In interest-bearing capital, the capital relationship reaches its most superficial and fetishized form. Here we have M–M′, money that produces more money, self-valorizing value, without the process that mediates the two extremes. In commercial capital, M–C–M′, at least the general form of the capitalist movement is present, even though this takes place only in the circulation sphere, so that profit appears as merely profit upon alienation; but for all that, it presents itself as the product of a social relation, not the product of a mere thing. The form of commercial capital still exhibits a process, the unity of opposing phases, a movement that breaks down into two opposite procedures, the purchase and sale of commodities. This is obliterated in M–M′, the form of interest-bearing capital. If £1,000 is lent out by a capitalist, for example, and the interest rate is 5 per cent, the value of the £1,000 as capital for one year is C + Ci′, where C is the capital and i′ the rate of interest. In this case we have 5 per cent 5/100 = 1/20; 1,000 + (1,000 × 1/20) = £1,050. The value of £1,000 as capital is £1,050. In other words, capital is not a simple quantity. It is a relation of quantities, a ratio between the principal as a given value, and itself as self-valorizing value, as a principal that has produced a surplus-value. And as we have seen, capital presents itself in this way, as this directly self-valorizing value, for all active capitalists, whether they function with their own capital or with borrowed capital.
M–M′. Here we have the original starting-point of capital, money in the formula M–C–M′, reduced to the two extremes M–M′, where M′ = M + Δ M, money that creates more money. This is the original and general formula for capital reduced to a meaningless abbreviation. It is capital in its finished form, the unity of the production and circulation processes, and hence capital yielding a definite surplus-value in a specific period of time. In the form of interest-bearing capital, capital appears immediately in this form, unmediated by the production and circulation processes. Capital appears as a mysterious and self-creating source of interest, of its own increase. The thing (money, commodity, value) is now already capital simply as a thing; the result of the overall reproduction process appears as a property devolving on a thing in itself; it is up to the possessor of money, i.e. of commodities in their ever-exchangeable form, whether he wants to spend this money as money or hire it out as capital. In interest-bearing capital, therefore, this automatic fetish is elaborated into its pure form, self-valorizing value, money breeding money, and in this form it no longer bears any marks of its origin. The social relation is consummated in the relationship of a thing, money, to itself. Instead of the actual transformation of money into capital, we have here only the form of this devoid of content. As in the case of labour-power, here the use-value of money is that of creating value, a greater value than is contained in itself. Money as such is already potentially self-valorizing value, and it is as such that it is lent, this being the form of sale for this particular commodity. Thus it becomes as completely the property of money to create value, to yield interest, as it is the property of a pear tree to bear pears. And it is as this interest-bearing thing that the money-lender sells his money. Nor is that all. The actually functioning capital, as we have seen, presents itself in such a way that it yields interest not as functioning capital, but rather as capital in itself, as money capital.
There is still a further distortion. While interest is simply one part of the profit, i.e. the surplus-value, extorted from the worker by the functioning capitalist, it now appears conversely as if interest is the specific fruit of capital, the original thing, while profit, now transformed into the form of profit of enterprise, appears as a mere accessory and trimming added in the reproduction process. The fetish character of capital and the representation of this capital fetish is now complete. In M–M′ we have the irrational form of capital, the misrepresentation and objectification of the relations of production, in its highest power: the interest-bearing form, the simple form of capital, in which it is taken as logically anterior to its own reproduction process; the ability of money or a commodity to valorize its own value independent of reproduction – the capital mystification in the most flagrant form.
For vulgar economics, which seeks to present capital as an independent source of wealth, of value creation, this form is of course a godsend, a form in which the source of profit is no longer recognizable and in which the result of the capitalist production process – separate from the process itself – obtains an autonomous existence.
It is only in money capital that capital becomes a commodity, whose self-valorizing quality has a fixed price as expressed in the prevailing rate of interest.
As interest-bearing capital, and moreover in its immediate form of interest-bearing money capital (the other forms of interest-bearing capital, which do not concern us here, are derived from this form and presuppose it), capital obtains its pure fetish form, M–M′ being the subject, a thing for sale. Firstly, by way of its continuing existence as money, a form in which all capital’s determinations are dissolved and its real elements are invisible. Money is in fact the very form in which the distinctions between commodities as different use-values are obliterated, and hence also the distinctions between industrial capitals, which consist of these commodities and the conditions of their production; it is the form in which value – and here capital – exists as autonomous exchange-value. In the reproduction process of capital, the money form is an evanescent moment, a moment of mere transition. On the money market, on the contrary, capital always exists in this form. Secondly, the surplus-value it creates, here again in the form of money, appears to accrue to it as such. Like the growth of trees, so the generation of money (jókos)* seems a property of capital in this form of money capital.
In interest-bearing capital, the movement of capital is abbreviated. The mediating process is omitted, and a capital of 1,000 is characterized as a thing that in itself is 1,000 and in a certain period is transformed into 1,100, just as wine in the cellar improves its use-value after a given period of time. Capital is now a thing, but the thing is capital. The money’s body is now by love possessed.† As soon as it is lent, or else applied in the reproduction process (in so far as it yields interest to the functioning capitalist as its owner, separate from profit of enterprise), interest accrues to it no matter whether it is asleep or awake, at home or abroad, by day and by night. In interest-bearing capital, therefore (and all capital is money capital in its value expression, or is now taken as the expression of money capital), the hoarder’s most fervent wish is realized.
It is this ingrown existence of interest in money capital as a thing (which is how the production of surplus-value by capital appears here) that Luther was so concerned with in his naïve polemic against usury. After he explains that interest may be demanded if the failure to repay a loan at the specified date causes the lender certain expenses that he has to pay, or if he missed the opportunity for a profitable bargain (he gives the example of the purchase of a garden), he continues:
‘Now that I have loaned you this (100 guilders), you have caused me to suffer two-fold damage, since I cannot pay on the one hand and cannot buy on the other, but must suffer a loss on both counts, and this is called duplex interesse, damni emergentis et lucri cessantis [a double damage, both from the loss caused and from the profit missed]… On hearing that Hans has suffered a loss with the 100 guilders he lent, and demands just compensation for this, they rush in and charge double on each 100 guilders, a double reimbursement, i.e. for the cost of the payment, and the inability to buy the garden, just as if the 100 guilders had had these two losses grown on to it naturally [Marx’s emphasis], so that wherever they have 100 guilders, they put it out and count two losses of this kind on top of it, even though they have not suffered them… This is why you are a usurer, taking damages from your neighbour’s money for a supposed loss which in fact no one caused you, and which you can neither prove nor reckon. Damages of this kind the lawyers call non verum sed phantasticum interesse [not actual damages, but imagined damages]. A loss which each conjures up for himself… it is no good to say that the losses might have been incurred, because I was not able to pay or buy. That would be a case of ex contingente necessarium, making something out of a thing that is not, and making what is uncertain into something completely sure. Surely usury of this kind would devour the whole world in a few years… If the lender meets with an unhappy accident, and he needs to recover from it, then he may demand damages, but in trade it is different, and just the opposite. There they scheme to profit at the cost of their needy neighbours, seeking to accumulate wealth and get rich, to be lazy and idle and live in luxury on the labour of other people, without care, danger or loss. To sit by my stove and let my 100 guilders gather wealth for me in the country, and yet keep it in my pocket because it is only a loan, without any danger or risk – my dear friend, who would not like that?’ (Martin Luther, An die Pfarrherrn wider den Wucher zu predigen, etc., Wittenberg, 1540.)
The conception of capital as value that reproduces itself and increases in reproduction, by virtue of its innate property as ever persisting and growing value – i.e. by virtue of the scholastics’ ‘hidden quality’ – is behind Dr Price’s amazing fancies, which leave far behind the fantasies of the alchemists; fancies which Pitt took quite seriously, and which he made the basis of his financial policy in his bills setting up the sinking fund.*
‘Money bearing compound interest increases at first slowly. But, the rate of increase being continually accelerated, it becomes in some time so rapid, as to mock all the powers of the imagination. One penny, put out at our Saviour’s birth to 5 per cent compound interest, would, before this time, have increased to a greater sum, than would be contained in a hundred and fifty millions of earths, all solid gold. But if put out to simple interest, it would, in the same time, have amounted to no more than seven shillings and four pence half-penny. Our government has hitherto chosen to improve money in the last, rather than the first of these ways.’80
He flies still higher in his Observations on Reversionary Payments, etc., London, 1772: ‘A shilling put out to 6 per cent compound interest at our Saviour’s birth’ (presumably in the Temple of Jerusalem) ‘would… have increased to a greater sum than the whole solar system could hold, supposing it a sphere equal in diameter to the diameter of Saturn’s orbit.’ ‘A state need never therefore be under any difficulties; for with the smallest savings it may in as little time as its interest can require pay off the largest debts’ (pp. xiii, xiv).
What a charming theoretical introduction for the English national debt!
Price was simply dazzled by the incredible figures that arise from geometric progression. Since he viewed capital as a self-acting automaton, without regard to the conditions of reproduction and labour, as a mere number that increases by itself (just as Malthus saw people in his own geometric progression), he could imagine he had found the law of its growth in the formula s = c (1 + i)n, where s = sum of capital + compound interest, c = the capital advanced, i = the rate of interest (expressed in aliquot parts of 100), and n = the number of years for which the process continues.
Pitt took Dr Price’s mystification quite seriously. In 1786 the House of Commons resolved that £1,000,000 should be raised for public purposes. According to Price, whom Pitt believed, nothing could be better than to tax the people with a view to ‘accumulating’ the sum raised, and thus spiriting away the national debt by the mystery of compound interest. That resolution of the House of Commons was soon followed by a bill drawn up by Pitt, which provided for the accumulation of £250,000, ‘until, with the expired annuities, the fund should have grown to £4,000,000 annually’ (Act 26, George III, Chapter XXXI).
In a speech of 1792, in which Pitt proposed to increase the sum devoted to the sinking fund, he adduced machines, credit, etc., among the reasons for England’s commercial supremacy, but as ‘the most widespread and enduring cause, that of accumulation’. This principle, he said, was completely developed in the work of Adam Smith, that genius… and this accumulation, he continued, was accomplished by laying aside at least a portion of the annual profit for the purpose of increasing the principal, which was to be employed in the same manner the following year, and which thus yielded a continual profit. By way of Dr Price, therefore, Pitt transformed Adam Smith’s theory of accumulation into the enrichment of a nation by accumulation of debts, and thus arrived at the comforting progress towards an infinity of loans – loans to pay loans with.
Already with Josiah Child, the father of modern banking, we find that ‘£100 put out at 10 per cent for seventy years, at compound interest would produce £102,400’ (Traité sur le commerce, etc., par J. Child, French translation, Amsterdam and Berlin, 1754, p. 115. Written in 1669).
How far Dr Price’s conception has unwittingly been taken over by modern economics is shown by the following quotation from The Economist: ‘Capital, with compound interest on every portion of capital saved, is so all-engrossing that all the wealth in the world from which income is derived, has long ago become the interest of capital… All rent is now the payment of interest on capital previously invested in the land’ (The Economist, 19 July 1851).
All wealth that can ever be produced belongs to capital in its capacity as interest-bearing capital, and everything that it has received up till now is only a first instalment for its ‘all-engrossing’ appetite. By its own inherent laws, all surplus labour that the human race can supply belongs to it. Moloch.
Finally, the following hodge-podge by the ‘Romantic’ Müller: ‘Dr Price’s tremendous growth of compound interest, or of the self-accelerating forces of human beings, presupposes an undivided or uninterrupted and uniform arrangement for several centuries, if it is to produce these tremendous effects. As soon as capital is broken up into individual branches, which start to grow independently, the entire accumulation of forces begins afresh. Nature has distributed over a career of some twenty to twenty-five years the progression of force that is the average lot of each individual worker (!). After this period has elapsed, the worker abandons his career and must now transfer the capital obtained through compound interest on labour to a new worker, in most cases dividing it among several workers or children. The latter must first learn to activate and apply the capital that falls to them before they can actually draw compound interest from it. Moreover, a tremendous amount of the capital bourgeois society obtains, even in the most energetic communities, is accumulated only gradually over long years, and not directly applied to the expansion of labour. Rather, once a certain sum has been collected, it is transferred to another individual, a worker, a bank or the state, in the form of a loan. The recipient of this, then, in so far as it is he who actually puts the capital in motion, draws compound interest from it, and can easily require the lender to content himself with simple interest. Finally, the law of consumption, greed and waste reacts against that tremendous progression in which the forces of men and their products might increase, if the law of production or thrift alone prevailed’ (A. Müller, op. cit., III, pp. 147–9).
It would be impossible to drivel out a more hair-raising absurdity than this in so few lines. Not to mention the comic confusion of worker with capitalist, the value of labour-power with interest on capital, etc. – the receipt of compound interest is simply explained by saying that capital is lent out and then brings in compound interest. Our Müller’s procedure is characteristic of the Romantics in every detail. Its content is formed out of everyday prejudices, skimmed from the most superficial appearance of things. This false and trivial content is then supposedly ‘elevated’ and rendered poetic by a mystifying mode of expression.
The accumulation process of capital may be conceived as an accumulation of compound interest, in so far as the part of profit (surplus-value) that is transformed back into capital, i.e. which serves to absorb new labour, may be called interest. However:
1. Apart from all the accidental circumstances, a large part of the existing capital is always being more or less devalued in the course of the reproduction process, since the value of commodities is determined not by the labour-time originally taken by their production, but rather by the labour-time that their reproduction takes, and this steadily decreases as the social productivity of labour develops. At a higher level of development of social productivity, therefore, all existing capital, instead of appearing as the result of a long process of capital accumulation, appears as the result of a relatively short reproduction period.81
2. As was shown in Part Three of this volume, the profit rate decreases in proportion to the growing accumulation of capital and the accompanying rise in the productivity of social labour, this being expressed precisely in the relative decrease of variable capital vis-à-vis constant. In order to produce the same rate of profit, therefore, if the constant capital set in motion by a worker increases ten-fold, the surplus labour-time would have to increase ten-fold as well, and very soon the total labour-time, or even the full twenty-four hours of the day, would not be sufficient, even if it were entirely appropriated by capital. Price’s progression depends on the idea that the rate of profit does not decline, as does every idea of this ‘all-engrossing capital at compound interest’.82
The identity of surplus-value and surplus labour sets a qualitative limit to the accumulation of capital: the total working day, the present development of the productive forces and population, which limits the number of working days that can be simultaneously exploited. But if surplus-value is conceived in the irrational form of interest, the limit is only quantitative, and beggars all fantasy.
Interest-bearing capital, however, displays the conception of the capital fetish in its consummate form, the idea that ascribes to the accumulated product of labour, in the fixed form of money at that, the power of producing surplus-value in geometric progression by way of an inherent secret quality, as a pure automaton, so that this accumulated product of labour, as The Economist believes, has long since discounted the whole world’s wealth for all time, as belonging to it by right and rightfully coming its way. The product of past labour, and past labour itself, is seen as pregnant in and of itself with a portion of present or future living surplus labour. We know however that in actual fact the preservation and thus also the reproduction of the value of products of past labour is only the result of their contact with living labour; and secondly, that the command that the products of past labour exercise over living surplus labour lasts only as long as the capital relation, the specific social relation in which past labour confronts living labour as independent and superior.