Turnover of industrial capital, commercial and bank credit: modern Unoist approach 5. Conclusion

 

5. Conclusion

This paper has examined how credit relations develop from the turnover of capital.

First, we showed that under continuous production, shortening circulation time does not reduce the total turnover time of capital. Instead, it reduces the amount of capital required in advance, including the reserve funds. However, these reserve funds always become idle in varying amounts and may occasionally run short.

Second, we argued that such reserve funds in circulation are difficult for individual industrial capitals to manage on their own. Therefore, they rely on each other by using commercial credit. Commercial credit arises spontaneously from the uneven distribution of available reserve funds among different capitals. Thus, under continuous production, credit contributes to reducing the advanced capital.

Third, this paper discussed how the credit giver in commercial credit can act as an intermediary and evolve into banking capital. The credit giver can assess buyers’ creditworthiness and its debt is trusted due to strong sales. It can extend the role of credit intermediary and expand its profit beyond its own productive capacities.

Fourth, we examined how profit is transferred through the markup on credit sales and through interest. Although the cash price is determined by the production price system, both the markup rate and interest rate are shaped by the competition for profit rates within the closed relationship between two or three capitals.

This study has some limitations. By focusing on the relationships between only a few capitals, it does not examine the formation of a general rate of interest. To explore the general rate, Future research should explore competition among multiple credit givers or intermediaries. Furthermore, this paper did not examine the potential for capital saving by specialization in credit operation.

Nevertheless, this paper has proposed a logical development of credit—from capital turnover, to commercial credit, and finally to bank credit—based on the theory of differentiation and emergence.

 

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