The general observations we have so far made on the credit system are as follows:
I. Its necessary formation to bring about the equalization of the profit rate or the movement of this equalization, on which the whole of capitalist production depends.
II. The reduction of circulation costs.
1. A major cost of circulation is money itself, in so far as it is itself value. And this is economized on in three ways by credit.
A. In that money is completely dispensed with in a large portion of transactions.
B. In that the circulation of the circulating medium is accelerated.85 This partly coincides with what is said under 2 below. On the one hand the acceleration is technical; i.e. with the volume and number of real turnovers of commodities for consumption remaining the same, a smaller quantity of money or money tokens performs the same service. This is connected with the technique of banking. On the other hand, credit accelerates the velocity of the metamorphosis of commodities, and with this the velocity of monetary circulation.
C. The replacement of gold money by paper.
2. Acceleration, through credit, of the individual phases of circulation or commodity metamorphosis, then an acceleration of the metamorphosis of capital and hence an acceleration of the reproduction process in general. (On the other hand, credit also enables the acts of buying and selling to take a longer time, and hence serves as a basis for speculation.) Contraction of the reserve fund, which can be viewed in two ways: on the one hand as a reduction in the circulating medium, on the other hand as a restriction of the part of capital that must always be in existence in the money form.86
III. Formation of joint-stock companies. This involves:
1. Tremendous expansion in the scale of production, and enterprises which would be impossible for individual capitals. At the same time, enterprises that were previously government ones become social.*
2. Capital, which is inherently based on a social mode of production and presupposes a social concentration of means of production and labour-power, now receives the form of social capital (capital of directly associated individuals) in contrast to private capital, and its enterprises appear as social enterprises as opposed to private ones. This is the abolition of capital as private property within the confines of the capitalist mode of production itself.
3. Transformation of the actual functioning capitalist into a mere manager, in charge of other people’s capital, and of the capital owner into a mere owner, a mere money capitalist. Even if the dividends that they draw include both interest and profit of enterprise, i.e. the total profit (for the manager’s salary is or should be simply the wage for a certain kind of skilled labour, its price being regulated in the labour market like that of any other labour), this total profit is still drawn only in the form of interest, i.e. as a mere reward for capital ownership, which is now as completely separated from its function in the actual production process as this function, in the person of the manager, is from capital ownership. Profit thus appears (and no longer just the part of it, interest, that obtains its justification from the profit of the borrower) as simply the appropriation of other people’s surplus labour, arising from the transformation of means of production into capital; i.e. from their estrangement vis-à-vis the actual producer; from their opposition, as the property of another, vis-à-vis all individuals really active in production from the manager down to the lowest day-labourer. In joint-stock companies, the function is separated from capital ownership, so labour is also completely separated from ownership of the means of production and of surplus labour. This result of capitalist production in its highest development is a necessary point of transition towards the transformation of capital back into the property of the producers, though no longer as the private property of individual producers, but rather as their property as associated producers, as directly social property. It is furthermore a point of transition towards the transformation of all functions formerly bound up with capital ownership in the reproduction process into simple functions of the associated producers, into social functions.
Before we go on, the following economically important fact must be noted. Since profit here simply assumes the form of interest, enterprises that merely yield an interest are possible, and this is one of the reasons that hold up the fall in the general rate of profit, since these enterprises, where the constant capital stands in such a tremendous ratio to the variable, do not necessarily go into the equalization of the general rate of profit.
(Since Marx wrote the above passage, new forms of industrial organization have been developed, as is well-known, representing the second and third degree of joint-stock company. The speed with which production can nowadays be increased in all fields of large-scale industry, which is greater every day, is confronted by the ever increasing slowness in expanding the market for this increased volume of products. What production produces in months the market can absorb only in years. On top of this there are the protectionist policies by which each industrial country puts up a barrier against others, particularly against England, and artificially boosts domestic productive capacity still further. The results are general and chronic overproduction, depressed prices, falling profits, even their complete cessation; in brief, the ancient and celebrated freedom of competition is at the end of its road and must itself confess its evident and scandalous bankruptcy. A further reason is that in each country the big industrialists in a particular branch of industry come together to form a cartel to regulate production. A committee fixes the quantity each establishment is to produce, and has the last word in dividing up the incoming orders. In a few cases it came to the formation of temporary international cartels, for instance between the English and the German iron producers. But even thisform of socialization of production did not suffice. The conflict of interests between the individual businesses broke through too often and restored competition. The next stage, therefore, in certain branches where the scale of production permitted, was to concentrate the entire production of the branch of industry in question into one big joint-stock company with a unified management. In America this has already been achieved in several cases, while in Europe the biggest example up till now is the United Alkali Trust, which has brought the entire British production of alkali into the hands of a single firm. The former owners of more than thirty individual plants received the assessed value of their entire establishments in shares, to a total of some £5 million, which represents the fixed capital of the trust. The technical management remains in the same hands as before, but financial control is concentrated in the hands of the general management. The floating capital, amounting to some £1 million, was offered to public subscription. The total capital is thus £6 million. In this branch, therefore, which forms the basis of the entire chemical industry, competition has been replaced in England by monopoly, thus preparing in the most pleasing fashion its future expropriation by society as a whole, by the nation. – F. E.)
This is the abolition of the capitalist mode of production within the capitalist mode of production itself, and hence a self-abolishing contradiction, which presents itself prima facie as a mere point of transition to a new form of production. It presents itself as such a contradiction even in appearance. It gives rise to monopoly in certain spheres and hence provokes state intervention. It reproduces a new financial aristocracy, a new kind of parasite in the guise of company promoters, speculators and merely nominal directors; an entire system of swindling and cheating with respect to the promotion of companies, issue of shares and share dealings. It is private production unchecked by private ownership.
IV. Apart from the joint-stock system – which is an abolition of capitalist private industry on the basis of the capitalist system itself, and which destroys private industry to the same degree that it spreads and takes over new spheres of production – credit offers the individual capitalist, or the person who can pass as a capitalist, an absolute command over the capital and property of others, within certain limits, and, through this, command over other people’s labour.87 It is disposal over social capital, rather than his own, that gives him command over social labour. The actual capital that someone possesses, or is taken to possess by public opinion, now becomes simply the basis for a superstructure of credit. This is especially the case in wholesale trade, and the greater part of the social product passes through this. All standards of measurement, all explanatory reasons that were still more or less justified within the capitalist mode of production, now vanish. What the speculating trader risks is social property, not his own. Equally absurd now is the saying that the origin of capital is saving, since what this speculator demands is precisely that others should save for him. (As recently the whole of France saved up one and a half thousand million francs for the Panama swindlers. The whole Panama swindle is exactly described here, a full twenty years before it took place. – F. E.) The other saying about abstention is diametrically refuted by his luxury, which also becomes a means of credit. Conceptions that still had a certain meaning at a less developed state of capitalist production now become completely meaningless. Success and failure lead in both cases to the centralization of capitals and hence to expropriation on the most enormous scale. Expropriation now extends from the immediate producers to the small and medium capitalists themselves. Expropriation is the starting-point of the capitalist mode of production, whose goal is to carry it through to completion, and even in the last instance to expropriate all individuals from the means of production – which, with the development of social production, cease to be means and products of private production, and can only remain means of production in the hands of the associated producers, as their social property, just as they are their social product. But within the capitalist system itself, this expropriation takes the antithetical form of the appropriation of social property by a few; and credit gives these few ever more the character of simple adventurers. Since ownership now exists in the form of shares, its movement and transfer become simply the result of stock-exchange dealings, where little fishes are gobbled up by the sharks, and sheep by the stock-exchange wolves. In the joint-stock system, there is already a conflict with the old form, in which the means of social production appear as individual property. But the transformation into the form of shares still remains trapped within the capitalist barriers; instead of overcoming the opposition between the character of wealth as something social, and private wealth, this transformation only develops this opposition in a new form.
The cooperative factories run by workers themselves are, within the old form, the first examples of the emergence of a new form, even though they naturally reproduce in all cases, in their present organization, all the defects of the existing system, and must reproduce them. But the opposition between capital and labour is abolished here, even if at first only in the form that the workers in association become their own capitalist, i.e. they use the means of production to valorize their own labour. These factories show how, at a certain stage of development of the material forces of production, and of the social forms of production corresponding to them, a new mode of production develops and is formed naturally out of the old. Without the factory system that arises from the capitalist mode of production, cooperative factories could not develop. Nor could they do so without the credit system that develops from the same mode of production. This credit system, since it forms the principal basis for the gradual transformation of capitalist private enterprises into capitalist joint-stock companies, presents in the same way the means for the gradual extension of cooperative enterprises on a more or less national scale. Capitalist joint-stock companies as much as cooperative factories should be viewed as transition forms from the capitalist mode of production to the associated one, simply that in the one case the opposition is abolished in a negative way, and in the other in a positive way.
Up till now, we have considered the development of credit – and the latent abolition of capital ownership contained within it – principally in relation to industrial capital. In the following chapters we discuss credit in relation to interest-bearing capital as such, both its effect on this and the form that it assumes in this connection. With respect to this, in general, a few more specifically economic points remain to be made.
But first of all this:
If the credit system appears as the principal lever of overproduction and excessive speculation in commerce, this is simply because the reproduction process, which is elastic by nature, is now forced to its most extreme limit; and this is because a great part of the social capital is applied by those who are not its owners, and who therefore proceed quite unlike owners who, when they function themselves, anxiously weigh the limits of their private capital. This only goes to show how the valorization of capital founded on the antithetical character of capitalist production permits actual free development only up to a certain point, which is constantly broken through by the credit system.88 The credit system hence accelerates the material development of the productive forces and the creation of the world market, which it is the historical task of the capitalist mode of production to bring to a certain level of development, as material foundations for the new form of production. At the same time, credit accelerates the violent outbreaks of this contradiction, crises, and with these the elements of dissolution of the old mode of production.
The credit system has a dual character immanent in it: on the one hand it develops the motive of capitalist production, enrichment by the exploitation of others’ labour, into the purest and most colossal system of gambling and swindling, and restricts ever more the already small number of the exploiters of social wealth; on the other hand however it constitutes the form of transition towards a new mode of production. It is this dual
character that gives the principal spokesmen for credit, from Law through to Isaac Péreire, * their nicely mixed character of swindler and prophet.