 If, for example, a certain merchant's capital is 100, and for these 100 the merchant buys commodities and sells them for 110, then his capital of 100 has completed one turnover, and the number of such turnovers per year depends on the number of times this movement M C M' is repeated. We here leave entirely out of consideration the costs which may be concealed in the difference between the purchase price and the selling price, since these do not alter in any way the form, which we are now analysing. The number of turnovers of a given merchant's capital, therefore, is analogous in this case to the repeated cycles of money as a mere medium of circulation. Just as the same thaler buys ten times its value in commodities in making ten cycles, so the same money-capital of the merchant, when turned over ten times, buys ten times its value in commodities, or realises a total commodity-capital of ten times its value; a merchant's capital of 100, for instance, a ten-fold value = 1,000. But there is this difference: In the cycle of money as a medium of circulation it is the same piece of money that passes through different hands, thus repeatedly performing the same function and hence making up for the mass of the circulating pieces of money by its velocity. But in the merchant's case it is the same money capital, the same money-value, regardless of what pieces of money it may be composed, which repeatedly buys and sells commodity-capital to the amount of its value and which therefore returns to the same hands, the same point of departure as M + DM, i.e., value plus surplus-value. This characterises its turnover as a capital turnover. It always withdraws more money from circulation than it throws in. It is self-evident, at any rate, that an accelerated turnover of merchant's capital (given a developed credit system, the function of money as a means of payment predominates) implies a more rapid circulation of the same quantity of money. A repeated turnover of commercial capital, however, never connotes more than repeated buying and selling; while a repeated turnover of industrial capital connotes the periodicity and renovation of the entire reproduction process (which includes the process of consumption). For merchant's capital this appears merely as an external condition. Industrial capital must continually bring commodities to the market and withdraw them from it, in order that rapid turnover of merchant's capital may remain possible. If the process of reproduction is slow, then so is the turnover of merchant's capital. True, merchant's capital promotes the turnover of productive capital, but only in so far as it shortens its time of circulation. It has no direct influence on the time of production, which is also a barrier to the period of turnover of industrial capital. This is the first barrier for the turnover of merchant's capital. Secondly, aside from the barrier formed by reproductive consumption, the turnover of merchant's capital is ultimately limited by the velocity and volume of the total individual consumption, since all the commodity-capital which is part of the consumption-fund depends on it. However (aside from the turnovers in the world of commerce, in which one merchant always sells the same commodity to another, and this sort of circulation may appear highly prosperous in times of speculation), the merchant's capital, in the first place, curtails phase C M for productive capital. Secondly, under the modern credit system it disposes of a large portion of the total social money-capital, so that it can repeat its purchases even before it has definitely sold what has previously been purchased. And it is immaterial in this case, whether our merchant sells directly to the ultimate consumer, or there are a dozen other intermediate merchants between them. Owing to the immense elasticity of the reproduction process, which may always be pushed beyond any given bounds, it does not encounter any obstacle in production itself, or at best a very elastic one. Aside from the separation of C M and M C, which follows from the nature of the commodities, a fictitious demand is then created. In spite of its independent status, the movement of merchant's capital is never more than the movement of industrial capital within the sphere of circulation. But by virtue of its independent status it moves, within certain limits, independently of the bounds of the reproduction process and thereby even drives the latter beyond its bounds. This internal dependence and external independence push merchant's capital to a point where the internal connection is violently restored through a crisis. Hence the phenomenon that crises do not come to the surface, do not break out, in the retail business first, which deals with direct consumption, but in the spheres of wholesale trade, and of banking, which places the money-capital of society at the disposal of the former. The manufacturer may actually sell to the exporter, and the exporter, in his turn, to his foreign customer; the importer may sell his raw materials to the manufacturer, and the latter may sell his products to the wholesale merchant, etc. But at some particular imperceptible point the goods lie unsold, or else, again, all producers and middlemen may gradually become overstocked. Consumption is then generally at its highest, either because one industrial capitalist sets a succession of others in motion; or because the labourers employed by them are fully employed and have more to spend than usual. The capitalists' expenditures increase together with their growing income. Besides, as we have seen (Book II, Part III), continuous circulation takes place between constant capital and constant capital (even regardless of accelerated accumulation). It is at first independent of individual consumption because it never enters the latter. But this consumption definitely limits it nevertheless, since constant capital is never produced for its own sake but solely because more of it is needed in spheres of production whose products go into individual consumption. However, this may go on undisturbed for some time, stimulated by prospective demand, and in such branches, therefore, the business of merchants and industrialists goes briskly forth. The crisis occurs when the returns of merchants who sell in distant markets (or whose supplies have also accumulated on the home market) become so slow and meagre that the banks press for payment, or promissory notes for purchased commodities become due before the latter have been resold. Then forced sales take place, sales in order to meet payments. Then comes the crash, which brings the illusory prosperity to an abrupt end. But the superficiality and meaninglessness of the turnover of merchant's capital are still greater, because the turnover of one and the same merchant's capital may simultaneously or successively promote the turnovers of several productive capitals. The turnover of merchant's capital does not just promote the turnovers of several industrial capitals, it can also expedite the opposite phases of the metamorphosis of commodity-capital. For instance, the merchant buys linen from the manufacturer and sells it to the bleacher. In this case, therefore the turnover of the same merchant's capital in fact, the same C M, a realisation of the linen represents two opposite phases for two different industrial capitals. Inasmuch as the merchant sells for productive consumption, his C M is always M C for one industrial capitalist, and his M C always C M for another industrial capitalist. If we leave out K, the circulation costs, as we do in this chapter, if, in other words, we leave aside that portion of capital which the merchant advances along with the money required to purchase commodities, it follows that we also omit DK, the additional profit made on this additional capital. This is thus the strictly logical and mathematically correct mode of analysis if we want to see how profit and turnover of merchant's capital affect prices. If the price of production of 1 lb. of sugar were 1, the merchant could buy 100 lbs. of sugar with 100. If he buys and sells this quantity in the course of the year, and if the average annual rate of profit is 15%, he would add 15 to the 100, and 3s. to 1, the price of production of 1 lb. of sugar. That is, he would sell 1 lb. of sugar at 1.3s. But if the price of production of 1 lb. of sugar should fall to 1s., the merchant could buy 2,000 lbs. of sugar with 100, and sell the sugar at 1s. 1 4/5d. per lb. The annual profit on capital invested in the sugar business would still be 15 on each 100. But the merchant has to sell 100 lbs. in the first case, and 2,000 lbs. in the second. The high or low level of the price of production has nothing to do with the rate of profit. But it would greatly and decisively affect that aliquot part of the selling price of each lb. of sugar, which resolves itself in mercantile profit, i.e., the addition to the price which the merchant makes on a certain quantity of commodities or products. If the price of production of a commodity is small, so, too, the amount the merchant advances in its purchase price, i.e., for a certain quantity of it. Hence, with a given rate of profit, the amount of profit he makes on this quantity of cheap commodities is small as well. Or, what amounts to the same, he can then buy with a certain amount of capital, say, 100, a larger quantity of these cheap commodities, and the total profit of 15, which he makes per 100, breaks up into small fractions over each individual piece or portion belonging to this mass of commodities. If the opposite takes place, then the reverse is true. This depends entirely on the greater or smaller productivity of the industrial capital in whose products he trades. If we except the cases in which the merchant is a monopolist and simultaneously monopolises production, as did the Dutch East India Company in its day, nothing can be more ridiculous than the current idea that it depends on the merchant whether he sells many commodities at a small profit or few commodities at a large profit on each individual piece of the commodities. The two limits of his selling price are: on the one hand, the price of production of the commodities, over which he has no control; on the other hand, the average rate of profit, over which he has just as little control. The only thing up to him to decide is whether he wants to deal in dear or in cheap commodities, and even here the size of his available capital and other circumstances also have their effect. Therefore, it depends wholly on the degree of development of the capitalist mode of production, not on the merchant's goodwill, what course he shall follow. A purely commercial company like the old Dutch East India Company, which had a monopoly of production, could fancy that it could continue a method adapted at best to the beginnings of capitalist production, under entirely changed conditions. The following circumstances, among others, help to maintain that popular prejudice, which, like all false conceptions of profit, etc., arises from the observation of pure commerce and merchants' prejudice: First: phenomena of competition, which, however, apply merely to the distribution of mercantile profit among individual merchants, the shareholders of the total merchant's capital; if one, for example, sells cheaper, in order to drive his competitors off the field. Secondly: an economist of the calibre of Professor Roscher may still imagine in Leipzig that it was "common sense and humanitarian" [Roscher, Die Grundlagen der National konomie, 3. Auflage, 1858, S. 192. Ed.] grounds, which produced the change in selling prices, and that it was not a result of a revolutionised mode of production. Thirdly: if production prices fall due to greater productivity of labour, and selling prices fall for the same reason, the demand, and with it the market-prices, often rise even faster than the supply, so that selling prices yield more than the average profit. Fourthly: a merchant may reduce his selling price (which is never more than a reduction of the usual profit that he adds to the price) so as to turn over a larger capital more rapidly. All these are matters that only concern competition between the merchants themselves. We have already shown in Book I [English edition: Vol. 1, pp. 519-20. Ed]. that high or low commodity-prices do not determine either the mass of surplus-value produced by a given capital, or the rate of surplus-value; although the price of a commodity, and with it the share of surplus-value in this price, are greater or smaller, depending on the relative quantity of commodities produced by a given quantity of labour. The prices of every specified quantity of a commodity are, so far as they correspond to the values, determined by the total quantity of labour incorporated in this commodity. If little labour is incorporated in much commodity, the unit price of the commodity is low and the surplus-value in it is small. How this labour incorporated in a commodity breaks up into paid and unpaid labour and what portion of its price, therefore, represents surplus-value, has nothing to do with this total quantity of labour, nor, consequently, with the price of the commodity. But the rate of surplus-value does not depend on the absolute magnitude of the surplus-value contained in the unit price of the commodity. It depends on its relative magnitude, its proportion to the wages contained in the same commodity. The rate of surplus-value may therefore be large, while the absolute magnitude of surplus-value in each unit of the commodity is small. This absolute magnitude of surplus-value in each piece of the commodity depends primarily on the productivity of labour, and only secondarily on its division into paid and unpaid labour. Now, in the case of the commercial selling price, the price of production is a given external precondition. The high commercial commodity-prices in former times were due 1) to the high prices of production, i.e., the unproductiveness of labour; 2) to the absence of a general rate of profit, with merchant's capital absorbing a much larger quota of surplus-value than would have fallen to its share if capitals enjoyed greater general mobility. The ending of this situation, in both its aspects, is therefore the result of the development of the capitalist mode of production. The turnovers of merchant's capital vary in duration, their annual number consequently being greater or smaller, in different branches of commerce. Within the same branch the turnover is more or less rapid in the different phases of the economic cycle. Yet there is an average number of turnovers, determined by experience. We have already seen that the turnover of merchant's capital differs from that of industrial capital. This is in the nature of things. One single phase in the turnover of industrial capital appears as a complete turnover of an independently constituted merchant's capital, or yet of its part. It also stands in a different relation to profit and price determination. In the case of industrial capital, its turnover expresses, on the one hand, the periodicity of reproduction, and, therefore, the mass of commodities thrown on the market in a certain period depends on it. On the other hand, its time of circulation creates a barrier, an extensible one, and exerts more or less of a restraint on the creation of value and surplus-value, because it affects the volume of the production process. The turnover, therefore, acts as a determining element on the mass of annually produced surplus-value, and hence on the formation of the general rate of profit, but it acts as a limiting, rather than positive, element. For merchant's capital, on the contrary, the average rate of profit is a given magnitude. The merchant's capital does not directly participate in creating profit or surplus-value, and joins in shaping the general rate of profit only in so far as it draws a dividend proportionate to its share in the total capital, out of the mass of profit produced by industrial capital. The greater the number of turnovers of an industrial capital under conditions described in Book II, Part II, the greater the mass of profit it creates. True, through the formation of a general rate of profit, the total profit is distributed among the different capitals not in proportion to their actual part in its production, but in proportion to the aliquot part they make up of the total capital, i.e., in proportion to their magnitude. But this does not alter the essence of the matter. The greater the number of turnovers of the total industrial capital, the greater the mass of profits, the mass of annually produced surplus-value, and, therefore, other circumstances remaining unchanged, the rate of profit. It is different with merchant's capital. The rate of profit is a given magnitude with respect to it, determined on the one hand by the mass of profit produced by industrial capital, and on the other by the relative magnitude of the total merchant's capital, by its quantitative relation to the sum of capital advanced in the processes of production and circulation. The number of its turnovers does, indeed, decisively affect its relation to the total capital, or the relative magnitude of merchant's capital required for the circulation, for it is evident that the absolute magnitude of the required merchant's capital and the velocity of its turnovers stand in inverse proportion. But, all other conditions remaining equal, the relative magnitude of merchant's capital, or the part it makes up of the total capital, is determined by its absolute magnitude. If the total capital is 10,000, and the merchant's capital 1/10 of that sum, it is = 1,000; if the total capital is 1,000, then 1/10 of it = 100. The absolute magnitude of merchant's capital varies, depending on the magnitude of the total capital, although its relative magnitude remains the same. But here we assume that its relative magnitude, say, 1/10 of the total capital, is given. This relative magnitude, however, is again determined by the turnover. If it is turned over rapidly, its absolute magnitude, for example, will = 1,000 in the first case, = 100 in the second, and hence its relative magnitude = 1/10. With a slower turnover its absolute magnitude is, say, = 2,000 in the first case, and = 200 in the second. Its relative magnitude will then have increased from 1/10 to 1/5 of the total capital. Circumstances which reduce the average turnover of merchant's capital, like the development of means of transportation, for instance, reduce pro tanto the absolute magnitude of merchant's capital, and thereby increase the general rate of profit. If the opposite takes place, then the reverse is true. A developed capitalist mode of production, compared with earlier conditions, exerts a two-fold influence on merchant's capital. On the one hand, the same quantity of commodities is turned over with a smaller mass of actually functioning merchant's capital; owing to the more rapid turnover of merchant's capital, and the more rapid reproduction process, on which this depends, the relation of merchant's capital to industrial capital diminishes. On the other hand, with the development of the capitalist mode of production all production becomes the production of commodities, which places all products into the hands of agents of circulation. It is to be added that under the previous mode of production, which produced on a small scale, a very large portion of the producers sold their goods directly to the consumers, or worked on their personal orders, save for the mass of products consumed directly, in kind, by the producer himself, and the mass of services performed in kind. While, therefore, under former modes of production commercial capital was greater in relation to the commodity-capital which it turned over, it was: 1) absolutely smaller, because a disproportionately smaller part of the total product was produced as commodities, and passed as commodity-capital into circulation, falling into the hands of merchants. It was smaller, because the commodity-capital was smaller. But at the same time it was proportionately larger, not only because its turnover was slower and not only in relation to the mass of commodities turned over by it. It was larger also because the price of this mass of commodities, and hence the merchant's capital to be advanced for it, were greater than under capitalist production on account of a lower productivity of labour, so that the same value was incorporated in a smaller mass of commodities. 2) It is not only that a larger mass of commodities is produced on the basis of capitalist production (taking into account also the reduced value of this mass of commodities), but the same mass of products, for instance, of corn, also forms a greater commodity mass, i.e., more and more of it becomes an object of commerce. As a consequence, there is an increase not only of the mass of merchant's capital, but of all capital applied in circulation, such as in marine shipping, railways, telegraph, etc. 3) However, and this is an aspect which belongs to the discussion of "competition among capitals": idle or only half-functioning merchant's capital grows with the progress of the capitalist mode of production, with the ease of entering retail trade, with speculation, and the redundance of released capital. But, assuming the relative magnitude of merchant's capital to total capital to be given, the difference of turnovers in the various branches of commerce does not affect either the magnitude of the total profit falling to the share of merchant's capital, or the general rate of profit. The merchant's profit is not determined by the mass of commodity-capital turned over by him, but by the dimensions of the money-capital advanced by him to promote this turnover. If the general annual rate of profit is 15%, and the merchant advances 100, which he turns over once a year, he will sell his commodities at 115. If his capital turns over five times a year, he will sell a commodity-capital he bought at 100 at 103 five times a year, hence in a year a commodity-capital of 500 at 515. This gives the same annual profit of 15 on his advanced capital of 100. If this were not so, merchant's capital would yield a much higher profit, proportionate to the number of its turnovers, than industrial capital, which would be in conflict with the law of the general rate of profit. Hence, the number of turnovers of merchant's capital in the various branches of commerce has a direct influence on the mercantile prices of commodities. The amount added to the mercantile price, the aliquot part of mercantile profit of a given capital, which falls upon the price of production of a commodity, is in inverse proportion to the number of turnovers, or the velocity of turnover, of merchants' capitals in the various lines of commerce. If a certain merchant's capital is turned over five times a year, it will add to a commodity-capital of equal value but 1/5 of what another merchant's capital, which turns over just once a year, adds to a commodity-capital of equal value. The modification of selling prices by the average period of turnover of capitals in different branches of commerce amounts to this: The same mass of profits, determined for any given magnitude of merchant's capital by the general annual rate of profit, hence determined independently of the specific character of the commercial operations of this capital, is differently distributed proportionately to the rate of turnover over masses of commodities of equal value, so that, for instance, if a merchant's capital is turned over five times a year, 15/5 = 3% if once a year, 15%, is added to the price of the commodities. The same percentage of commercial profit in different branches of commerce, therefore, increases the selling prices of commodities by quite different percentages of their values, all depending on their periods of turnover. On the other hand, in the case of industrial capital, the period of turnover does not in any way affect the magnitude of the value of individual commodities produced, although it does affect the mass of values and surplus-values produced in a given time by a given capital, because it affects the mass of exploited labour. This is concealed, to be sure, and seems to be otherwise as soon as one turns to prices of production. But this is due solely to the fact that, according to previously analysed laws, the prices of production of various commodities deviate from their values. If we look upon the process of production as a whole, and upon the mass of commodities produced by the total industrial capital, we shall at once find the general law vindicated. While, therefore, a closer inspection of the influence of the period of turnover on the formation of values by industrial capital leads us back to the general law and to the basis of political economy, that the values of commodities are determined by the labour-time contained in them, the influence of the turnovers of merchant's capital on mercantile prices reveals phenomena which, without benefit of a very far-reaching analysis of the connecting links, seem to point to a purely arbitrary determination of prices; namely, that they are fixed by a capital simply bent upon pocketing a certain quantity of profit in a year. Due particularly to this influence of turnovers, it appears that within certain limits the process of circulation as such determines commodity-prices independently of the process of production. All superficial and false conceptions of the process of reproduction as a whole are derived from examinations of merchant's capital and from the conceptions which its peculiar movements call forth in the minds of circulation agents. If, as the reader will have realised to his great dismay, the analysis of the actual intrinsic relations of the capitalist process of production is a very complicated matter and very extensive; if it is a work of science to resolve the visible, merely external movement into the true intrinsic movement, it is self-evident that conceptions which arise about the laws of production in the minds of agents of capitalist production and circulation will diverge drastically from these real laws and will merely be the conscious expression of the visible movements. The conceptions of the merchant, stockbroker, and banker, are necessarily quite distorted. Those of the manufacturers are vitiated by the acts of circulation to which their capital is subject, and by the levelling of the general rate of profit.  Competition likewise assumes a completely distorted role in their minds. If the limits of value and surplus-value are given, it is easy to grasp how competition of capitals transforms values into prices of production and further into mercantile prices, and surplus-value into average profit. But without these limits, it is absolutely unintelligible why competition should reduce the general rate of profit to one level instead of another, e.g., make it 15% instead of 1,500%. Competition can at best only reduce the general rate of profit to one level. But it contains no element by which it could determine this level itself. From the standpoint of merchant's capital, therefore, it is the turnover which appears to determine prices. On the other hand, while the rate of turnover of industrial capital, in so far as it enables a certain capital to exploit more or less labour, exerts a determining and limiting influence on the mass of profit, and thus on the general rate of profit, this rate of profit obtains for merchant's capital as an external fact, its internal connection with the production of surplus-value being entirely obliterated. If, under otherwise equal circumstances and particularly the same organic composition, the same industrial capital is turned over four times a year instead of twice, it produces twice as much surplus-value and, consequently, profit. And this is apparent as soon, and as long, as this capital has a monopoly on an improved method of production, which makes this accelerated turnover possible. Conversely, differences in the periods of turnover in different branches of commerce manifest themselves in the fact that profit made on the turnover of a given commodity-capital is in inverse proportion to the number of times the money-capital turns over this commodity-capital. Small profits and quick returns appear to the shopkeeper to be the principle which he follows out of sheer principle. For the rest, it is self-evident that regardless of alternating, mutually compensating, speedier and slower turnovers, this law of turnover of merchant's capital holds good in each branch of commerce only for the average turnovers made by the entire merchant's capital invested in each particular branch. The capital of A, who deals in the same branch as B, may make more or less than the average number of turnovers. In this case the others make less or more. This does not alter the turnover of the total mass of merchant's capital invested in this line. But it is of decisive moment for the individual merchant or shopkeeper. In this case he makes an extra profit, just as industrial capitalists make extra profits if they produce under better than average conditions. If competition compels him, he can sell cheaper than his competitors without lowering his profit below the average. If the conditions which would enable him to turn over his capital more rapidly, are themselves for sale, such as a favourable shop location, he can pay extra rent for it, i.e., convert a portion of his surplus-profit into ground-rent. 
Economic Manuscripts: Capital, Vol.3, Chapter 18