that these middle strata may initially consolidate the political domination of capital. As these middle strata grow the breakdown is speeded up. As long as the mass of surplus value is growing absolutely this is not visible. But once there is a lack of valorisation due to the advance of accumulation this fact is shown all the more sharply.