ECONOMIC DEVELOPMENT OF SLAVE-HOLDING – SERFDOM SOCIETY. TRADE PHASE.
1. Development of productive forces of society.
After completion of the slave-holding social revolution, the productive forces gained a broad space for their development. Economic progress accelerated. Rapid development of technics, technology and economy, as well as social division of labour in its highest form – branch division of labour took place. Specialization of single enterprises occurred. Money-commodity exchange, commerce, including foreign trade, developed rapidly.
Primitive-communal economy, mainly of natural character with low level of social division of labour and commodity production, restrained the development of technics, especially mechanical technics. Underdeveloped trade was not conductive to exchange of information, experience and technical achievements.
For a long time, plough, that played the most revolutionary role in that period of development of society, represented a light wooden tool with stone, copper, bronze or iron ploughshare. Rapid commodization of production, production for market led to its quick upgrading. Ploughs with metal ploughshare and mould-board (first - straight, then – of spiral shape) appeared, that increased the labour productivity and quality of land cultivation. Later, all-metal ploughs occurred, but they had not got wide spread at that time. The heavy plough appeared.
In agriculture, another draught mechanisms began to be used: horse reaper, horse threshing-machine, horse grain mill. Together with draught mechanisms, hand mechanisms were also widely applied: air-blowing (in metallurgy); dewatering, ore-lifting and ore-breaking (in mining), mechanisms for making olive oil (in food industry), pulley-lifting mechanisms (in construction); lathe, vice (in handicraft); potter’s wheel with foot drive and fly-wheel (in pottery); power-saw bench (in woodworking); Heron’s piston pump (in fire-fighting).
Complex mechanisms were also used for organization of mass public performances.
Mechanical tools got further application in military sphere. Together with bow and sling, that were used as weapons from the time of hunting-technical revolution, the powerful mechanisms for throwing spears, stones, for breaking walls began to be applied: mangonels, catapults, battering-rams, etc. Archimedes’s stone-throwing mechanisms could throw stones weighing up to 30 kg to the distance of up to 120 meters. Heavy cavalry appeared. In navy, sailing vessels and rowing boats – triere, where rovers were situated in three decks, got further development.
Along with mechanical tools, simple technical means, mainly of iron, got wide spread occurrence: axes, shovels, spades, pitchforks, peckers, mattocks, scythes, shears, pincers, chisels, hammers, and many others.
Iron, clay of which burnt bricks began to be made, and wood became the most used materials. Big buildings were made of stone, marble, limestone. Large ports were built for needs of trade.
2. Socio-productive relations.
In the course of the second social revolution, the state ownership of the main means of production was substituted for mainly private ownership. Cultivated land distributed between community members as land plots was turned to private property first of all; now peasants were allowed to sell it. Thus, land turned to article of purchase and sale, became a commodity. However, in the first period of slave-holding society, the concentration of large amount of land in the hands of single persons was a relatively rare phenomenon.
It can be explained by a number of reasons. First, usurious exploitation was substantially restricted. If, before the social revolution, the rate of usurious profit reached 50% and even more, then, after the revolution, the rate of 20% and less was usual. As a result, considerable part of surplus product remained in the hands of small producers. Second, the tax pressure was decreased. And, third, production was still of natural character.
However, the part of labour products made for market gradually rose. The social division of labour increased. Handicraft industry, all the product of which is made for sale, isolated itself completely. Market orientation of other branches of economy became stronger.
Selling the surplus of agricultural products, peasants partly turned to small commodity producers. For money, gained from sale of agricultural products, they bought various craft products, that they did not make themselves. First, peasants bought only a few of technical means preferring to make them themselves. But, attending markets in cities, they made sure that professional masters made technical means, as well as the other handicraft products, of by far better quality and sold them for relatively low price. And that led to the fact that peasants living not far from cities began to specialize in making agricultural products, gradually refusing from making craft products. As a result, not only craftsmen but also a part of peasants turned to small commodity makers.
Certainly, the majority of peasants carried on natural economy as before, selling and buying not much. But the number of commodity producers after the social revolution considerably increased as compared with pre-revolutionary period. In some of early Greek trade states, small commodity makers constituted even absolute majority of population.
This was simple commodity production; it was not based on slave labour. Producers, labourers themselves were owners of their households, land plots, craft workshops. The simple commodity production was, for some period of time, accompanied by simple commodity circulation, i.e. without intermediate sellers, without traders. However, this period of simple commodity circulation when commodity producers sold their commodities themselves was very short. It coincides chronologically with the transition period from primitive-communal to slave-holding society, i.e. with the period of slave-holding social revolution. But simple commodity production, unlike simple commodity circulation, existed for far longer period, for some centuries.
At the first, trade phase of slave-holding society there was no slave-holding production - either large, or medium. In agricultural and handicraft production, slaves were used very seldom, in addition, they constituted only a small part of population. They were used mostly in state construction and mines, in service (home slavery) and trade, as porters, loaders, rovers on merchant vessels, etc.
The main working class were small independent producers, considerable part of which being commodity producers: craftsmen and some part of peasants.
“Both small peasant farm, and independent handicraft production partly formed the basis of feudal mode of production, and partly, after decomposition of the latter, continued to exist together with capitalist production. At the same time, they constituted the economic base of classic society in the most flourishing period of its existence, when the initial oriental common ownership had already disintegrated, and the slavery had not yet got control over production to any noticeable extent” (K.Marx. Das Kapital, vol.1, p.346, remark 24).
At the first phase of slave-holding society, the class of small producers was opposed to the class of traders. The latter was formed of various groups from old and new society.
First, the class of traders, formed after the social revolution, included insignificant number of small retailers that existed already in old, primitive-communal society on the eve of slave-holding social revolution. Second, this class included a part of former commercial agents of primitive-communal state that, on behalf of state and for money of state (or tribal formation) carried on foreign and wholesale internal trade. At that, they illegally appropriated some part of trade income of the state having accumulated considerable treasures. Third, the class of traders accepted a part of former usurers that were not satisfied with profit rate of 20% and leaving (entirely or partially) usury were looking for (and found) more profitable application of their capital in the sphere of trade. Fourth, the class of traders included some part of former communal (tribal-clan, state-bureaucratic, priest, military) aristocracy, being out of job after the social revolution but possessing substantial funds. Finally, fifth, this class received enriched craftsmen and peasants that, according to a number of circumstances, found themselves in extremely favourable conditions in comparison with overwhelming majority of other labourers.
Thus, the social structure of slave-holding society in its first, trade phase is characterized by the availability of: class of traders that can be subdivided into two groups (sub-classes) – class of traders - slave-holders and class of small traders; class of small commodity makers exploited by both groups of class of traders; class of slaves exploited by class of traders – slave-holders; class of small commodity makers carrying on natural household and selling the surplus of products of their labour only by chance, not systematically. Besides, there were hired labourers in that period, being the least numerous group of population. Hired labourers were exploited by traders – slave-holders and the slave-holding state. Among the exploiting classes, there were also small groups of slave-holders – managers, carrying on slave-holding economy with the application of slave labour, and usurers, significance and economic might of which were undermined as a result of the social revolution.
3. Trade profit.
The main classes of the first period of development of slave-holding society were by no means slave-holders and slaves, as some researchers think, but traders and small commodity makers. Small commodity makers, together with natural producers, constituted the main working class. But at the same time, small commodity makers, unlike natural producers, were the main exploited class as well.
The class of small commodity makers was opposed by the class of traders, that exploited them. If the main social function of the class of small commodity makers was production of material values, then the social function of class of traders was the sale of these material values. If, under the simple commodity circulation, the surplus product made by small commodity makers remained at their disposal entirely, then, under the circulation by means of class of traders, some part of surplus product was appropriated by this class.
Some part of surplus product made by small commodity makers is appropriated by traders as trade profit. The trade profit of traders is the difference between the price of production of commodity, that is measured by costs spent for its production and sale plus average profit (and this is the price at which this commodity is sold by trader on commodity market), and purchasing price at which the trader buys up the labour products (at that becoming commodities) from small commodity makers. The difference between market and purchasing prices constitutes the trade profit of merchant (trader). Market price at which the merchant sells the commodity corresponds to the price of production of commodity that is higher than its value. And the purchasing price at which the small commodity makers sell their product of labour to the trader is, as a rule, lower than its value.
The trader sells commodities in the commodity market at the price of production of commodities that is higher than their value that is equal to the amount of labour embodied in commodities, both direct labour and labour transferred from other products of labour (for example, raw materials, means of labour, etc.) that were spent for the production of given commodities: entirely (raw materials) or partially (means of labour). But the seller buys these commodities from small commodity makers not at their value but at the price of production that is lower. And since the prices of production of commodities of small commodity makers are, as a rule, lower than their values, the difference between them is appropriated by the trader in the form of trade profit. Thus, traders compensate material costs of production of commodity and some part of newly- created value of commodity. The remaining part of labour that creates the surplus product is unrequited labour; this surplus or unrequited labour is appropriated by traders free of charge in the form of surplus product. This is the essence of exploitation of small commodity makers by traders.
One may ask a question: why do the small commodity makers sell their product of labour to the traders at the price of its production and why don’t they sell it themselves in the commodity market at the price of its value; after all, in the latter case all the surplus product would pass into their possession and would not be partially expropriated by traders in the form of trade profit? Or, why don’t the commodity producers sell their commodities to the traders at the price of their value, but sell them at lower price – price of production? If commodity producers could sell their commodities themselves or sell them to the traders at their value, then the exploitation of producers of material values by traders simply could not exist. This is a very important question that deserves the most detail consideration.
Let’s suppose, that the level of social division of labour in some land has reached the level enough for the commodity production and trade to appear, but this level is insufficient for the commodity circulation by means of class of traders to arise. In other words, there is simple commodity production and simple commodity circulation in this land. There are neither slave-holders – undertakers (managers) nor traders. Small commodity makers themselves sell the products of their labour in the local commodity market.
But, some day, there appears a trader in this land that proposes his service – sale of labour products of commodity makers.
Before the trader to come, the commodity producers sold their commodity at its value. This value of commodity consisted of two parts: material costs of production, i.e. value, transferred to the labour product by the means of production spent during its production, and the value newly created by producer equal to the amount of direct labour spent, that is measured by working time.
The newly created value, in its turn, could be divided into two isolated parts: one part is created by the producer directly in the process of production, the other part is created by the same producer in the course of its realization, mainly during the transportation of commodity from the place of its production to the place of its sale, i.e. from the field, workshop, etc. to the commodity market, bazaar, trade fair, shop, etc. First, the value of commodity is created during its production, then this value is increased in the course if its circulation – transportation, etc. The value of commodity ready for use is always higher than the value of this very commodity just produced but not ready for use; partly because of the fact that the commodity is located not in the place of its application but in the place of its production. Such a commodity could be compared with labour product in process, intermediate product.
Let’s suppose then, that the newly created value of some producer is equal to 250 hours of labour, at that this product was created during 25 ten-hour working days or during one month. At that, the newly-created value of commodity is divided into two parts: the first part is equal to 200 hours of labour and is created by producer in the course of production; the second part is equal to 50 hours of labour and is created by producer during circulation, trade, for example, at transportation, packing, unpacking, carrying, weighing, loading, unloading, etc. Besides, the value of labour product includes the third part of value equal to material costs of production that is transferred into the labour product by the means of production. To avoid confusion, let us suppose this latter part of value to be insignificantly small so that it could be neglected. Suppose then, that, on the commodity market, the product of one hour of labour can be sold at the price of one monetary unit - MU (in average and under the equality of demand and supply). Then our commodity producer will sell his labour product for 250 MU. Another small commodity makers, that did not use anyone’s services before the appearance of the trader, sell their commodities in exactly the same way.
The trader suggests producers to sell him their labour products in the place of their production thereby releasing producers from the labour connected with realization of commodities. If the trade deal between the producers and the trader takes place, that would lead to the increase (owing to the rise of social division of labour) of labour productivity: both the labour of producers in the course of production, and the labour during circulation of commodities – that very labour that is transferred by producers to the trader.
At what price will the producers sell the trader their commodities? Obviously, not less than the price, at which they sold their product on the commodity market themselves. However, some adjustment is necessary. Formerly, our producer created the product with value of 250 labour hours in a month. Now he creates the labour product of the same value in the same month as well. But there is some difference between these commodities, equal by value, by the amount of labour embodied in them. Formerly, the commodity producer spent 20 of 25 working days for making the product and 5 days – for its realization. Now he spends all 25 days for production of commodities. It’s clear, that, during 25 working days, he will produce more material values. But this larger mass of material values (use values, according to Marx) will have the same value as a lower mass of material values created in 20 working days formerly had. And it’s obvious, because, formerly, 20 days of production were accompanied by 5 days of realization (transportation, etc.) of commodities, so that total value was equal to 250 working hours. Now, all the value of commodity, equal to 250 working hours, is created exclusively in the course of production during all the 25 days.
So, our producer, refusing from the trip to the nearest city for selling his commodity, sells it to the trader on-site. At that, he sells the product of month’s labour for 250 MU, and consequently, loses nothing.
However, not everyone can agree with these conditions. Assume that the half of producers, according to a number of circumstances, would, as before, sell their commodity themselves, while the other half would sell it to the trader. What would be the result? To find it out, it’s necessary to follow the trader and the producers that set off for the commodity market.
The commodity market is the very place where the changes will take place that will entail serious consequences. Formerly, under the simple commodity circulation, i.e. without traders, our producer sold his commodity for 250 MU. Now the price for the same commodity will drop, because the trader’s part of value of commodity will be lower. The labour productivity of the trader is several times more than the productivity of the labour of small commodity makers in the field of realization of commodities, as a professional trader transports and sells commodities by large lots, gained experience in commerce, knows his market and customer demand very well, has more efficient means of trade, especially means of transportation. If the value of commodity of small commodity producers is equal to 200 + 50 = 250 working hours, then the value of commodities of traders of the same mass (produced in the same 20 days) would be a bit lower, say, 210 working hours, where 200 hours of producers is supplemented with 10 hours of trader. As a result, the identical commodities, say, grain or canvas, with different value would enter the commodity market. The value of commodity of small commodity producers that sell their commodity themselves is equal to 250 working hours, while the value of traders’ commodity of the same mass is equal to 210 working hours. As a result of competition, these commodities will be sold not at their individual values but at average value, i.e. at 230 MU. After all, one and the same, say, wheat cannot be sold on one and the same market simultaneously at different prices. If small commodity producers do not sell their commodity for 230 MU, they could not sell it because customers would buy the same commodity at trader for 230 MU and would not buy their commodity for 250 MU. And even if they manage to sell their commodity after all traders at their individual price, then they would spend too much time for this, so that they would show a loss anyway. After all, during that lost time they would produce nothing.
So, the trader sold his commodity for 230 MU, its value being 210 working hours, while small commodity producers sold their commodity for 230 MU, its value being 250 MU. The trader got a profit of 20 MU for each commodity bought from each commodity producer, the product of their 20-day labour, while the commodity producers, having sold themselves their product of 20-day labour, lost some part of the value of this product, the negative profit of each of them being 20 working hours or 20 MU. Thus, they found themselves in less profitable situation, than their “colleagues” that refused from trade on market and sold all their commodity to the trader at its value, i.e. product of 20-day labour for 200 MU, and product of 25-day labour – for 250 MU, etc. The only result is that still larger number of small commodity producers will sell their commodity to the trader wholesale. And this, in turn, will cause further drop in prices at which the trader will buy commodities from small commodity producers.
At that, the producers can do nothing against the traders, just as before the social revolutions the debtors could do nothing against usurers. The traders will reduce purchasing prices for the products of small commodity producers so long as (in spite of this landslide of prices) it is advantageous for the commodity producers to sell their products of labour to the trader wholesale and not to carry them to the nearest commodity market in the city for selling them there.
Even if all the commodity producers, having organized themselves in something like shop community or trade union, sell their commodities to the traders exactly at their values (in our example – 200 MU for the commodity of the value of 200 working hours), then the traders would do in a different way, namely they would sell on the market the commodities bought for 200 MU from commodity producers (according to their value) at the price of not 230 MU but higher, say, 250 MU (or 240 MU). In such a case, the traders would have trade profit of 40 MU (or 30 MU) from the sale of commodity of each producer, made during 20 working days. But even in such a case, the small commodity producers would gain nothing. Formerly, selling their commodity at the price lower than its value, they suffered losses during the sale. Now they do not sustain any loss in the course of sale. But if formerly they bought at the same trader necessary commodities at the price of their production, then now traders sell their commodities with extra charge to the price of production. What they lost formerly at the sale of their own commodities, they lose now when buying someone else’s products. But the trader will be with profit in any case. Thus, the trader in any case exploits small commodity producers, appropriating their surplus product partially or entirely. Using his monopoly of the means of circulation: means of transportation, means of trade (shops, warehouses, market facilities that are too expensive for small commodity producers, etc.), money funds, as well as using slave and hired labour for his trade, the trader can, in some cases, reduce commodity prices to the level lower than the price of their production, so that all the surplus product and, sometimes, even some part of necessary product of small commodity producers was appropriated by him in the form of trade profit. Besides, traders can temporarily fix prices in the commodity market not only lower than prices of production, but even lower than values of commodities with the aim not to let small commodity producers to trade on the market. In such a way, all the surplus product of the class of small commodity producers (or its significant, major part) during the first, trade phase of slave-holding society was appropriated by the class of traders in the form of trade profit. This appropriation of surplus product by traders took place owing to the fact that traders, selling commodities at the price of their production, i.e. higher than their value, buy commodities of small commodity producers at their prices of production, i.e. lower than their value. The exploitation of small commodity producers by traders is based on non-equivalent exchange, the same way as the exploitation of debtors by usurers. Therefore, after the second social revolution, exploitation of man by man, that appeared in the period of decay, descent of primitive-communal society after the agrarian-technical revolution, was not eliminated but simply changed its form: the most undisguised, rough, cynical usurious form of exploitation turned to soft, latent, masked form of exploitation – exploitation in the process of trade, or, simply, trade exploitation. The essence of this exploitation is in the fact that commodities are sold not at their values but at the prices of their production equal to production costs plus average profit. As the sizes of capital of merchants are many times larger than that of small commodity producers, the major part of aggregate surplus product of society passes into the possession of merchants. And thus, the results of economic progress – increase of labour productivity in commerce pass mainly to the class of traders, not to all society.
4. Kinds of trade profit.
Trade profit of the class of merchants, being only another name of surplus product created by the class of small commodity producers, at the first, trade phase of slave-holding society, becomes apparent in three main kinds or forms. The first form of trade profit originates from the fact that traders appropriate the major part of surplus product of small commodity producers by means of non-equivalent exchange with them. Selling the commodities in the commodity market at the price higher than their value, the traders buy them from small commodity producers at the price lower than value. This difference between purchasing and selling prices of traders constitutes the first form of trade profit or trade profit I, that we discussed above. Thus, trade profit I is based on non-equivalent exchange of commodities (by means of money) between traders and small commodity producers. As a result of this non-equivalent exchange, the class of traders exploits the class of small commodity producers, appropriating some part of surplus product created by the class of commodity producers.
Trade profit I had grown into a developed form before another forms of trade profit, it paved the way to other forms, converting primitive natural economy to developed commodity production. Trade profit I corresponds to that initial period of trade phase of slave-holding society when trade and developed commodity production only got on their own feet, class of traders was only forming itself accumulating capital and experience in plundering masses of labourers.
But very soon this class became independent, formed itself and began to exploit labourers more thoroughly. Formerly, traders made money directly by own hands. But in the course of accumulation of capital and solidity, their wish to do anything by hands became weaker. Traders did not want to be engaged in loading and unloading, packing, selling, carrying commodities and many other kinds of work necessary in trade sphere. To free themselves from physical work, they began to use the labour of slaves and hired workers in trade.
The use of labour of slaves and, in part, hired workers allowed to extend the scale of trade, commodity production, money circulation, and, together with that, the scale of exploitation of small commodity producers. But, along with broadening the exploitation of small commodity producers, there also appeared exploitation of another class of society – class of slaves and, to a smaller extent, hired labourers. Slaves began to do all the physical work that was earlier performed by the trader himself. And the trader began to do the work on organization of commerce, on signing commercial transactions, on trade personnel management.
Trade workers being occupied by productive labour in commercial sphere – transportation, carrying, loading, packing, parcelling, etc. – increased the value of commodities that merchant bought from some men and sold to the other at higher price. This new value created by trade workers – slaves and hired labourers – and measured by their working time was higher than their manpower costs. Difference between the value newly created by trade workers that is added to the “old” value of commodities and their manpower costs constitutes the surplus product created by productive trade workers and appropriated by the trader free of charge. This surplus product (surplus value) is expropriated by the trader from trade workers and appropriated by him in the form of trade profit that, unlike trade profit I, could be named trade profit II.
There is a significant distinction between trade profit I and trade profit II in spite of their internal unity and external similarity. The trade profit I is created for class of traders by small commodity producers, that are the owners of the main means of production, at least formally, legally. The trade profit II is created for the class of traders by slaves that are not owners of any means of production, moreover, they themselves are property of the trader, a specific commodity that could be bought, sold or resold.
The trade profit II, in its developed form, appeared after the trade profit I, the latter being its prerequisite. If, at first, the class of traders consisted mainly of small traders, possessing small capitals, who could not afford to buy several slaves and hire a soldier to guard slaves and clerk; who had to do not only pleasant work of calculating profits, but also troublesome physical work, who loaded, transported commodities, operated horses during transportation, rowed and steered the boat, stood behind the counter, and all these - themselves; then afterwards the traders bought several or several dozen slaves, large vessels, warehouses (formerly, they sold their commodities in small shops and in the open air), purchased commodities by large lots, frequently by cashless settlement, possessed credit in case of necessity, of which a small trader could not even dream formerly.
Shortly after the formation of traders as class, they began to extend the old and lay new commercial routes not only within the limits of their own countries, at that penetrating the most distant, most god-forsaken and wildest places of them, but also to another countries, both near, neighbouring and remote. As a result, together with profit I and profit II, there appeared also profit III that is essentially different from the first two forms of trade profit.
If profit I and profit II are based on the non-equivalent exchange between the traders and small commodity producers (trade profit I) and between traders – slave-holders and slaves (trade profit II), then trade profit III is, on the contrary, grounded on equivalent exchange. In different places in one and the same country, and, especially, in different countries with underdeveloped commodity production, material values of similar consumer properties (similar use values) have extremely unequal values and prices of production. These different values and prices of production are conditioned by the fact that, owing to different levels of social labour productivity, the different amounts of labour is being spent for their production.
For example, in one place or country, for the production of, say, one centner of wheat, two, three, five or even ten times as much labour (measured by working time) is needed in comparison with another place owing to various factors: level of development of technics and technology of production, agrotechnics, land fertility, climate, etc. The same way, another material values: food-stuff, clothes, craft products, etc. are made with different labour inputs in different countries. The less interconnected are single countries or places, the more isolated from one another they are, the less developed is the trade, means of connection, etc. between them, the more is the difference between values and prices of production of similar material values in these places or countries.
This very difference in the prices of production of similar commodities on different commodity markets is the base of the profit III. A trader, having arrived in some distant region of his country or in another country, buys there such commodities that are produced in this place with low labour inputs and the market price of them on the local commodity market is very small as compared to prices of similar commodities in the place or country from which the trader has come and to which he is to return. Besides, he sells the commodities he brought with him, and, above all, he studies the local market: demand, prices, etc. Having purchased commodities in this country or region, he transports them to his country or region and sells them at the price several times as much in comparison with that of purchase. At that, he purchases and sells commodities at the prices of production of them. The difference between the prices is conditioned by the fact that, in two different, distant, isolated commodity markets, similar commodities have different prices of production.
Having sold in his land the commodities brought, at the prices several times as much in comparison with that of purchase, the trader purchases in his own place a large lot of commodities that are cheap here but expensive – in another land. And in both countries or regions he gains great profits, far bigger than average ones, in spite of the fact that the exchange is carried out in strict correspondence with the law of price of production.
Trade profits I, II and III do not exist separately, independently of each other. They interlace with one another, merging into unified profit. It doesn't matter for trader, of what nature his profit is, he is much more interested in its amount not form. However, the differentiation of these forms of trade profit, especially trade profit III, helps us to understand the reasons for transition of slave-holding society from the first, trade phase to the second, productive phase.
5. Trade profit rate. The law of reduction of trade profit rate.
Comparing the trade profit gained by trader with the capital advanced by him, we have the rate of trade profit that is equal to the ratio of profit to capital. Usually, the rate of profit is calculated during the year, not during the time of one turnover, so, to have annual profit rate it is necessary to multiply the rate of profit for one turnover by the number of turnovers during the year. Or, it’s better to divide all the profit gained during the year by the advanced capital. The profit rate shows a trader how profitably his capital is used. The amount of trade profit by itself does not show how profitable the trade for one or another month or year was.
There may be a greater profit at a lower rate of profit, and, vice versa, lower profit at bigger profit rate. Only the ratio of annual profit to the capital can be an objective criterion of efficiency of capital investment.
What does the rate of trade profit depend upon, how is it changing in the course of time? Above, we distinguished three forms of trade profit. To answer the question put, it is expedient to consider the trade profit rate for each form separately. Let’s suppose, that a trader appropriates his profit exclusively in the form of trade profit I.
In the example considered above our trader gained trade profit of 40 MU a month from the trade with each commodity producer. If we suppose, that he traded with 25 producers, then his annual profit will constitute 40 * 25 * 12 = 12000 MU (we assume that he trades all the year round gaining constant profit). If, at that, he had advanced 60000 MU, then his rate of profit I would be 12000 * 100% / 60000 = 20%. How can he increase the rate of profit? For this, it is necessary either to increase profit at the same capital of 60000 MU, or to reduce capital at the same profit of 12000 MU. The latter way is unacceptable for the trader, as, even if he increases the rate of profit, the amount of profit could even decrease while some part of capital would be out of work. The trader will, of course, strive for the rise of profit at the same capital. And this profit is equal to 40 * 25 * 12 = 12000 MU.
The trade profit and, consequently, the rate of profit at the same capital could be increased, first, at the expense of reduction of the time of turnover. If he makes not twelve but fifteen turnovers a year, he would have the profit of 40 * 25 * 15 = 15000 MU and the rate of trade profit of 15000 * 100% / 60000 = 25%. The time of turnover could be reduced at the expense of the increase of labour productivity. But the labour productivity cannot rise endlessly, especially so rapidly as the trader wishes. So, the possibility to increase the profit rate and amount of profit at the expense of the rise of labour productivity and, accordingly, to decrease the period of turnover is limited. Suppose, our trader maximized the labour productivity and minimized the period of turnover of trade capital.
Trade profit I could be also increased at the expense of the rise of the number of small commodity producers, but here the abilities of our trader are confined as he has no workers and his own forces are enough only to sell the commodities of 25 producers and, besides, to purchase the commodities of a bigger number of producers it is necessary to increase the amount of capital that he does not possess.
Only the first multiplier in our formula remains – the amount of profit gained by the trader from the trade with each producer every month. We saw above that this value depends on the difference of labour inputs, i.e. productivities of labour of trader and producers in the course of circulation of commodities. In our example above, the labour inputs at the realization of commodities were equal to 50 w. hours, and the inputs of the trader – 10 w. hours. This very difference determines the trade profit that is equal to 40 MU (50 – 10). Thus, even here the amount of profit is limited by the possibilities of the increase of labour productivity of the trader. Of course, the labour productivity in the field of circulation rises but this rise is quite slow. Besides, if the productivity of trader’s labour increases, say, owing to improvement of trade routes, means of transportation, etc., it would also increase the productivity of labour of producers that sell their commodities themselves. If the labour inputs of the trader drops from 10 to 5 w. hours, and the inputs of producers (at the realization of commodities) – from 50 to 45 w. hours, then the trader would gain the same profit of 40 MU (45 – 5). And if the labour inputs of the trader and small commodity producers drop not by 5 w. hours, but proportionally to costs, say, are halved, then the profit of the trader would even decrease: 50 / 2 – 10 / 5 = 20 MU. And even if, at that, the period of turnover is halved (though, actually, this drop would be much smaller, because the transportation of commodities constitutes only one, though maybe the major, part of the period of turnover of trade capital), the amount of profit and, consequently, the rate of profit would not rise: 40 * 25 * 12 = 20 * 25 *24 = 12000 MU.
Thus, the rate of trade profit I tends to be on a level. Consequently, the traders appropriating exclusively trade profit I can increase it only at the expense of the raise of advanced capital, and they did it during the first period of trade phase of slave-holding society increasing their capital capitalizing some part of trade profit. And the increase of capital is only possible at the expense of utilization and exploitation of the labour force of slaves and hired workers in trade, as the trader just physically cannot realize himself several times larger amount of commodities.
The exploitation of alien labour force means that the trader, together with trade profit I, gains trade profit II and, at the same time, has the rate of trade profit II. Undoubtedly, the rate of profit gained from the capital assigned for buying labour force is higher than the rate of trade profit I because, if a trader expropriates only some part of surplus product of small commodity producers, then he can expropriate all or nearly all surplus product of his trade workers. And as the level of exploitation of slaves and hired workers increases in the course of the rise of labour productivity and respective drop of the value of labour force, so does the rate of trade profit II. But this rise of the rate of profit is insignificant because the increase of labour productivity is small as well.
Let’s turn to the trade profit III. We have already seen that this profit and, at the same time, the rate of profit is the highest of all. And the less tied are two regions or two countries, the more different are the labour inputs, i.e. labour productivity during the production of similar material values in different countries between which the trade exists, the higher is the rate of trade profit III. If the rates of trade profit I and profit II amounted to dozens of percent, then the rate of profit III, gained mainly in foreign trade and trade of central regions of a country with its remote areas, especially with newly occupied and annexed foreign territories, was estimated at hundreds of percent. Capital of the traders appropriating the trade profit III increased incredibly quickly – two, three and more times annually.
However, as times went by and in the course of development of social division of labour, commodity production, means of transportation, transport roads and water communication lines, in the course of migration and assimilation of population, progress of technics, especially production technics, technology of production, economy, agrotechnics, etc., a gradual smoothing of levels of labour production took place, so that differences in labour inputs during production of similar products, commodities gradually rubbed away. New, advanced methods of production, new, the most efficient, the most productive technics began to spread from economically developed regions, districts and countries to economically backward regions. These backward regions and countries began to overtake leading countries and regions. As a result, the differences in values and market prices of the same or similar commodities in different lands drops gradually but steadily. And decrease of these differences caused the drop of a mount of trade profit III and, consequently, the rate of profit as well.
As the rate of trade profit I and rate of trade profit II change slowly, and this change is such that they sometimes a bit drop, sometimes a little rise, and the higher rate of profit III drops as times go by, at that it drops much quicker than the two first profits rise sometimes, then, one can observe the overall decrease of trade profit of the class of traders during the whole trade phase of slave-holding society. Of course, in some short periods, the reverse phenomenon can be displayed, i.e. the periods when the rate of trade profit did not drop but, vice versa, increased, but if one takes the whole trade phase up to the origin and spread of slave-holding production, then, undoubtedly, the drop of the rate of trade profit is available.
This drop of the rate of trade profit is the law of economic development of the slave-holding society at its first phase.
The decrease of rate of trade profit of the class of traders - slave-holders at the first, trade phase of slave-holding society had far-reaching consequences. Already long before the end of this phase of development of slave-holding society, there appeared slavery and slaves some part of which were exploited in slave-holding enterprises. However, not only large but even small such enterprises were not widespread then. There were a few of those who agreed to keep a large enterprise because of small profit and rate of profit that could be gained from such enterprises. The profit rate in large slave-holding commodity production was several times lower than that in trade. That is why, instead of keeping large enterprises, men of means preferred to invest their money into trade sphere. Keeping large enterprises was hampered by relatively high prices for slaves, for hire of labour force and for land. Small commodity and natural economy dominated in commodity production and in social production at all, it was carried on by small, independent producers on the base of individual ownership of the main means of production and individual labour (and that of members of family). There were a little of large and medium slave-holding enterprises at that time, they took a small part in overall production.
But as times went by, in the course of decrease of the rate of trade profit that, dropping more and more, became nearly equal to the profit of slave-holders – managers, it became equally or almost equally profitably to invest money both into trade and into production sphere. It was promoted by intensification of competition of traders, who, increasing in number more and more, and getting richer and richer, invested more and more money into the trade sphere. It was also promoted by the fact that prices for land dropped as a result of acquisition of vast territories of land by slave-holding states that were partly sold out. Thus, while the rate of trade profit dropped, the rate of production profit, i.e. profit gained by slave-holders – managers in the field of material production, on the contrary, began to increase. And when they became equal, the great capital transfer from the sphere of trade to the sphere of production began. Of course, this transfer lasted for not one year and not one decade, otherwise the rate of trade profit would rise again owing to lack of capital in trade, and the rate of production profit would drop because of abundance of capital there. The transfer of capital lasted for more or less long period of time, but in comparison with duration of existence of the slave-holding society and even with duration of the trade phase of this society this period was insignificant. And in some time, the main part of money funds, majority of slaves found themselves in the sphere of production; the major part of aggregate surplus product of slave-holding society began to be expropriated and appropriated by exploiters in this very sphere. And this means that the slave-holding society entered the new, productive phase of its development.
6. Economic laws.
During the commodity production in clan society, commodities were exchanged according to the amount of labour spend for their production. If one commodity contains two hours of labour, and the other – four hours, then, on the commodity market, the former would be sold for half sum of money in comparison with the latter, so that if the price of the former is 10 MU, then the price of the latter is 20 MU. And the more developed is the society, commodity production, the less is the difference between prices of commodities and their values.
However, we have already seen above that, in the slave-holding society, commodities began to be exchanged at the price of their production, there appeared the non-equivalent exchange, exploitation of man by man. The exploitation appeared first in the primitive-communal society after the agrarian-technical revolution. The origin of exploitation of man by man meant that the primitive-communal socio-productive relations became out of date and the society was in need of another production relations. The exploitation of man by man at the second phase of primitive-communal society existed mainly in usurious form being the most undisguised, most cynical form of exploitation. Under that form of exploitation, the exploiters turned to parasitic, indolent caste with the only occupation – to consume the things produced by the others.
At the trade phase of new, slave-holding society, the dominant position belonged to the other, more disguised, masked form of exploitation of man by man – exploitation of small commodity producers by traders. This trade form of exploitation is also based on non-equivalent exchange - between traders and commodity producers: free peasants and craftsmen. Non-equivalent exchange means the deflection from the law of value, transformation of the latter to the law of the price of production, and, at the same time, the origin and development of economic contradiction between the class of traders – slave-holders and class of small commodity producers that is supplemented with contradiction between slave-holders (traders and managers) and slaves (and hired labourers). This contradiction is expressed in smouldering, disguised, and sometimes open class struggle between traders and producers, between slave-holders and slaves (and hired labourers), between the rich and the poor, between usurers and debtors, as the latter had not disappeared in new society though significantly shortened in number.
The history of early slave-holding states, especially Ancient Greece and Rome, is full of the facts of unlimited expansion in all directions, first – trade-economic, then – military-political. This expansion that caused the creation of great number of colonies in various parts of civilized and uncivilized world accessible for slave-holding states, and then – the creation of huge slave-holding states; this commercial and military expansion was the consequence of the action of economic law of correspondence of the size of commodity market to the level of social division of labour.
The agrarian-technical and slave-holding social revolutions led to considerable growth of social division of labour, commodity production, money-commodity exchange and foreign trade. However, the availability of a great number of dwarfish state, semi-state and pre-state formations with their borders, limitations of movement (especially for foreigners), imposition of traders with duties, robberies, and piracy – at sea, hampered the development of social division of labour. Suffice it to say, that as a result of these various obstacles braking the development of social division of labour, the production in slave-holding society was mainly of natural character that fettered the development of productive forces of society, rise of productivity of social labour. And the latter did not allow to satisfy ever growing needs of people.
The increased level of social division of labour and commodity production was in need of larger commodity market free from limitations and border barriers for their development. And, in the class society based on exploitation of man by man, this was possible only by means of armed conquests and annexations of foreign territories, plunder of entire nations and tribes, depopulation or enslavement of considerable part of inhabitants of these countries. The history of any early slave-holding state is the history of uninterrupted aggressive wars, depopulation of peoples, annexations of territories. This expansion was carried out by two waves – first, a smaller wave of traders moved, then – the wave of warriors. After the conquest of a new territory, the latter became a part of slave-holding state and, together with this, a part of commodity market that rose more and more promoting further growth of social division of labour.
But, following its policy of expansion, the ruling class of slave-holders created so enormous states (for example, empire of Alexander the Macedonian, republic of Ancient Rome), that their sizes multiply exceeded the needs of economic development, needs of social division of labour. To hold vast conquered territories, the slave-holding states bore enormous expenses that by far exceeded the benefits gained from commerce, because in this case there was again a violation of correspondence between the level of social division of labour and the size of commodity market, since the latter was much larger than it was necessary for normal economic development under achieved level of social division of labour and commodity production.
At the first, trade phase of slave-holding society, the dominating form of economy was small commodity and natural production with individual labour of producer and his family. This fully agreed with the law of correspondence of production centralization to the level of operational division of labour, because, at that time, in production, the base of which was agriculture, there was no operational division of labour, moreover, there were no conditions for it. Owing to this economic law, the agricultural production had wide opportunities, broad perspectives for its progressive development.
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