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Journal of Agrarian Change, Vol. 16 No. 3, July 2016, pp. 410–431.

Merchant Capitalism, Peasant Households and

Industrial Accumulation: Integration of a Model

JAIRUS BANAJI

My paper underscores the theoretical contribution of an early essay by Henry Bernstein, ‘Notes
on Capital and Peasantry’, published in 1977. It uses the ideas in that essay to construct a
general argument about the ways in which capitalism dominates household producers. The first
section summarizes the arguments of Bernstein’s essay and relates them to key passages of A.V.
Chayanov’s work. The second section builds a model of how commercial capitalism worked in the
produce trades of the nineteenth and early twentieth centuries. The third section proposes a wider
taxonomy, where the differences between commercial and industrial capital and their respective
forms of domination of the countryside are laid out. The key category here is vertical integration
as a form/strategy of accumulation chiefly characteristic of the latter. The fourth section suggests
that we need to take merchant capitalism more seriously as a historical category as well as one
of theory, rejecting the idea that merchant’s capital ‘exclusively inhabits the circulation sphere’.
Keywords: merchant capitalism, household production, vertical integration, Marxist
theory

‘NOTES ON CAPITAL AND PEASANTRY’: THE RESILIENCE OF A MODEL

There were various interests involved in the production and supply of cash crops in the
colonial economies. These included the metropolitan industries which consumed the crops
as elements of constant capital; the large trading companies which organized the collection
of cash crops (directly or through intermediaries) and their subsequent export to the industries
of the particular colonial power or to the world market; the colonial state which was interested
in the extension of commodity relations for several reasons … The industrial interests, the trading
companies and the state combined to attempt to regulate what was grown, how it was grown, the quality of
the produce, as well as to establish monopolistic pricing and marketing arrangements.(Bernstein 1977, 64;
my emphasis)
I shall argue in this paper that the essential idea contained in the passage just quoted, an extract from
‘Notes on Capital and Peasantry’, Henry Bernstein’s seminal contribution to debates in the late
1970s, radically transforms our understanding of the relationship between capitalism and the coun-
tryside well beyond anything envisaged by Marx himself either in Capital or any other writings of his.
In Kautksy’s Agrarian Question, there are passing hints along the same lines, but Kautsky himself chose
not to develop these any further since his interest lay in the countrysides of advanced capitalism and
the transformations at work there. In fact, before the return to agrarian questions that characterized
post-war debates, especially in the 1970s, the only explicit developments on these lines were select

Jairus Banaji, Research Professor, Department of Development Studies, School of Oriental and African Studies,
University of London, Thornhaugh Street, London WC1X 0XG, UK. E-mail: jb67@soas.ac.uk

© 2016 John Wiley & Sons Ltd doi: 10.1111/joac.12175

 Merchant Capitalism, Peasants and Accumulation 411

passages in Chayanov’s Peasant Farm Organization, but it is well known that Chayanov’s work entered
those debates for entirely different reasons, mainly because Marxists felt the need to contrapose their
own orthodox understanding of peasant farming to the ostensibly ‘populist’ theory represented
there. Chayanov stressed the resilience of peasant households and their ability to withstand the full
blast of capitalism; Marxists, in contrast, saw capitalism uprooting the peasantry, destroying it, both
through its direct evolution within their ranks and in more sweeping and catastrophic ways that
subordinated the rural areas to large-scale industry.
Though laid out as a series of ‘notes’, no fewer than 57, Bernstein’s essay sidestepped this debate
by mapping the elements of a different and distinctive structure of accumulation that may well have
seemed to vindicate both contending positions – resilience to the extent that peasant households were
not uprooted but ‘incorporated’, which in turn allowed for conflict and resistance on their part; sub-
ordination to the extent that while they survived (i.e. continued to exist in vast numbers), their cycle
of reproduction was now largely and crucially shaped by capital. Next to the outright expropriation
of rural communities linked to the overtly predatory expansion of state, mining and plantation
capital, Bernstein suggested that peasant commodity production was a further widespread ‘pattern of
exploitation’ (1977, 61) (what I have just referred to as a structure of accumulation). From the stand-
point of the household, subsistence remained the prime motive or sole aim of production, but the
process of securing peasant subsistence became inextricably bound up with the market in the sense
that a large part of the peasantry had to (was doomed or compelled to) meet its subsistence requirements through
cash crop production. Thus even as households retained (more precisely, may have retained) ‘some
control over the organization of production’, their own continued survival and subsistence was im-
possible ‘outside commodity relations’ (p. 63). From the standpoint of capital, the household was no
longer an independent commodity producer, since the cash crops produced by those households
were components of its own accumulation and thus produced in conditions that capital naturally sought
to dominate, determine or control to the degree possible. Bernstein suggested that what researchers
had to study was ‘the ways in which capital attempts to regulate the conditions of peasant production
(as well as exchange) without undertaking its direct organization’ (p. 64; his emphasis). ‘There were
various interests involved’ here, and they ‘combined to attempt to regulate what was grown, how it
was grown, etc.’, as in the master-quote above (p. 64).
This is a model of accumulation that is full of tensions, then, and vastly more involved and complex
than any straightforward confrontation of wage-labour and capital. It means, to begin with, that ‘the
branches of the imperial trading companies and the apparatuses of the colonial state – despite their
mercantile and politico-administrative form – had to perform certain functions associated with productive
capital’ (p. 64). Some notes later, Bernstein cited the example of ‘rural development programmes’ that
‘often dictate very precisely the forms of the labor-process to be employed and represent a more
direct intervention in the organization of production’ (p. 65). And, in an obvious and early reference
to contract farming, ‘There is also the situation where industrial consumers of agricultural commod-
ities promote their production by peasants (under contract agreements) to ensure a continuous and
regulated supply to the factory or processing plant’ (p. 66).
That the whole of this intervention was driving towards a relatively new, integrated model of how
capital accumulation worked across large swathes of the colonial/imperial economies of the nine-
teenth and early twentieth centuries is proved by Bernstein’s emphatic rejection of any purported
articulation of modes of production. A substantial section of ‘Notes’ that bears the heading ‘Capital,
State and Peasantry’ begins by asserting that any conceptualization of the relations of production in-
volved in peasant commodity production should be ‘pursued in the relations between peasant households
and capital rather than by invoking modes of production other than the capitalist mode’ (p. 68; my emphasis). ‘It
makes little sense to talk of the “conservation” of modes of production whose conditions of repro-
duction, it is admitted, have been destroyed by capitalism even if the forms of production have not
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412 Jairus Banaji

been completely transformed’ (p. 69). Bernstein went on to suggest that the domination of capitalism
over the peasantry and the countryside was a wider process than the development of capitalism
within the mass of the peasantry and/or countryside.1 Over and above that, and in one of the best
‘notes’ of the paper, Bernstein argued, ‘the movement of capital to determine the conditions of small
commodity production and exchange can be described broadly in terms of the “vertical concen-
tration” of the producers’ (p. 70). That is, in contrast to the ‘classic model’ of capital expanding by
dispossessing rural producers and centralizing rural means of production into industrial-scale enter-
prises, ‘Vertical concentration refers to the coordination, standardization, and (greater or lesser)
supervision of the production of numerous small producers through a central agency whether this
represents productive capital directly (as in out-grower arrangements), forms of merchant’s capital
which thereby actively intervene in the organization of production, or whether the agency is that
of a cooperative or other state-managed scheme’ (p. 70). And the following note went on to point
out that ‘A.V. Chayanov in the final chapter of his work on Peasant Farm Organization … drew
attention to vertical concentration brought about by the intervention of trading capital in the
conditions of production …’.
Finally, ‘Notes’ concludes with the general argument: ‘[T]he position taken here is that peasants
have to be located in their relations with capital and the state, in other words, within capitalist relations
of production mediated through forms of household production which are the site of a struggle for
effective possession and control between the producers and capital/state’ (p. 73).
In select passages of Peasant Farm Organisation (1925), Chayanov drew an important distinction
between two general forms in which capitalism can penetrate and/or establish domination over
agriculture. Two of these passages are especially interesting. In the first of these, in the introduction
to his tract, he wrote,
At the present time, the peasant farm almost everywhere has been drawn into the system of the
capitalist commodity market … After Professor Lyashchenko’s works on the evolution of Russian
farming and Lenin’s on the American farm, we can see with great clarity that we should not nec-
essarily expect the development of capitalist influence and concentration in agriculture to take the form of the
creation and development of latifundia. More probably, we should expect trading and finance capitalism to
establish an economic dictatorship over considerable sectors of agriculture, which as regards production
will remain as before, composed of small-scale family labor peasant undertakings subject in
their internal organization to the laws of the labor–consumer balance. (Chayanov 1966, 49;
my emphasis)
Thus here it is ‘trading and finance capitalism’ that establishes the domination of capital over
sectors of the peasantry, with no necessary effects on the existing organization of production. Indeed,
the ‘survival’ of the peasantry is a prerequisite for this form of capitalist penetration-cum-domination.
Moreover, the implication here is that capital instrumentalizes the logic of household production by
subsuming it into the wider networks that it controls.
Lyashchenko’s work ‘on trading capitalism’ was again cited in a later passage to reiterate the point
that ‘bringing agriculture into the general capitalist system need by no means involve the creation of
very large, capitalistically organized production units based on hired labor’.2 This is especially the
case, Chayanov argues, when ‘agriculture … becomes subject to trading capitalism that sometimes in the form
1
‘Two alternative lines of approach to the relations of production have been indicated above. The first is that of
investigating the relations of simple commodity producers with (various forms of) capital … The second is that of in-
vestigating the internal differentiation of simple commodity producers (towards capitalist farmers and wage-workers).
We have been at pains to emphasize that the latter “classic model” is a special case of the first set of relations, and not its sole or
necessary form of development’ (Bernstein 1977, 69).
2
Translated excerpts from two of Lyashchenko’s works can be found in Vasudevan (1998).

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 Merchant Capitalism, Peasants and Accumulation 413

of very large-scale trading undertakings draws masses of scattered peasant farms into its sphere of influence and,
having bound these small-scale commodity producers to the market, economically subordinates them
to its influence’ (p. 257), then going on to cite the example of the Moscow cotton firm Knop’s control
over cotton growers. Chayanov suggested that each of the main commodity markets was character-
ized by its own ‘organisation’ or ‘structure’ or ‘trading machine’; for example, in the flax market of
the western guberniyas, ‘The machine that has been described penetrates, with its hundreds of thou-
sands of branches, to the full depths of the peasant farms and leaving them free as regards production,
entirely dominates them economically’ (pp. 261–2). But Chayanov added that in commodities where
quality was an issue, ‘the trading machine … begins to actively interfere in the organization of production,
too. It lays down technical conditions, issues seed and fertilizers, determines the rotation, and turns
its clients into technical executors of its designs and economic plan’ (p. 262). North American
agriculture exemplified more advanced forms of this process, so that Chayanov referred already in
the 1920s to ‘new ways in which capitalism penetrates agriculture’. ‘These ways convert the farmers
into a labor force working with other people’s means of production. They convert agriculture,
despite the evident scattered and independent nature of the small commodity producers, into an
economic system concentrated in a series of the largest undertakings and, through them, entering the sphere
controlled by the most advanced forms of finance capitalism’ (p. 262). Compared with this ‘vertical
capitalist concentration’, Chayanov argued, the lateral expansion of capital – that is, the growth of
large-scale farming based on concentration of the means of the production (dispossession of smaller
producers etc.) – was a much less widespread process in countries such as Russia.
These were remarkable formulations for their time, enormously prescient. Clearly, ‘Notes on
Capital and Peasantry’ was an attempt to reason on the same lines, at least implicitly rejecting the idea
that capital’s economic domination of the countryside was reducible to agrarian capitalism conceived
in the standard way; namely, as the growth of capitalist relations among rural classes.3 Both texts
invoked ‘vertical concentration’ as the characteristic method by which capitalist firms that have no
intrinsic relation to agriculture intrude on its economic life, and establish a network of controls as
pervasive as processes of peasant differentiation and land concentration. The rest of this paper
develops the argument that the categories of ‘commercial capital’ and ‘merchant capitalism’ need
to be taken more seriously than they have been, by Marxists especially. The second section develops
the category of commercial capitalism through a set of empirical snapshots of the colonial produce
trades. The third section sets out a four-part taxonomy of the ways in which capitals reshape the
countryside, arguing that the truly radical changes only come about with full vertical integration
by industrial capital. The fourth section extends the general argument to suggest that between
Maurice Dobb’s legacy and the work of the Russian historian Pokrovsky, it is the latter’s perspectives
that offer Marxists a stronger basis for overcoming what one historian has called the ‘bifurcated
historiography’ of early capitalism.

COMMERCIAL CAPITALISM AND THE PRODUCE TRADES

The subordination of household production to capital implies a specific structure of capitalist
accumulation. Circulation becomes a value-creating process by subsuming production. The most interesting
contemporary expressions of this, arguably, are the giant retailers who ‘manage production and trade
networks’ in buyer-driven commodity chains. Gary Gereffi drew attention to them in the 1990s to
underline ‘the key role played by commercial capital (i.e. large retailers and brand-named companies
that buy but do not make the goods they sell) in the expansion of manufactured exports from devel-
oping countries’ (Gereffi 1994, 95, 97). What this implies is that the division between circulation and
3
‘In the standard way’ refers to the classic model developed by Lenin (notably in The Development of Capitalism in
Russia) and later, in the 1920s, by Agrarian Marxists such as Kritsman.

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414 Jairus Banaji

production has to be stated with a greater sense of integration than the sharp and inflexible contrast
between them that dominates so much Marxist writing. Marx himself allowed for this complexity
when he described the Dutch East India Company as a ‘striking example’ of the ‘manner and form
in which commercial capital operates where it dominates production directly’ (Marx 1981, 446–7).
The subordination of producers described by Chayanov and Bernstein in the summary provided
above – that is, capital’s ability to ‘dominate’ household producers – is one example of the interpen-
etration of circulation and production in ‘real’ capitalism. The transport industry itself is another,
Marx describing transport (‘storage and the dispersal of goods in a distributable form’) as ‘production
processes that continue within the process of circulation …’. Marx goes on to say, ‘In so far as capital that
functions exclusively in the circulation process, and especially commercial capital, sometimes com-
bines part of these functions with its own, it does not appear in its pure form. We only have this pure
form once those functions are discarded and removed’ (Marx 1981, 379–80), a passage that shows,
incidentally, that much of the treatment of ‘commercial capital’ in Capital is best viewed in terms
of the ‘simplifying assumptions’ involved in it.
The produce trades that were the backbone of British mercantile capitalism in the nineteenth
century worked in terms of a ‘hierarchy of financial and commercial relationships’ distributed across
commodity chains with a broadly similar structure, even when the precise characteristics of the chain
varied enormously. Figure 1 displays this broad structure for 12 markets, simplifying the details for
each of these. From this, it is clear that commodity chains have to be viewed as combined accumu-
lations of capital at all higher levels of the hierarchy, so that the drive to enforce price domination
worked not just with respect to producer households but also in terms of actual or potential com-
petitors within the chain. The larger commercial capitals at the apex of the hierarchy resented their
dependence on the middle levels (the ‘middlemen’ capitalists) and sought to bypass them wherever
possible, but complete vertical integration was neither possible nor particularly desirable. It was im-
possible because local dealers controlled the trade at lower levels. ‘The trade was entirely in the hands
of the local dealers, and it was their interest to keep out outsiders’, wrote Rivett-Carnac in 1869
about the Bombay cotton trade.4 Given that ‘smaller’ capitals were deeply entrenched in most mar-
kets that were progressively penetrated by the large international trading firms in the course of the
nineteenth century, it makes more sense to see the latter not creating these networks but having
to adapt to them and seeking their integration. It was, moreover, not particularly desirable because
firms such as Volkart Brothers would have to tie up less of their own capital in advances if the bulk
of this credit flowed from indigenous classes of capital (merchants and moneylenders) to whom
household producers were naturally both better known and more accessible.5 In fact, the best
description of the entrenched nature of local capitals and the way in which the chain operated comes,
remarkably enough, from an early tract on the organization of the Bombay cotton trade, letters that
Samuel Smith wrote in 1863, which were collected together and published in the same year as The
Cotton Trade of India6:

4
Rivett-Carnac, Report of the Cotton Department for the Yar 1868–69, cited in Dejung (2013, 92).
5
Salomon Volkart was strongly opposed to the advance system, as (later) were groups within the United Africa
Company (cf. Dejung 2013, 104); see also Ammann (1921, 19) (‘the rotten system of granting the contractors cash
advances …’). Satya (1997, 225) claims that ‘operating capital was provided to the Berar moneylenders by European
firms doing business in cotton’ and describes this as the Marwaris’ ‘bondage’ to the latter (22; ‘sutta bondage’) but cites
absolutely no evidence for this. For his part, Beckert (2014) shows no interest in how the cotton was actually secured
from peasant households in districts such as Berar and has no analysis of the problem of indebtedness in the cotton
tracts of western India, surprising omissions in such an excellent study.
6
Smith founded Smith, Edwards & Co. the year after this pamphlet was written. By 1900, that firm was ‘much the
largest of the Liverpool cotton brokers’ (Chapman 1992, 196).

© 2016 John Wiley & Sons Ltd

 Figure 1 Commodity chains – the essential structure of the produce trades.

© 2016 John Wiley & Sons Ltd

Sources (monograph titles are provided to illustrate the diversity of research bases of the figure): Lynn, Commerce and Economic Change in West Africa: The Palm Oil
Trade in the Nineteenth Century (1997); Marfaing, L’évolution du commerce au Sénégal 1820–1930 (1991); Boone, Merchant Capital and the Roots of State Power in Senegal
1930–1985 (1992); Royal Commission on Agriculture in India, Volume IV: Evidence taken in the Bengal Presidency (1927); Goswami, Industry, Trade, and Peasant Society:
The Jute Economy of Eastern India, 1900–1947 (1991); Farooqui, Smuggling as Subversion: Colonialism, Indian Merchants, and the Politics of Opium, 1790–1843 (1998);
Royal Commission on Opium, Minutes of Evidence Taken Before the Royal Commission, Vol. III (1894); Amin, Sugarcane and Sugar in Gorakhpur (1984); Smith, The
Cotton Trade of India (1863); Dejung, Die Fäden des globalen Marktes (2013); Indigo Commission, Report of the Indigo Commission appointed under Act XI of 1860
(1860); Chowdhury, Growth of Commercial Agriculture in Bengal (1757–1900) (1964); Crow and Murshid, The Finance of Forced and Free Markets: Merchants’ Capital
in the Bangladesh Grain Trade (1989); Cheng, The Rice Industry of Burma 1852–1940 (1968); Pégourier, Le marché du riz d’Indochine (1937); Brocheux and Hémery,
Indochine: la colonisation ambiguë 1858–1954 (2001); Hao, The Commercial Revolution in Nineteenth-Century China (1986).
Merchant Capitalism, Peasants and Accumulation 415
416 Jairus Banaji

[I]n each village one or more money lenders or small capitalists were settled, whose business
was to make advances to the ryots when they sowed their crops … the money lender in each
village was usually a petty dealer besides, especially in the article of cotton … all over the cotton
region the crops passed into the hands of [these] dealers about the planting season or soon after
it … But the petty village dealers were seldom rich enough to carry on this business without
assistance from other quarters … They also were obliged, in turn, to make contracts with
wealthier dealers in the large interior towns, and receive part payment in advance … But
another link in the chain has to [be] added before we reach the terminus of the business.
The large dealers in the interior again who made contracts for the produce of several villages
could seldom afford to lie out of so much capital, but relieved themselves by reselling again
to the wealthy native merchants of Bombay. From this arose another series of contracts: the
large dealers of the interior contracted to deliver to Bombay merchants as much cotton as they
expected to receive from the petty dealers, charging a price sufficient to leave them a fair profit,
and receiving an advance generally ranging from 25 to 50 per cent of the value of the produce
to be delivered … By this curious system … an intricate network of contracts enveloped the
cotton trade … the capital that set the ryot in motion flowed through successive channels from
the same fountain head … And it may further be added that, the native merchants in Bombay
have been in the habit of making large contracts with the English merchants, or at least with
the shippers to England, though in this latter case it is not the custom to give advances. (Smith
1863, 20–2)
Smith later repeated that in forward contracts between European businesses and the Bombay dealers, ‘it
is not the custom to pay for the cotton till it is delivered’, but added, ‘a few of the wealthiest houses
occasionally employ native agents to buy their cotton up-country from the petty local dealers, and in that
case they must advance a considerable sum, some times fifty per cent of the whole, at the time the con-
tract is made’ (Smith 1863, 53). But even with the railway expansion in progress at the precise moment
Smith was scripting his letters, there were obvious limits to how far such backward integration could go:
The grand specific universally urged to the attainment of this [improving the quality of cotton,
JB] is the introduction of European agency into the interior … its efficacy is much exaggerated
at home. The difficulties in the way of dealing directly with the ryots are so great that most
Europeans at first would find it impracticable … [I]t is the custom of the ryots almost uni-
versally to sell their crops in anticipation, and receive a large payment in advance, but this is a
business which can never suit a European house in Bombay. Suppose its agent up-country wished
to contract for 5000 bales directly with the ryots, he must make separate agreements with some
thousands of cultivators, and be willing to lie out of £50,000 or so, at present prices, for several
months … Insurmountable difficulties present themselves to Europeans contracting with the
ryots … But with the native dealers the case is different. (Smith 1863, 34–5; my emphasis)
All the same, railway expansion did enable the big cotton exporters to achieve a degree of vertical
integration by the 1870s, as European firms established purchasing agencies in the up-country
markets and ginned and pressed their cotton into full-pressed bales (Vicziany 1979, 181–5). This
restructuring was part of a more sweeping set of changes that compressed price differences between
international markets and increased competition between the biggest exporters. But by this stage the
cotton boom and its aftermath had seen Indian merchants driven out of the top end of the trade and
sharp increases in the concentration of exports among the largest firms (Vicziany 1979, 165–72).
Staying with India for the moment, Shahid Amin’s fine case study of sugar production in
Gorakhpur, subtitled An Inquiry into Peasant Production for Capitalist Enterprise in Colonial India, shows
capitalist sugar mills there and elsewhere in eastern Uttar Pradesh (UP) channelling their advances to
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 Merchant Capitalism, Peasants and Accumulation 417

cane-growing households through powerful intermediaries and a mass of smaller agents: ‘The
general rule seems to have been for the mills to advance a major proportion of their total dadan [cash
advances] through eight or ten big contractors who were responsible for the bulk of the cane supply.
An average factory would engage some sixty agents to supply cane’, the bulk of this, ‘a third to a half of
the total requirements of the mills’, being met by about eight big contractors ‘with a host of smaller
agents making up the rest’ (Amin 1984, 144). In the middle 1930s, contractors were employed by
all the factories in Gorakhpur. The big contractors were ‘zamindars and other persons of local
influence’, notably moneylenders, who for a commission ‘undertook to hound their cultivators to a
particular factory’ (‘Note on Middlemen’, cited in Amin 1984, 149). And again, as with Bombay
cotton, ‘mediating’ the disbursement of advances (the circulation of capital) contained both an eco-
nomic and a control dimension: the economies of scale involved in mobilizing cane through a handful
of contractors, as well as the ‘hold’ those middlemen (‘cane controllers’) exerted over the peasantry.7
The raw jute trade was quite differently structured, with a handful of mills ‘organised under a single
body’ and a ‘profusion of intermediaries’, balers, brokers and middlemen (Goswami 1991, 50). Here, as
in paddy (Crow and Murshid 1989), the wholesale merchants (aratdars) were said ‘to advance money to
practically all the beparis [subordinate traders] in the jute trade’. The aratdar was said to ‘finance the bepari
to bring in a certain quantity of jute’ (Royal Commission 1927, 276–7; responses of G. Morgan, Propri-
etor of Morgan, Walker & Co., jute brokers), the beparis collecting their supplies from the small dealers
or retail intermediaries called farias, who travelled between villages by boat. Unlike the sugar factories
of eastern UP, there is no evidence that Calcutta jute mills did anything but buy bales of jute from the
jute dealers and big European balers such as Ralli Brothers and Steels. Thus the statement that Calcutta
firms sent their own money up-country to finance the upstream levels of the trade (Royal Commission
1927, 290) must refer to the aratdars or jute merchants. Even today ‘Jute growers avail agricultural loans
from them under the dadan system in which the loan is tied to the selling of the crop to the
money-lender’ (Roul 2009, 142). Jute was Krishna Bharadwaj’s classic ‘very small farm’ crop, both
labour-absorbing and yielding comparatively higher gross revenues per acre: ‘It is particularly favoured
by the very small farms of under 1.25 acres’ (Bharadwaj 1974, 69). The use of more labour-intensive
crops, Chayanov had argued, was a means of buying increased annual agricultural income at the cost of
lower payments to each unit of labour (Chayanov 1966, 113). Bengal jute, like sugar cane in eastern
UP, the incubation and feeding of silkworms in China (Bell 1999), palm oil production in West Africa
and tea in Kenya, embodied vast amounts of unpaid family labour, the upshot of which was that ‘Raw
jute is an extremely cheap fibre’, the key source of profitability in a global industry plagued by
overproduction (Stewart 1998, 43–4, citing W.A. Graham Clark).8
These examples demonstrate that ‘middlemen’ were scarcely extraneous, dispensable elements of
a system that could have worked just as easily without them. They were the system; they were how the
chains of commercial capitalism straddling the world’s main commodity markets were structured, as
much as the lead capitals (firms such as UAC, CFAO or Volkart Brothers) resented their dependence
on them and their own vulnerability to what Unilever saw as the ‘abuses’ of the produce business. If
the ‘subsumption of households to capital’ (Cowen 1981, 121) entailed an inherent instability in
terms of control over producers, the tension was no less evident in the dilemma faced by the maisons
de commerce and big commercial firms vis-à-vis the native brokers and dealers used by them as middle-
men and contractors: ‘[T]he really big abuse and also the most debated issue between the firms was

7
‘From the point of view of the sugar factories, giving advances to thousands of petty producers, enforcing the en-
gagements and making separate payments in them was a tiresome chore best left to influential contractors …’ (Amin
1984, 141).
8
Cf. Saul’s succinct comment, ‘In no other branch of activity were British goods being so widely displaced by
Empire competition’ (Saul 1960, 194); about Indian jute exports including manufactures.

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418 Jairus Banaji

the advance made to middlemen and factors’, writes Fieldhouse in his history of the United Africa
Company (Fieldhouse 1994, 119). Competitors pressed UAC to end the system of advances so that
buying firms could, collectively, reduce their dependence on middlemen; to no avail of course. The
dilemma was nicely summed up by Rawlings in 1937:

If the native cocoa dealers of the Gold Coast can in fact finance the cocoa crop without credit
facilities, how long do you think the exporting houses can remain in business without forever
paying a higher price on the Gold Coast than the African shipper can get on the home market?
… In the long run, does it not come down to this – that the exporting houses have got to
choose between paying more on the Gold Coast than the average home market and relying
for their profit on successful market gambling, or alternatively, financing the marketing of
the crop, in the hope of getting a substantial proportion of tied customers, and being able to
buy at a rather lower price than they would have to pay if all the cocoa were free cocoa? (cited
in Fieldhouse 1994, 120)
‘Advances were accepted as an integral part of the system, the price the foreign firms had to pay to
discourage African entrepreneurs from bypassing them in the produce trade’ (Fieldhouse 1994, 120;
my emphasis). Or, as Fieldhouse says about the Northern Nigeria ‘Kano contractors’ who bought
agreed quantities of groundnuts for UAC on commission, ‘They were an essential feature of the system,
but they presented one problem: because of their very size they were highly independent and were
liable to use UAC commissions to finance their own operations or purchases for other trading firms’
(Fieldhouse 1994, 443–4; my emphasis). The French commercial houses in Senegal faced exactly
the same conflict. As Marfaing says, ‘In general all the maisons de commerce fought against the system
of advances (le crédit) even as they realised it was the basis of their business transactions’ (Marfaing
1991, 211). And indeed, the pools, cartels or price combinations that were a recurrent feature of
commercial practices at this level were certainly directed as much against the middlemen (Bonin
2008, 297, n. 65, quoting a CFAO report dated 30/5/38, ‘En verité, le pool a été créé pour remédier
aux abus d’intermédiaires …’) as against producer households. In Burma, where the Europeans dom-
inated the rice-milling industry, the Bullinger Pool, a combination of four of the largest rice-milling
and exporting firms in the 1920s and early 1930s (Cheng 1968, 67), was a cartel of this sort, directed,
like earlier combinations, against the sellers of paddy; that is, as Cheng notes, ‘brokers, speculators,
traders and other middlemen’ (Cheng 1968, 66). The Burmese rice trade was largely financed by
the big mills, at least down to the Depression, and ‘when middlemen held out from selling, the
merchants [the rice-millers, JB] would threaten to send out notices to call in the loans unless large
quantities of grain were delivered to them’ (Cheng 1968, 68–9, cf. 52: ‘Large dealers usually made
their contracts directly with the [mill] manager and took advances directly from him’).
Commodity chains were thus differentially structured in terms of variables such as financing, bro-
ker densities and the controls established over household labour, but intermediary capitals or middle
levels of the hierarchy were an invariant feature. British sources routinely referred to the bigger
moneylending merchants of India as ‘capitalists’ (Banaji 1977), just as the Wolof traders in Senegal
described the bigger brokers who enjoyed regular advance of stocks from the European importers
as ‘les Capitalistes’ (cited in Newbury 1972, 89; cf. Fieldhouse 1994, 112: ‘African capitalists or
middlemen’). The brokers of West Africa involved in the early nineteenth century palm oil trade
‘cut impressive figures’ (Lynn 1997, 71). Their crucial resource was control of water transportation,
immense canoes that could carry up to eight or nine tons of oil at a time (Lynn 1997, 65–6). ‘Massive
fleets of canoes … would set out from Bonny up the creeks of the interior to visit the oil markets’
(Lynn 1997, 66) and, Lynn points out, ‘The capital required to enter the oil trade was too great
for small-scale traders effectively to challenge the existing oligarchy of brokers … Transport
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 Merchant Capitalism, Peasants and Accumulation 419

remained the major barrier to entry on the African side of the trade’ (Lynn 1997, 80). In Indochina,
the rice trade depended crucially on the powerful paddy merchants of Cholon. Pégourier, who
described them in the 1930s as ‘le syndicat des marchands de paddy’, noted that collection, processing
and export required ‘considerable capitals’ (Pégourier 1937, 52–3), and Brocheux and Hémery claim
that ‘the hard core of Chinese capitalism in Indochina (was always) the big bourgeoisie of Cholon’,
with its control over an ‘immense banking, commercial and moneylending network … that covered
Cochinchina, Cambodia, and Laos’ (2001, 162–3). The French were simply ‘unable to gain a foot-
hold in the wholesaling of rice’ (Brocheux 1995, 69). In India, the big Japanese cotton traders who
had used the direct purchasing system to dominate the cotton trade in the early part of the twentieth
century would see their profits decline sharply in the late 1920s once the Jethawalas or Bombay
wholesale merchants replicated the same strategy, with aggressive buying in the up-country markets
(Contractor 1928, 26; Naoto 2001).

CONTROL, SUBORDINATION, VERTICAL INTEGRATION

In Bernstein’s Class Dynamics of Agrarian Change, we encounter the elements of a taxonomy that can
finally make sense of the complex relations between capitalism and agriculture. The ‘increased incor-
poration of the colonial peasantries of Asia and Africa as producers of export crops’ is how he
describes the model that I have just discussed as the ‘produce trades’ (Bernstein 2010, 52). Distinct
from that was the emergence, in the late nineteenth century, of the ‘industrial plantation’ and, more
recently, of thoroughly industrialized forms of agriculture partly based on contract farming (Bernstein
2010, 67 ff., 90 ff.). Building on these distinctions, the established and conventional ways of understand-
ing and debating the development of capitalism in agriculture (namely, as the capitalism of agrarian
classes, whether peasant or landlord) can now be expanded into a wider-ranging taxonomy of the
ways in which commercial and industrial capitals penetrate, control and/or reshape the countryside
and its relations. These less conventional or less ‘orthodox’ patterns can be summed up in the distinc-
tion between: (1) the commercial capitalism of the produce trades; (2) contract farming; (3) stronger
forms of vertical integration; and (4) industrialized agriculture. It should be noted at the outset
that there are strong family resemblances between these models and that, like any classification,
the construct is deliberately schematic. In terms of this classification, the distinction Chayanov drew
in positing a ‘purely economic’ domination of capital over agriculture (see pp. 3–4 above) applies
chiefly to the produce trades and contract farming.

Produce Trades
The capitalism of the produce trades has been discussed in the pages above, but it should be pointed
out here that commercial regimes that were broadly defined by more direct forms of subordination
than those discussed above are best related to this model. Leading examples are the Caribbean sugar
plantations, Bengal opium and Bihar indigo, all of which had common origins in the consignment
trades of the later seventeenth and eighteenth centuries (Davies 1952; Checkland 1958), and were
also dominated to unequal degrees by commercial capital but based on forced cultivation, whether
by slaves or by peasant households.9 Bengal opium was a government monopoly and based, as Marx
wrote, on a ‘mixture of compulsion and enticement’ (Marx 1980, 19). The enticement lay in the
government’s use of cash advances, though this entailed legally enforceable contracts that bound

9
Further examples in this category would include the forced cultivation of cotton in Mozambique under Salazar
(Pitcher 1993; Isaacman and Chilundo 1995), altogether more successful than the failed French experiments to en-
courage export of cotton from French Sudan (Roberts 1996).

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420 Jairus Banaji

households to stipulated quantities of raw opium (Banaji 2013). The price paid to the producer bore
absolutely no relation to any set of market prices and was effectively a monopoly price. Export or
‘provision’ opium was eventually dispatched to Calcutta, where it was auctioned to private merchant
houses, such as Jardine Matheson, with close financial and commercial ties to the City. The Havana
sugar industry exemplifies a different form of merchant domination over agriculture. Here, merchant
houses such as the Torrientes, Havana-based sugar brokers, were acquiring land and constructing
mills as early as the 1830s. They used advances (the refacción contracts) to establish what Laird Bergad
calls ‘merchant economic control over the planters’, and began, by the late 1850s, to establish ‘direct
ownership over the largest and most productive sugar mills in the Matanzas region’ (Bergad 1990, 53,
64 ff., 133 ff.). By the latter part of the nineteenth century, ‘large-scale Havana merchants with inter-
national connections financed the most important aspects of the Matanzas sugar economy’ (Bergad
1990, 173). Within the Cuban sugar industry, houses such as the Torrientes and Fessers represented a
layer of capital quite distinct from the smaller merchant houses that were primarily middlemen in the
sugar export trade, the Fessers maintaining a merchant house at 12 Leadenhall Street, London
(Bergad 1990, 170–1). Bihar indigo shared characteristics with both of the above and was in some
sense an intermediate case. Like Cuba’s sugar, North Indian indigo was grown by planters, a pecu-
liarly rapacious class, but it was grown on a decentralized (ryoti or assamewar) system, using peasant
household labour in preference to plantations (neez cultivation). It was grown on the advance
system and planters testifying before the Indigo Commission of 1860 had no compunction telling
the inquiry, ‘There are some individuals who could clear themselves, if we would let them, but
we would not clear them on principle, in as much as it would be tantamount to closing the
factory’ (Report of the Indigo Commission 1860, 37). Moreover, the labour process was so tightly
controlled that peasants found the supervision ‘harassing and vexatious’: ‘The planters all urge that
strict supervision over each successive agricultural operation is rendered necessary by the
indolence, supineness, procrastination, and faithless character of the Bengali … factory servants
must be regularly deputed to see that the ryot ploughs, sows, weeds and cuts at the proper dates’
(Report of the Indigo Commission 1860, 16). And finally, of course, indigo was financed by the
leading Calcutta agency houses, who lost badly when the industry crashed at the end of the
1820s, dragging them down as well (Chowdhury 1964, 87, 91–105). Since the planters worked
entirely with borrowed capital, Colin Fisher could describe them, plausibly in my view, as acting ‘as
middlemen between the cultivators and the agency and business houses in Calcutta’ (Fisher 1978,
114; cf. Chowdhury 1964, 87). The Chayanovian differential between wages and unpaid family
labour that was crucial to the produce trades was, of course, equally evident here (cf. Chowdhury
1964, 129–30) and translated into the colossal sum of one million pounds sterling per annum that
was repatriated from north Bihar in the 1870s (Fisher 1978, 130).

Contract Farming
As Michael Watts’ various papers have shown, this is probably best seen as a field of tension between
capital’s drive for vertical integration and the household’s desire for stable reproduction, or what
Mike Cowen called its drive ‘to resist direct proletarianisation’ (Cowen 1981, 139). But several points
need to be made about this. We are now firmly in the realm of industrial capital, away from the chains
so typical of commercial capitalists, and the drive for vertical integration reflects the control imper-
ative that is characteristic of all industrial accumulation. (This is how we should understand Marx’s
‘real’ subsumption.) The subordination of household producers now acquires a more direct and for-
mal aspect, though even here there can be differences of degree. Chen Han-seng’s seminal study of
BAT’s operations in Shandong province in the 1930s was probably the first substantial monograph
ever written on contract farming and, as its title indicates, it dealt with a large industrial firm
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 Merchant Capitalism, Peasants and Accumulation 421

straddling global markets.10 What is interesting in Chen’s account, however, is that BAT had to deal
with Chinese peasants through local capitalists (compradores) and gentry, disbursing cash advances
and loans of working capital through them and evidently having to rely on their networks. Chen con-
cluded that ‘without the assistance of Chinese trade capital and usury capital foreign industrial capital in
the form of the B.A.T. cannot go very far in China’ (Chen 1939, 9–10). The compradores were ‘Chi-
nese capitalists’ but they seemed to work entirely with ‘a huge quantity of cash from the company’ (Chen
1939, 10, 15; my emphasis), and what mattered more to Chen was the fact that prices were entirely dic-
tated by the foreign leaf experts flown in by BAT. The real source of ‘oppression of the Chinese tobacco
peasants’ was BAT itself, thanks to its ‘virtual monopoly of leaf collection’, which compelled them to
‘surrender their leaves at almost any price’ (Chen 1939, 53–4). In some contrast to this, in India in
the same years BAT worked through a leaf-buying subsidiary Indian Leaf Tobacco Development
Co. (ILTD), which dealt directly with growers willing and able to try out FCV tobacco once its buying
depots had established a ceiling price for the market in Guntur tobacco: ‘Growers contracted with the
company to sell the entire standing crop to ILTD at a pre-determined price’ (Cox 2000, 219–20);
‘ILTD … effectively engaged in backward vertical integration into tobacco cultivation via bonded con-
tracts linked to a system of close managerial supervision’ (Cox 2000, 220). Price domination was built
into the contract with producers, and the ‘company, through the contract system, could exercise signif-
icant control in the field itself’ (Duvvury 1985).11 The example of BAT shows that the global operations
of international firms can reflect different degrees of vertical integration within the same giant enterprise.
More substantially, Watts’ own work contains an unresolved ambiguity that is worth reflecting
on. He is at pains to point out that ‘Contracting represents a major front along which capitalism
advances into the sphere of family or household production’ (Watts 1990, 152; my emphasis). This is entirely
in keeping with the passages from Chayanov that I cited earlier.12 Contract farming, Watts argues,
‘represents … social relations of production in which independent commodity producers are subor-
dinated to “management” through a distinctive labor process’ (Watts 1994, 28); the nature of the
contract is ‘its capacity to shape, regulate, and discipline the production and labor process of the
grower’ (Watts 1994, 62); and so on. In these statements, contract farming is an intensified and
formalized method of capitalist control over household production. On the other hand, most of
the actual examples cited in ‘Life under Contract’ suggest that the companies behind contract farm-
ing have a clear and overwhelming bias for capitalist growers rather than middle or poor peasants
(Watts 1990, 153, 156; Watts 1994, 39, 56). The issue this raises is whether these ‘indigenous
capitalist growers with well-developed lobbies within the state apparatus’ (Watts 1994, 39) should
be construed as a ‘class of labour’ at all – in other words, as still within the domain of ‘peasant-based
contract production’ (Watts 1994, 65). Behind the formal reality of ‘contract’, very different sorts of
hierarchies and relations of control and subordination seem to be at work, and we clearly need a
brighter line between contract farming as a ‘sort of control over and regulation of household labor’
(Watts 1994, 67) and contract farming as a legal and economic relationship between capitals. In Class Dy-
namics, Bernstein observes that the ‘farms that tend to be most fully incorporated in modern capitalist
agriculture as described by Chayanov for North America … are usually capitalist enterprises employing
wage labor’ (Bernstein 2010, 94–4).13 That these enterprises strike Bernstein as analogous to firms pro-
ducing auto parts for the big car manufacturers suggests to me that the capitalist growers in Costa Rica
10
With mergers and acquisitions, price wars, foreign subsidiaries and the battle between ATC and Wills, the
tobacco industry was already displaying the essential features of an aggressive modern capitalism by the 1890s! Cox
(2000, 81) calls BAT ‘one of the earliest examples of a modern-style multinational corporation’.
11
Duvvury (1985) shows that BAT abandoned contract farming in the 1940s and switched to the ‘depot system’,
retaining its dominance despite greater competition.
12
One of these (Chayanov 1966, 262) even forms the master-quote to Watts’ more detailed study from 1994, ‘Life
under Contract’.
13
Cf. MacDonald (2006, 1245) on the US today: ‘Contracting is far more prevalent among larger farms …’.

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422 Jairus Banaji

and elsewhere that Watts discusses are not ‘labourers’ at all (even propertied ones: Watts 1994, 33), but
entrepreneurs or small capitalists, akin to many if not most of the growers in the US broiler industry
that Watts and William Boyd have discussed in detail in various remarkable papers.

Vertical Integration
If this is defined as expressing capital’s will to dominate production conceived as a total process, and
includes the full set of strategies by which it achieves such total integration, then the striving for
vertical integration is just as characteristic of the larger commercial capitals as it is of industrial capital.
On the other hand, it remains true that only with large-scale industrial capital does the ‘total’ produc-
tion process becomes truly integrated, breaking down the boundaries between all sorts of discrete
moments (science, industry, agriculture etc.). Thus Susan Becker’s work on Metallgesellschaft and
other big German non-ferrous metal traders shows merchant capital of an advanced type integrating
backward into control over smelting and refining operations in a bid to secure the metal trade from
being bypassed by producers within the industry. Becker makes the point that for firms such as
Metallgesellschaft, ‘trading remained its core business’ even with its ramified network in global sup-
ply sources (Becker 1998, 2002). A degree of vertical integration has always characterized the bigger
commercial capitals for the past 200 years or so. CFAO, France’s biggest trading company in West
Africa, is described by Malon as ‘une grande société de traite à forte intégration verticale’ (Malon
2006, 288). The up-country purchasing agencies of cotton traders, such as Volkart, were also inte-
grating backward to gain closer access to the growing areas. The Sassoons, who left Baghdad to make
Bombay the hub of their commercial empire in the second quarter of the nineteenth century, rep-
resented an even stronger form of integration with their supply bases in Malwa. By the 1860s, they
were successfully driving Jardine Matheson out of the opium trade with substantial advances to In-
dian dealers willing to consign shipments on a regular basis: ‘Jardine’s associates in India attempted the
same, but as their advances were provided through large agency houses in Bombay and Calcutta,
they failed to affect the producing areas where Sassoon’s purchased unharvested poppy crops through
experienced agents … Jardine’s could not finally compete successfully with the Sassoon system of
crop purchases in the Malwa-producing districts of India’ (Le Fevour 1968, 27–8).
On the other hand, vertical integration remains the strategy of big industrial capital par excellence,
the general movement by which industrial accumulation penetrates, controls and reshapes the coun-
tryside,14 ‘incorporating’ whole sectors of the farming population and depleting landscapes. In purely
capitalist terms, large-scale industry has a revolutionary impact on the countryside, much beyond
anything envisaged by Kautsky. When Kautsky wrote that both industry and agriculture ‘are devel-
oping in the same direction’ and that this was easier to see if they were regarded ‘as elements of a
single process’ (Kautsky 1976, 45–6), he mainly had in mind the evolution of large capitalist holdings
that replicated features of industrial accumulation such as increasing firm size and scale economies.
Agrarian capitalism was a modified version of industrial accumulation. But this fails to capture the
true extent of capital’s transformation of first nature. Where merchant capital prises agriculture
(and mining, marine resources etc.) open to commercial and capitalist exploitation, industrial capital
carries that process to a wholly different level. In Nature’s Metropolis, Cronon describes in vivid detail
the ‘second nature’ that capitalism imposed on the American landscape. This was industrial capitalism
with volume production, ‘massive investments in capital infrastructure’ (Cronon 1992, 244) and
‘immense, vertically integrated corporations capable of exercising managerial control over the food
of many nations on a scale never before seen in the history of the world’ (Cronon 1992, 254–5). The
14
There is no better description of how capital literally reshapes the countryside than Cronon’s superb history of
Chicago, especially the pages on the new livestock economy that emerged in the Great West between 1860 and
1890 following extermination of the bison (Cronon 1992, ch. 5).

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sheer scale of subordination, the nature of its impact and the degree of subsumption all distinguish
industrial accumulation’s subjugation of the countryside from the earlier cycles of commercial capital-
ism. As the large US rubber manufacturing firms integrated backward into rubber growing in the
1920s, Goodyear came to control total holdings of 93,000 acres in Sumatra (by 1931) (Allen 1943,
42), U.S. Rubber controlled 135,000 acres in Malaya and Sumatra by the end of 1927 (Wilkins
1974, 101), Firestone got the Liberian government to agree to a ‘ninety-nine year lease on the use
of up to one million acres of land’ (!) (Tully 2011, 194), and Dunlop’s Malayan estates extended over
100,000 acres by 1933 (Tully, 2011, 195). These are scales of ownership or of intended operation far in
excess of anything the mercantile businesses were used to, except possibly for the French and Belgian
concessionary companies in the Congo: ‘The large rubber estates were disciplined industrial undertak-
ings, with enormous workforces and considerable investment in infrastructure’ (Tully 2011, 200).15 In
French-controlled Indochina, where the rubber plantations survived the crisis of the early 1930s to
become ‘the most modern in Asia and the most competitive worldwide’,16 they were basically run like
‘agro-industrial factories’ based on a vision of Vernet’s ‘scientific plantation’, with technicians, labora-
tories and Taylorized labour processes (Hémery, in Brocheux and Hémery 2001, 126), although here
two financial powerhouses dominated the industry next to Michelin itself, which laid down its first
rubber plantations as early as 1906 (Coates 1987, 142). ‘Giant corporations’ controlled over 300,000
acres (Murray 1980, 267; citing Montaigut, La colonisation française dans l’est de la Cochinchine, 1929).
The rubber industry of South-East Asia was a creation ex novo, a sort of miraculous conjuring of
second nature thanks largely to the London agency houses and the frenetic work of Arthur
Lampard.17 The ‘large-scale vertically integrated plantation enterprises’ (Murray 1980, 267) that
emerged from the vortex of speculation (Stillson 1971) and prodigious demand for rubber were per-
fect exemplars of what Bernstein has called the new type of industrial plantation. But with industrial
hogs and designer chickens, the degree of industrialization of agriculture reaches an unparalleled
evolution, subsuming ‘nature’ in radical, grotesque and probably irreversible ways, and subjecting
tens of thousands of contract growers to the kind of rigorous and gradually worsening subordination
described by Boyd and Watts when discussing the integration of family-size poultry producers and
pig farmers into industrially coordinated manufacturing processes (Boyd and Watts 1997; Watts 2004).
The ‘integrator’ model described in these papers is the limit case of the pattern discussed by Bernstein
in ‘Notes on Capital and Peasantry’ in the sense that it still embodies a ‘contractor’ model (house-
holds subsumed to capital), beyond which lies full vertical integration with no subcontracting at
all. Full integration has reached a more advanced stage in the pork industry than it has in broilers;
for example, the second and third biggest US pork producers (Premium Standard Farms and
Seaboard respectively) are either largely or fully integrated operations, depending on which states
we look at (Reimer 2006).18 As firms such as these, or like Tyson Foods in the broiler industry,
become the modern ‘agribusiness’ counterparts of the large integrated enterprises that came to dom-
inate whole sectors of US manufacturing in the late nineteenth and early twentieth centuries (in oil,
rubber, steel, chemicals, sugar, tobacco, meat packing etc.) (Chandler 1977), it is industrial capital that
finally establishes an ‘economic dictatorship over considerable sectors of agriculture’ (Chayanov).
This is not a pattern that Kautsky foresaw, even if he does allow, in one passage, for the possibility
that the small commodity producer may ‘in his actual situation, if not formally, leave the stage of

15
Tully (2011, 201) notes that ‘the huge Dunlop estate at Johor was treating 7,000 lbs. of rubber each day in its on-
site factory using state-of-the-art technology’.
16
Bailed out by a government subsidy of 90 million francs! See Boucheret (2008, 731).
17
Charles Arthur Lampard (1862–1916) was called the ‘Rubber King’ of London because he ‘became rubber’s most
ardent champion’: see Pugh et al. (1990).
18
This simply means that the hogs processed at their plants are raised on vertically integrated farms.

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424 Jairus Banaji

simple commodity production and become involved in capitalist production, not of course as an
entrepreneur but as a worker exploited by capital’ (Kautsky 1976, 78–9).

REINTERROGATING THEORY
In his much neglected classic The Growth of Commercial Agriculture in Bengal, B.B. Chaudhury quotes an
indigo planter as saying, ‘No European farmer could produce either sugar cane or tobacco or any raw
material as cheaply as the ryots’, and then goes on to comment, ‘This partly explains the failure of dif-
ferent experiments in Bengal to grow commercial crops on the basis of capitalistic farming’ (Chowdhury 1964,
130). In a similar vein, the great French Africanist Jean Suret-Canale wrote that in colonial Africa, ‘pro-
duction on the capitalist pattern was not profitable in cotton or groundnuts’ (Suret-Canale 1971, 218),
and Martin Murray says about another part of the French colonial empire, ‘metropolitan capital’s
apparent lack of interest in rice production can be ascribed to the unprofitability of rice cultivation
on a strictly capitalist basis’ (Murray 1980, 159). In each of these passages, capitalist production is identified
with capital’s control and shaping of the labour process, and with wage-labourers concentrated in
unified sites of production. On the other hand, in work done in the late 1970s by Henry Bernstein,
Mike Cowen (Cowen 1976) and myself, it was argued that capitalism could work through a more
complex pattern of accumulation based on household commodity production. Cowen in particular re-
ferred to middle peasant production being ‘reproduced in subordination to capital’ and being ‘secured’
by an ‘advanced form of capitalism’ such as international finance (Cowen 1981, 138–9). It is the general
implications for theory of this latter model that we still need to develop in a more forthright way.
The first implication is that industrial capitalism of the classic type cannot be seen as the sole form
and structure of capital accumulation, if only because this leaves large swathes of capitalism’s history
unexplained and shrouded in ambiguity. In this paper, I have suggested that our best option in tack-
ling this potential dilemma is to develop a notion of merchant capitalism consistent with the broad
framework of Marx’s own work.19 Bill Freund, for example, noted that ‘Before the Second World
War, merchant capital dominated the process of capital accumulation in Nigeria, extracting surplus through
relations of exchange …’ (Freund 1981, 156; my emphasis). To me, it seems that the two halves of
this statement were in tension as soon as it was written, unless of course Freund was simply endorsing
a theory of ‘unequal exchange’, which he almost certainly was not. If merchant capital dominated a
process of capital accumulation and relations of exchange were the key mechanism allowing it to do
that, a structure of accumulation was being at least implicitly posited that tied the two elements of this
pattern more tightly together. And indeed, elsewhere in his book Freund refers to ‘the central extrac-
tive position of merchant capital and its domination of society through networks of traders’ as the
essential feature of the ‘general pattern of capitalist penetration of West Africa’ (Freund 1981, 99).
This is an almost perfect image of what I have called the commercial capitalism of the produce trades,
a structure based on commodity chains and combined accumulation. Before proceeding, however, it
may help to see what Marx himself says about merchant’s capital in volumes two and three of Capital.
Why commercial capitalism sometimes and merchant capitalism at other times? This seeming un-
certainty can be cleared up immediately. In volume three, ‘[m]erchant’s or trading capital is divided
into two forms or subspecies, commercial capital and money-dealing capital’ (Marx 1981, 382). Thus
mercantile capitalism can be said to cover a wider range of functions than commercial capitalism in the
narrower sense of accumulation by commercial capitalists. To the extent that the imperial economies
of the nineteenth century (largely those of France and Britain) welded together a whole conglomer-
ation of interests connected with banking, insurance, shipping, plantation companies, managing
19
The role of merchant/commercial capital in capitalist development needs to be rethought, as one reader of this
paper rightly suggested, but this is best discussed elsewhere and will be in a book I am currently writing, which I pro-
pose to call A Brief History of Commercial Capitalism.

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 Merchant Capitalism, Peasants and Accumulation 425

agencies and so on, over and above the purely trade element,20 the proper characterization for their
economic structures is mercantile capitalism. Although most trade sectors were dominated by com-
mercial oligopolies,21 ‘free trade’ had the practical/ideological function of expanding the market
sphere within which invisible earnings, the ‘invisible’ exports of the French and British service sectors
could be earned (Cain and Hopkins 2002, 158 ff., 164, 296).22 Moreover, in the French colonies, cer-
tainly in Indochina, financial interests (the Banque de l’Indochine and le groupe Rivaud-Hallet) were
every bit as powerful as purely commercial ones (Morlat 2008). However, in Capital volume three,
Marx assumes that the merchant is simply a dealer in commodities, that he ‘does not produce any
commodities himself, but simply deals in them, facilitating their movement’ (Marx 1981, 381).
The merchant’s money capital never assumes the form of productive capital (Marx 1981, 386). On
the other hand, in volume two a more complex image emerges in so far as Marx treats transport as
an industry and sees the means of transport, ships included, as means of production, and hence
elements of productive capital. About the ‘additional production process of the transport industry’,
he says ‘The productive capital invested in this industry … adds value to the products transported’
and this ‘partly through the value added by the work of transport’ (Marx 1978, 226, cf. 241–2). What
this means is that to contrapose merchant’s capital to productive capital (as opposed to industrial capital!)
represents a confusion of levels of abstraction. The view that merchant’s capital ‘exclusively inhabits
the circulation sphere’ (Marx 1978, 272) or that it ‘remains forever penned into [industrial] capital’s
circulation sphere’ (Marx 1981, 386) is a simplifying assumption, and it certainly cannot be used as
a basis for writing the history of capitalism, except at the risk of an unconscionable formalism.
While there is a substantial historical literature that deals with both mercantile and commercial
capitalism, it is rare to find historians proposing explicit definitions of their object. Frédéric Mauro
was one who did, through much of his work. Mauro defined commercial capitalism to mean an eco-
nomic system where merchants dominate production and extract a major share of the profits.23 Perhaps
the most succinct definition he proposed was in L’expansion européenne (1600–1870), where it is
called a ‘system where the management and profits of production are in the hands of commercial
capitalists’ or, again, ‘… in the hands of a class of big merchants’.24 Of course, in Annales circles it
was common to think of merchant capitalism (Braudel) or commercial capitalism (Mauro, Mousnier)
as a historical epoch (for Braudel, this spanned the whole period from the fourteenth to the
eighteenth centuries; see especially Braudel 1969, 53, 65) but clearly the two notions were comple-
mentary and certainly not in conflict.
The ‘share of profits’ criterion, even if not a strictly theoretical one, works remarkably well for
much of the historical research that has been published. For example, Bergad writes that ‘Cuban
sugar production generated substantially more profits for brokers than for growers’. In fact, ‘Sugar
importers in New York or London derived profits that dwarfed those reaped by Havana or Matanzas
20
The agency houses were closely connected with all of these and might even be described as the true pivot of
Britain’s mercantile capitalism. See Chapman (1992) for their their evolution into investment groups, and
Puthucheary (2004 [1960], ch. 2) for their role in Malaya.
21
Fieldhouse (1994, 9) (domination of four large firms in the West African trade); Macaulay (1934, 39) (two firms
dominate the Burma timber trade); Stahl (1951, 103) (four leading mercantile houses in Malaya); Contractor (1928,
38–9) (five shippers control two thirds of raw cotton exports).
22
Cain and Hopkins are right to argue that the Lancashire lobby was ‘far less powerful than Marx supposed’ (2002,
291): ‘Neither Manchester nor industry as a whole ought to be used as a proxy for British business in India. Other
sizeable commercial interests, notably in finance and shipping, were also growing rapidly in the second half of the
[19th] century’ (2002, 293).
23
‘For further expansion of their businesses’ was left unsaid by Mauro, doubtless because it seemed too obvious.
24
Mauro (1964): ‘… capitalisme commercial, c’est-à-dire, un système où la gestion et les profits de la production
sont entre les mains des commerçants-capitalistes’ (p. 99); ‘… où la gestion et les profits de la production sont entre
les mains d’une classe des gros commerçants’ (p. 325). Cf. Mauro (1961, 2): ‘Theoretically, in a system of pure com-
mercial capitalism, the control and the profits of production should both be in the hands of a merchant class distinct
from the workers’; so too in Mauro (1970), which has repeated occurrences of ‘commercial capitalism’.

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merchant houses’ (Bergad 1990, 178, 176). Here, between planters, Cuban export houses and
foreign-based importers, the largest share of profits seems to have gone to the last category. The
same, broadly speaking, was true of US cotton, where ‘Southerners estimated that New York busi-
ness men received as much as forty cents out of every dollar paid for Southern cotton’ (Foner 1941,
7; so too Johnson 2013, 257). Northern (that is, New York) merchants had a substantial stake in
Southern slavery.25 And, of course, the same was true of businesses based on household commodity
production. In the Lebanese silk trade, ‘very little of the huge income from silk exports reached the
farmers who produced the cocoons. Most of the revenue went to merchants in Beirut or Tripoli and
in Marseilles or Lyons, and to the brokers who acted as middlemen between the trading houses in the
port cities of Syria and the farmer-producers’ (Firro 1990, 164). Or finally, ‘The biggest share of the
profits derived from the rice industry, as in other major industries of Burma – timber, oil, mining,
cement, banking and cotton and general trade – went to British firms’ (Cheng 1968, 233).
The second element in Mauro’s definition, namely that merchants manage the production they
exploit, and establish domination over it, also has substantial historical backing. As John Barber points
out, Pokrovsky himself had seen small commodity production as typical of commercial capitalism
and as one of the chief constraints on its further expansion (Barber 1981). But historically, merchant’s
capital actively involved itself in a very wide range of sectors. In Europe itself, ‘In the generation of
successful heavy industry, mercantile capital and capitalists were of supreme significance’ and came to
control a ‘good deal of Europe’s large-scale enterprise in mining, metallurgy, glass, sugar, salt and so
forth’ (Supple 1977, 435). The hydraulic silk mills of northern Italy were the work of big merchant
groups, of a commercial capital that, as Carlo Poni says, ‘is no longer extrinsic to the mode of
production, but tends to seize hold of it, enlarging the size of plants with substantial investments’
(Poni 1976, 469). The large integrated cloth-producing mills in the US, which were the cutting edge
of American industry in the early nineteenth century, flowed from partnerships between merchant
capital and technical expertise (Porter and Livesay 1971, 23 ff.). In South Africa ‘Large British and
colonial diamond merchants … were amongst the earliest promoters of private mining companies’.
Turrell tells us that, ‘While merchants invested in production primarily to ensure easy access to their
chosen trading commodity [backward integration! JB] … almost all of them acquired a detailed
understanding of production and management through active involvement in the direction of com-
panies’ (Turrell 1987, 81–2). In India, several studies document the integration of commercial and
agrarian capital in regions such as Sind, the Central Provinces or West Bengal under the Left Front,
showing the active involvement of large merchant firms in wheat, rice and cotton (Cheesman 1982;
Harriss-White 2008). And, finally, I have referred already to Susan Becker’s study of the German
non-ferrous metal traders and their business strategies. She makes it clear that Metallgesellschaft
and others remained traders – that is, wedded to their core commercial business – despite extensive
vertical integration (Becker 2002, 48, 77, 80).
In a fascinating paper on Tawney’s LSE lectures, David Ormrod noted that British historians have
been dominated by a ‘perspective which has bifurcated the historiography of early capitalism’ into a
false polarity between production and exchange. He also refers to Robert Brenner reviving this ‘false
antithesis’ ‘in a notably strident fashion’ (Ormrod 1984, 146 ff.). Tawney, of course, was ‘mainly pre-
occupied … with the genesis of commercial capitalism’, as Thompson noted (Thompson 1964, 356;
cf. Ormrod 1984, 152), and much less inclined to contrapose commercial to agrarian or any other
form of capitalism. That was chiefly a legacy of Maurice Dobb, but through Dobb of a whole tradition
of Marxist politics and history that went back to the late 1920s and the fierce backlash against M.N.
Pokrovsky’s work. Pokrovsky had made commercial capitalism central to both his histories of Russia,

25
Foner (1941, 6) notes that ‘Down to the outbreak of the Civil War, New York dominated every single phase of
the cotton trade from plantation to market.’

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the first and longer one including the term in the very title of the book (Pokrovsky 1931), the second
shorter version making ‘merchant capital’ central to the interpretation of modern Russian history.26 As
Barber says, ‘No single concept was so identical with Pokrovsky as that of commercial capitalism, and
none had such influence during the 1920s on the study of Russian society’ (Barber 1981, 57; my emphasis).
Lenin himself was so impressed by Pokrovsky’s shorter history that in 1920 he wrote to him to say
he was ‘extremely pleased with your new book’ and referred to its ‘Marxist assessment’ (Lenin
1966, 530; letter dated 5 December 1920). Unlike Lenin, however, most latter-day Marxists have
been much less open to the category, doubtless because they have (possibly unwittingly) laboured
under the burden of the spurious orthodoxy constructed by Dobb who, alas, seems to have latched
on belatedly to the Stalinist backlash against Pokrovsky and the latter’s forced recantation in 1931.

SUMMARY
The twin categories of ‘commercial capital’ and ‘merchant capitalism’ deserve to be taken far more
seriously than they have been in the mainstream Marxist tradition.27 Marx himself knew the mer-
chant’s domination of producers chiefly in the form of merchant control of the cottage industries;
that is, of a putting-out system as the characteristic form of early capitalist industry (Marx 1978,
318–19; Noordegraaf 1997, 180). But his own lifetime coincided with the heyday of British imperial
expansion, when a very wide range of staples flowed into international markets thanks to a system that
is best described as British mercantile capitalism. Opium, jute, sugar, tea, cotton, rice, timber and so on
were all financed and controlled by merchant houses or mercantile firms that Chayanov would later
characterize as ‘large-scale trading capital’. In some remarkably perceptive passages, the Russian econ-
omist described the global commodity chains formed on this basis as ‘vertical capitalist concentration’.
In ‘Notes on Capital and Peasantry’, Henry Bernstein drew attention to Chayanov’s use of this expres-
sion as his (Chayanov’s) description of a general model of capitalist penetration/domination distinct
from the ‘classic model’ of the capitalist differentiation of the peasantry. Chayanov himself seemed
to think that ‘vertical concentration’ was a more widespread process of accumulation in the agrarian
world than the growth of capitalism ‘in’ agriculture as Marxists understood this, ‘evidently because
capitalist exploitation gives a higher percentage from vertical than from horizontal concentration’
(Chayanov 1966, 262–3). More interestingly, he was aware that vertical concentration might be char-
acterized by widely differing relationships to production, with a spectrum of forms defined at one end
by ‘purely economic’ domination, at the other by much tighter forms of integration of producer
households. Chayanov located contract farming somewhere in the middle, citing the example of
‘the sowing of sugar beet on peasant fields by contract with the sugar factories or contractors’
(Chayanov 1966, 262).
From the standpoint of the overall production of capital, ‘vertical concentration’ is simultaneously
a process of vertical integration, of capital striving to subsume the key stages of industries normally dis-
persed across the globe.28 The most powerful commercial capitals dominating the produce trades of
Asia and Africa have been described as ‘vertically integrated trading and shipping combines’ (Boone
1992, 44), and I have suggested that a degree of vertical integration was always true of the biggest
26
I have only been able to consult Mirsky’s translation of the tenth edition of Pokrovsky’s Brief History of Russia.
That edition contains Pokrovsky’s recantation in an Appendix to volume one and it is possible that Pokrovsky himself
toned down formulations found in earlier Russian editions of the work. Thus he refers repeatedly to ‘merchant cap-
ital’ as opposed to merchant capitalism, though the text of this late edition still refers occasionally to ‘merchant
capitalists’.
27
This refers specifically to what can loosely be called the ‘mainstream Marxist tradition’ shaped by Dobb’s exeget-
ical influence and reflected in different ways by Perry Anderson, Robin Blackburn and Robert Brenner.
28
‘Subsume’ need not mean ‘own’: Liam Campling has pointed out to me that in the context of global value chains,
‘the lead capital may vertically disintegrate de jure control (i.e. they are not classically “vertically integrated”) but main-
tain de facto “control” (e.g. quasi-monopolistic/quasi-monopsonistic centralisation in a strategic “node” of a chain)’.

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428 Jairus Banaji

commercial capitals. If ‘mercantile capitalism’ is, in my view, the best description we can have of the
actual nature of French and British investments in their colonial territories, it is important to construct
a picture of how it functioned. So after the summary of ‘Notes on Capital and Peasantry’ that forms the
greater part of the first section of this paper (highlighting the theoretical contribution of Bernstein’s early
work), the second section turned to the job of building a model of what I have called the ‘commercial
capitalism of the produce trades’. It was argued there that value chains have to be viewed as combined
accumulations of capital. A key feature of the argument is that indigenous classes of capital were in-
dispensable to the chains that made up this form of capitalism. Lead firms might complain repeatedly
about the ‘excessive commissions’ of the middlemen and their own vulnerability to them, but could
do little about this. The big dealers and wholesale merchants (e.g. the big opium dealers of Ujjain or
the palm oil brokers of Old Calabar and Bonny) were clearly capitalists in their own right, but a pro-
liferation of petty traders was a widespread feature of the lower end of most chains (in jute, paddy,
wattle etc.) and the characterization of these agents is more ambiguous. In the third section, it is ar-
gued that if vertical integration is a tendency of ‘capital in general’, then it is best reflected or expressed
in the movement of industrial capital. Agricultural contracting and vertical integration are strategies of
accumulation more typical of industrial capital, in contrast to the distended chains through which ac-
cumulation typically occurs under commercial capital. The taxonomy proposed there is purely pro-
visional. Patterns (2), (3) and (4) are defined by their tighter integration of household producers into
accumulation by lead capitals. The point of my remarks is both to remind the reader that we are deal-
ing here with an integration of peasant labour into capitalist production in a strict sense and to under-
score fluidity in the arrangements between capital and household producers, the very different ways in
which the countryside was and could be integrated into accumulation. But even at this end of the
vertical concentration spectrum, there are major differences in the nature and degree of vertical inte-
gration and hence of the control exercised over households.
Bernstein’s 1977 paper was not an isolated intervention but part of a debate on ‘capital and
peasantry’, where the underlying issue was whether Marxists could generate a theoretically consistent
understanding of what was happening in the countryside both under colonialism and later, given that
European styles of ‘agrarian capitalism’ were not a major feature of much of the Third World. A key
influence in those debates was the work that Mike Cowen did on Kenya’s Central Province, showing
that household production had been expanded there ‘as an integral part of the development of capital-
ism’ (1981, 125; my emphasis). In Cowen’s study, the intervention of an international layer of capital
was seen as stabilizing the peasantry against more ‘spontaneous’ trajectories of capitalism. More remark-
ably, he suggested that ‘As long as households produce commodities which enter into the full circuit of
capital, then they will be subject to the extraction of relative surplus value’ (my emphasis). In other
words, ‘necessary labour time is reduced if households increasingly consume commodities which have
been produced under conditions in which the average productivity of labour is rising’ (Cowen 1981,
126). These arguments may well explain why contract farming came to be used so widely precisely in
the final decades of the twentieth century, as the post-war increases in industrial productivity kicked in.

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