In the previous two chapters, we have studied

• • the processes of the generation and accumulation of surplus value that was analysed by Marx in Volume I of Capital (Chapter 3) and

• • the processes surrounding the realization of surplus value in the sphere of circulation that was analysed by Marx in Volume II of Capital (Chapter 4).

To complete the analysis of the capitalist system, we now need to understand how the surplus value that is generated in production of commodities and realized through sale of commodities is distributed through various channels to finally emerge as the income stream of various fractions of the ruling class – the trading capitalists (the merchants), the industrial capitalists, the money capitalists and the resource owners. It is the purpose of this chapter to study the processes of distribution and redistribution of surplus value by discussing the main threads of the argument that were developed in Volume III of Capital (Marx, 1993b).

The first thing to note is that the argument in Volume III of Capital proceeds in two analytically separate steps. In the first step of the argument, we understand how the already produced surplus value is distributed across different sectors of industrial capital, that is, capital that is involved in the process of capitalist production of commodities. We will see that the key mechanism that brings about this redistribution of surplus value, in the first step of the argument, is the competition between industrial capitals, the latter manifested in the mobility of capitals across sectors in search of higher rates of profit. This process redistributes the already generated surplus value across different sectors of the economy, giving rise to a uniform (average) rate of profit and a corresponding set of prices of commodities known as prices of production. This argument about the emergence of prices of production will also move through two levels of abstraction. In the higher level of abstraction, we will abstract from commercial capital. After developing the argument in this simplified set-up, we will return to the argument and incorporate commercial capital – capital that is only involved in trade (pure buying and selling), but not in production (broadly understood) – into the analysis to see that the competitive process leads to the total surplus value being divided between industrial and commercial capital in the form of industrial profit and commercial profit, respectively.