Vladimir Ilyich Lenin


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.


[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]

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