On our first consideration of the general or average rate of profit (Part Two of this volume), we did not yet have this rate before us in its finished form, since the equalization that produced it still appeared simply as an equalization of the industrial capitals applied in different spheres. This was supplemented in Part Four, where we discussed the participation of commercial capital in this equalization, and commercial profit. The general rate of profit and the average profit were then presented within more closely defined limits than before. In the further course of our analysis it should be borne in mind that when we speak of the general rate of profit or the average profit from now on, this is in the latter sense, i.e. always with respect to the finished form of the average rate. Since this is now the same for industrial and commercial capital, it is also no longer necessary to make a distinction between industrial and commercial profit, once it is a question of this average rate of profit. Whether capital is invested industrially in the sphere of production, or commercially in that of circulation, it yields the same annual average profit in proportion to its size.
On the basis of capitalist production, money – taken here as the independent expression of a sum of value, whether this actually exists in money or in commodities – can be transformed into capital, and through this transformation it is turned from a given, fixed value into a self-valorizing value capable of increasing itself. It produces profit, i.e. it enables the capitalist to extract and appropriate for himself a certain quantity of unpaid labour, surplus product and surplus-value. In this way the money receives, besides the use-value which it possesses as money, an additional use-value, namely the ability to function as capital. Its use-value here consists precisely in the profit that it produces when transformed into capital. In this capacity of potential capital, as a means to the production of profit, it becomes a commodity, but a commodity of a special kind. Or what comes to the same thing, capital becomes a commodity.54
Let us take the average annual rate of profit as 20 per cent. Under average conditions, then, and with the average level of intelligence and activity appropriate to the intended purpose, a machine with a value of £100 that is applied as capital yields a profit of £20. Thus a man who has £100 at his disposal holds in his hands the power of making this £100 into £120, and thus producing a profit of £20. What he possesses is a potential capital of £100. If this man makes over his £100 for a year to someone else, who actually does use it as capital, he gives him the power to produce £20 profit, a surplus-value that costs him nothing and for which he does not pay any equivalent. If the second man pays the proprietor of the £100 a sum of £5, say, at the end of the year, i.e. a portion of the profit produced, what he pays for with this is the use-value of the £100, the use-value of its capital function, the function of producing a £20 profit. The part of the profit paid in this way is called interest, which is thus nothing but a particular name, a special title, for a part of the profit which the actually functioning capitalist has to pay to the capital’s proprietor, instead of pocketing it himself.
It is clear that the possession of this £100 gives its owner the power of drawing an interest, a certain part of the profit that his capital produces. If he did not give the other person the £100, the latter would be unable to produce the profit or to function at all as a capitalist with respect to this £100.55
It is nonsense for Gilbart to speak of natural justice in this connection (see note). The justice of transactions between agents of production consists in the fact that these transactions arise from the relations of production as their natural consequence. The legal forms in which these economic transactions appear as voluntary actions of the participants, as the expressions of their common will and as contracts that can be enforced on the parties concerned by the power of the state, are mere forms that cannot themselves determine this content. They simply express it. The content is just so long as it corresponds to the mode of production and is adequate to it. It is unjust as soon as it contradicts it. Slavery, on the basis of the capitalist mode of production, is unjust; so is cheating on the quality of commodities.
The £100 produces a profit of £20 by functioning as capital, whether industrial or commercial. But the sine qua non of this capital function is that it is actually spent as capital, that the money is laid out on the purchase of means of production (in the case of industrial capital) or of commodities (in the case of commercial capital). If it is to be spent, however, it must first be available. If A, the proprietor of the £100, either spent it for his private consumption or treated it as a hoard, it could not be spent as capital by B, the functioning capitalist. B does not spend his own capital, but that of A; yet he cannot spend A’s capital unless A wills it. In point of fact, therefore, it is A who originally spends the £100 as capital, even though his function as a capitalist is entirely restricted to this act of expenditure. As far as the £100 is concerned, B functions as a capitalist only because A turns the £100 over to him and hence spends it as capital.
Let us firstly consider the characteristic circulation of interest-bearing capital. The second thing to investigate then is the specific way it is sold as a commodity, i.e. lent instead of being relinquished once and for all.
The starting-point is the money that A advances to B. This can occur either with or without security. The first form is however of greater antiquity, with the exception of advances on commodities or papers such as bills, stocks, etc. These particular forms do not concern us here. What we have to deal with is interest-bearing capital in its ordinary form.
In B’s hands, the money really is transformed into capital, going through the movement M–C–M′ and then returning to A as M,’ as M + Δ M, where Δ M represents the interest. For the sake of simplification, we leave aside for the time being the case where the capital remains in B’s hands for a protracted period and the interest is paid at regular intervals.
The movement is thus: M–M–C–M′–M′.
What appears in duplicate here is, (1) the expenditure of the money as capital, and (2) its reflux as realized capital, as M′ or M + ΔM.
In the movement of commercial capital M–C–M′, the same commodity changes hands twice, or, if merchant sells to merchant, several times; but each time the same commodity changes place in this way it displays a metamorphosis, a purchase or sale, no matter how often this process might be repeated before its definitive fall into consumption.
In C–M–C, on the other hand, we have a double change of place by the same money, but one which displays the complete metamorphosis of the commodity, this being first transformed into money, and then out of money again into another commodity.
With interest-bearing capital, as against this, M’s first change of place is neither a moment of commodity metamorphosis nor of the reproduction of capital. This begins only the second time it is spent, in the hands of the functioning capitalist, who uses it to pursue trade or transforms it into productive capital. M’s first change of place here expresses nothing more than its transfer or making over from A to B; a transfer which customarily takes place under certain legal forms and provisions.
This double expenditure of the money as capital, the first time as a simple transfer from A to B, is matched by its double reflux. As M′ or M + Δ M, it flows back from the movement cycle to the functioning capitalist B. B then transfers it again to A, but with a part of the profit as well, as realized capital, M + Δ M, where Δ M does not amount to the whole profit, but simply the part of the profit that is interest. It flows back to B as he has paid it out, as functioning capital, but as the property of A. For its reflux movement to be complete, B has to transfer it again to A. Besides the capital sum, however, B has also to surrender to A a part of the profit he has made on this capital sum, under the heading of interest, since A has given the money to him only as capital, i.e. as value that is not just maintained in the course of its movement, but creates a surplus-value for its owner. It remains in B’s hands only as long as it is functioning capital. And on its reflux – after the prescribed interval has elapsed – it ceases to function as capital. As capital that is no longer functioning, it must be transferred back again to A, who has not ceased to be its legal owner.
The form of lending which is characteristic of this commodity capital as a commodity can incidentally also be found in other transactions, in place of the form of sale. The form of lending results from capital’s characteristic here of emerging as a commodity, or, in other words, it results from the fact that money as capital becomes a commodity.
We have already seen (Volume 2, Chapter 1), and recall here only briefly, that capital functions in the circulation process as commodity capital and money capital. In neither of these two forms, however, does capital as capital become a commodity.
Once productive capital has been transformed into commodity capital, it must be put on the market and sold as a commodity. Here it functions simply as a commodity. The capitalist appears simply as the seller of a commodity and the buyer as the buyer of a commodity. As a commodity, the product must realize its value in the circulation process, by its sale, and must assume its transformed form as money. It is quite immaterial here whether this commodity is bought by a consumer as means of subsistence or by a capitalist as means of production, as a component of capital. In the act of circulation the commodity capital functions simply as a commodity, not as capital. It is commodity capital as distinct from a simple commodity (1) because it is already pregnant with surplus-value, so that the realization of its value is at the same time the realization of surplus-value; though this does not alter its simple existence as a commodity, as a product with a definite price; (2) because this function that it has as a commodity is a moment of its reproduction process as capital, and hence its movement as a commodity, because this is simply a partial movement in its process, is also its movement as capital; it does not become so by the mere act of selling, but only because this act is connected with the total movement of this particular sum of value as capital.
As money capital, likewise, it actually operates simply as money, i.e. as means of purchase for commodities (the elements of production). If this money is also money capital, a form of capital, this is not the result of the act of purchase, the actual function that it performs here as money, but rather of the way in which this act is connected with the overall movement of capital, in that this act, which it performs as money, introduces the capitalist production process.
In so far as it actually functions, however, and actually plays its role in the process, commodity capital is active here only as commodity, and money capital only as money. In no individual moment of the metamorphosis, taken by itself, does the capitalist sell the commodity to the buyer as capital, even though it represents capital for him, nor does the buyer alienate his money as capital to the seller. In both cases the commodity is alienated simply as commodity and the money simply as money, as the means for purchasing commodities.
It is only in the context of the whole process, at the moment where the point of departure appears as simultaneously the point of return, in M–M′ or C–C′, that capital emerges in the circulation process as capital (whereas it emerges in the production process as capital by the subordination of the worker to the capitalist and the production of surplus-value). At the moment of return, however, the mediation has disappeared. What does exist is M′ or M + Δ M (whether this value sum increased by Δ M exists in the form of money, commodities or elements of production), a sum of money equal to that originally advanced plus an excess over this, the realized surplus-value. And precisely at this point of return, where the capital exists as realized capital, as valorized value, in this form – in so far as it is taken as a point of repose, imaginary or real – the capital does not enter circulation but rather appears as withdrawn from circulation, as the result of the entire process. In so far as it is spent again, it is never alienated to a third party as capital but rather sold to him as a simple commodity or given to him in return for a commodity as simply money. It never appears in its circulation process as capital but only as commodity or money, and here this is its only existence for others. Commodity and money are capital here not because commodities are turned into money and money into commodities, not in their actual relationships to buyers or sellers, but simply in their ideal relationships, either to the capitalist himself (considered subjectively) or as moments of the reproduction process (considering it objectively). It is not in the process of circulation that capital exists as capital in its real movement but only in the process of production, the process of exploiting labour-power.
With interest-bearing capital the situation is different, and this is precisely what constitutes its specific character. The owner of money who wants to valorize this as interest-bearing capital parts with it to someone else, puts it into circulation, makes it into a commodity as capital; as capital not only for himself but also for others. It is not simply capital for the person who alienates it, but it is made over to the other person as capital right from the start, as value that possesses the use-value of creating surplus-value or profit; as a value that continues its movement after it has functioned and returns to the person who originally spent it, in this case the money’s owner. That is, it is removed from him only for a certain interval, only temporarily stepping from the possession of its proprietor into the possession of the functioning capitalist. It is neither paid out nor sold, but simply lent; alienated only on condition that it is, first, returned to its starting-point after a definite period of time, and second, is returned as realized capital, so that it has realized its use-value of producing surplus-value.
A commodity that is lent out as capital is lent either as fixed or as circulating capital, according to its specific properties. Money can be lent in both forms; it is lent as fixed capital, for example, if it is repaid in the form of an annuity, so that a portion of the capital always returns together with the interest. Certain commodities, by the nature of their use-value, can be lent only as fixed capital, such as houses, boats, machines, etc. But all loan capital, whatever form it might have and no matter how its repayment might be modified by the nature of its use-value, is always simply a special form of money capital. For what is lent here is always a definite sum of money, and it is on this sum that the interest is reckoned. If what is lent is neither money nor circulating capital, it is also paid back in the way that fixed capital returns. The lender receives both a periodic interest and a part of the used-up value of the fixed capital itself, an equivalent for the depreciation over this period. And at the end of the loan’s term, the unused portion of the fixed capital is returned in kind. If the loaned capital is circulating capital, it similarly returns to the lender in the general mode of reflux of circulating capital.
The manner of the reflux is thus determined in each case by the actual cyclical movement of capital as it reproduces itself and its specific varieties. But for loan capital, the reflux takes the form of repayment, because the advance, the alienation of the loan capital, has the form of a loan.
In this chapter we shall be dealing only with money capital proper, from which the other forms of loan capital are derived.
The capital lent out flows back in a double sense. In the reproduction process it returns to the functioning capitalist, and then its return is repeated once again as a transfer to the lender, the money capitalist, as a repayment to its real proprietor, a return to its legal starting-point.
In the actual process of circulation, capital always appears as commodity or money, and its movement is reducible to a series of purchases and sales. In short, the circulation process is reducible to the metamorphosis of commodities. It is different when we consider the reproduction process as a whole. If we proceed from money (and it is the same thing if we proceed from the commodity, for we are then proceeding from its value, and thus viewing it too in the guise of money), a certain sum of money is given out and it returns after a given period with an increment. What returns is the replacement for the sum of money advanced, plus a surplus-value. It has been maintained and increased in the course of a certain cyclical movement. But money that is lent as capital is hired out precisely as a sum of money that is maintained and increased, a sum which returns with an addition after a certain period and can go through the same process once again. It is not given out as money or as a commodity, i.e. neither exchanged for a commodity when it is advanced as money nor sold for money when it is advanced as a commodity. It is rather given out as capital. The reflexive relationship in which capital presents itself when we view the capitalist production process as a whole and a unity, and in which capital appears as money breeding money, is here simply embodied in it as its character, its capacity, without the intervening mediating movement. And it is in this capacity that it is alienated, when it is lent out as money capital.
Proudhon’s bizarre conception of the role of money capital is put forward in his Gratuité du crédit. Discussion entre M. F. Bastiat et M. Proudhon, Paris, 1850. Lending appears to Proudhon as an evil because it is not selling. A loan made on interest ‘is the ability to sell the same object over and over again, always receiving the price afresh without ever abandoning ownership over the thing sold’ (p. 9).*
The object – money, house, etc. – does not change its owner, as it does in buying and selling. But Proudhon does not see that when money is given out in the form of interest-bearing capital, no equivalent for it is received in return. It is true that in any act of buying and selling, in fact whenever an exchange process takes place, the object is given away. But the value is never given away. What is given away on sale is the commodity and not its value, which is returned in the form of money, or, what is here just another form of this, a bill or entitlement to payment. On purchase, money is given away, but not its value, which is replaced in the form of commodities. The industrial capitalist keeps the same value in his hands throughout the reproduction process (leaving aside the surplus-value), simply in different forms.
In so far as exchange takes place, i.e. exchange of objects, there is no change in value. The capitalist in question always keeps the same value in his hands. While the capitalist is producing surplus-value, there is no exchange; by the time exchange takes place, the surplus-value is already contained in the commodities. As soon as we consider not the isolated acts of exchange but rather the overall circuit of capital, M–C–M′, what happens is that a definite sum of value is constantly advanced, and this sum of value plus the surplus-value or profit is withdrawn from the circulation sphere. The mediation of this process, however, is not to be seen in the simple acts of exchange alone. And it is precisely this process of M as capital which the interest of the lending money-capitalist is based on and from which it derives.
‘In point of fact,’ says Proudhon, ‘the hat-maker who sells hats… retains their value, neither more nor less. But the lending capitalist… not only receives his capital back without deduction; he receives more than this capital, more than he puts into the exchange. On top of the capital, he receives an interest’ (p. 69).
Here the hat-maker represents the productive capitalist in contrast to the lending capitalist. Proudhon has evidently not managed to penetrate the secret of how the productive capitalist can sell commodities at their values (the adjustment to prices of production is in his version a matter of indifference), and by that very act receive a profit over and above the capital he puts into the exchange. Let us assume that the price of production of 100 hats is £115 and that this production price happens to be equal to the value of the hats; i.e. the capital that produces the hats is of average social composition. If the profit is 15 per cent, the hat-maker realizes a profit of £15 by selling the commodities at their value of £115. To him, they cost only £100. If he has produced them with his own capital, he pockets the entire excess of £15; if with borrowed capital, he has possibly to give up £5 of this as interest. This in no way affects the value of the hats, but simply the distribution of the surplus-value already contained in the hats among different people. And since the value of the hats is not affected by the payment of interest, it is nonsense for Proudhon to say:
‘Since in trade, the interest on capital is added to the worker’s wages to make up the price of the commodity, it is impossible for the worker to buy back the product of his own labour. Vivre en travaillant*is a principle that involves a contradiction, under the rule of interest’ (p. 105).56
How little Proudhon has understood the nature of capital is shown by the following sentence, in which he describes the movement of capital in general in terms of the characteristic movement of interest-bearing capital:
‘Since, through exchange, money capital always returns to its source with an accumulation of interest, reinvestment enables the same individual to draw a continual profit’ [p. 154].
What still remains a puzzle to him in the specific movement of interest-bearing capital? The categories: buying, price, alienation of goods, and the immediate form in which surplus-value appears here; in brief the phenomenon that here capital has become a commodity as capital, that buying has therefore been transformed into lending, and price into a share in the profit.
The return of capital to its point of departure is always the characteristic movement of capital in its overall circuit. This is in no way something exclusively distinctive of interest-bearing capital. What distinguishes interest-bearing capital is the superficial form of the return, separated off from the mediating circuit. The lending capitalist parts with his capital, transfers it to the industrial capitalist, without receiving an equivalent. But this is in no way an act of the actual cyclical process of capital; it simply introduces this circuit, which is to be effected by the industrial capitalist. This first change of place on the part of the money does not express any act of metamorphosis, neither purchase nor sale. Ownership is not surrendered, since no exchange takes place and no equivalent is received. The return of the money from the industrial capitalist to the lending capitalist simply supplements the first act in which the capital is given out. Advanced in the money form, the capital returns to the industrial capitalist again in the money form by way of the cyclical process. But since the capital did not belong to him when he gave it out, it cannot belong to him on its return. Its progress through the reproduction process cannot possibly transform the capital into his property. He therefore has to give it back to the lender. The initial act which transfers the capital from the lender to the borrower is a legal transaction which has nothing to do with the actual reproduction process of capital, but simply introduces it. The repayment which transfers the capital that has flowed back from the borrower to the lender again is a second legal transaction, the complement of the first; the one introduces the real process, the other is a subsequent act after that is completed. The point of departure and point of return, the lending-out of the capital and its recovery, thus appear as arbitrary movements mediated by legal transactions, which take place before and after the real movement of capital and have nothing to do with it as such. It would make no difference to this real movement if the capital belonged to the industrial capitalist from the start and returned to him alone therefore as his own property.
In the first introductory act, the lender hands over his capital to the borrower. In a second, subsequent and concluding act, the borrower gives this capital back to the lender. In so far as the transaction between these two is concerned (we leave aside for the time being the interest), in so far as we are dealing therefore simply with the movement of the capital lent between lender and borrower, these two acts (separated by a longer or shorter interval, during which the real reproduction movement of the capital takes place) encompass the whole of this movement. And this movement, namely the act of giving out money on condition of repayment, is the general movement of lending and borrowing, this specific form of a merely conditional alienation of money or commodities.
The characteristic movement of capital in general, the return of money to the capitalist, the return of capital to its point of departure, receives in the case of interest-bearing capital a completely superficial form, separated from the real movement whose form it is. A hands over his money not as money but rather as capital. There is no change here in the capital itself. It simply changes hands. Its actual transformation into capital is accomplished only in the hands of B. But for A, it has become capital simply by having been given to B. The actual reflux of the capital from the production and circulation process only takes place for B. For A, the reflux takes place in the same form as the alienation. The giving-out or lending of money for a certain time, and the repayment of this with interest (surplus-value), is the entire form of the movement attributable to interest-bearing capital as such. The real movement of the money lent out as capital is an operation lying beyond the transactions between lenders and borrowers. In these transactions, taken by themselves, this mediation is obliterated, invisible and not directly involved. Capital as a special kind of commodity also has a kind of alienation peculiar to it. Here therefore the return does not appear as a consequence and result of a definite series of economic processes, but rather as a consequence of a special legal contract between buyer and seller. The period of the reflux depends on the course of the reproduction process; in the case of interest-bearing capital, its return as capital seems to depend simply on the contract between lender and borrower. And so the reflux of the capital, in connection with this transaction, no longer appears as a result determined by the production process, but rather as if the capital lent out had never lost the form of money. Of course, these transactions are actually determined by the real refluxes. But this is not apparent in the transaction itself. It is also in no way always the case in practice. If the real reflux does not take place at the right time, the borrower must look to see what other sources of help he can draw on to fulfil his obligations to the lender. The mere form of capital – money that is given out as a sum A and returns as a sum A + 1/x A, after a certain period of time, but without any other mediation besides this temporal interval – is simply the irrational form of the real capital movement
In the real movement of capital, the return is a moment in the circulation process. Money is first transformed into means of production; the production process transforms it into a commodity; by the sale of the commodity it is transformed back into money, and in this form it returns to the hands of the capitalist who first advanced the capital in its money form. But in the case of interest-bearing capital the return, like the giving out, is simply the result of a legal transaction between the owner of the capital and a second person. All that we see is the giving-out and the repayment. Everything that happens in between is obliterated.
But because money advanced as capital has the property of returning to the person advancing it, to whoever spends it as capital, because M–C–M′ is the immanent form of the capital movement, for this very reason the owner of money can lend it as capital, as something which possesses the property of returning to its point of departure and of maintaining and increasing itself in the movement it undergoes. He gives it out as capital because, after being applied as capital, it flows back to its starting-point; the borrower can repay it after a given period of time precisely because it flows back to himself.
The assumption behind the lending of money as capital, therefore, giving it out on condition of its repayment after a certain time, is that the money really is applied as capital and really does flow back to its point of departure. In other words, the real cyclical movement of money as capital is the assumption behind the legal transaction by which the borrower of the money has to return it to the lender. If the borrower does not apply it as capital, that is his affair. The lender lends it as capital, and as capital it has to pass through the functions of capital, which include the circuit of money capital right through to its return to its starting-point in the money form.
The acts of circulation M–C and C–M′ in which the sum of value functions as money or as commodity are simply intermediary processes, particular moments of its total movement. As capital, it undergoes the total movement M–M′. It is advanced as money or a sum of value in some form or other, and returns as this sum of value. The lender of money does not spend this on purchasing a commodity, or if the sum of value exists in commodities he does not sell these in exchange for money; he rather advances it as capital, as M–M′, as value which returns again to its point of departure at a definite date. Instead of buying or selling, he lends. This lending is thus the appropriate form for its alienation as capital, instead of as money or commodity. This in no way implies that lending cannot also be a form for transactions that have nothing to do with the capitalist reproduction process at all.
*
Up to now we have only considered the movement of the capital lent between its owner and the industrial capitalist. We must now turn to investigate interest.
The lender puts his money out as capital; the value sum that he alienates to someone else is capital, and this is why it flows back to him. But this return alone would not be the reflux of a value sum lent as capital, as opposed to the simple repayment of a sum of value previously loaned. In order to flow back as capital, the sum of value advanced must not only have maintained itself in the movement, but valorized itself, it must have increased its value, so as to return with a surplus-value as M + Δ M, where this Δ M is interest, or that part of the average profit which does not remain in the hands of the functioning capitalist, but falls rather to the money capitalist.
To say that it is alienated by him as capital means that it has to be returned to him as M+ Δ M. But we still have to consider the form in which interest flows back at regular intervals in the meantime, without the capital, whose repayment only follows at the end of an extended period.
What does the money capitalist give the borrower, the industrial capitalist? What actually does he alienate to him? For it is only the act of alienation that makes the lending of money into the alienation of money as capital, i.e. the alienation of capital as a commodity.
It is only by way of this alienation that the money-lender’s capital is given out as a commodity, or that the commodity in his possession is given to someone else as capital.
What is alienated in the case of ordinary sale? Not the value of the commodity sold, for this only changes its form. It exists ideally in the commodity as its price, before it is really transferred to the hands of the seller in the form of money. The same value and the same magnitude of value here undergo only a change of form. At one point they exist in the commodity form, at another point they exist in the money form. What is really alienated by the seller, and thus transferred to the individual or productive consumption of the buyer, is the use-value of the commodity, the commodity as a use-value.
What then is the use-value that the money capitalist alienates for the duration of the loan and makes over to the productive capitalist, the borrower? It is the use-value that money receives through the fact that it can be transformed into capital, that it can function as capital so as to produce in its movement a definite surplus-value, the average profit (anything more or less than this quantity appears here as merely accidental), besides conserving its original value. With other commodities, the use-value is ultimately consumed, and in this way the substance of the commodity disappears, and with it its value. The commodity of capital, on the other hand, has the peculiar property that the consumption of its use-value not only maintains its value and use-value but in fact increases it
It is this use-value that money has as capital – the capacity to produce the average profit – that the money capitalist alienates to the industrial capitalist for the period during which he gives him control of the capital loaned.
The money loaned in this way is to a certain extent analogous in this respect to labour-power, in its position vis-à-vis the industrial capitalist. The difference is this: the industrial capitalist pays the value of the labour-power, whereas he simply repays the value of the loaned capital. The use-value of labour-power for the industrial capitalist is that of producing more value (profit) in its use than it possesses and costs itself. This excess value is its use-value for the industrial capitalist. And the use-value of the loaned money capital similarly appears as a capacity to represent and increase value.
The money capitalist in actual fact alienates a use-value, and for this reason what he gives out is given out as a commodity. To this extent the analogy with any other commodity is complete. Firstly it is a value transferred from one hand to another. In the case of the simple commodity, the commodity as such, both buyer and seller retain in their hands the same value, only in a different form; both of these still keep the same value that they alienated, the one in the commodity form, the other in the money form. The difference in the case of the loan is that in this transaction the money capitalist is now the only one who gives out value; but he preserves this by the subsequent repayment. In the loan, only one party receives value, since only one party gives value out. Secondly, one party alienates a real use-value, and the other party receives and uses it. As distinct from an ordinary commodity, however, this use-value is itself a value, i.e. the excess of the value that results from the use of the money as capital over its original magnitude. The profit is this use-value.
The use-value of money lent out is its capacity to function as capital and as such to produce the average profit under average conditions.57
What then does the industrial capitalist pay, i.e. what is the price of the capital lent out?
‘That which men pay as interest for the use of what they borrow,’ according to Massie, ‘is a part of the profit it is capable of producing.’58
What the buyer of an ordinary commodity buys is its use-value, what he pays is its value. What the borrower of the money buys is likewise its use-value as capital; but what does he pay for this? Certainly not its price or value, as with other commodities. The value does not change its form between lender and borrower, as it does between buyer and seller, so that this value exists at one point in the form of money, and at another in the form of a commodity. The identity between the value given out and that received back is displayed here in a completely different way. The sum of value, the money, is given out without an equivalent and returned after a certain period of time. The lender remains the owner of this value throughout, even after it has been transferred from him to the borrower. With simple commodity exchange, the money is always on the side of the buyer; but with lending, the money is on the side of the seller. It is he who gives the money away for a certain time, and it is the buyer of the capital who receives it as a commodity. But this is possible only in so far as the money functions as capital and is therefore advanced. The borrower borrows the money as capital, as self-valorizing value. But it does not become capital in itself, just like any capital at its starting-point, until the moment of its advance. It is only by its use that it is valorized and realized as capital. But it is as realized capital that the borrower has to pay it back, i.e. as value plus surplus-value (interest); and the latter can only be a part of the profit he has realized. Only a part, and not the whole. For the use-value for the borrower is that it produces him a profit. Otherwise the lender would not have been able to alienate the use-value. On the other hand, the whole profit cannot fall to the borrower. Otherwise, he would pay nothing for the alienation of the use-value. He would only repay the money advanced to the lender as simple money, not as capital, as realized capital, for it is realized capital only as M + Δ M.
Both lender and borrower put out the same sum of money as capital. But it is only in the hands of the borrower that it functions as such. Profit is not doubled by the double existence of the same sum of money as capital for two persons. It can only function for both of them as capital by a division of the profit. The part accruing to the lender is called interest.
The entire transaction takes place, according to our assumptions, between two kinds of capitalist, the money capitalist and the industrial or commercial capitalist.
It must never be forgotten that capital as capital is a commodity here, and that the commodity we are dealing with is capital. All the relationships that appear here, therefore, would be irrational from the standpoint of the simple commodity, or even from the standpoint of capital in so far as it functions as commodity capital in its reproduction process. Lending and borrowing, instead of selling and buying, is here a distinction proceeding from the specific nature of the commodity of capital. Similarly the fact that what is paid here is interest instead of the price of the commodity. If interest is spoken of as the price of money capital, this is an irrational form of price, in complete contradiction with the concept of the price of a commodity.59 Here, price is reduced to its purely abstract form, completely lacking in content, as simply a particular sum of money that is paid for something which somehow or other figures as a use-value; whereas in its concept, price is the value of this use-value expressed in money.
Interest as the price of capital is a completely irrational expression right from the start. Here a commodity has a double value,
firstly a value, and then a price that is different from this value, although price is the money expression of value. Money capital is at first nothing more than a sum of money, or the value of a certain quantity of commodities assessed as a sum of money. If a commodity is lent as capital, this is only the disguised form of a sum of money. For what is lent as capital is not a certain number of pounds of cotton, but rather a certain amount of money that exists in the form of cotton as the cotton’s value. The price of capital therefore relates to it as a sum of money, even if not as currency, as Mr Torrens believes (see note 59 above). How then is a sum of value to have a price besides its own price, besides the price that is expressed in its own money form? Price, after all, is the value of the commodity as distinct from its use-value (and this is also the case with market price, whose distinction from value is not qualitative, but merely quantitative, bearing exclusively on the magnitude of value). A price that is qualitatively distinct from value is an absurd contradiction.60
Capital manifests itself as capital by its valorization; the extent of this valorization expresses the quantitative extent to which it is realized as capital. The surplus-value or profit produced by it – the rate or level of this – is measurable only in comparison with the value of the capital advanced. And so the greater or lesser valorization of interest-bearing capital is also measurable only by comparing the amount of interest, the part of the total profit falling to this capital, with the value of the capital advanced. If price thus expresses the value of a commodity, interest expresses the valorization of money capital and appears therefore as the price that the lender is paid for it. We see from this how completely absurd it is to try to apply directly the simple relationships of exchange mediated by money, buying and selling, to this phenomenon, as Proudhon does. The basic assumption is precisely that money functions as capital and hence can be made over to someone else as potential capital.
Capital itself appears here as a commodity in so far as it is offered on the market and the use-value of money as capital really is alienated. Its use-value however is to produce a profit. The value of money or commodities as capital is not determined by their value as money or commodities but rather by the quantity of surplus-value that they produce for their possessor. The product of capital is profit. On the basis of capitalist production, the difference between money spent as money and money advanced as capital is simply a difference of application. Money or a commodity is already potential capital in itself, just as labour-power is potential capital. For (1) money can be turned into elements of production, and is already, just as it is, simply an abstract expression of these elements, their existence as value; (2) the material elements of wealth possess the property of being already potential capital, because their complementary antithesis, the thing that makes them capital – namely wage-labour – is present as soon as capitalist production is assumed.
The antithetical social determination of material wealth – its antithesis to labour as wage-labour – is already expressed in capital ownership as such, quite apart from the production process. This one moment, then, separated from the capitalist production process itself, whose constant result it is, and as whose constant result it is also its constant presupposition, is expressed in this way: that money, and likewise commodities, are in themselves latent, potential capital, i.e. can be sold as capital; in this form they give control of the labour of others, give a claim to the appropriation of others’ labour, and are therefore self-valorizing value. It also emerges very clearly here how this relationship is the title to, and the means to the appropriation of, the labour of others, and not any kind of labour that the capitalist is supposed to offer as an equivalent.
Capital further appears as a commodity in so far as the division of profit into interest and profit proper is governed by supply and demand, i.e. by competition, just like the market prices of commodities. But here the distinction is just as striking as the analogy. If supply and demand coincide, the market price of the commodity corresponds to its price of production, i.e. its price is then governed by the inner laws of capitalist production, independent of competition, since fluctuations in supply and demand explain nothing but divergences between market prices and prices of production – divergences which are mutually compensatory, so that over certain longer periods the average market prices are equal to the prices of production. As soon as they coincide, these forces cease to have any effect, they cancel each other out, and the general law of price determination then emerges as the law of the individual case as well; market price then corresponds to price of production in its immediate existence and not only as an average of all price movements, and the price of production, for its part, is governed by the immanent laws of the mode of production. Similarly with wages. If supply and demand coincide, their effect ceases, and wages are equal to the value of labour-power. It is different, though, with interest oh money capital. Here competition does not determine divergences from the law, for there is no law of distribution other than that dictated by competition; as we shall go on to see, there is no ‘natural’ rate of interest. What is called the natural rate of interest simply means the rate established by free competition. There are no ‘natural’ limits to the interest rate. Where competition does not just determine divergences and fluctuations, so that in a situation where its reciprocally acting forces balance, all determination ceases, what is to be determined is something inherently lawless and arbitrary. More about this in the next chapter.
In the case of interest-bearing capital, everything appears in a superficial manner: the advance of capital as a mere transfer from lender to borrower; the reflux of the realized capital as a mere transfer back, a repayment with interest from the borrower to the lender. So, too, does the property inherent to the capitalist mode of production, that the rate of profit is determined not simply by the ratio of the profit made in one individual turnover to the capital value advanced, but also by the length of this turnover time itself, i.e. as the profit that industrial capital yields in particular periods of time. This too takes a completely superficial form in the case of interest-bearing capital, i.e. it appears that a certain interest is paid to the lender for a certain interval of time.
With his customary insight into the inner connections of things, the romantic Adam Müller (Elemente der Staatskunst [Elements of Statecraft], Berlin, 1809 [part iii], p. 138) says:
‘In determining the price of things, time is unimportant; in determining interest, time is the principal thing involved.’
He does not see how production time and circulation time come into play in determining the prices of commodities, and how it is precisely in this way that the rate of profit is determined for a given period of turnover of capital, while interest is determined precisely by this determination of profit for a given period. His wisdom here, as always, lies in the way that he sees clouds of dust on the surface and pretentiously proclaims this dust to be something mysterious and significant.