The DEVELOPMENT of CAPITALISM in RUSSIA

Chapter V. The First Stages of Capitalism in Industry

VI. Merchant’s Capital in the Small Industries

As we know, the small peasant industries in many cases give rise to
special buyers-up, who are particularly engaged in the commercial
operations of marketing products and purchasing raw materials, and who
usually in one way or another subject the small tradesmen to
themselves. Let us see what connection this phenomenon has with the
general system of small peasant industries and what its significance is.

The principal economic operation of the buyer-up is to buy goods (finished
products or raw materials) in order to resell them. In other words, the
buyer-up is a representative of merchant’s capital. The
starting-point of all capital—both industrial and merchant’s—is the accumulation of free money in the hands of
individuals (by free money we mean that money which is not needed for
personal consumption, etc.). How this property differentiation takes place
in our rural districts has been shown in detail above by the data on the
differentiation of the agricultural and the industrial peasantry. These
data revealed one of the conditions giving rise to the appearance of the
buyer-up, namely: the scattered nature, the isolation of the small
producers, the existence of economic conflict and strife among them.

Another condition relates to the character of the functions performed by
merchant’s capital, i.e., to the marketing of wares and to the
purchase of raw materials. Where the development of commodity production
is slight, the small producer limits himself to disposing of his wares in
the small local market, sometimes even to disposing of them directly to
the consumer. This is the lowest stage of the development of commodity
production, hardly to be distinguished from artisan production. As the
market expands, this petty, scattered marketing (which fully conforms to
petty, scattered production) becomes impossible . In the big
market, selling must he on a big, on a mass scale. And so the petty
character of production proves to be in irreconcilable contradiction with
the need for big, wholesale marketing. Under the existing social and
economic conditions, with the isolation of the small producers and their
differentiation, this contradiction could only be resolved by the
well-to-do minority taking charge of marketing, concentrating it in their
hands. By buying-up goods (or raw materials) on a large scale, the
buyers-up thus cheapened marketing costs and transformed marketing from a
petty, casual and irregular operation into a large and regular one; and
this purely economic advantage of large-scale marketing inevitably led to
the small producer finding himself cut off from the market and defenceless
in face of the power of merchant’s capital. Thus, under commodity
economy, the small producer inevitably falls into dependence upon
merchant’s capital by virtue of the purely economic superiority of
large, mass-scale marketing over scattered, petty marketing. [1]

It goes without saying that actually the profits of the buyers-up are often far from limited to
the difference between the returns of mass sales and those of petty sales, just as the profits of the industrial
capitalists often consist of deductions from normal wages. Nevertheless,
to explain the profits of the industrial capitalists we must assume that
labour-power is sold at its real value. Similarly, to explain the role of
the buyer-up we must assume that he buys and sells goods in accordance
with the general laws of commodity exchange. Only these economic causes of
the domination of merchant’s capital can provide the key to an
understanding of the variety of forms which it assumes in real life, and
among which we constantly meet (there can be no doubt of that) the
plainest fraud. To proceed otherwise, as the Narodniks usually do, that
is, to confine oneself to enumerating the various tricks of the
“kulaks,” and on these grounds completely to brush aside the
economic nature of the phenomenon would be to adopt the viewpoint of
vulgar

economics. [2]

To substantiate our thesis concerning a necessary causal relation between
small production for the market and the domination of merchant’s
capital, lot us deal in greater detail with one of the best descriptions
of how the buyer-up appears and of the part he plays. We have in mind the
investigation of the lace industry in Moscow Gubernia ( Industries of Moscow Gubernia , Vol. VI, Pt. II). The “tradeswomen” came
into being in the following way. In the 1820s, when this industry first
developed, and later, when the number of lace-makers was still small, the
principal buyers were the landlords, the “gentry”. The consumer was in the neighbourhood of the producer. As the industry spread,
the peasants began to send their lace to Moscow “as chance
offered,” for example, through comb-makers. The inconvenience of this primitive form of marketing very soon made itself felt: “how
can a muzhik not engaged in this business go from house to house?”
The sale of the lace was entrusted to one of the lace-makers, who was
compensated for the time she lost. “She also brought back thread for
the lace.” Thus the inconveniences of isolated marketing led to
turning trade into a special function performed by one person who gathered
the wares from many lace-makers. The patriarchal proximity of these women
workers one to the other (relatives, neighbours, fellow-villagers, etc.)
at first gave rise to attempts at the co-operative organisation of sales,
to attempts at entrusting this function to one of the women workers. But
money economy at once causes a breach in the age-old patriarchal
relations, at once gives rise to the phenomena we noted above when
examining the mass-scale data on the differentiation of the
peasantry. Production for sale teaches that time is money. It becomes
necessary to compensate the intermediary for her lost time and labour; she
becomes accustomed to this occupation and begins to make it her
profession. “Journeys of this kind, repeated several times, gave
rise to the tradeswoman type” ( loc . cit ., 30). The woman who has been to Moscow several times establishes the
permanent connections which are so necessary for proper
marketing. “Thus the need and habit of living on earnings from
commission operations develops.” In addition to commission earnings,
the tradeswoman “does what she can to advance the price of
materials, paper, thread”; she sells the lace above the set price
and pockets the difference; the tradeswomen declare that the price
received was less than the one agreed on: “take it or leave
it,” they say. “The tradeswomen begin . . . to bring goods
from the towns and make a considerable profit.” The commission agent
thus becomes an independent trader who now begins to monopolise sales and
to take advantage of her monopoly to subjugate the lace-makers
completely. Usurious operations appear alongside commercial
operations—the lending of money to the lace-makers, the taking of
goods from them at reduced prices, etc. “The girls . . . pay 10
kopeks per ruble as a commission for sales. . . . They know very well that
the tradeswoman makes even more out of them by selling the lace at a
higher price. But they simply do not knowhow to arrange things
differently. When

I suggested that they should take turns in going to Moscow, they replied
that this would be worse, because they did not know where to sell the
lace, whereas the tradeswoman already knew all the places. She sells the
finished lace for them and brings back orders, materials, patterns, etc.;
she always gives them money in advance, or on loan, and one can even sell
her a piece of lace outright, should the need arise. Thus, on the one
hand, the tradeswoman becomes a most needed, indispensable person; on the
other, she gradually develops into a person who cruelly exploits the
labour of others—a woman kulak” (32). To this it should be
added that such types develop from among the small producers themselves:
“However many enquiries we made, we found that all the tradeswomen
had formerly been lace-makers themselves, and consequently, were familiar
with the trade; they came from the ranks of these same lace-makers; they
had had no capital to start with, and had only gradually begun to trade in
calico and other goods, as they made money out of their commissions” (31). [3]

There can, therefore, be no doubt that under commodity economy, not only prosperous
industrialists in general, but also, and particularly, representatives of
merchant’s capital emerge from among the small producers. [4]

And once they have emerged, the elimination of small, scattered marketing by large-scale,
wholesale marketing becomes inevitable. [5]

Here are a few examples of how marketing is organised by the bigger “handicraft” proprietors who are at
the same time buyers-up. The marketing of abacuses by craftsmen of Moscow
Gubernia (see the statistics relating to them in our table; Appendix I) is done mainly at fairs all
over Russia. To do business oneself at a fair one must have, firstly, a
considerable amount of capital, as only wholesale trade is conducted at
the fairs; and, secondly, one must have an agent to buy up wares where
they are made, and to send them on to the merchant. These requirements are
met “by the one merchant-peasant,” who is also a “craftsman,” possesses a considerable amount of capital and
engages in finishing the abacuses (i.e., fitting the frames and beads) and
marketing them; his six sons are “engaged exclusively in
commerce,” so that two persons have to be hired to cultivate the
allotment. “It is not surprising,” observes the investigator,
“that he is able to sell his wares . . . at all the fairs, whereas
the smaller traders usually sell theirs at nearby markets”
( Industries of Moscow Gubernia , VII, Pt. I, Sec. 2, p. 141). In
this case the representative of merchant’s capital was still so
little differentiated from the general mass of “muzhik cultivators” that he even continued to retain his allotment farm and
his large patriarchal family. The spectacle-frame makers of Moscow
Gubernia are entirely dependent upon the industrialists to whom they sell
their wares. These buyers-up are at the same time “craftsmen”
possessing their own workshops; they lend raw materials to the poor on
condition that the finished articles are delivered to them, the
“masters,” etc. The small industrialists made an attempt to
sell their wares in Moscow themselves, but failed; it did not pay to sell
goods in small quantities amounting to a matter of 10 or 15 rubles
( ibid ., 263). In the lace industry of Ryazan Gubernia the
tradeswomen make profits amounting to 12 to 50% of the lace-makers’
earnings. The “substantial” tradeswomen have established
regular-connections with marketing centres and send goods by mail, which
saves travelling expenses. How necessary wholesale marketing is can be
seen from the fact that the traders consider that even sales amounting to
150 and 200 rubles do not cover marketing expenses ( Transactions of the Handicraft Commission , VII, 1184). The marketing of Belyov lace
is organised as follows. In the town of Belyov there are three grades of
tradeswomen: 1) The distributor, who hands out small orders, makes the
round of the lace-makers herself and delivers the finished article to the bigger tradeswomen. 2) The subcontractor, who places orders herself, or
buys up goods from the distributors and delivers them to the big cities,
etc. 3) The big tradeswomen (2 or 3 “firms”), who do business
with commission agents, to whom they send lace and from whom they receive
big orders. It is “practically impossible” for the provincial
trades women to sell their goods to the big shops: “the shops prefer
to do business with the wholesale buyers-up who deliver the wares in big
quantities . . . of the most diverse patterns”; the tradeswomen are
obliged to sell to these “suppliers”; “it is from them that they learn all the requirements of the market; it is they who fix
prices; in short, but for them, there is no way out” ( Transactions of the Handicraft Commission , X,
pp. 2823-2824). Numerous such examples could be given. But those given are
quite sufficient to show how utterly impossible is small, scattered
marketing where production is for big markets. In view of the scattered
state of the small producers and of their complete differentiation [6] large-scale marketing can only be organised by large capital ,
which, by virtue of this, reduces the handicraftsmen to a position of
utter helplessness and dependence. One can therefore judge how absurd are
the current Narodnik theories which recommend helping the
“handicraftsmen” by “organising marketing.” From the purely theoretical aspect such theories belong to the category of
petty-bourgeois utopias, based on a failure to understand the indissoluble
connection between commodity production and capitalist marketing. [7]

As for the facts of Russian reality, the authors of such theories simply ignore
them: they ignore the scattered state of the small commodity-producers and their utter differentiation; they ignore the fact that it is from their
very midst that “buyers-up” have emerged and continue to
emerge; that in capitalist society marketing can only be organised by big
capital. It is natural that if one leaves out of account all these
features of the unpleasant but undoubted reality, it is not difficult to
conjure up phantasies [8] ins Blaue hinein . [9]

We are unable here to go into descriptive details showing exactly how
merchant’s capital manifests itself in our “handicraft”
industries, and how helpless and wretched is the position in which it
places the small industrialist. Moreover, in the next chapter we shall
have to describe the dominance of merchant’s capital at a higher
stage of development, where (as an adjunct of manufacture) it organises
capitalist domestic industry on a mass scale. Here let us confine
ourselves to indicating the main forms assumed by merchant’s capital in the small industries. The first and simplest form is the
purchase of wares by the merchant (or owner of a big workshop) from the
small commodity producers. Where buying-up is poorly developed, or where
there are numerous competing buyers-up, the sale of goods to the merchant
may not differ from any other sale; but in the vast majority of cases the
local buyer-up is the only person to whom the peasant can regularly
dispose of his wares, and then the buyer-up takes advantage of his
monopoly position to force the price he pays to the producer down to rock
bottom. The second form of merchant’s capital consists in its
combination with usury: the peasant, who is constantly in need of money,
borrows it from the buyer-up and repays the debt with his goods. The sale
of his goods in this case (which is very widespread) always takes place at
artificially reduced prices, which often do not leave the handicraftsman
as much as a wage-worker could get. Moreover, the relations of the
creditor to the debtor inevitably lead to the personal dependence of the
latter, to bondage, to the creditor taking advantage of specific occasions
of the debtor’s need, etc. The third form of merchant’s
capital is payment for wares with goods, a common practice among village
buyers-up. The specific feature of this form is that it is typical not
only of the small industries but of absolutely all undeveloped stages of
commodity production and capitalism. Only large-scale machine industry,
which has socialised labour and broken radically with all patriarchal
usages, has eliminated this form of bondage by causing it to be legally
prohibited in large industrial establishments. The fourth form of
merchant’s capital is payment by the merchant with the particular
kinds of goods that are needed by the “handicraftsman” for
production (raw or auxiliary materials, etc.). The sale of materials of
production to the small industrialist may also be an independent operation
of merchant’s capital, quite analogous to the operation of buying-up
finished goods. When, however, the buyer-up of finished goods begins to
pay for them with the raw materials needed by the “handicraftsman,” this marks a very big step in the
development of capitalist relations. Having cut off the small
industrialist from the finished-goods market, the buyer-up now cuts him
off from the raw-materials market, and thereby brings him completely under his sway. It is only one step from this form
to that higher form of merchant’s capital under which the buyer-up
directly hands out materials to the “handicraftsmen” to be
worked up for a definite payment. The handicraftsman becomes de facto a wage-worker, working at home for the capitalist; the
merchant’s capital of the buyer-up is here transformed into
industrial capital. [10]

Capitalist domestic industry arises. In the small industries it is met with more or less sporadically; its
introduction on a mass scale, however, relates to the next and higher
stage of capitalist development.

---
Notes:
[1]
Regarding the significance of trading, merchant’s capital in the
development of capitalism in general we would refer the reader to
Capital , Vol. III. See especially III, I, S. 253-254 (Russ. trans., 212), on the essence of commodity-trading capital; S. 259
(Russ. trans., 217), on the cheapening of marketing by merchant’s
capital, S. 278 279 (Russ. trans., 233-234), on the economic necessity of
the phenomenon that “concentration appears earlier historically in
the merchant’s business than in the industrial workshop”;
S. 308 (Russ. trans., 259) and S. 310-311 (Russ. trans., 260-261), on the
historical role of merchant’s capital as necessary “premises
for the development of capitalist production.” [11] — Lenin

[2]
The preconceived viewpoint of the Narodniks, who have idealised the
“handicraft” industries and pictured merchant’s capital
as a sort of deplorable deviation and not as a necessary accessory to
small production for the market is unfortunately reflected in statistical
investigations. Thus, we have a number of house-to-house censuses of
handicraftsmen (for Moscow, Vladimir and Perm Gubernias) which carefully
investigated the business of each small industrialist, but ignored the
business of the buyers-up, did not investigate how his capital is
built up and what determines its magnitude, what are the sales’
receipts and purchase costs of the buyer-up etc. Cf. our Studies ,
p. 169 (See present edition, Vol. 2, The Handicraft Census of 1894-95 in Perm Gubernia .— Ed .).— Lenin

[3]
The emergence of buyers-up from among the small producers themselves is a
common thing noted by investigators almost everywhere as soon as they
touch upon this question. See, for example, the same remark about
“distributors” in the kid-glove industry ( Industries of Moscow Gubernia , Vol. VII, Pt. II, pp. 175-176), about the buyers-up
in the Pavlovo industry (Grigoryev, loc . cit ., 92), and
many others.— Lenin

[4]
Korsak ( Forms of Industry ) in his day quite rightly noted the
connection between the unprofitableness of small-scale marketing (and of
small-scale buying of raw materials) and the “general character of
small scattered production” (pp. 23 and 239).— Lenin

[5]
Very often the big handicraft proprietors whom we discussed in detail
above are also in some measure buyers-up. For instance, the purchase of
the wares of small industrialists by big ones is a very widespread
practice.— Lenin

[6]
Mr. V. V. asserts that the handicraftsman who is under the sway of
merchant’s capital “suffers losses that are fundamentally
quite superfluous” ( Essays on Handicraft Industry , 150). Maybe Mr. V. V. imagines that the differentiation of the small
producers is “fundamentally” a “quite superfluous” phenomenon, i.e., fundamentally as regards the commodity economy under
which the small producer lives?— Lenin

[7]
“It is not a matter of the kulak, but of the shortage of capital
among the handicraftsmen,” say the Perm Narodniks ( A Sketch of the Condition of Handicraft Industry in Perm Gubernia , p. 8). But
what is a kulak if not a handicraftsman with capital? The trouble is just
that the Narodniks refuse to investigate the process of differentiation of
the small producers which yields entrepreneurs and “kulaks”
from their ranks.— Lenin

[8]
Among the quasi-economic arguments advanced in support of the Narodnik
theories is the one about the small amount of “fixed” and
“circulating” capital needed by the “independent handicraftsman.” The line of this extremely widespread argument is
as follows: handicraft industries greatly benefit the peasant and
therefore should be implanted. (We do not dwell on the amusing notion that
the mass of the peasantry which is being steadily ruined can be helped by
turning some of their number into small commodity-producers.) And in
order to implant these industries one must know how much
“capital” the handicraftsman needs to carry on his business. Here is one of numerous calculations of this sort. The Pavlovo
handicraftsman, says Mr. Grigoryev for our edification, needs a fixed
“capital” of 3 to 5 rubles, 10-13-15 rubles, etc., counting
cost of implements, and a circulating “capital” of 6 to 8
rubles, counting weekly expenditure on food and raw materials. “Thus, the amount of the fixed and circulating capital
( sic !) in Pavlovo District is so small that it is very easy to
acquire the tools and materials needed for independent ( sic !!)
production” ( loc . cit ., 75). And indeed, what could be “easier” than such an argument? With a stroke of the
pen the Pavlovo proletarian is turned into a “capitalist”; all
that was needed was to call his weekly keep and miserably cheap tools
“capital.” But the real capital of the big buyers-up who have
monopolised sales, who alone are able to be “independent”
de facto , and who handle capital running into the thousands this
real capital the author simply passes over! Queer people, indeed, these
well-to-do Pavlovians: for generations they have used, and continue to
use, every foul means to pile up thousands of rubles of capital, whereas
according to the latest discoveries it seems that a “capital”
of a few dozen rubles is sufficient to make one “independent”!— Lenin

[9]
at random.— Ed .

[10]
The pure form of merchant’s capital is the purchase of a commodity
in order to sell this same commodity at a profit. The pure form
of industrial capital is the purchase of a commodity in order to sell it
in worked-up form , hence the purchase of raw materials, etc., and
the purchase of labour-power, which processes the material.— Lenin

[11]
Karl Marx, Capital , Vol. III, Moscow, 1959, pp. 263-264, 270-271,
290, 319-320, 321-320, 321-322. [p. 361]