***

{Profit (including industrial profit) is proportionate to the amount of the capital advanced; on the other hand, the wages drawn by the industrial capitalist [stand] in inverse ratio to the amount of capital.  [They are] considerable where the capital is small (because, in this case, the capitalist is something between an exploiter of other people’s labour and a person who lives off his own labour), and insignificant where the capital is large, or they are quite independent of it in the case where a manager is [employed].  One part of the labour of superintendence merely arises from the antagonistic contradiction between capital and labour, from the antagonistic character of capitalist production, and belongs to the incidental expenses of production in the same way as nine-tenths of the “labour” occasioned by the circulation process.  A conductor does not have to be the owner of the instruments used by the orchestra, nor is it one of his functions as a conductor to speculate on the subsistence costs of the members of the orchestra, or, in general, to have anything to do with their “wages”.  It is very remarkable that economists like John Stuart Mill, who cling to the forms of “interest” and “industrial profit” in order to convert “industrial profit” into wages for superintendence of labour, admit along with Smith, Ricardo and all other economists worth mentioning, that the average rate of interest is determined by the average rate of profit, [which according to] Mill stands in inverse ratio to the rate of wages, and it is therefore nothing but unpaid labour, surplus labour.

Two facts provide the best proof that the wages of superintendence do not enter [into the] average rate of profit at all.

||924| 1) That in co-operative factories, where the general manager receives a salary as in all other factories, and is responsible for the whole labour of superintendence—the overseers themselves are simply workers—the rate of profit is not below, but above, the average rate.

2) That where profit is continuously substantially above the average rate, as in individual, non-monopolised branches of business such as those of small shopkeepers, farmers, etc., this is correctly explained by the economists as being due to the fact that these people pay themselves their own wages.  Where only the proprietor himself works, his profit consists of—1) the interest on his small capital; 2) his wages; 3) that part of the surplus time which, because of his capital, he is able to work for himself instead of for someone else; i.e., the part not already represented by interest.  If, however, he employs workers, then their surplus labour has to be added.

Of course the worthy Senior (Nassau) also converts industrial profit into wages of superintendence.  But he forgets this humbug as soon as it is a question, not of doctrinaire phrases, but of practical struggles between workers and factory owners.  Thus, he opposes the shortening of the working-day, because in a working-day of say 11 ¹/₂ hours, the workers allegedly work only one hour for the capitalist, and the product of this one hour constitutes the capitalist’s profit (apart from the interest for which they also work an hour according to his own calculation).  Suddenly here industrial profit is equal to the value added by the unpaid labour-time of the worker and not to the value added by the labour which the capitalist performs in the production process of commodities.  If industrial profit were the product of the capitalist’s own labour, then Senior should not have deplored that the workers work only one hour for the capitalist for nothing instead of two, and even less should he have said that, if the workers worked only 10 ¹/₂ hours instead of 11 ¹/₂, there [would be] no profit at all.  He should have said that if the workers worked only 10 ¹/₂ hours instead of 11 ¹/₂, the capitalist would not receive wages of superintendence for 11 ¹/₂ hours but only for 10 ¹/₂ hours, he would thus lose one hour’s wages of superintendence.  In which case the workers would answer that if ordinary wages for 10 ¹/₂ hours have to suffice for them, then the higher wages the capitalist receives for 10 ¹/₂ hours should suffice for him.

It is incomprehensible how economists like John Stuart Mill, who are Ricardians and even express the principle that profit is equal to surplus-value, surplus labour, in the form that the rate of profit and wages stand in inverse ratio to one another and that the rate of wages determines the rate of profit (which is incorrect when put in this form), suddenly convert industrial profit into the individual labour of the capitalist instead of into the surplus labour of the worker, unless the function of exploitation of other people’s labour is called labour by them, the result of this is indeed that the wages of this labour are exactly equal to the amount of other people’s labour appropriated, in other words, they depend directly on the degree of exploitation, not on the degree of exertion that this costs the capitalist.  (Insofar as this function of exploitation really requires labour in the course of capitalist production, it is represented by the wages of general managers.)  I say that it is incomprehensible that, after they as Ricardians have reduced profit to its real element, they allow themselves to be misled by the antithesis of interest and industrial profit which is simply a disguised form of profit and is merely regarded as an independent form due to ignorance of the nature of profit.  Only because one part of profit, interest, appears to be due to capital as a thing, an automatically functioning, automatically creating thing, apart from the production process, the other part appears as industrial profit, as arising from the activity taking place in the process (really the active process, this however also includes the activity of the operating capitalist) and therefore as due to the labour of the capitalist.  Consequently, because capital and the surplus-value which arises from it and is called interest are considered mysteries.  This view, which clearly arises from notions reflecting the most superficial aspects of the external form of capital, is the exact opposite of Ricardo’s view and altogether inconsistent with his conception of value.  Insofar as capital is value, its value is determined by the labour contained in it before it enters into the [production] process.  Insofar as it enters the process as a thing, it does so as use-value, and as such, it can never create exchange-value, whatever its use.  One can see how splendidly the Ricardians understand their own master.  In relation to the moneyed capitalist, the industrial capitalist, who embodies functioning capital and therefore actually squeezes out surplus labour, is of course quite justified in pocketing a part of this surplus.  In relation to the moneyed capitalist, he is a worker, but a worker who is a capitalist, in other words, an exploiter of other people’s labour.  ||925| But in relation to the workers it is strange to plead that the exploitation of their labour costs the capitalist labour and that, therefore, they have to pay him for this exploitation; it is the plea of the slave-driver addressed to the slave.}

***

Every pre-condition of the social production process is at the same time its result, and every one of its results appears simultaneously as its pre-condition.  All the production relations within which the process moves are therefore just as much its products as they are its conditions.  The more one examines its nature as it really is, [the more one sees] that in the last form it becomes increasingly consolidated, so that independently of the process these conditions appear to determine it, and their own relations appear to those competing in the process as objective conditions, objective forces, aspects of things, the more so as, in the capitalist process, every element, even the simplest, the commodity for example, is already an inversion and causes relations between people to appear as attributes of things and as relations of people to the social attributes of things.

< Interest is the remuneration for the productive employment of savings; profit, properly so called, is the remuneration for the agency for superintendence during this productive employment[g] (The Westminster Review, Vol. V, January–April 1826, p. 107).

Thus interest here is declared to be remuneration for the fact that money, etc., is employed as capital; it therefore arises from capital as such, which is remunerated for its quality qua capital.  Industrial profit, on the other hand, is remuneration for the function of the capital or capitalist “during this productive employment”, i.e., in the production process itself.> |925||

||925| Interest is only a part of profit, the part which is paid to the owner of capital by the industrial, functioning capitalist.  Since he can appropriate surplus labour only by means of capital (money, commodities), etc., he has to hand over a portion of it to the man who makes capital available to him.  And the lender, who wants to enjoy the advantages of money as capital without letting it function as capital, can do this only by being content with a part of the profit.  They are in fact co-partners, one of them being the juridical owner of the capital, and the other, while he employs it, the economic owner.  But since the profit only arises from the production process, is only its result and has first to be produced, interest is in fact merely a claim on part of the surplus labour which has yet to be performed, a title to future labour, a claim on a portion of the value of commodities which do not as yet exist, it is therefore only the result of a production process which takes place during the period at the end of which the interest only falls due.

||926| Capital is bought (that is, it is lent at interest) before it is paid for.  Money functions here as means of payment as it does in relation to labour-power, etc.  The price of capital—i.e., interest—enters therefore just as much into the advances made by the industrialist (and into the advances made to himself where a man is operating with his own capital) as the price of cotton which, for example, is bought today, but for which he has to pay perhaps in six weeks’ time.  This fact is in no way altered either by the fluctuations in the rate of interest—the market price of money—or the fluctuations in the market prices of other commodities.  On the contrary.  The market price of money—the name for interest-bearing capital as money capital—is fixed on the money market by competition between buyer and seller, by demand and supply, like the price of any other commodity.  The struggle between the moneyed and industrial capitalists is simply a struggle over the division of the profit, over the share which is to accrue to each of the two sections when the division is made.  The relationship (demand and supply), like each of its two extremes, is itself a result of the production process or, in common parlance, [is determined] by the business situation existing at the time, the actual position in which the reproduction process and its elements find themselves.  But, formally and apparently, it is this struggle which determines the price of capital (i.e., interest) before capital enters into the production process.  This determination, moreover, occurs outside the real production process, and depends on factors independent of the process; this price determination appears rather as one of the conditions within which the process has to take place.  Thus the struggle appears not only to establish the property title to a definite part of the future profit, but to cause this part not to emerge as a result of the production process, but on the contrary to enter into it as a pre-condition, as the price of capital, just as the prices of commodities or wages enter into it as pre-conditions, although in the course of the reproduction process they in fact continuously emerge from it.  Each component of the price of a commodity, insofar as it appears as an advance—as an already existing commodity price which enters into the production price—ceases to represent surplus-value as far as the industrial capitalist is concerned.  That part of the profit which thus enters into the production process as the price of capital is reckoned as part of the cost of the outlay; it therefore no longer appears to be surplus-value and is converted from a product of the process into one of its given pre-conditions—a condition of production—which as such enters into the process in an independent form and determines its result.

(If, for example, the rate of interest falls, and the situation obtaining on the market requires a reduction in the price of commodities below cost-price, the industrialist can lower the commodity price without reducing the rate of industrial profit; he can indeed lower the price and secure a higher industrial profit, which, however, will be regarded by the man operating only with his own capital as a fall in the rate of profit, a reduction in the gross profit.  Everything which appears as a given condition of production, such as the prices of commodities, wages, capital—the market prices of these elements—affects the determination of the market price of the commodity at any particular time; the real cost-price of a particular commodity is established only within the fluctuations of the market prices, and is only the self-equalisation of these market prices, just as the value of commodities is only established as a result of the equalisation of the cost-prices of all the different commodities.  Thus, the vicious circle of the vulgarian, whether he is a theoretician regarding matters from the capitalist standpoint or is in fact a capitalist—namely, that the prices of commodities determine wages, interest, profit and rent and that, on the other hand, the prices of labour, interest, profit and rent determine the prices of commodities—is merely an expression of the circular movement in which the general laws assert themselves in contradictory fashion in the real movement and in appearance.)

A part of the surplus-value—interest—thus appears as the market price of capital, which enters into the [production] process, and is therefore regarded not as surplus-value but as a condition of production.  Thus, the fact that two sets of capitalists share the surplus-value, one set remaining outside the production process and the other participating in it, is presented in such a way that one part of surplus-value is due to capital outside the process and the other part to capital within the process.  The fact that the division [of the surplus-value] is established beforehand is presented as the independence of one part from the other, as the independence of one part from the production process itself; and finally as the immanent attribute of things, money, commodities, but of these things as capital; this again appears not as the expression of a relationship, but in such a way that this money, these commodities are technologically intended for the labour process and because of this they become capital.  Defined in this way, they are the simple elements of the labour process itself ||927| and as such they are capital.

There is nothing mysterious at all in the fact that the value of the commodity is made up partly of the value of the commodities contained in it, partly of the value of the labour—that is to say, the paid labour—partly of the unpaid but none the less salable labour, and that the part of its value which consists of unpaid labour—i.e., its surplus-value—is in turn divided into interest, industrial profit and rent; in other words, the person who “produces” and first of all takes possession of the whole of this surplus-value has to hand over portions of it to others, one portion to the landlord, another to the owner of the capital, and he keeps the third for himself; he does so however under a name—industrial profit—which distinguishes it from interest and rent, and from surplus-value and profit.  The breakdown of surplus-value, that is, of part of the value of commodities, into these special headings or categories, is very understandable and does not conflict in the least with the law of value.  But the whole matter is mystified because these different parts of surplus-value acquire an independent form, because they accrue to different people, because the titles to them are based on different elements, and finally because of the autonomy with which certain of these parts of surplus-value confront the production process as its conditions.  From parts into which value can be divided, they become independent elements which constitute value, they become component parts.  This is what they are as far as market prices are concerned.  They really become the constituent elements of the market price.  How their apparent independence as conditions of the process is regulated by the inherent law and that they are only apparently independent, does not become evident at any moment in the course of the production process, nor does it operate as a determining conscious motive.  Exactly the opposite.  The highest consistency which can be assumed by this semblance of results taking the form of independent conditions becomes firmly established when parts of surplus-value—in the form of prices of the conditions of production—are included in the price.

And this is the case with regard to both interest and rent.  They are part of the outlay of the industrial capitalist and the farmer.  They seem here to represent not unpaid surplus labour, but paid surplus labour, that is, surplus labour for which an equivalent is paid during the production process, although not to the worker whose surplus labour it is, but to other people, i.e., the owners of capital and of land.  They constitute surplus labour as far as the worker is concerned, but they are equivalents as regards the capitalist [who lends the money] and the landowner to whom they have to be paid.  Interest and rent therefore appear not as surplus-value, and still less as surplus labour, but as prices of the commodities “capital” and “land”, for they are paid to the capitalist and the landowner only in their capacities as owners of commodities, only as owners and sellers of these commodities.  That part of the value of the commodity which represents interest, therefore, appears as reproduction of the price paid for capital, and that part which represents rent appears as reproduction of the price paid for the land.  These prices therefore become constituent parts of the total price.  This does not merely appear to be the case to the industrial capitalist; for him interest and rent really constitute part of his outlay, and whereas, on the one hand, they are determined by the market price of his commodity—as the market price it is a determination of a commodity in which a social process or the result of a social process appears as a particular aspect belonging to the commodity, and the up and down of this process, its movement, appears as the fluctuations of the commodity price—on the other hand, the market price is determined by them, in just the same way as the market price of cotton determines the market price of yarn and, on the other hand, the market price of yarn determines the demand for cotton, hence the market price of cotton.

Since parts of surplus-value, i.e., interest and rent, enter into the production process as the prices of commodities—of the commodity land and the commodity capital—they exist in forms which not only conceal, but which disavow their real origin.

That surplus labour, unpaid labour, constitutes just as essential an element of the capitalist production process as paid labour, is expressed by the fact that factors of production—land and capital—distinct from labour have to be paid for, in other words, that costs besides the price of the commodities advanced and wages enter into the price.  Parts of surplus-value—interest and rent—appear here as costs, as advances made by the exploiting capitalist.

Average profit enters into the production price of commodities as a determining factor and thus already here surplus-value [appears to be] not a result, but a condition, not one of the parts into which the value of the commodity is divided, but a component part of its price.  But average profit, like the production price itself, acts rather as a determining ideal and at the same time appears as surplus over and above the advances made ||928| and as a price which is different from the cost-price properly speaking.  Whether or not [average profit is obtained] and whether it is higher or lower than the profit corresponding to the market price—that is, corresponding to the direct result of the [production] process—determines the reproduction process, or rather the scale of reproduction; it determines whether more or less of the capital existing in this or that sphere of production is withdrawn or invested; it also determines the ratio in which newly accumulated capital flows into these particular spheres, and finally, to what extent these particular spheres act as buyers in the money market.  On the other hand, as interest and rent, the separate portions of surplus-value in a quite definite form become pre-conditions for the individual production prices and are anticipated in the form of advances.

***

<Advances, that is, what is paid out by the capitalist, may be defined as costs.  Profit accordingly appears as a surplus over these costs.  This applies to the individual prices of production.  And consequently, one can call the prices determined by the advances cost-prices.

Costs of production can be defined as prices determined by the average profit—that is, the price of the capital advanced plus the average profit—since this profit is the condition for reproduction, a condition which regulates the supply and the distribution of capital amongst the various spheres of production.  These prices are production prices.

Finally, the real amount of labour (materialised and immediate labour) it costs to produce a commodity, is its value.  It constitutes the real production cost of the commodity itself.  The price which corresponds to it is simply the value expressed in money.

The term “cost of production” is used alternately in all three senses.>

***

If no surplus-value were produced, then of course together with surplus-value the part of it which is called interest would also cease to exist, and so would the part which is called rent; the anticipation of surplus-value would likewise come to an end, in other words, it would no longer constitute a part of the costs of production in the shape of the price of commodities.  The existing value entering into the production process would not emerge from it as capital at all, and accordingly, could not enter into the reproduction process as capital, nor be lent out as capital.  It is thus the continuous reproduction of the same relations—the relations which postulate capitalist production—that not only causes them to appear as the social forms and results of this process, but at the same time as its continual prerequisites.  But they are these only as prerequisites continually posited, created, produced by the process itself.  This reproduction is therefore not conscious reproduction; on the contrary, it only manifests itself in the continuous existence of these relations as prerequisites and as conditions dominating the production process.  The parts, for example, into which the commodity value can be divided are turned into its component parts which confront one another as independent parts, and they are consequently also independent in relation to their unity, which on the contrary appears to be a compound of these parts.  The bourgeois sees that the product continually becomes the condition of production.  But he does not perceive that the production relations themselves, the social forms in which he produces and which he regards as given, natural relations, are the continuous product—and only for that reason the continuous prerequisite—of this specific social mode of production.  The different relations and aspects not only become independent and assume a heterogeneous mode of existence, apparently independent of one another, but they seem to be the direct properties of things; they assume a material shape.

Thus the participants in capitalist production live in a bewitched world and their own relationships appear to them as properties of things, as properties of the material elements of production.  It is however in the last, most derivative forms—forms in which the intermediate stage has not only become invisible but has been turned into its direct opposite—that the various aspects of capital appear as the real agencies and direct representatives of production.  Interest-bearing capital is personified in the moneyed capitalist, industrial capital in the industrial capitalist, rent-bearing capital in the landlord as the owner of the land, and lastly, labour in the wage-worker.  They enter into the competitive struggle and into the real process of production as these rigid forms, personified in independent personalities that appear at the same time to be mere representatives of personified things.  Competition presupposes this externalisation.  These forms conform to its nature and have come into being in the natural evolution of competition, and on the surface competition appears to be ||929| simply the movement of this inverted world.  Insofar as the inner connection asserts itself in this movement, it appears as a mysterious law.  The best proof is political economy itself, a science which seeks to rediscover the hidden connection.  Everything enters into competition in this last, most externalised form.  The market price, for example, appears to be the dominant factor here, just as the rate of interest, rent, wages, industrial profit appear to be the constituents of value, and the price of land and the price of capital appear as given items with which one operates.

We have seen how Adam Smith first reduces value to wages, profit (interest) and rent, and then, conversely, presents these as independent constituent elements of commodity prices.  He expresses the secret connection in the first version and the outward appearance in the second.

If one comes still closer to the surface of the phenomenon, then, in addition to the average rate of profit, interest and even rent can be represented as constituent parts of commodity prices (that is, of market prices).  Interest can be so represented quite directly, since it enters into the cost-price.  Rent—as the price of land—may not determine the price of the product directly, but it determines the method of production, whether a large amount of capital is concentrated on a small area of land, or a small amount of capital is spread over a large area of land, and whether this or that type of product is produced—e.g., cattle or corn—the market price of which  covers the rent most effectively, for the rent must be paid before the term stipulated by contract expires.

In order that rent should not bring about a reduction in industrial profit, pasture is turned into arable land and arable land into pasture, etc.  Rent therefore determines the market prices of individual commodities not directly, but only indirectly, by influencing the proportions in which the various types of commodities are produced in such a way that demand and supply will produce the best price for each so that rent can be paid.  Even though rent does not directly determine the market price of corn, for example, it determines directly the market price of cattle, etc., in short, of commodities produced in the spheres where rent is not regulated by the market prices of their products but where the market prices of products are regulated by the amount of rent borne by the grain-producing land.  The price of meat, for example, is always too high in industrially developed countries, that is, it is not only far above its production price, but above its value.  For the price must cover not only the cost of production, but also the rent which the land would carry if corn were grown on it.  Otherwise, meat produced by large-scale stock-breeding—where the organic composition of capital approximates more closely [to the composition of capital in industry] or may have an even greater preponderance of constant capital over variable capital—could only pay a very small amount of absolute rent, or even none at all.  The rent which it pays, and which enters directly into its price, is, however, determined by the absolute plus the differential rent which the land would pay as arable land.  This differential rent, moreover, does not exist here in most cases.  The best proof is that meat pays rent on the kind of land where corn does not.

If, therefore, profit enters into the production price as a determining factor, it can be said that wages, interest arid, to a certain degree, rent constitute determining elements of the market price and certainly of the production price.  Of course, ultimately everything can be reduced to value which is determined by labour-time, for on the whole the movement of interest is determined by profit, while corn rent on the other hand is determined partly by the rate of profit, partly by the value of the product and the equalisation of the different values produced on different kinds of land to the market value; the rate of profit, however, is determined partly by wages, partly by the productivity of labour in those spheres of production which produce constant capital—in the last analysis therefore by the level of wages and the productivity of labour; wages, however, are the equivalent of a part of the commodity (that is, [they are] equal to the paid portion of labour contained in the commodity, and profit is equal to the unpaid portion of labour contained in the commodity).  Finally, the productivity of labour can affect the price of commodities only in two ways, either it affects their value, i.e., reduces it, or it affects their surplus-value, that is, increases it.  Cost-price is nothing but the value of the capitals advanced plus the surplus-value they produce distributed amongst the different spheres according to the quota of the total capital which each sphere represents.  Thus, cost-price resolves into value if one considers the total capital and not the individual spheres.  On the other hand, the market prices in each sphere are continually reduced to the cost-price as a result of the competition between the capitals of the different spheres.  Competition amongst the capitalists in each individual sphere seeks to reduce the market price of commodities to their market value.  Competition between capitalists of different spheres reduces market values to common cost-prices.

Ricardo opposes Smith’s establishment of value out of the parts of value which are determined by itself.  But he is not consistent.  Otherwise it would have been impossible for him to argue with Smith whether profit, wages and rent or, as he says, merely profit and wages, enter into price, that is, enter as constituent parts.  Regarded analytically, they enter into it as soon as they are paid.  He ought to have put it in this way: The price of every commodity is reducible to profit and wages, the prices of some commodities (and of very many, indirectly) are reducible to profit, rent and wages.  But no commodity price is constituted by them ||930| for they are not independent factors acting of their own accord, having a definite magnitude, and making up the value of commodities; on the contrary, when the value is given, it can be divided into those parts in many different proportions.  The magnitude of value is not determined by the addition or combination of given factors—i.e., profit, wages and rent—but one and the same magnitude of value, a given amount of value, is broken down into wages, profit and rent, and according to different circumstances it is distributed between these three categories in very different ways.

Assuming that the production process repeats itself continuously under the same conditions, in other words, that reproduction takes place under the same conditions as production, which presupposes that productivity of labour remains unchanged, or at least that variations in productivity do not alter the relationships of the different factors of production; thus, even if the value of commodities were to rise or fall as a result of changes in productivity, the distribution of the value of commodities amongst the different factors of production would remain the same.  In that case, although it would not be theoretically accurate to say that the different parts of value determine the value or price of the whole [output], it would be useful and correct to say that they constitute it insofar as one understands by constituting the formation of the whole by adding up the parts.  The value would be divided at a steady and constant rate into [pre-existing] value and surplus-value, and the [newly created] value would be resolved at a constant rate into wages and profit, the profit again being broken down at a constant rate into interest, industrial profit and rent.  It can therefore be said that P—the price of the commodity—is divided into wages, profit (interest) and rent, and, on the other hand, wages, profit (interest) and rent are the constituents of the value or rather of the price.

This uniformity or similarity of reproduction—the repetition of production under the same conditions—does not exist.  Productivity itself changes and changes the conditions [of production].  The conditions, on their part, change productivity.  But the divergences are reflected partly in superficial oscillations which even themselves out in a short time, partly in a gradual accumulation of divergences which either lead to a crisis, [to a] violent, seeming restoration of the old relationships, or very gradually assert themselves and are recognised as a change in the conditions.

Interest and rent, which anticipate surplus-value, presuppose that the general character of reproduction will remain the same.  And this is the case as long as the capitalist mode of production continues.  Secondly, it is presupposed moreover that the specific relations of this mode of production remain the same during a certain period, and this is in fact also more or less the case.  Thus the result of production crystallises into a permanent and therefore prerequisite condition of production, that is, it becomes a permanent attribute of the material conditions of production.  It is crises that put an end to this apparent independence of the various elements of which the production process continually consists and which it continually reproduces.

<What value is for the genuine economist the market price is for the practical capitalist, that is, in each case the primary factor of the whole movement.>

The form of interest-bearing capital characteristic of and in accordance with capitalist production is credit.  It is a form created by capitalist production itself.  (The subordination of commercial capital [by the capitalist mode of production] does not in fact require such a new creation since commodity and money, and the circulation of commodities and money, remain the elementary prerequisites of capitalist production and are only turned into absolute prerequisites; commercial capital, on the one hand, is therefore the general form of capital and, on the other hand, insofar as it represents capital in a specific function—capital which operates exclusively in the circulation process—its determination by productive capital does not in any way alter its form.)

The equalisation of values to cost-prices occurs only because the individual capital functions as a commensurate part of the total capital of the whole class and, on the other hand, because the total capital of the class is distributed amongst the various individual spheres according to the needs of production.  This is brought about by means of credit.  Credit not only makes this equalisation possible and facilitates it, but one part of capital—in the form of moneyed capital—appears in fact to be the material common to the whole class and employed by it.  This is one purport of credit.  The other is the continual attempt made by capital to shorten the metamorphoses which it has to undergo in the circulation process, to anticipate the circulation time, its transformation into money, etc., and in this way to counteract its own ||931| limitations.  Finally, the function of accumulating, insofar as it is not conversion [of revenue] into capital but the supply of surplus-value in the form of capital, becomes, in part, the responsibility of a special class, in part everything accumulated by society in this sense becomes accumulation of capital and is placed at the disposal of the industrial capitalists.  Operations of this kind take place at a very large number of isolated points in society, [their results] are concentrated and collected in certain reservoirs.  Money which lies idle due to freezing of the commodities in the metamorphosis, is thus converted into capital.

***

Land—rent and capital—interest are irrational expressions insofar as rent is defined as the price of land and interest as the price of capital.  The common origin [of all these different revenues] is still recognisable in the forms of interest-bearing capital, rent-bearing capital, profit-bearing capital, since, in general, capital involves appropriation of surplus labour; so that these different forms merely express the fact that the surplus labour produced by capital is, as concerns capital in general, divided between two types of capitalists, and in the case of agricultural capital, it is divided between capitalist and landlord.

Rent as the (annual) price of land and interest as the price of capital are just as irrational as √-3.  The latter form contradicts the number in its simple, elementary form just as those do in the case of capital in its simple form of commodities and money.  They are in the converse sense irrational.  Land—rent, i.e., rent as the price of land, defines land as a commodity, a use-value which has a value whose monetary expression is its price.  But a use-value which is not the product of labour cannot have a value; in other words, it cannot be defined as the materialisation of a definite quantity of social labour, as the social expression of a certain quantity of labour.  It is nothing of the kind.  Only if it is the product of concrete labour can use-value take the form of exchange-value—become a commodity.  Only under this condition can concrete labour, for its part, be expressed as social labour, value.  Land and price are incommensurable magnitudes, nevertheless they are supposed to bear a certain relation to each other.  Here a thing which has no value has a price.

Interest as the price of capital, on the other hand, expresses the converse irrationality.  Here a commodity which has no use-value has a dual value, it has a value in the first place and in addition a price, which is different from this value.  For capital is, to begin with, nothing but a sum of money or a quantity of commodities equal to a certain sum of money.  If the commodity is lent out as capital, then it is nothing but a sum of money in camouflaged form.  For what is lent as capital is not so many pounds of cotton, but so much money whose value exists in the form of cotton.  The price of the capital is therefore related to it only as the existence of a sum of money, that is, a certain value expressed in money and existing in the form of exchange-value.  How is it possible for a value to have a price apart from the price which is expressed in its own money form?  Price after all is the value of the commodity as distinct from its use-value.  Price in contradistinction to the value of the commodity, price as the value of a sum of money (for price is simply the expression of value in money) is therefore a contradiction in terms.

This irrationality of expression (the irrationality of the thing itself arises from the fact that, as regards interest, capital as the prerequisite appears divorced from its own process, in which it becomes capital and consequently self-expanding value, and that, on the other hand, rent-bearing capital exists only as agricultural capital, as capital which only yields rent in a particular sphere, and this form in which it appears is transmitted to the element that differentiates it in general from industrial capital), this irrationality of expression is so much felt by the vulgarian that he falsifies both expressions in order to make them appear rational.  He asserts that interest is paid on capital insofar as it is use-value, and therefore talks about the utility which the products or means of production have for reproduction and of the utility which capital has as a material element of the labour process.

But, after all, its utility, its use-value, already exists in its form as a commodity and without this it would not be a commodity and would have no value.  As money, it is the expression of the value of commodities and is ||932| convertible into them in proportion to their own value.  But if I convert money into a machine, into cotton, etc., then I convert it into use-values of the same value.  The conversion is concerned only with the value form.  As money, it has the use-value of being convertible into any other commodity, a commodity, however, of the same value.  As a result of this transformation, the value of money changes no more than that of the commodity when it is converted into money.  The use-value of the commodities into which I can convert money does not give the money, in addition to its value, a price which is different from its value.  If, however, I presuppose the conversion and assert that the price is paid for the use-value of the commodities, then the use-value of the commodities is not paid for at all or is only paid insofar as their exchange-value is paid for.  How the use-value of any commodity is utilised, whether it enters into individual or industrial consumption, has absolutely no bearing on its exchange-value.  It only determines who will buy it—the industrial capitalist or the immediate consumer.  The productive usefulness of a commodity can therefore account for the fact that the commodity has exchange-value at all, for the labour embodied in the commodity is paid for only if it has use-value.  Otherwise it is not a commodity—it is a commodity only as the unity of use-value and exchange-value.  But this use-value can by no means account for the fact that as exchange-value or as price, it has in addition another and different price as well.

One can see how the vulgarian wants to get over the difficulty here by seeking to convert capital—that is, the money or the commodity insofar as these have a specifically different form from themselves as money or commodity—into a mere commodity, in other words, by disregarding precisely the specific difference which has to be explained.  He does not wish to say that capital is a means for the exploitation of surplus labour and that it therefore represents greater value than the value contained in it.  Instead he says: It has more value than its own value because it is an ordinary commodity like any other, that is, it possesses a use-value.  Here capital is identified with commodity, whereas the point to be explained is how the commodity can function as capital.

The vulgarian, insofar as he does not echo the Physiocrats, deals with land in the opposite way.  In the previous case, he converted capital into a commodity in order to explain the difference between capital and commodity and the conversion of the commodity into capital.  Now he converts land into capital because the capital relation as such is more in tune with his ideas than the price of land.  Rent can be regarded as interest on capital.  For example, if the rent is 20 and the rate of interest is 5, then it can be said that this 20 is interest on a capital of 400.  And in fact the land then sells at 400, which simply amounts to the sale of the rent for a period of 20 years.  This payment of the anticipated 20 years’ rent is thus the price of the land.  The land is thereby converted into capital.  The annual payment of 20 merely represents 5 per cent interest on the capital which was paid for the land.  And in this way, the formula land—rent is converted into capital—interest, which, for its part, is transmogrified into payment for the use-value of commodities, that is, into the relationship of use-value to exchange-value.

The more analytical vulgarians understand that the price of land is nothing more than an expression for the capitalisation of rent; [that] in fact [it is] the purchase price of rent for a number of years and that it is determined by the prevailing rate of interest.  They understand that rent is antecedent to this capitalisation of rent and that, on the other hand, it is therefore impossible to explain rent by its own capitalisation.  They therefore deny the existence of rent itself by asserting that it is interest on the capital invested in the land.  This does not prevent them from admitting that land in which no capital is invested carries rent, any more than it prevents them from admitting that equal amounts of capital invested in land of different fertility yield different amounts of rent, or that unequal amounts of capital invested in land of unequal fertility may yield the same amounts of rent.  [They admit] that likewise the capital invested in land—if indeed it is to account for the rent paid for the land—may yield perhaps five times as much interest, that is, five times as much rent, as is yielded by the same amount of capital invested as fixed capital in industry.

One perceives that here the difficulty is always eliminated by disregarding it and substituting a relationship expressing the opposite of the specific difference which has to be explained, and therefore, in any case, not expressing the difference at all.  |932||

[6.  The Struggle of Vulgar Socialism Against Interest (Proudhon).  Failure to Understand the Inner Connection Between Interest and the System of Wage-Labour]

||935| Proudhon’s polemic against Bastiat on the question of interest is characteristic both of the manner in which the vulgarian defends the categories of political economy and of the way in which superficial socialism (Proudhon’s polemic hardly deserves the name) attacks them.  We shall return to this in the section on the vulgarians.  Here only a few preliminary remarks.

The return movement [of money] should not have shocked Proudhon as being something peculiar if he understood anything at all about the movement of capital.  Neither should the surplus-value contained in the returning amount.  This is a characteristic feature of capitalist production.

<For Proudhon however, as we shall see, the surplus is a surcharge.  Altogether his criticism is that of a novice, he has not mastered the first elements of the science he intends to criticise.  Thus, he has never understood that money is a necessary aspect of the commodity (see Part I).  Here he even confuses money and capital because loan capital appears as money capital in the form of money.>

What might have struck him was not the surplus for which no equivalent was paid, since surplus-value—and capitalist production is based on it—is value which has cost no equivalent.  This is not a specific feature of interest-bearing capital.  The specific feature—insofar as we are considering the form of the movement—is only the first phase, that is, precisely the opposite of what Proudhon has in mind, namely, that the lender hands over the money without receiving an equivalent for it at the outset and that, therefore, the return of the capital with interest, as regards the transaction between borrower and lender, [is not related to] the metamorphoses which capital undergoes and which, insofar as they are mere metamorphoses of economic form, consist of a series of exchanges, conversion of commodities into money and conversion of money into commodities; insofar as they are real metamorphoses, that is, elements of the production process, they coincide with industrial consumption.  Here consumption itself constitutes a phase of the movement of economic forms.

But what money in the hands of the lender does not do, it does in the hands of the borrower who really employs it as capital.  It performs its real movement as capital in the hands of the borrower.  It returns to him as money plus profit, money plus ¹/_x money.  The movement between lender and borrower only expresses the starting-point and the final point of capital.  It is money when it passes from the hands of A into those of B.  It becomes capital in B’s hands, and as such, after undergoing a certain revolution, it returns with profit.  This interlude, the real process, which comprises both the circulation process and the production process, is not connected with the transaction between borrower and lender.  It [the transaction] recommences only after the money has been realised as capital.  The money now passes back into the hands of the lender along with a surplus, which, however, comprises only part of the surplus realised by the borrower.  The equivalent which the borrower receives is industrial profit, that is, the part of the surplus which he retains and which he appropriates only by means of the money borrowed.  All this is not visible in the transaction between him and the lender.  This is limited to two acts.  Transfer from A’s hands into those of B.  Interval during which the money remains in B’s hands.  After this interval the money along with interest returns into A’s hands.

If one examines merely this form—the transaction between A and B—then one regards the mere form of capital without the intervening stage: a certain amount of money a is handed over and after a certain period returns as a+¹/_xa without the assistance of any intermediate link apart from the period of time which elapses between the departure of the sum of money a and its return as a+¹/_xa.

And it is in this abstract form, which, indeed, exists as an independent movement alongside the real movement of capital, opens it and closes it, that Mr. Proudhon considers the matter in hand, so that everything inevitably remains incomprehensible to him.  If instead of buying and selling, lending in this form were to be abolished, then, according to Proudhon, the surplus would disappear.  In fact only the division of the surplus between two sets of capitalists would disappear.  But this division can and must be constantly generated anew whenever it is possible to convert commodities or money into capital, and, on the basis of wage-labour, this is always possible.  In order that it should be impossible for commodities and money to become capital and therefore be lent as capital in posse, they must not confront wage-labour.  If they are thus not to confront it as commodities and money and consequently labour itself is not to become a commodity, then that amounts to a return to pre-capitalist modes of production ||936| in which it [labour] does not become a commodity, and for the greater part still exists in the form of serf or slave labour.  On the basis of free labour, this is only possible where the workers are the owners of their means of production.  Free labour develops within the framework of capitalist production as social labour.  To say that they are the owners of the means of production amounts to saying that these belong to the united workers and that they produce as such, and that their own output is controlled jointly by them.  But wanting to preserve wage-labour and thus the basis of capital, as Proudhon does, and at the same time to eliminate the “drawbacks” by abolishing a secondary form of capital, reveals the novice.

Gratuité du Crédit.  Discussion entre M. Fr. Bastiat et M. Proudhon, Paris, 1850.

He regards lending as something evil because it is not a sale.

To lend at interest “is the ability to sell the same object again and again and always to receive a price for it without ever relinquishing ownership of the object which one sells” (op. cit., p. 9) (First Letter written by Chevé, one of the editors of La Voix du Peuple).

What confuses him is that the “object” (money or a house, for example) does not change owners as in the case of buying and selling.  But he does not see that when money is handed over, no equivalent is received in return; that, on the contrary, in the real [production] process, in the form and on the basis of exchange, not only an equivalent, but a surplus which is not paid for, is returned; insofar as exchange, exchange of things, takes place, no change of values occurs, the same person remains the “owner” of the same value, and insofar as there is a surplus, there is no exchange.  When the exchange of commodity and money begins again, the surplus is already absorbed in the commodity.  Proudhon does not understand how profit, and consequently interest as well, arise from the law of the exchange of values.  “House”, “money”, etc., ought therefore to be exchanged not as “capital”, but as “commodities … at cost-price” (op. cit., pp. 43-44).

“Indeed the hatter, who sells hats…gets back […] their value, neither more nor less.  But the capitalist who lends money, not only…gets his capital back undiminished, he receives more than the capital, more than he put into the exchange; he receives interest in addition to the capital…” (op. cit., p. 69).

Mr. Proudhon’s hatters do not appear to be capitalists but journeymen.

“Since in trade the price of the commodity is formed by adding interest on capital to the workers’ wages, the worker is therefore unable to buy back the product of his own labour.  To live by one’s labour is a principle which, under the rule of interest, comprises a   contradiction” (op. cit., p. 105).

The worthy Proudhon confuses money as a means of circulation with money as capital in Letter IX (pp. 144-52) and therefore concludes that “capital” in France yields 160 per cent, namely, 1,600 million interest annually in State debts, mortgages, etc., on a capital of one thousand million, i.e., “the amount of currency … circulating in France…”

Further:

“Since, as a result of the accumulation of interest, money capital always returns to its source, from one exchange to another, it follows that re-lending is always undertaken by the same hand, always brings profit to the same person” (op. cit., p. 154).

Because capital is lent out in the form of money, Proudhon believes that money capital, that is, currency, possesses this specific attribute.  Everything should be sold but nothing lent.  In other words: In the same way as he wanted commodities to exist but did not want them to become “money”, so here he wants commodities, money, to exist but they must not develop into capital.  When all phantastic forms have been stripped away, this means nothing more than that there should be no advance from small, petty-bourgeois peasant and artisan production to large-scale industry.

“Since value is nothing but a proportion, and all products are necessarily proportional to one another, it follows that, from a social point of view, products are always values, and stable values at that.  For society, the difference between capital and product does not exist.  This difference is quite subjective, it exists only for individuals” (op. cit., p. 250).

What mischief is caused when such philosophical German terms as “subjective” fall into the hands of a Proudhon.  The bourgeois social forms are “subjective” for him.  And the subjective, and moreover erroneous, abstraction that, because the exchange-value of commodities expresses a proportion, it expresses every possible proportion between commodities and does not express a third thing to which the commodities are proportional—this false “subjective” abstraction is the social point of view ||937| according to which not only commodity and money, but commodity, money and capital are identical.  Thus, from this “social point of view”, all cats are indeed grey.

Finally there is also the surplus in the form of morality:

“All labour must produce a surplus” (op. cit., p. 200).

With which moral precept the surplus is naturally defined very nicely.  |937||

[7.  Historical Background to the Problem of Interest.  Luther’s Polemic Against Interest Is Superior to That of Proudhon.  The Concept of Interest Changes as a Result of the Evolution of Capitalist Relations]

||937| Luther, who lived in the period of the dissolution of medieval civil society into the elements of modern society—a process which was accelerated by world trade and the discovery of new gold deposits—naturally knew capital only in its two antediluvian [forms] of interest-bearing capital and merchant capital.  Whereas in its early phase capitalist production, haying gained strength, seeks to subordinate interest-bearing capital to industrial capital by force—this was in fact done first of all in Holland, where capitalist production in the form of manufacture and large-scale trade first blossomed, and in England in the seventeenth century it was, partly in very naive terms, declared to be the primary requisite of capitalist production—on the other hand, during the transition to capitalist production, the first step is the recognition that “usury”, the old-fashioned form of interest-bearing capital, is a condition of production, a necessary production relation; in the same way as later on its justification is recognised by industrial capital, which regards it as flesh of its own flesh, as soon as industrial capital subordinates interest-bearing capital to itself (eighteenth century, Bentham).

Luther is superior to Proudhon.  The difference between lending and selling does not confuse him, for he perceives that usury exists equally in both.  The most striking feature of his polemic is that he makes his main point of attack the fact that interest is an innate element of capital.

I.  Books on trade and usury written in 1524.  [Von Kauffshandlung und Wucher in] Part VI of Luther’s Works, Wittenberg, 1589.

(This was written on the eve of the Peasant War.)

[About] trade (merchant capital):

“There is now great outcry against the nobles or robbers amongst the merchants” (one can see why the merchants are for the princes and against the peasants and knights), “that they have to conduct their trade in great danger and that they are arrested, beaten, despoiled and robbed, etc., in consequence of trading.  But if they suffered these things for the sake of righteousness, then, in truth, all merchants would be holy men…  But since such great unrighteousness and un-Christian thieving is rife throughout the whole world because of the merchants, and often enough amongst them themselves, why should we wonder if God wills it that such great wealth, gained by unrighteous means, is lost or stolen in its turn, and that because of it, the merchants are knocked on the head or arrested?… And it is the duty of the princes to punish such unrighteous commerce with due force and to see to it that their subjects are not fleeced so shamefully by the merchants.  But because they do not do this, God uses the knights and the robbers and punishes the wickedness of the merchants through them; they must be His devils.  Just as He plagues with devils or destroys with enemies the Land of Egypt and the whole world.  Thus He causes one scoundrel to be flogged by another, but He does not indicate thereby that knights are lesser robbers than merchants, since the merchants rob the whole world every day while a knight only robs one or two people once or twice a year” (p. 296).

“… Follow the words of Isaiah: Your princes have become the companions of thieves.  While they hang thieves who have stolen a guilder or half a guilder, they consort with those who rob the whole world and who steal more safely than any others; truly, the proverb—big thieves hang ||938| little thieves—still holds good, and, as Cato, the Roman senator, said: Little thieves are put into dungeons and in the stocks, but great thieves parade in gold and silk.  But what will God have to say in the end?  He will do as He said when He spoke through the mouth of Ezekiel: He will crush and melt prince and merchant, one thief and another, into one another like lead and brass, just as happens when a town is burned down, so that there will be princes and merchants no longer, and I fear that this is not so far off” (p. 297).

[On] usury.  Interest-bearing capital:

“I am told that nowadays 10 guilders, i.e., 30 per cent, are charged in any Leipzig market; some add also the Neunburg market so that it comes to 40 per cent.  I don’t know whether it is even higher.  Shame on you, where the devil will it end?… Whoever in Leipzig now has 100 florins, takes 40 in a year, this means that he has eaten up a peasant or a burgher in a year.  If he has 1,000 florins, then he takes 400 in a year, that is, he eats up a squire or a rich gentleman in a year.  If he has 10,000, he takes 4,000, that is, he eats up a rich count in a year.  If he has 100,000, as must happen in the case of the great merchants, then he takes 40,000 in a year, that is, he eats up a great, rich prince in a year.  If he has 1,000,000, then he takes 400,000 in a year, that is, he eats up some great king in a year.  And he suffers not any danger in so doing, neither to his body nor to his treasure, labours not, sits by the fire and roasts apples; thus a chair thief may sit at home and eat up a whole world in 10 years” (pp. 312-13).

<II.  Eyn Sermon auf das Evangelion von dem reichen Mann und armen Lazaro etc., Wittemberg, 1555 [A Sermon on the Gospel of the Rich Man and Poor Lazarus, etc.].

“We must not regard the rich man according to his outer bearing, for he wears sheep’s clothing and his life shines and seems pretty and covers up the wolf most perfectly.  For the Gospel does not charge him that he committed adultery, murder, robbery, sacrilege or anything that the world or reason would censure.  Indeed he is as honest in his life as that Pharisee who fasts twice a week and is not as other men.”>

Here Luther tells us how usurer’s capital arises, [through] the ruination of the citizens (small townspeople and peasants), the gentry, the nobility and the princes.  On the one hand, the usurer comes into possession of the surplus labour and, in addition, the conditions of labour of plebeians, peasants, members of craft guilds, in short, of the small commodity producers who need money in order, for example, to make payments before they convert their commodities into money, and who have to buy certain of their conditions of labour, etc.  On the other hand, the usurer appropriates rent from the owners of rent, that is, from the prodigal, pleasure-seeking rich.  Usury is a powerful means for establishing the pro-conditions for industrial capital—a mighty agency for separating the conditions of production from the producers, insofar as it has the twofold result, firstly, of establishing independent fortunes in the form of money, secondly, of appropriating the conditions of labour to itself, that is, ruining the owners of the old conditions of labour, just like the merchant.  And both have the common feature that they acquire an independent fortune, that is, they accumulate in their hands in the form of money claims part of the annual surplus labour, [part] of the conditions of labour [and also part] of the accumulated annual labour.  The money actually in their hands constitutes only a small portion of both the annual and the annually accumulated wealth and circulating capital.  That they acquire fortunes means that a significant portion of both the annual production and the annual revenue accrues to them, and this is payable not in kind, but in the converted form, in money.  Consequently, insofar as money does not circulate actively as currency, is not in movement, it is accumulated in their hands.  They also hold some of the reservoirs of circulating money and to an even larger extent they hold and accumulate titles to products, but in the form of money titles, titles to commodities converted into money.  ||939| On the one hand, usury leads to the ruin of feudal wealth and property; on the other hand, it brings about the ruin of petty-bourgeois, small-peasant production, in short, of all forms in which the producer is still the owner of his means of production.

The worker in capitalist production does not own the means of production, [he owns] neither the land he cultivates nor the tools with which he works.  This alienation of the conditions of production corresponds here, however, to a real change in the mode of production itself.  The tool becomes a machine, and the worker works in the workshop, etc.  The mode of production no longer tolerates the dispersal of the means of production connected with small property, just as it does not tolerate the dispersal of the workers themselves.  In capitalist production, usury can no longer separate the conditions of production from the workers, from the producers, because they have already been separated from them.

Usury centralises property, especially in the form of money, only where the means of production are scattered, that is, where the worker produces more or less independently as a small peasant, a member of a craft guild (small trader), etc.  As peasant or artisan, whether the peasant is or is not a serf, or the artisan is or is not a member of a craft guild.  The usurer here not only appropriates the part of the surplus labour belonging to the bondsman himself, or in the case of the free peasant, etc., the whole surplus labour, but he also appropriates the instruments of production, though the peasant, etc., remains their nominal owner and treats them as his property in the process of production.  This kind of usury rests on this particular basis, on this mode of production, which it does not change, to which it attaches itself as a parasite and which it impoverishes.  It sucks it dry, enervates it and compels reproduction to be undertaken under constantly more atrocious conditions.  Thus the popular hatred of usury, especially under the conditions prevailing in antiquity, where this form of production—in which the conditions of production are the property of the producer—was at the same time the basis of the political relationships, of the independence of the citizen.  This comes to an end as soon as the worker no longer possesses any conditions of production.  And with it the power of the usurer likewise comes to an end.  On the other hand, insofar as slavery predominates or [insofar as] the surplus labour is consumed by the feudal lord and his retainers and they fall prey to the usurer, the mode of production also remains the same, only it becomes more oppressive.  The debt-ridden slave-holder or feudal lord squeezes more out because he himself is being squeezed dry.  Or, finally, he makes way for the usurer, who becomes a landowner, etc., like the eques,[h] etc., in Ancient Rome.  In place of the old exploiter, whose exploitation was to some extent a means of political power, there appears a coarse, money-hunting parvenu.  But the mode of production itself remains unchanged.

The usurer in all pro-capitalist modes of production has a revolutionary impact only in the political sense, in that he destroys and wrecks the forms of property whose constant reproduction in the same form constitutes the stable basis of the political structure.  [The usurer] has a centralising [effect] as well, but only on the basis of the old mode of production, thus leading to the disintegration of society—apart from the slaves, serfs, etc., and their new masters—into a mob.  Usury can continue to exist for a long time in Asiatic forms of society without bringing about real disintegration, but merely giving rise to economic decay and political corruption.  It is only in an epoch where the other conditions for capitalist production exist—free labour, a world market, dissolution of the old social connections, a certain level of the development of labour, development of science, etc.—that usury appears as one of the factors contributing to the establishment of the new mode of production; and at the same time causing the ruin of the feudal lords, the pillars of the anti-bourgeois elements, and the ruin of small-scale industry and agriculture, etc., in short, as a factor leading to the centralisation of the conditions of production in the form of capital.

The fact that the usurers, merchants, etc., possess “monetary fortunes” simply means that the wealth of the nation, insofar as it takes the form of commodities or money, is concentrated in their hands.

At the outset capitalist production has to fight against usury to the extent that the usurer himself does not become a producer.  With the establishment of capitalist production the domination of the usurer over surplus labour, a domination which depends on the continued existence of the old mode of production, ceases.  The industrial capitalist collects surplus-value directly in the form of profit; he has also already seized part of the means of production and he appropriates part of the annual accumulation directly.  From this moment, and especially as soon as industrial and commercial wealth develops, the usurer—that is, the lender at interest—is a person who is differentiated from the industrial capitalist only as the result of the division of labour, but is subordinated to industrial capital.

||940| III.  An die Pfarrherrn wider den Wucher zu predigen.  Vermanung, Wittemberg, 1540 (without pagination).

[Discusses] trading (buying, selling) and lending.  (Unlike Proudhon, Luther is not deceived by these differences of form.)

“Fifteen years ago I wrote against usury since it had already become so widespread that I could hope for no improvement.  Since that time, it has exalted itself to such a degree that it no longer wishes to be a vice, sin or infamy but extols itself as downright virtue and honour as if it conferred a great favour on and did a Christian service to the people.  What will help and counsel us now that infamy has become honour and vice virtue?  Seneca says with good reason: Deest remedii locus, ubi, quae vitia fuerunt, mores fiunt.[i] Germany has become what it had to become, accursed avarice and usury have corrupted it completely…

“First concerning lending and borrowing: Where money is lent and more or better is demanded and taken in return, that is usury, anathemised in all laws.  Therefore all those who take five, six or more on a hundred on money lent are usurers, and they know they are acting as such and are called the idolatrous servants of covetousness and of Mammom… And one should say the same in respect of corn, barley and other goods, where more or better is: demanded in return, that it is usury, goods stolen and extorted.  For lending means my handing over my money, goods or chattels to somebody for as long as he needs them, or for as long as I can and wish to, and he returns the same things to me in his own good time, in as good a condition as that in which I lent him them.”

“Thus they also make a usury out of buying and selling.  But this is too much to deal with in one single bite.  We must deal with one thing now, with usury as regards loans; when we have put a stop to this (as on the Day of Judgement), then we will surely read the lesson with regard to usurious trade.”

“Thus Squire Usurer says: Friend, as things are at present, I do my neighbour a great service in that I lend him a hundred at five, six, ten.  And he thanks me for such a loan as a very special favour.  He does, in truth, entreat me for it and pledges himself freely and willingly to give me five, six, ten guilders in a hundred…  Should I not be able without extortion to take this interest with a good conscience?…

“Let [whoever wants to do so] extol himself, put on finery and adorn himself [but pay no heed and keep firmly to the scripture] … whoever takes more or better than he gives, that is usury and is not a service, but a wrong done to his neighbour, as when one steals and robs.  All is not service and benefit to a neighbour that is called service and benefit.  For an adultress and an adulterer do one another a great service and pleasure.  A horseman does a great service to a robber by helping him to rob on the highway, and attack the people and the land.  The papists do us a great service in that they do not drown, burn, murder all or let them rot in prison, but let some live and drive them out or take from them what they have.  The devil himself does his servants a great, inestimable service…  To sum up: the world is full of great, excellent daily services and good deeds…  The poets write about the Cyclops Polyphemus, who said he would do Ulysses an act of friendship, namely, that he would eat his companions first and then Ulysses last.  In sooth, this would have been a service and a fine favour.  Such services and good deeds are performed nowadays most diligently by the high-born and the low-born, by peasants and burgesses, who buy goods up, pile up stocks, bring dear times, ||941| increase the price of corn, barley and of everything people need; they then wipe their mouths and say: Yes—one must have what one must have; I let my things out to help people although I might—and could—keep them for myself; and God is thus fooled and deceived…  The sons of men have become very holy…  So that now nobody can profiteer, be covetous or wicked; the world has really become holy, everyone serves his fellows, nobody harms anybody else… 

“But if this is the kind of service he does, then he does it for Satan himself; although a poor needy man requires such service and must accept it as a service or favour that he is not eaten up completely… 

“He[j] does and must do thee such a favour” (pay interest to the usurer) “if he wants to get money.”

<One can see from the above that usury increased greatly in Luther’s time and was already justified as a “service” (Say, Bastiat).  Even the formulation of competition or harmony existed already: “Everyone serves his fellows.”

In the world of antiquity, during the better period, usury was forbidden (i.e., interest was not allowed).  Later [it was] lawful, and very prevalent.  Theoretically the view always [predominated] that interest in itself is wicked (as was stated by Aristotle).

In the Christian Middle Ages, it was a “sin” and prohibited by “the canon”.

Modern times.  Luther.  The Catholic-pagan view still [prevailed].  Usury became very widespread (as a result partly of the monetary needs of the government, [partly] of the development of trade and manufacture, [and the] necessity to convert the products into money).  But its civic justification is already asserted.

Holland.  The first apologia for usury.  It is also here that it is first modernised and subordinated to industrial or commercial capital.

England.  Seventeenth century.  The polemics are no longer directed against usury as such, but against the amount of interest, and the fact that it dominates credit.  The desire to establish the form of credit.  Regulations are imposed.

Eighteenth century.  Bentham.  Unrestricted usury is recognised as an element of capitalist production.>

[A few more extracts from Luther’s An die Pfarrherrn wider den Wucher zu predigen.]

Interest as compensation for loss.

[“The following case can happen and no doubt does happen often, that I, Hans, lend you, Baltzer, a hundred guilders on condition that I must have it back by Michaelmas when I shall need it urgently, otherwise (if you fail me) I shall be in dire trouble.  Michaelmas comes and you do not give me the hundred guilders back.  Thereupon the judge takes me by the throat, or throws me in the dungeon or prison, or some other trouble befalls me until I pay.  There I sit, or remain locked away, missing my food and improvement to my great cost; and you with your delay have brought me to this pass and returned my good deed so badly.  What shall I now do?  My losses increase day by day and I suffer additional expenses because, and so long as, you delay and do nothing.  Who is now to bear the loss or penalty?  For my losses with remain an insufferable guest in my house until I am utterly ruined.”]

“Well then, speaking in worldly and juridical fashion (we shall have to wait until later to speak about it theologically), you, Baltzer, are due to give me the hundred guilders along with all the losses and charges which have been added.” <By charges, he means legal charges, etc., which the lender has incurred because he himself could not pay his debts.> “It is therefore right and proper and likewise according to reason and natural haw that you make restitution to me of everything—both the capital sum and the loss…  In legal books, the Latin word for this indemnification is interesse…

“Something else can happen in the way of loss.  If you, Baltzer, do not give me back my hundred guilders by Michaelmas and l have to make a purchase, say to buy a garden, a plot of land or a house, or anything from which I and my children could derive great use or sustenance, then I must forego it and you do me damage and are a hindrance to me so that I can never get such a bargain again because of your delay and inactivity, etc.  But since I lent you the hundred guilders, you have caused me to suffer twofold damage because I cannot pay on the one hand and cannot buy on the other and thus must suffer loss on both sides.  This is called duplex interesse, damni emergentis et lucri cessantis[k]… 

“Having heard that Hans has suffered loss on the hundred guilders which he lent and demands just recompense for this loss, they rush in and charge such double compensation on every 100 guilders, namely, for expenses incurred and for the inability to buy the garden; just as though every hundred could grow double interest naturally, so that whenever they have a hundred guilders, they loan them out and charge for two such losses which however they have not incurred at all…

“Therefore thou art a usurer, who makes good thine own imagined losses with your neighbour’s money, losses which no one has caused thee and which thou canst neither prove nor calculate.  The lawyers call such losses non verum, sed phantasticum interesse.[l] A loss which each man dreams up for himself…

“It will not do ||942| to say I might incur a loss because I might not have been able to pay or buy.  That would mean ex contingente necessarium,[m] making something that must be out of something which is not, to turn a thing which is uncertain into a thing which is absolutely sure.  Would such usury not eat up the world in a few years… 

“If the lender accidentally incurs a loss through no fault of his own, he must be recompensed, but it is different in such deals and just the reverse.  There he seeks and invents losses to the detriment of his needy neighbours; thus he wants to maintain himself and get rich, to be lazy and idle and to live in luxury and splendour of other people’s labour and worry, danger and loss.  So that I sit behind the stove and let my hundred guilders gather wealth for me throughout the land, and, because they are only loaned, I keep them safely in my purse without any risk or worry; my friend, who would not like that?

“And what has been said about money which is loaned applies also to corn, wine and such like goods which are lent, for they also may occasion such double damage.  But such double damage is not something naturally accruing to the goods, but may arise by accident only and cannot therefore be reckoned as damage unless it has actually occurred and been proved, etc… 

“Usury there must be, but woe to the usurers…

“All wise, reasonable heathens have also inveighed against usury as something exceedingly evil.  Thus Aristotle, in his Politics, says that usury is against nature and for this reason: it always takes more than it gives.  Thereby it abolishes the means and measure of all virtue, which we call like for like, aequalitas arithmetica[n], etc.…

“But taking from other people, stealing or robbing, is called a shameful way of maintaining oneself, and those who do so are called, by your leave, thieves and robbers, whom we are accustomed to hang on the gallows; a usurer however is a nice thief and robber and sits in a chair, therefore we call him a chair thief… 

“The heathens were able, by the light of reason, to conclude that a usurer is a double-dyed thief and murderer.  We Christians, however, hold them in such honour that we fairly worship them for the sake of their money…  Whoever eats up, robs and steals the nourishment of another, commits as great a murder (so far as in him lies) as he who starves a man to death or utterly undoes him.  But such does a usurer, and sits the while, safe on his chair, when he ought rather to be hanging on the gallows and eaten by as many ravens as he has stolen guilders, if only there was so much flesh on him that so many ravens could stick their beaks in and share it… 

“But the dealers and usurers will cry out that what is written under hand and seal must be honoured.  To this the jurists have given a prompt and sufficient answer.  In malis promissis.[o] Thus the theologians say that some people give the devil something under hand and seal signifies nothing, even if it is written and sealed in blood.  For what is against God, Right and Nature is null and void.  Therefore let a Prince who can do so, take action, tear up bond and seal, take no notice of it, etc. …

“Therefore there is on this earth no greater enemy of men, after the devil, than a miser and usurer, for he wants to be God over all men.  Turks, soldiers, tyrants are also bad men, yet they must let the people live and confess that they are bad and enemies, and can, nay must, now and then show pity on some.  But a usurer and money-grubber, such a one would have the whole world perish of hunger and thirst, misery and want, so far as in him lies, so that he may have all to himself and everyone receive from him as from a God and ||943| be his serf for evermore.  This is what gladdens his heart, refreshes his blood.  And, at the same time, he can wear sable cloaks, golden chains, rings, gowns, wipe his mouth, be deemed and taken for a worthy, pious man, who is more merciful than God Himself, more loving than the Mother of God, and all the holy Saints… 

“And they write of the great deeds of Hercules, how he overcame so many monsters and frightful horrors in order to save his country and his people.  For usury is a great horrible monster, like the werewolf, who lays everything waste, more than any Cacus, Geryon or Antaeus, etc.  And yet he decks himself out and wants to appear pious so that people may not see where the oxen have gone (that he drags backwards into his den).”

<An excellent picture, it fits the capitalist in general, who pretends that what he has taken from others and brought into his den, emanates from him, and by causing it to go backwards he gives it the semblance of having come from his den.>

“But Hercules shall hear the cry of the oxen and of the prisoners and shall seek out Cacus even on the cliffs and among the rocks, and he shall set the oxen loose again from the villain.  For Cacus means the villain that is a pious usurer who steals, robs and eats everything.  And will not admit that he has done it and thinks no one will find him out, because the oxen, drawn backwards into his den, make it seem from their footprints that they have been let out.  Thus the usurer wants to deceive the world, as though he were of use and gave the world oxen, whereas, in reality, he seizes them for himself and consumes them… 

“Therefore, a usurer and miser is, indeed, not truly a human being, sins not in a human way and must be looked upon as a werewolf, more than all the tyrants, murderers and robbers, nearly as evil as the devil himself, but one who sits in peace and safety, not like an enemy, but like a friend and citizen, yet robs and murders more horribly than any enemy or incendiary.  And since we break on the wheel and behead highwaymen and burglars, how much more ought we to break on the wheel and kill all usurers, and drive out, curse and behead all misers… ”

A highly picturesque and striking description of both the character of old-fashioned usury, on the one hand, and of capital in general, on the other, with the “imagined loss”, the “indemnification which naturally accrues” to money and commodities, the general phrases about usefulness, the “pious” air of the usurer who is not “like the rest of men”, the appearance of giving when one is taking, and of letting out when one is pulling in, etc.

***

“The great premium attached to the possession of Gold and Silver, by the power it gives of selecting advantageous moments of purchasing, gradually gave rise to the trade of the Banker.” The Banker “differs from the old Usurer in this respect, that he lends to the rich and seldom or never to the poor.  Hence he lends with less risk, and can afford to do it on cheaper terms; and for both reasons, he avoids the popular odium which attended the Usurer” (Francis William Newman, Lectures on Political Economy, London, 1851, p. 44).

The involuntary alienation of feudal landed property develops along with the development of usury and money.

“The introduction of money which buys all things, and in consequence of that, the favour due to creditors, who have lent their money to a possessor of land, brings in the necessity of legal alienation for the payment of what has been thus lent…” (John Dalrymple, An Essay towards a General History of Feudal Property in Great Britain, London, 1759, fourth ed., p. 124).

||944| “According to Thomas Culpeper (1641), Josiah Child (1670) and Paterson (1694) wealth depends on the self-imposed reduction in the rate of interest on gold and silver.” [This rule] “was observed in England for almost two centuries” (Charles Ganilh, (Des systémes d’économie politique…, seconde éd., tome premier, Paris, 1821, pp. 58-59]).

When Hume—in opposition to Locke—declared that the rate of interest is regulated by the rate of profit, he had a much higher development of capitalism in mind.  This was even more true of Bentham when he wrote his defence of usury towards the end of the eighteenth century.

A reduction in the rate of interest was imposed by law from the time of Henry VIII to that of Queen Anne.

No country had a general rate of interest during the Middle Ages.  Only the priests [prohibited all transactions involving interest] with great sternness.  Legal measures safeguarding loans were unreliable.  The rate of interest was consequently very high in individual cases.  The amount of money in circulation was small and it was necessary to make most money payments in cash, for bills of exchange were not yet widely used.  Hence interest and the concept of usury varied considerably.  In Charlemagne’s time it was regarded as usurious if 100 per cent was charged.  The local burghers in Lindau on Lake Constance charged 216 ²/₃ per cent in 1344.  The legal rate of interest in Zürich was fixed at 43 ¹/₃ per cent by the Council.  In Italy, 40 per cent had to be paid occasionally although the usual rate did not exceed 20 per cent from the twelfth to the fourteenth centuries.  Verona decreed a legal rate of 12¹/₂ per cent.  Frederick II 10 per cent, but this only for Jews.  He would not say what the rate should be for Christians.  The usual rate in the Rhenish part of Germany was 10 per cent as early as the thirteenth century (Hüllmann, Städtewesen des Mittelalters, Zweiter Teil, Bonn, 1827, pp. 55-57).

The enormous rates of interest in the Middle Ages (insofar as they were not paid by the feudal aristocracy, etc.) were based in the towns, in very large measure, on the gigantic profits upon alienation which the merchants and urban craftsmen made out of country people, whom they cheated.

In Rome, as in the entire ancient world—apart from merchant cities, like Athens and others, which were particularly developed industrially and commercially—[high interest was] a means used by the big landowners not only for expropriating the small proprietors, the plebeians, but for appropriating their persons.

Usury was originally permitted freely in Rome.  The Law of the Twelve Tables (303 A.U.C.[p]) “fixed interest on money at 1 per cent per year” (Niebuhr says 10 per cent).  “This law was promptly infringed […] Duilius”(398 A.U.C.) “reduced the rate of interest to l per cent again […] unciario foenore[q] […]  It was limited to ¹/₂ per cent in the year 408, and in 413 lending at interest was totally prohibited as a result of a referendum initiated by the Tribune Genucius [… ] It is not surprising that in a republic in which the citizens were forbidden to carry on industry and both wholesale and retail trade, trading in money should also be prohibited” (Dureau de la Malle, [Économie politique des Romains,] t. II, [Paris, 1840,] pp. 259-61).  “This lasted for 300 years until the fall of Carthage.  It then [became legal to charge up to] 12 per cent, but the usual rate of annual interest was 6 per cent” (loc. cit., p. 261).  “Justinian fixed the rate of interest at 4 per cent; in Trajan’s time the legal rate of interest was 5 per cent, usura quincunx.[r] In Egypt the legal commercial interest was 12 per cent in 146 B.C.” (loc. cit., pp. 262-63).  |944||

***

||950a| James William Gilbart in his The History and Principles of Banking (London, 1834) says the following with regard to interest.

“That a man who borrows money with a view of making a profit by it, should give some portion of his profit to the lender, is a self-evident principle of natural justice.  A man makes a profit usually by means of traffick.  But in a country purely agricultural, and under such government as was the feudal system,[s] there can be but little traffick, and hence but little profit.” Legislation against extortionate interest is therefore justified in the Middle Ages.  “Besides, in an agricultural country a person seldom wants to borrow money except he be reduced to poverty or distress by misfortune” (p. 163).

“In the reign of Henry VIII, interest was limited to 10 per cent.  James I reduced it to 8 per cent […] Charles II […] to 6 per cent […] Anne […] to 5 per cent” (pp. 164-65).  “…in those times, the lenders […] had in fact, though not a legal, yet an actual monopoly, and hence it was necessary that they, like other monopolists, should be placed under restraint.  In our times, it is the rate of profit which regulates the rate of interest.  In those times, it was the rate of interest which regulated the rate of profit.  If the money-lender charged a high rate of interest to the merchant, the merchant must have charged a higher rate of profit on his goods.  Hence, a large sum of money would be taken from the pockets of the purchasers to be put into the pockets of the money-lenders.  This additional price, too, put upon the goods, would render the public less able and less inclined to purchase them” (p.165).

In the seventeenth century, Josiah Child in his Brief Observations concerning Trade and Interest of Money, and Thomas Culpeper in his Traité contre l’usure (1621) likewise, attacks Thomas Manley (author of the tract Interest of Money Mistaken) whom he calls the “champion of the usurers”.  Naturally the point of departure—like that of all the arguments of English economists of the seventeenth century—was the wealth of Holland where there was a low rate of interest.  Child considers that this low rate of interest is the cause of wealth.  Manley declares that it is only the result [of wealth].

“Insomuch that to know whether any Country be rich or poor … no other question needs to he resolved, but this, viz. What Interest do they pay for Money?” ([Josiah Child, Brief Observations concerning Trade and Interest of Money, London, 1668, p. 9;] Troités, p. 74).[t]

“…the gentleman brings up his battalia, and, like a stout champion for the sly and timorous herd of usurers, plants his main battery against that part which I confessed to be weakest…  And he positively denies that the lowness of interest is the cause” (of wealth), “and affirms it to be only the affect thereof…” ([Josiah Child, A New Discourse of Trade…, London, 1775, p. 39;] Traités, p. 120).

“When interest is abated, they who call in their money must either buy land” (whose price goes up as a result of the number of buyers), “or trade with it…”([A New Discourse…, p. 47;] Traités, p. 133).

“… whilst interest is at 6 per cent no man will run an adventure to sea for the gain of 8 or 9 per cent which the Dutch, having money at 4 or 3 per cent at interest, are contented with…”([A New Discourse…, p.47;] Traités, p. 134).

The low rate of interest and the high price of land force the merchant to stick to commerce.  “…it” (a low rate of interest) “inclines a nation to thriftiness” ([A New Discourse…, p. 52;] Traités, p. 144).

“…if trade be that which enricheth any kingdom, and lowering of interest advanceth trade…then the abatement of interest, or more properly restraining of usury… is doubtless a primary and principal cause of the riches of any nation; it being not improper to say, nor absurd to conceive, that the same thing ||950b| may be both a cause and an effect” ([A New Discourse…, p.58;] Traités, p. 155).

“…an egg is the cause of a hen, and a hen the cause of an egg.

“… [The like may be said of nations:] the abatement of interest causeth an increase of wealth, and the increase of wealth may cause a further abatement of interest.  But that is best done by the midwifery of good laws…” ([A New Discourse…, p. 59;] Traités, p. 156).

“… I am an advocate for industry, he for idleness…” ([A New Discourse…, p.71;] Traités, p. 179).

He appears here as the direct champion of industrial and commercial capital.  |XV-950b||

[a] Tokos—to bear, produce, the product; figuratively: interest on money lent.—Ed.

[b] Free credit.—Ed.

[c] One must, after all, recover what is due to oneself, even if one takes it out of one’s own pocket.—Ed.

[d] See this volume, pp. 480-81.—Ed.

[e] This can also mean: “the means of production do not yet work with it”, i.e., capital.—Ed.

[f] The English socialists.—Ed.

[g] Marx gives this passage in his own words.—Ed.

[h] Knight.—Ed.

[i] There is no remedy where that which was regarded as unvirtuous becomes the habit.—Ed.

[j] The poor man.—Ed.

[k] Twofold compensation, for the loss incurred and for the gain missed.—Ed.

[l] Not real but imagined losses.—Ed.

[m] Making a necessity out of an accident.—Ed.

[n] Arithmetical equality.—Ed.

[o] In evil promises.—Ed.

[p] A.U.C.—anno urbis conditae—in the year of the founding of the City, used to express the date since the foundation of Rome (753 B.C.).—Ed.

[q] Increase by one twelfth (one ounce).—Ed.

[r] Interest of five twelfths (five ounces).—Ed.

[s] In Marx’s manuscript this sentence reads (in German) as follows: “But in the Middle Ages the population was wholly agricultural.  And in this case, just as under a feudal government”, etc.—Ed.

[t] Marx quotes this and the following passages from the French translation of Child’s work—Traités sur le commerce et sur les avantages qui résultent de la réduction de l’interest de l’argent, Amsterdam et Berlin, 1754.—Ed.