William J. Blake: An American Looks at Karl Marx
When buying and selling are discussed, most students think of businessmen who are retailers, jobbers, wholesalers, commission salesmen, etc., rather than of industrial capitalists. True the two functions are often combined as in the General Motors Sales Corporation and in other so-called perpendicular trusts.1
There appeared to be a certain air of unreality when the Marxist question was put as to how money becomes more money in the process of circulating commodities, when suddenly the reader was thrust from the movement of commodities back to the employment of labor in production itself.
The unreality occurs because the exchange of goods is effected by merchants. The question is, how do they make their money if nothing profitable occurs in the sphere of circulation, but must originate in production? We know they make money. Yet it is clear that if surplus-value could be made merely by circulating goods, few persons would bother to work their heads off in factories to produce it, and yet tens of millions do.
Now the function of merchants is not wholly in the sphere of circulation. It is, for some of their activities, but for others it is mixed with jobs that terminate production, such as trucking, etc.
But the pure merchant, the dealer in goods—say, by telephone—who buys and sells all day long without ever leaving a desk, still makes money and he has only a few clerks. It is true that he exploits them after his fashion, but his profits, unlike those of the industrial manufacturer, are not related to that exploitation directly, or rather, proportionately. A grain merchant who guesses on the future of markets and the cost of chartering ships and the foreign exchanges he will require, and at what rate, is likely to make or lose fortunes with little reference to the pittance he pays his billing clerk or his typist. His cables alone usually cost him ten times as much.
Yet the merchant is a gigantic part of the capitalist economy. As Marx says, no one knows if he has surplus-value until it is realized by a sale. Advertising is partly done by producers (national magazine and radio advertising), but newspaper advertising is almost entirely that of distributors. They hire hundreds of thousands in large cities.
In considering the merchant not as a transporter or warehouser but only as a circulator of commodities, we abstract his functions but by doing so we are enabled to understand an interesting aspect of surplus-value. The conversion of values from their form as commodities to their price, or money form, is carried on in the sphere of circulation by the merchant. The merchant’s expenses in this connection are often large, but what interests us is the source from which he meets these expenses.
The Time Factor in Merchandising
It takes time to move goods from the factory to the consumer. That time is divided into two aspects, the inevitable lapse due to transportation and stocking in stores for goods to be made ready and available to the whims of buyers. These are part of distribution, that is, the last series in the long annals of production.
But a large part of the lapse of time is due to speculation and pure exchange. It is said that the wheat market in Chicago turns over the United States crop dozens of times a year in active trading. Goods consigned to Liverpool will stay in warehouses for months while they are being transferred to dozens of men who never see them and, sometimes, would not even recognize them.2
Thus the services of merchants are a compound of true services and of speculative intervention. A house like R. H. Macy and Co. represents almost entirely the true distribution aspect. A futures trading house in Chicago, Liverpool, or Antwerp is typical of the purely circulatory aspect. No ethical reference is intended here, nor the much-mooted question of the necessary role of speculation, once given a capitalist economy.
The Economy of Productive Capital
Merchant capital economizes production capital. If the producer of silk goods, say, had to wait a year until his goods finally decorated the fair forms of Paris ladies, he would require $500,000. If he can get this circulation of his goods taken care of by another, he can work with much less money, since he will be in funds as soon, or nearly as soon, as his goods quit his factory. He can use the proceeds to buy means of production and so make a more modest capital do the work of larger capital. But this does not alter the relation of both the merchant who advances the money and the factory owner who receives the sale price, as against the total concept of surplus-value.
For the merchant does only what the factory owner does not do. He cannot take the difference of values except where they are to be found, out of the labor-time given gratis by the silk workers to their employer.
Producers Sell for Less than Value
What happens is that the factory owner sells the silk for less than its value, and so divides the surplus-value with the merchant. Both live on the workers’ time instead of merely one; only that the factory owner has the capacity to turn over his capital more often and thus make more profits and the merchant has to make his money out of the purchase at less than value and realize it at value.
We are now speaking in pure economic terms of merchants and factory owners as a class and not allowing for the special guile with which one gets the better of the other or the adroit merchant makes other merchants cede part of their part of others’ surplus-value to him by way of “sharp trading.” For that does not affect surplus-value as a whole.
The merchant economy is based on buying at less than value from the producer and realizing the value of the commodity and no more from the ultimate consumer.
That he does not reach the ultimate consumer but shares part of his share with a jobber, and he in turn with a factor or even a peddler, and that these in turn split their parts with salesmen in the shape of commissions—all these do not affect the fact that the ultimate consumer pays only the value and that the capitalist in the factory got rid of his merchandise to the first merchant for less than value. (Or, to be more careful, in the commercial world, for “value,” read “price of production.”)
For the capitalist class as a whole it does not matter whether the merchant capital is advanced or not; it has to be there either in the hands of the producer or merchant who circulates. It depends on who circulates. But the convenience for producers is worth a division of the surplus-value: it is a true aid to turnover and profits.
Now how does the merchant actually make money once this is done? We are speaking of the merchant under modern capitalism, not of the fabled Sir Richard Whittington who exported a cat and received the riches of far lands in return. The cat is in the bag, today, of the average rate of profit.
The Division of Average Profit
The total productive capital is no longer figured on the basis of what the factory owner alone requires. If his capital is $90,000, and the profit $18,000, it would be 20 per cent. But what really happens is that the factory owner would require $100,000 to make his $18,000 if he himself had to wait out the circulation of his goods. He could not get that full $18,000 surplus-value unless he did so. So the rate of profit is really 18 per cent, counting the time between production and the realization of value. But the capitalist is willing to take his 18 per cent, the average rate of profit on the actual productive capital ($90,000). The merchant makes the same average rate of profit (on his $10,000), for if merchants made less their capital would flow into direct production, and if they made more, factory owners would transfer their investments gradually into trade.
That the merchants make less money than the producers, as a rule, is not due to a lesser rate of profit but to a need for less capital, since they must provide no money for plant, machinery, wages, etc., and there is, accordingly more competition. But all this does not alter the fact that the sum total of goods are sold for the sum total of their values. There is no money added by the process of pure circulation.3
Lately the merchant has not been receiving his share of the value, as is prescribed by the law of the average rate of profit. Monopolies tell him what to sell at or lose his agencies. Frequently he has to buy their worthless class of stocks so as to curry their favors. Chain stores are reducing the profits of retailers, in so far as they represent pure circulation, to nothing, leaving him only the recompense of his hour of ordinary labor. Large companies sell their own goods through “dummy” competitors.
We shall see later in our study of finance imperialism that the merchant is slowly going the way of the horse and buggy. But there are still a great many of him and, in some countries, like France, he is really a gigantic economic and political force. Whatever the tendency of merchant capital, whatever its diminished part in economy, it is still very important, and will be as long as capitalism endures.
1. A perpendicular trust is one that attempts to control production of various stages of the production of one commodity; a horizontal trust is one that attempts control of as many factories as possible in one line.
2. I knew a speculator in barley to look at that crop from a railway coach in France and say, “They ought to weed those fields, but they’re too lazy.” [Author.]
3. What about those who work for the merchant? This applies also to those who work for any nonindustrial capitalist. How is the rate of surplus-value determined, since there is non question of the production of goods?
We must distinguish two types of employees. Those who work in the department stores, for example, and are actually completing the production of merchandise in its last movement to consumption, are subject to the same laws as the industrial workers. But how about those who work for the mere circulator of goods? And, by analogy, those who work for the banker? Or for lawyers? Or for all that varied collection of persons who go to offices every day to work for promoters, etc.?
Their wages are, to use a big word, homologated to industrial capital. They are sellers of labor-power, whether at a typewriter or working with a pen.
Their compensation is reduced to their means of subsistence, for the rate of profit or return of their employers as a class approximates the average rate of profit and would be diminished, exactly as that of the industrial capitalists, if they paid more. But how is that determined, since there is no value being produced, and both live off goods being sold at less than value?
There is a division to be made, though, between the pure circulator or money-lender and his help, which is analogous to the industrial capitalist; the analogy being in the average rate of profits of all employers. Actually the wages of the mass of white-collar workers in the cities (or black-coat workers as they are called in Europe) is exactly the same as that of factory workers in the city in which they live. In New York, the average factory worker received $24 in the boom year of 1929, the average clerical help about the same, or less. In London the average worker made (1938) $14 a week, the clerks about $15. The surplus of labor brings all classes of ordinary labor to the same basis. The average rate of profits compels the capitalist to act similarly to industry. Of course, there are exceptional cases where wages are not related to profit: these are freaks. They do not affect one per cent of office and store help.