What is commercial capital? Japanese contributions to Marxian market theory

Abstract

This article deals with the Japanese contributions to the Marxian theory of commercial capital, which can be originally found in Part 4 of Capital Vol. 3. This part was formerly considered important for developing the historical development of capitalist society in Japan, which is called the stages theory. From the 1980s to the 2000s, Shigekatsu Yamaguchi led the Japanese studies on the Marxian theory of commercial capital to reorganise the theory in Parts 4 and 5 of Capital Vol. 3, thereby pioneering the theoretical study of the capitalist market. Based on that development, we discuss the reconstruction of the relationship between the theory of the capitalist market and the stages theory, thereby illustrating a renewed and clearer understanding of the historical trajectory of capitalism.

Keywords

commercial capital Japanese Marxism Kozo Uno Marx stages theory

Introduction

Reading Marx’s Capital Vol. 3 is becoming more and more important. While Capital Vol. 1 has attracted wide attention all over the world for quite a long time, most parts of Capital Vol. 3 have gone relatively unnoticed. The notable exception is Part 3 of Vol. 3; its theme, the tendency of the rate of profit to fall (TRPF). Numerous scholars have since then discussed whether or not this law is provable.

However, Japanese Marxians have also become interested in other spheres in Capital Vol. 3. Indeed, Parts 4 and 5 have drawn no less attention than Part 3. It is especially noteworthy that Part 4, entitled ‘The Transformation of Commodity Capital and Money Capital into Commercial Capital and Money-Dealing Capital (Merchant’s Capital)’, has been a popular discussion topic among Japanese Marxians. However, Part 5, ‘The Division of Profit into Interest and Profit of Enterprise’, was only taken up by R. Hilferding, who wrote Finance Capital in 1910. Since then, Western literature has paid little attention to the theory of commercial capital developed in Part 4. To complete the introduction of Japanese Marxian economics, the theory of commercial capital is indispensable, and we think it is extremely useful for all critical thinkers of capitalism to understand how and why Japanese Marxians have studied this area of economic theory.

Today, the theory of commercial capital is worth studying now more than ever. A number of heterodox scholars are investigating the dynamics of the financial market, especially following the 2008 world crisis. Among them, certain Marxians stress TRPF to point out that capital prefers to invest in financial assets rather than to become engaged in material production with a decreasing rate of profit.¹ This argument is valuable because most heterodox discussions focus exclusively on financial dynamics and tend to neglect the relationship of financial business to the real economy. TRPF offers one way to describe the entire theoretical picture of the capitalist economy. However, TRPF does not explain how the financial market is actually established. True, the financial revenue in the 1980s onwards surges in comparison to the profit secured in the material production, and yet, we need to prove the existence of the financial market in theory first.

We must theoretically analyse the financial market to know how it is generated and serves as a field of investment. Of course, studying banking capital is indispensable. At the same time, however, commercial capital is also becoming an essential player in finance theory in Japan. Marxian economists have traditionally regarded commercial capital as an agent of industrial capital, who represents the trade of material goods produced by industrial capital. Nevertheless, recent Japanese Marxian economists have considered commercial capital as an organiser of the capitalist market in general, thereby dealing not only in material goods but also in financial assets. Japanese contributions to the theory of commercial capital can be helpful when investigating financial dynamics, such as credit expansion and the bubbles that occurred in modern capitalism.

The history of Japanese studies on commercial capital can be divided into three periods. The first period runs from the 1950s to the 1970s and was led by Kozo Uno (1897–1977), one of the most influential of Japanese Marxian economists. Many people followed his argument and as a result formed a group of scholars called the Uno school or Unoists. Consequently, the study of commercial capital has been since conducted by the Uno school. The first section of this article discusses how Uno tried to develop Marx’s argument regarding this topic.

The important figure in the second period was Shigekatsu Yamaguchi, a student of Uno and also one of his main critics. His first book was published in 1983 and entitled, Competition and Commercial Capital (Yamaguchi 1983a). It stimulated fierce debate in this field of study and became one of the reference points for the period from the 1980s to the 2000s. He educated many Marxian scholars at the University of Tokyo, contributing to the popularity of this theme among those at the Uno school. This article in the second section deals with Yamaguchi’s theory.

The third period began in the 2000s. The theory of commercial capital is still one of the most popular areas of study in Japanese Marxian economics. One of the issues, however, is how to develop and update Yamaguchi’s theory to understand modern capitalism better. We thus describe the current achievements and their implications in the third section of this article.

Commercial capital and ‘capital as an automatically interest-bearing force’

Since the Uno school has propelled the further development of the theory of commercial capital, it is necessary to examine the general framework of the Unoist way of theorising the foundations of capitalism.

The Unoist basic theory of capitalism is called the principles of political economy. It is used as the standard for analysing the historical transformation of capitalism. It was critically developed from the three volumes of Marx’s Capital and consists of three parts, namely, the doctrines of circulation, production and distribution. Uno’s (1980) book on the principles, Principles of Political Economy, has become a representative textbook for university courses in Japan.

These three parts examined here do not correspond to each volume of Capital. They were originally rearranged to form a more logically compelling theoretical model. The first part deals with the concepts of the market, including commodity, money and capital. The second part considers the topics of labour, reproduction, exploitation, and accumulation. In the third and last part, we consider the market mechanism, including the price system, financial markets and business cycles. This configuration is by and large still regarded as effective and thus shared in almost all of the Unoist textbooks on the principles of political economy.²

The most distinct part of the Unoist principles of political economy is the first part, the doctrine of circulation, which studies the market as such: it logically develops the concept of capital from the theoretical analyses of commodity and money, declaring it as an indispensable element of the market in capitalism. This approach is radically different from Marx’s, who essentially dismissed the motion of capital independent of production (i.e. M – C – M’) and insisted that the sale and purchase of labour-power are necessary elements to solve the contradictions present in the general formula for capital.³

We do not have enough space here to go into detail on this point, but what is still crucial for us is the consequences of this apparently slight reorganisation. For Uno, neither the first part nor the second part could be regarded as complete alone. The first part investigates the market without taking the production process into account, while the second part studies the social reproduction per se. The two fields must be integrated somehow. Thus, in the third part, Uno studies how capital, which originates in the market, subsumes social production and develops into several concrete forms, including commercial capital. The third part offers a renewed field of study of the capitalist market on the basis of social reproduction.⁴

Uno’s theory of commercial capital illuminates this point of argument. Its foremost originality rests in having a clear distinction between merchant capital (kaufmännisches Kapital, Kaufmannskapital) and commercial capital (kommerzielles Kapital, Handelskapital).⁵ First, Uno (1980) discusses merchant capital as a topic in the doctrine of circulation when he introduces the formula M – C – M’ as follows:

A concrete manifestation of the formula M – C – M’ can be seen in merchants’ capital which appears even in pre-capitalist societies with the evolution of a commodity-economy, giving impetus to its further development. Merchants’ pursuit of increased value has its foundation in the practice of ‘buying cheap and selling dear’. This practice characterizes the capitalist activity of merchants. . . . Merchant capital makes profit by wedging itself, as it were, between one community and another and bridging those who sell cheap and those who purchase dear. In other words, it lacks a real foundation inside an economic community for the pursuit of increased value. (p. 14)

Since the first part of Uno’s Principles focuses exclusively on the market itself abstracted from the entire economy, the formula M – C – M’ has no foundation for valorisation within the sphere of production. Here, this feature is associated with the merchant capital, which can be observed in the pre-capitalist era.

Indeed, merchant capital does play an essential role in Uno’s analysis of the historical transformation of capitalism. It is named the stages theory and published as another textbook, which is now available in English, The Types of Economic Policies under Capitalism (Uno 2016b). He divides the history of capitalism into three stages – mercantilism, liberalism and imperialism. The first stage, that of mercantilism, corresponds to the period from the 17th or 18th century to the early-19th century, when the system of mass production and wage labour was not fully established, and merchants thus prevailed as a result. Uno (2016b) summarises the features of this stage in the following sentences:

From the beginning, this historical process [of the penetration of commodity-economy into the communities] presupposed, and was assisted by, the unfolding of international commodity trade, under the influence of which hitherto isolated local communities were drawn into the orbit of an integrated national economy. The economic catalyst of that process turned out to be merchant capital, as it was politically aided by the absolute monarchy of nascent modern nation-states. (p. 36)

This period is regarded as the ‘formative period of capitalism’ in Uno’s stages theory: the lack of a productive foundation of merchant capital represents its very incompleteness as a form of society.⁶

However, after wage labour permeated nationwide and industrialisation advanced like it did in mid-19th century England, merchant capital lost its dominant position in capitalist society, and the age of industrial capital began. Nevertheless, world trade did not shrink; rather, it was reorganised and expanded further under the influence of industrial capital. This period is the second stage of capitalism in Uno’s stages theory, and it is called the stage of liberalism. Uno grounded his basic theory of capitalism on this second stage and further emphasised the difference in the state of world trade between these two periods. Consequently, commercial capital was distinguished from the concept of merchant capital and taken as more of a theoretical concept that could be organically related to the logical development of industrial capital and social reproduction. Uno (1980) explains this difference, together with the role that money-lending capital plays, as follows:

The . . . money-lending capital together with merchant capital whose formula, let it be recalled, was M – C – M’ emerges even in pre-capitalist societies as soon as a commodity-economy develops to some extent. The value augmentation of these two types of capital, however, cannot be said to be rooted in the labour-and-production process, the substantive economic base of these societies. . . . Yet as forms of capital they do represent the self-augmenting motion of value. It is for this reason that they constitute the antecedents and the vital ingredients of industrial capital, the form of capital which actually takes possession of the process of production and establishes the capitalist mode of production. The hegemony of industrial capital, however, gives these formulae of money-lending and merchant reasonable foundations for the value augmentation. Industrial capital too must circulate and incurs in the process some unproductive circulation-costs, which are to be saved on a capitalist-social basis by way of utilizing these two formulae. (p. 109)⁷

The formula of merchant capital is defined in the first part of the Principle, the doctrine of circulation, where the capitalist production is not yet discussed. For Uno, it theoretically precedes the concept of industrial capital and thus regarded as ‘the antecedents and the vital ingredients of industrial capital’. Meanwhile, the formula gains ‘reasonable foundations for the value augmentation’ in the third part, the doctrine of distribution and shows itself under the concept of commercial capital which has its basis on the social reproduction dominated by industrial capital. Commercial capital is thus defined separately from merchant capital and within the theoretical context of the motion of industrial capital. Commercial capital specialises in the selling process, so that industrial capital can outsource its own process of circulation. This function will be more stressed by Yamaguchi, as we shall see later. Distinguishing these two concepts, merchant capital and commercial capital, Uno (1980: 109) maintains that the ‘original activities in pre-capitalist societies’ of merchant capital ‘can better be appreciated’ using the theoretical conception of commercial capital.

In Uno’s Principles, commercial capital has another important role to play. It is used as a theoretical step to examine the fetishism of capital. While Uno firmly rejected the concept of interest-bearing capital in Part 5 of Capital Vol. 3, he tried to refurbish it in his original manner. It is renamed ‘Capital as an Automatically Interest-Bearing Force’ (or Capital as an AIBF), which was thought to be logically developed from the concept of commercial capital.⁸ According to Uno (1980), it is first commercial profit, not profit in general, that is divided into interest and entrepreneurial profit, since commercial profit is the general notion of profit for the capitalists themselves, just as ‘the old concept of “profit upon alienation”’ has ‘preoccupied all forms of capital since the heyday of merchant capital, that is, the concept that profit is nothing but the difference of the selling price over the unit-cost’ (p. 115). Uno (1980) then elucidates how the concept of capital as an AIBF is generated in the following sentences:

Commercial profit arises from the saving of circulation-costs which, thought necessary, encumber the formation of surplus value, the only source of industrial profit. It is this circuitousness that leads to a peculiar misconception originating in the circulation-form of capital itself. Since the acceleration of the turnover of capital by the policy of ‘quick sales at small gains’ often promotes commercial profit, the cause of this profit is naturally attributed to the judicious activity of the commercial capitalist himself. . . . [C]ommercial capitalists become capitalists par excellence and their speculative activity enshrouds every reality of the capitalist economy. . . . Hence interest on that ‘cash’ must automatically be subtracted from commercial profit to determine the so-called entrepreneurial profit, or the reward for the purely capitalist activity of buying and selling commodities. Underlying this capitalist conception of entrepreneurial profit, however, is the even more self-deceptive notion that ‘capital automatically begets interest’, with which notion indeed the fetishism of the capitalist economy is consummated. (p. 115)

Hence, ‘[t]he division of commercial profit into interest and entrepreneurial profit fixes the idea of capital as an automatically interest-bearing force’ (Uno 1980: 115). As a result, ‘the spirit of capital’ permeates the capitalist society, suggesting that all kinds of capital ‘should not be left idle even for a moment’ (Uno 1980: 116). Commercial capital thus plays a catalytic role in developing capital as an AIBF per Uno’s formulation.

In order to maintain this argument and its structure, Uno needed to place the theory of commercial capital after the theory of credit system, opposing Capital Vol. 3. This question of order became one of the hottest topics later on in Unoist studies. Nonetheless, at least for Uno, we can surmise that commercial capital must have been the direct source of the notion of capital as an AIBF when we think of his stages theory. He related the concept of capital as an AIBF to his stages theory as follows:

From a historical perspective, . . . it was merchant capital (M – C – M’) that first emerged as the dominant form of accumulation in the early stage of capitalist development, then came industrial capital (M – C . . . P . . . C’ – M’) in the middle stage, and, finally, finance-capital (M . . . M’) in the declining stage. . . . [F]inance-capital may . . . be viewed in some sense as a concrete-historical manifestation of what I call in theory ‘automatically interest-bearing capital’ [or capital as an AIBF], which is, by far, the most sophisticated (or synthetic) form of capital, having itself become a commodity in the form of an automatically interest-bearing asset (which appears to be the furthest away from the production-process), in much the same way as land, once commodified, may be regarded to be an asset that automatically bears rent. (Uno 2016b: 174)

While capital as an AIBF reinforces the notion of ‘the fetishism of the capitalist economy’ deduced in theory, finance capital is deemed to be ‘a concrete-historical manifestation’ of capital as an AIBF developed in history. This conceptual distinction means that, according to Uno, finance capital cannot be deduced from the activities of industrial capital in theory; it is only capital as an AIBF that can be theoretically developed. ‘[T]he issue here is whether industrial capital, which we claim forms the theoretical basis of capitalism in general, has the capacity within itself to logically develop into finance-capital’ (Uno 2016b: 174). Uno’s (2016b) answer is a negative one: ‘not even the theoretical concept of automatically interest-bearing capital possesses such a virtue’ (p. 174).

Hence, when finance capital emerges as a manifestation of capital as an AIBF, it is viewed as proof that capitalism is in decline, which can only be provided through historical analyses. Uno (1980) maintained that ‘[i]n the pure theory of capitalism, capital is invested for the purpose of earning a profit, not merely for earning interest’ (p. 125). If capital as an AIBF realises as a form of finance capital, and capital is invested just for gaining interest, not profit, that is an indicator of capitalism losing its briskness. Here, Uno divides the sphere of the principles of political economy from that of the stages theory. The historical analysis of the stages theory must clarify how and why capital as an AIBF emerged as finance capital in the late-19th century.⁹

If we are to summarise the earlier arguments, we find a latent, but firm, relationship between the concept of commercial capital and the historical study of capitalism in Uno’s works (Figure 1). The theory of commercial capital is constructed within the logical structure of industrial capitalism, and it should be used as a standard for studying the roles of merchants in pre-capitalist societies. It is also considered useful for capturing the movement of merchant capital dominant in the stage of mercantilism. Actually, commercial capital is still being developed in theory, but it still retains sufficient features to use for investigating the stage of mercantilism that corresponds to the still-undeveloped or ‘formative’ period of capitalism. However, since the stage of imperialism is a full-fledged capitalist society, commercial capital must be developed into its complete image of capital as an AIBF in order to be valid as a standard of analysis. Indeed, in place of commercial capital, capital as an AIBF plays a central role in studying imperialism.

Figure 1.

Commercial capital and stages theory in Uno.

The theoretical relationship between commercial capital and capital as an AIBF thus marks the historical transformation of capitalism that is depicted in Uno’s stages theory. It is thus not coincidental that the theory of commercial capital has been one of the most discussed topics in the Unoist studies of economics.

Commercial capital as an agent for industrial capital

Shigekatsu Yamaguchi marks the beginning of the second period of the studies of commercial capital in Japan. Whereas Uno regarded commercial capital as developing into capital as an AIBF, Yamaguchi dealt with it as forming a complementary system of industrial capital. This difference corresponds to the difference in theoretical position of commercial capital. In the first period of study, the theory of commercial capital was placed as part of the theory of interest, while in the second period, it has been included in the theory of market system, which also addresses the issues regarding financial systems.

We first discuss the approach in the second period of studying commercial capital. The point is that Yamaguchi contrasted the conceptions of competition and market system with those of ‘Capital in General’ approach and capital fetishism. After that, we introduce the features of his theory of commercial capital.¹⁰

Capitalist competition and systematic approach to the capitalist market

Yamaguchi summarises Marx’s plan for the critique of political economy as follows:

Part I Capital

(a) Capital in General

(b) Competition

(d) Joint-stock Capital

Part II Landed Property

Part III Wage Labour

Part IV State

Part V Foreign Trade

Part VI World Market (and Crisis)

Yamaguchi suggests Marx adopted this plan on the critique of political economy in the late 1850s when he excluded the factors of competition, as the plan clearly distinguished two topics, (a) ‘Capital in General’ and (b) ‘Competition’. In fact, this distinction can also be seen in Capital Vol. 3. Marx (1991) states in the following paragraph in the last part of his Chapter 43 entitled ‘The Trinity Formula’:

In presenting the reification of the relations of production and the autonomy they acquire vis-à-vis the agents of production, we shall not go into the form and manner in which these connections appear to them as overwhelming natural laws, governing them irrespective of their will, in the form that the world market and its conjunctures, the movement of market prices, the cycles of industry and trade and the alternation of prosperity and crisis prevails on them as blind necessity. This is because the actual movement of competition lies outside our plan, and we are only out to present the internal organization of the capitalist mode of production, its ideal average, as it were. (pp. 969, 970)

Indeed, this ‘Capital in General’ approach was very influential in Japanese Marxian political economy at Yamaguchi’s time.¹¹ According to Yamaguchi, the third volume of Capital would then be, as it were, a static theory of equilibrium under this interpretation. However, a competitive edge of Marxian political economy would be found in revealing the fetishistic character of capitalist class relations. Uno’s concept of ‘capital as an AIBF’ is also generally in line with this dominant interpretation, Yamaguchi argues.

To the contrary, if we take capitalist competition fully into account, the scope of Capital Vol. 3 must be expanded to include the following topics, not only ‘(b) Competition’, but also ‘(c) Credit’, ‘(d) Joint-stock Capital’, ‘Part II Landed Property’, and ‘Part VI World Market (and Crisis)’. Marx (1991) himself maintains, at the very beginning of Capital Vol. 3, that the issue of competition must be considered as well:

It cannot be the purpose of the present, third volume simply to make general reflections on this unity [of the process of capitalist production (Vol.1) and the process of circulation (Vol.2)]. Our concern is rather to discover and present the concrete forms which grow out of the process of capital’s movement considered as a whole. In their actual movement, capitals confront one another in certain concrete forms, and, in relation to these, both the shape capital assumes in the immediate production process and its shape in the process of circulation appear merely as particular moments. The configurations of capital, as developed in this volume, thus approach step by step the form in which they appear on the surface of society, in the action of different capitals on one another, i.e. in competition, and in the everyday consciousness of the agents of production themselves. (p. 117)

Yamaguchi emphasises the importance of capitalist competition when developing the arguments in Vol. 3. In Yamaguchi’s opinion, we must pay attention to the process of equilibrium rather than the static result of equilibrium, and the market system and its organisation should arise as a disequilibrium on the way to an equilibrium.

For Yamaguchi, Uno’s Principles is still insufficient in this respect. In other words, Uno’s doctrine of distribution in his Principles is seen as sometimes inconsistent with the general logic of capitalist competition. According to Yamaguchi, the typical example is Uno’s theory of commercial capital. Uno does not pay enough attention here to the competing relations among individual industrial capitals.

In order to overcome Uno’s shortcomings, Yamaguchi promotes the theory of market system at the sacrifice of the theory of fetishism. He distinguishes these two as different approaches and abandons the latter to purify the theory of market system which constructs itself among the competition of individual industrial capitalists.

Yamaguchi thinks highly of Uno, who related the theory of credit to the dynamics of accumulation of industrial capital and described its function clearly. Uno studied commercial capital from the same point of view, viz. its relation to industrial capital, and positioned it as a systematically important entity for profit equalisation along with banking capital.

Nevertheless, Uno’s theory of interest at the same time illustrates the gradual process of perfecting the fetish character of the capitalist mode of production, as we have seen in section ‘Commercial capital and “capital as an automatically interest-bearing force”’. The key player in this context was commercial capital. In Uno’s theory of commercial capital, he shifted his interest from the function of commercial capital to the perverted view regarding profit, which would become the basis of the concept of capital as an AIBF. Yamaguchi condemns this turn in focus as inconsistent. It is because of this circumstance, according to Yamaguchi, that Uno failed to complete the study of the market system centred on commercial capital and lacked the theory of the capital market.

In sum, Yamaguchi deemed the ‘Capital in General’ approach, which excluded the relations of capitalist competition out of the theory, as the foundation of developing the theory of fetishism of capital. As he included the concept of competition in his methodology, he felt he had to abandon the commitment to the theory of fetishism. According to Yamaguchi, as the theory of fetishism is methodologically based on the ‘Capital in General’ approach, it hinders the full development of theory of competition. Therefore, Yamaguchi concentrated on enhancing the theory of market system instead, the basis of which is laid on the commercial capital.

Method, structure and precondition

Now let us look at method, structure and precondition in the second period of study of commercial capital.

Differentiation and development method (DDM)

In order to develop the theory of market system, Yamaguchi starts from a hypothetical situation where there are only industrial capitalists. This focus is somewhat similar to the abstracted situation presented in Chapter 1 of Capital Vol. 1, where we have only commodities, but no such thing as money. However, Yamaguchi’s method is certainly different from what Marx offered in Chapter 16 of Capital Vol. 3, wherein commercial capital and industrial capital are both given. Yamaguchi proposes to investigate how commercial capital is differentiated and developed from industrial capital. This method is called the ‘Differentiation and Development Method (DDM)’.

Industrial capital and commercial capital appear as independent in an actual economy. We cannot fully appreciate the internal relationship between the two from a simple superficial observation. According to Yamaguchi, DDM describes the logical development of commercial capital from industrial capital and theoretically reproduce a relation, in which industrial capital necessarily differentiates commercial capital from itself through its own profit-seeking activities. In addition, DDM offers a standard for analysing capitalist history, wherein merchant capital had become subject to industrial capital and turned itself into commercial capital, that is, an agent for productive capital.

Structure of the market system

In general, Capital Vol. 3 is read to having the following structural order: commercial capital (Part 4), interest-bearing capital (Chapter 21–24, Part 5), and credit (Chapter 25–35, Part 5). We can largely say that Uno placed the topic of credit before commercial capital. According to Uno, although the credit system and the commercial capital play the same role in increasing the production of surplus value by saving circulation costs, commercial capital is more progressive in this respect and must be developed on the basis of the credit system. Whereas ‘bank-capital directly contributes towards the extension of society’s surplus-value production since the capitalist-social employment of funds reduces the burden of circulation-capital and, at the same time, increases the magnitude of productive capital’, ‘[c]ommercial capital, in contrast, promotes the social production of surplus value indirectly’ and ‘replaces industrial capitals in the conversion of commodity-capital into money-capital by specializing in, and expediting the hazardous process C’ – M’ of selling commodities in the motion of industrial capital’ (Uno 1980: 113).

Yamaguchi again reverses the structural order of the topics of credit and commercial capital. The reason is that the credit relationship involves a future estimation and shows a more sophisticated mode of circulation. Commercial capital, according to Yamaguchi, must precede the credit system since it is more readily available for individual capitalists.

Furthermore, the commercial capital and the credit system play different roles in the equalising mechanism for the rates of profit. The commercial capital refrains from trading with industrial capital with a low rate of profit. Meanwhile, the credit system does work for relatively stagnant industries as well as for industries in prosperity. The function of commercial capital is not sufficient for profit equalisation and must be supplemented by the functions of the credit system. Yamaguchi insists this also means commercial capital must appear before the credit system is created in theory.

The uncertainty of the circulation process

Last but definitely not least, we must pay attention to the precondition of DDM, the uncertainty of the circulation process. Because industrial capital is faced with this uncertainty, commercial capital must emerge.

This keyword means uncertain and unpredictable fluctuations during the selling period for commodities. One cannot know when his or her commodity will be purchased. This unpredictability is a hindrance to a smooth process of production. If the commodity does not sell well, then the selling period will be longer than expected. Then the industrial capital might run out of cash, or in other words, the transformation of commodity capital into money capital will be hampered. This issue will make it difficult to purchase production materials, thus exposing the producer to the risk of idle equipment. In order to avoid such a situation, industrial capital needs circulation capital as its reserves. Circulation capital is, as it were, a buffer to the uncertainty found in the circulation process, thereby preventing fixed capital from being idle.

However, the amount of circulation capital is also uncertain and is left to the discretion of each individual industrial capitalist. It is sometimes too large and sometimes too small. Also, industrial capitalists use their circulation costs for advertisement and other sales promotions. The effect of these activities cannot be predicted. It is because of this uncertainty of the circulation process that the complex market system arises in the capitalist market.

Summarising the argument in the second period

Yamaguchi’s argument can be summarised as follows. As we have noted earlier, the uncertainty of the circulation process incessantly causes an unexpected surplus or shortage of circulation capital, thereby damaging the profitability of industrial capital. In order to cope with this uncertainty, industrial capitalists have a need for agents who manage the selling process on behalf of them. If someone, say X, promised to purchase the product immediately after it is produced, there would be no uncertainty in the selling process, and the producer would be able to save at least part of its circulation capital.

Many industrial capitalists would compete to transfer their selling processes to X. This competition would lower the price of the products to X, allowing X to take a profit margin. As a result, the profit of the industrial capital would be partially distributed to X. This possibility is grounds for commercial capital to develop. Commercial capital substitutes for industrial capital and undertakes the task of selling commodities, thereby bearing part of the circulation costs instead. Consequently, industrial capital can raise the rate of profit by outsourcing the selling process to commercial capital.

However, commercial capital does not always respond to the demands of industrial capital. Since commercial capital does not have fixed production equipment, it can swiftly change the articles sold at its store. If the margin is not sufficient, commercial capital immediately stops handling the article. Then the selling process will be set back to the industrial capital. Commercial capital is not a panacea for the uncertainty of the circulation process. The credit system must appear and overcome the limitations of commercial capital.

Commercial capital as an organiser of the market

Yamaguchi reorganised the theory of commercial capital as the main part of the theory of market system, instead of the theory of interest. Our third section considers the third period of study for this field, which can be labelled the theory of market organisation. The difference between ‘market system’ and ‘market organisation’ will be elucidated as we investigate the recent discussions.

Classifying commercial capital

To begin, we take a look at the arguments by Hideaki Tanaka. Tanaka (2017) points out that the selling period should be regarded as the anticipated maximum period of circulation, not the average period. Industrial capitalists individually set this maximum period by estimating the fluctuating number of sales in order to minimise negative impacts on the production process. Because most commodities are purchased within this anticipated maximum period, industrial capital must usually have surplus commodity capital and idle money capital.

In order to save this surplus circulation capital, the anticipated maximum period must be shortened. However, it cannot be shortened without controlling the number of short-term sales. Commercial capital is required for this purpose, according to Tanaka, to establish a long-term and stable trade relationship.

Tanaka admits that commercial capital may also engage in temporary trade with industrial capital. During this short-term relationship, industrial capital cannot expect stable outsourcing of the selling process. Nor does it let industrial capital regulate the circulation period.

However, in a long-term and stable trade relationship, industrial capital will not be confronted with considerable changes in the amount of trade or sudden cancellation of the contract. Since it naturally causes some disadvantages to the activity of commercial capital, this relationship cannot be a general feature of the market system.

Tanaka thereby classifies commercial capital into two types: (1) one is to concentrate on temporary trade and enjoy the benefits of having the flexibility in choosing commodities and trading counterparts, speculating on market fluctuations and (2) the other is to establish a firm relationship with industrial capital and mediate interconnections between industrial capital as an organiser. While Yamaguchi pursues the logic of determining a single theoretical image of commercial capital, Tanaka starts discussing possible diversity in the form of commercial capital.

Expanding commercial capital

Another vital figure today is Masashi Shimizu. According to Shimizu, although it is not exceptional for commercial capital to set back the selling process into industrial capital, the industrial capital should be informed beforehand, or the amount of trade should be decreased gradually. In addition, commercial capital can change the content of the outsourcing contract if it becomes unfavourable. Without those flexible measures, cancelling the contract of outsourcing would be too risky for each party. Thus, Shimizu assumes it is necessary for commercial capital to build a relationship to industrial capital with a certain predictability. Consequently, the market would have a dual structure: the core would be commercial capital that undertakes the selling process with certain predictability, while there would be another type of commercial capital in the periphery with a single or temporary relation to industrial capital. As a result, the market is thus organised by the activities of commercial capital (Shimizu 2006).

For Shimizu, commercial capital expands the scope of the business on the basis of this predictable form of outsourcing and backsourcing. Shimizu asserts commercial capital is not only engaged in handling products manufactured by industrial capital: it would sometimes act as an industrial organiser, who coordinates multiple production processes;¹² or it would sometimes be a recruiter of workers in the labour market. Also, it could work as a securities firm, supporting the project of founding business through buying and selling financial assets. It could even be an equivalent to banking capital, dealing with funds as a result of trading products constantly with the same parties (Shimizu 2013, 14).

In short, recent researchers have focused on how commercial capital creates a multilayered structure of the capitalist market, including not only a product market but also a money market and a capital market and others. Commercial capital is not just an agent substituting for industrial capital anymore: it is a primary organiser of the capitalist market. In the third period of study, commercial capital thus plays a far more expanded role.

The market system and the market organisation

Researchers studying in the third period have reorganised the concept of commercial capital, thereby reconstructing the theory of market system into the theory of market organisation.

Yamaguchi’s concept of commercial capital can be conceptualised as follows: it is a specialised and scattered player that depends on industrial capital.

First, it specialises as a wholesaler for industrial capital. This aspect is generally in line with Capital, in which other functions are discarded and removed as follows: ‘the transport industry, storage and the dispersal of goods in a distributable form . . . we can therefore ignore these functions’ (Marx 1991: 379, 380); commercial capital is ‘stripped of all the heterogeneous functions . . . such as storage, dispatch, transport, distribution and retailing’ (Marx 1991: 395); ‘[h]ere, as throughout the text, attention is paid only to ordinary trade, not to speculation, the examination of which lie outside the ambit of our discussion’ (Marx 1991: 422).

Second, commercial capital is scattered in that it does not aim to form any organisation with other individual capital. The above quotation from Capital, ‘attention is paid only to ordinary trade, not to speculation, the examination of which lie outside the ambit of our discussion’, is followed by this phrase: ‘together with everything that pertains to the division of commercial capital’ (Marx 1991: 422). As a result, Marx did not examine the organisation that was possibly founded by commercial capital. Here, Yamaguchi’s attitude is similar to that of Marx, as Yamaguchi asserts the organisation of commercial capital is ‘left inside a black box, as it were’.

Third, commercial capital is dependent on industrial capital, after all. Marx (1991) maintains ‘the subordination of commercial capital to industrial capital takes with the progressive development of capitalist production’ (p. 446). Yamaguchi agrees with Marx and insists that commercial capital assists the capital accumulation of industrial capital and thereby complements the formation of a general rate of profit.

However, commercial capital in the recent arguments can be characterised as an interdisciplinary organiser that is independent from industrial capital.

It is an organiser, not a scattered individual, who builds a stable relationship with certain predictability. Also, it is rather independent of industrial capital in that it creates market organisation on the basis of the possibility of making industrial capital backsource the process of circulation. As Shimizu argues, this possibility would motivate commercial capital to seek ways to cancel the outsourcing contract without taking much risk.

These two new features let commercial capital play more roles other than simply buying and selling on behalf of industrial capital. In the third period of study, commercial capital theoretically has abundant other functions, including storage, transport, retailing and speculation. Commercial capital is regarded as an interdisciplinary actor who squeezes itself into other spheres, and thereby allows the logic of capital to permeate throughout the spheres.¹³

This turn in the theoretical image of commercial capital corresponds to the turn that has taken place from the theory of market system to the theory of market organisation.

Yamaguchi considers the market system as a complementary system to the profit-seeking activity of industrial capital. It forms a layered structure from the product or commodity market at the bottom that reaches to the capital market at the top, as shown in Table 1.

Table 1.

The structure of market system.

The third layer	Capital market	Securities capital
The second layer	Money market	Banking capital
The first layer	Commodity market	Commercial capital

The lower layer is simpler and more accessible to industrial capital, but its function is limited: the limitation of the lower layer is overcome by the upper layer. The market system has just such a strictly ordered structure. Furthermore, these three players are all regarded as alter egos of industrial capital, so to speak, who specialise in the processes that are outsourced from industrial capital.

Meanwhile, after Yamaguchi, the younger generation launched into reconsidering this structure. Shimizu focuses on the interrelation of the three markets and players, rather than on one-way development. They are regarded as parallel and influencing each other. For Shimizu, the capitalist market is a more interrelated network with a multi-dimensional structure. Tanaka also rejects a single-track generation of the market system and emphasises the bilateral effects occurring between the credit system and the commercial capital. According to Tanaka, commercial credit should be used by commercial capital to overcome its defects, while commercial capital should be required to complement commercial credit.

These recent arguments concentrate on reconsidering the relationship among the three players. Indeed, they somewhat take them for granted. However, if commercial capital wants a more predictable contract, why not industrial capital? Not only commercial capital, but also industrial capital is competent in establishing such a relation. There must be another player, industrial capital, that acts as an organiser of the market.

In addition, the theory of banking is now at issue. The banking organisation has a long history of argument, and the main point has been how to deduce the central bank in theory. Consequently, it is centred on the vertical relationship of rediscount. Recent researchers, however, have discussed horizontal relationships, such as a correspondent arrangement and a clearing house, as indispensable topics in banking theory.¹⁴

The theory of market system is thus being reorganised as a new theoretical field, viz. the theory of market organisation.

The stages theory reconsidered

Finally, we would like to take a look at the reorganisation of the stages theory based on the new theory of market organisation. As we have seen in section ‘Commercial capital and “capital as an automatically interest-bearing force”’, Uno’s theory of commercial capital offered an archetype of his stages theory in which he conceptualised the three stages of mercantilism, liberalism and imperialism. Meanwhile, Yamaguchi, who overhauled Uno’s principles of political economy as noted in section ‘Commercial capital as an agent for industrial capital’, did not express a clear view of the stages theory as an analysis of the historical development of capitalism: Yamaguchi only suggested a typological classification of the variety of capitalism. However, we observe a newly arranged stages theory based on the third period of study of commercial capital, where the configuration of market organisation is analysed amid the relationships between the different players.

As we have seen earlier, (1) the organisational relationships between different types of capitalists have a theoretical necessity that is grounded in the capitalist market system. (2) The theory of market organisation should include the function of industrial capital. Thus we have four types of capital, that is, commercial capital, banking capital, securities capital and industrial capital, and they should be regarded as equivalent to each other. On the basis of these two findings, (3) organisational relations can be theoretically classified into the following two types.

The first type of market organisation would be the closed structure, in which two of the four types of capital make an exclusive contract, for example (Figure 2). The other type is the open structure, wherein any of the four types of capital could participate, such as in a stock exchange or a platform business (Figure 3).

Figure 2.

The closed structure of market organisation.

Figure 3.

The open structure of market organisation.

These types of market organisation could be used to reconsider the stages theory. The closed structure of market organisation occurred in its nascent form as a market structure in the 19th century, where a relatively small individual capitalists competed with each other. It grew into monopoly capital as the scale of fixed capital increased at the end of the 19th century, particularly in the United States and in Germany. This structure dominated the capitalist market until the 1970s.

This development can be explained as a change induced by an external factor to the theory. The increase in fixed capital as an external factor turned the competitive relationship between the industrial capitals into the united relationship of capital, known as monopoly. Commercial capital also changed its position. In the 19th century, it retained its relative independence from industrial capital. However, at the end of the century, commercial capital was subjugated by industrial capital as monopoly capital with increased fixed capital and thereby turned into a complementary and subordinate position to the profit augmentation delivered by industrial capital.¹⁵

The closed structure of market organisation had to transform in the 1970s, when the capitalist societies faced the double crises of the Nixon shock and the Oil shock and the ensuing stagflation. As a result, the open structure has gained power in the market. This transformation is most conspicuous in the financial sectors, which have been deregulated globally after the exchange rate was floated. It was further propelled by the development of information technologies and resulted in financialisation, followed by the global financial crisis of 2008–2009. The historical shift in the 1970s and 1980s could be theoretically conceived as an enlarging open structure pitted against the closed structure: individual capitalists now visit the various exchanges of stock, commodities and others to make a deal with an indefinite number of market players, instead of negotiating with them one by one. The recently rising platform business like GAFA could also be regarded as one of the open structures of market organisation.

We do not mean to insist on the decline of the closed structure. However, the closed structure itself is now under an ongoing transformation. Stimulated by the new information technologies and deregulations, large-scale wholesalers in the United States and Japan are reorganising the entire processes of circulation and production and integrating both under their control. This reorganisation shows a trend that is contrary to the former affiliation between industry and commerce, which was mainly led by the industrial companies. Therefore, the power relation in the closed structure is now changing as well.

The two theoretical types of structure of market organisation would thus be the foundation for the analysis of the historical transformation in the late-20th century capitalism. Today’s global capitalism could be characterised by the rise of an open structure, although conceptualising the form of capital in globalism remains to be seen (Figure 4). This transformation would be overlooked or undervalued without the reorganisation of the theory of market: it could be misunderstood as a continuation of the ongoing stages of imperialism. Meanwhile, the typology in Yamaguchi’s argument abandons any attempt to grasp the trajectory of capitalism in the 20th century. The recent study of market organisation would be useful in reconnecting the basic theory with the history of capitalist society and thereby provide a more meaningful and accurate analysis of its development.

Figure 4.

The stages theory reconsidered.

Conclusion

It was Uno who pioneered the theory of commercial capital in Japanese Marxian political economy. It was dedicated to his understanding of history of capitalist development, viz. the stages theory. Yamaguchi contributed to further theoretical elaborations and focused on the competition between capitals and the market system. After Yamaguchi, recent researchers now discuss the organisational relations forged by various kinds of capital to deal with the uncertainty in the market. In Japanese Marxian political economy, commercial capital is not a subtopic of value and reproduction; rather, it is developed as one of the main topics of fundamental theory.

This trend is apparently unique to Japan. The background remains to be discussed. Let us here just suggest two possible factors: (1) so-called the debates on Japanese capitalism in the 1920s and 1930s (Nihon shihon shugi ronso) might have contributed to the study of commercial capital.¹⁶ As the debates raged over the peculiarities of Japanese development of capitalism, which had been affected by foreign capitalism, we could speculate that people paid attention to the features of Japanese commercial structure, such as general trading companies.¹⁷ (2) The doctrine of circulation in the Unoist fundamental theory, which was mentioned in section ‘Commercial capital and “capital as an automatically interest-bearing force”’, has promoted the study of the market as such, independently of the production, presumably leading to the emphasis upon the commercial activities. The relation between the two field should be elaborated in more detail.

Footnotes

ORCID iD

Kei Ehara

Notes

Author biographies

Shinya Shibasaki is Lecturer in the Faculty of Economics at Hokusei Gakuen University, Japan. His Japanese publications include “Turning from the market mechanism theory to the market organization theory”, SGCIME (ed) Marxian Theory of Market, Sakurai-Shoten Publisher and “The Collection of Debt under Commercial Capital”, Political Economy Quarterly, Vol.53, No.2.

Kei Ehara is Associate Professor in the Faculty of Economics at Oita University, Japan. His English publications include “The Crisis Theory and the Stages Theory in the Uno School”, Marx-Engels-Jahrbuch 2017/18 and “From Classical Market View to Marxian Market View: Reinterpreting the Theory of Market Value”, World Review of Political Economy, Vol.9, No.3.

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