1. The confusion to which this can give rise in the minds of the economists is shown in Volume 1, Chapter 9, 3, pp. 333–8, with the example of N. W. Senior.*
2. ‘From what has gone before we know that surplus-value is purely the result of an alteration in the value of v, of that part of the capital which was converted into labour-power; consequently, v + s = v + Δ v (V plus an increment of v). But the fact that it is v alone that varies, and the conditions of that variation, are obscured by the circumstance that in consequence of the increase in the variable component of the capital, there is also an increase in the sum total of the capital advanced. It was originally £500 and becomes £590’ (Volume 1, Chapter 9, p. 322).
3. Malthus, [Principles of Political Economy, 2nd edition, London, 1836, p. 268. [Marx’s emphasis.]*
4. ‘Capital: that which is expended with a view to profit.’ Malthus, Definitions in Political Economy, London, 1827, p. 86.
5. Cf. Volume 1, Chapter 20, pp. 686 ff.
6. R. Torrens, An Essay on the Production of Wealth, London, 1821, pp. 51–3 and 349.
7. Malthus, Definitions in Political Economy, London, 1853, pp. 70, 71. [See also Theories of Surplus-Value, Part III, p. 24.]
8. ‘The masses of value and of surplus-value produced by different capitals – the value of labour-power being given and its degree of exploitation being equal – vary directly as the amounts of the variable components of these capitals, i.e. the parts which have been turned into living labour-power’ (Volume 1, Chapter 11, p. 421).
9. The manuscript has here: ‘For later investigation, how this case is related to ground-rent.’ – F.E.
10. The manuscript also contains further and very detailed calculations on the mathematical difference between rate of surplus-value and rate of profit (s′ — p′), a difference which has all kinds of interesting properties, and whose movement presents cases in which the two rates draw apart and cases in which they converge. These movements can also be represented by curves. I have refrained from reproducing this material, since it is of little importance for the immediate aim of this book, and all that is required here is to draw attention to this point for those readers who might wish to pursue it further. – F.E.
11. ‘Since in all factories there is a very large amount of fixed capital in buildings and machinery, the greater the number of hours that machinery can be kept at work the greater will be the return’ (Reports of the Inspectors of Factories… 31 October 1858, p. 8).
12. See Ure on advances in factory construction. [See below, p. 199.]
13. The Factory Question and the Ten Hours Bill by R. H. Greg, London, 1837, p. 115.
14. The final sentence from the report is in error. The loss due to waste should be 3d. instead of 6d. This loss is 25 per cent in the case of Surat, but only 12 1/2 to 15 per cent in the case of American cotton, and it is this that is meant here, the same percentage having been correctly calculated on the price of 5–6d. per lb. It is true, none the less, that the proportion of waste was often significantly higher than before on American cotton shipped to Europe during the latter years of the Civil War. – F.E.
15. Babbage, among others, gives examples [op. cit.]. The customary expedient – reduction of wages – was applied here too, and so this constant devaluation has a completely different effect from the one Mr Carey dreams of in his harmonious head.†
16. Since the above was written (1865), competition on the world market has increased significantly owing to the rapid development of industry in all civilized countries, particularly America and Germany. The fact that the modern productive forces, rapidly and gigantically surging forward, are daily and increasingly outgrowing the laws of capitalist commodity exchange within which they are supposed to move – this fact impresses itself more and more today even on the consciousness of the capitalists. There are two particular symptoms of this. Firstly, the new mania for general protective tariffs, differing from the old protectionism because they are precisely designed to protect exportable articles. Secondly, the cartels (trusts) formed by manufacturers in whole branches of production for the regulation of production and therewith prices and profits too. It is readily apparent that these experiments can be pursued only in a relatively favourable economic climate. The first storm is bound to bowl them over and show how, much as production does need regulating, it is certainly not the capitalist class that is called to this task. In the meantime, the only purpose these cartels serve to promote is the swallowing of the little fish by the big fish even more rapidly than before. – F.E.
17. It goes without saying that, unlike Mr Baker, we do not seek to explain the wool crisis of 1857 in terms of the disproportion in price between raw material and manufactured item. This was simply a symptom, while the crisis was a general one. – F.E.
18. A sharp distinction is made in England between woollen manufacture proper, which spins and weaves carded yarn from short wool (main centre Leeds), and worsted manufacture, which spins and weaves worsted yarn from long wool (main centre Bradford). – F.E.
19. The rapid expansion of machine-spinning for linen in Ireland dealt a death-blow to the export of handwoven German linen from Silesia, Lusatia and Westphalia. – F.E.
20. The above point has already been developed in brief in the third edition of Volume 1 [Pelican edition, p. 762, at the beginning of Chapter 25]. But since the two earlier editions do not contain this passage, it was all the more necessary to repeat it here. – F.E.
21. It follows from Chapter 4 that the above argument is correct only when capitals A and B have a different value composition, but nevertheless their variable components in percentage terms are directly proportionate to their turnover times, or in inverse proportion to their number of turnovers. Capital A is composed, say, of 20c fixed and 70c circulating, i.e. 90c + 10ν = 100. Given a rate of surplus-value of 100 per cent, the 10ν produces 10x, in one turnover; rate of profit for the turnover 10 per cent. Capital B, on the other hand, is 60c fixed + 20c circulating, i.e. 80c + 20ν = 100. The 20ν, for one turnover at the above rate of surplus-value, produces a surplus of 20s; rate of profit for the turnover 20 per cent, i.e. double that of A. But if A turns over twice a year and B only once, then A too produces 2 × 10 = 20s in the year, and the annual rate of profit is the same in both cases, i.e. 20 per cent. - F.E.
23. Corbet [An Inquiry into the Causes and Modes of the Wealth of Individuals, London, 1841], p. 174.
24 This is obviously leaving aside the possibility of extracting a temporary super-profit by means of depressing wages, monopoly pricing, etc. – F.E.
25 Malthus. [Principles of Political Economy, 2nd edn, London, 1836, p. 268.]
27 At that time, in 1865, this was still simply Marx’s ‘opinion’. Today, after the comprehensive investigations of the primitive community by writers from Maurer to Morgan, it is an established fact scarcely anywhere contested. –F.E.*
28. K. Man, A Contribution to the Critique of Political Economy [pp. 27–52].
29. K. Marx, A Contribution… [ibid.].
30 The controversy between Storch and Ricardo in connection with ground-rent (a controversy only as far as the subject is concerned, as neither party paid any attention to the other), over the question whether market value (in their terms market price or price of production) is governed by commodities produced under the least favourable conditions (Ricardo) or the most favourable (Storch), is thus resolved in this way, that both are right and both are wrong, and also that both have entirely omitted to consider the average case.* Compare Corbet on those cases where price is governed by the commodities produced under the best conditions.† And compare this: ‘It is not meant to be asserted by him’ (Ricardo) ‘that two particular lots of two different articles, as a hat and a pair of shoes, exchange with one another when those two particular lots were produced by equal quantities of labour. By “commodity” we must here understand the “description of commodity”, not a particular individual hat, pair of shoes, etc. The whole labour which produces all the hats in England is to be considered, to this purpose, as divided among all the hats. This seems to me not to have been expressed at first, and in the general statements of this doctrine.’ (Observations on Certain Verbal Disputes in Political Economy, etc., London, 1821, pp. 53–4.)
31. The following ‘subtlety’ is sheer stupidity: ‘Where the quantity of wages, capital, and land, required to produce an article, are become different from what they were, that which Adam Smith calls the natural price of it, is also different, and that price, which was previously its natural price, becomes, with reference to this alteration, its market-price; because, though neither the supply, nor the quantity wanted, may have been changed’ – both of these change here, precisely because the market value, or, as Adam Smith has it, the price of production, changes as a result of the change in value – ‘that supply is not now exactly enough for those persons who are able and willing to pay what is now the cost of production, but is either greater or less than that; so that the proportion between the supply and what is with reference to the new cost of production the effectual demand, is different from what it was. An alteration in the rate of supply will then take place, if there is no obstacle in the way of it, and at last bring the commodity to its new natural price. It may then seem good to some persons to say that, as the commodity gets to its natural price by an alteration in its supply, the natural price is as much owing to one proportion between the demand and supply, as the market-price is to another; and consequently, that the natural price, just as much as the market-price, depends on the proportion that demand and supply bear to each other… The great principle of demand and supply is called into action to determine what A. Smith calls natural prices as well as market-prices’ (Malthus, Observations on Certain Verbal Disputes, etc., London, 1821, pp. 60–61). This clever man does not understand that in the case in question it is precisely the change in cost of production, and also therefore in value, that has brought about the change in demand, i.e. in the relationship of demand and supply, and that this change in demand can induce a change in supply. This would however prove completely the opposite of what our theorist wants to prove, which is that the change in cost of production is in no way governed by the relationship of demand and supply, but on the contrary is what governs this relationship.
32. ‘If each man of a class could never have more than a given share, or aliquot part, of the gains and possessions of the whole, he would readily combine to raise the gain;’ (he does so whenever the relationship of demand and supply permits) ‘this is monopoly. But where each man thinks that he may anyway increase the absolute amount of his own share, though by a process which lessens the whole amount, he will often do it; this is competition’ (An Inquiry into those Principles Respecting the Nature of Demand, etc., London, 1821, p. 105).
33Malthus [Principles of Political Economy, loc. cit., pp. 77–8].
34. It is quite characteristic of Ricardo, whose mode of procedure here is of course different from ours, as he did not understand the adjustment of values to production prices, that he did not once consider this possibility, but only the first case, a rise in wages and its influence on the production prices of commodities.* And the servum pecus imitatorum† did not even succeed in making this quite self-evident and in fact tautological practical application.
35. ‘We should also expect that, however the rate of the profits of stock might diminish in consequence of the accumulation of capital on the land and the rise of wages, yet the aggregate amount of profits would increase. Thus supposing that, with repeated accumulations of £100,000, the rate of profit should fall from 20 to 19, to 18, to 17 per cent, a constantly diminishing rate, we should expect that the whole amount of profits received by those successive owners of capital would be always progressive; that it would be greater when the capital was £200,000, than when £100,000; still greater when £300,000; and so on, increasing, though at a diminishing rate, with every increase of capital. This progression, however, is only true for a certain time, thus 19 per cent on £200,000 is more than 20 per cent on £100,000; again 18 per cent on £300,000 is more than 19 per cent on £200,000; but after capital has accumulated to a large amount, and profits have fallen, the further accumulation diminishes the aggregate of profits. Thus, suppose the accumulation should be £1,000,000, and the profits 7 per cent, the whole amount of profits will be £70,000; now if an addition of £100,000 capital be made to the million, and profits should fall to 6 per cent, £66,000 or a diminution of £4,000 will be received by the owners of the stock, although the whole amount of stock will be increased from £1,000,000 to £1,100,000.’ Ricardo, Political Economy, Chapter VI, [Pelican edition, pp., 142–3]. In point of fact, what is assumed here is that the capital grows from 1,000,000 to 1,1000,000, i.e. by 10 per cent, while the rate of profit falls from 7 per cent to 6 per cent, i.e. by 14 3/7 per cent. Hinc illae lacrimae!*
36 Adam Smith is right here, as against Ricardo, who says: ‘They contend, that the equality of profits will be brought about by the general rise of profits; and I am of the opinion, that the profits of the favoured trade will speedily subside to the general level.’ [Pelican edition, p. 148.]
37. I have put the above in parentheses because, although it is re-edited from a note in the original manuscript, it goes beyond the original material in certain particulars. – F.E.
38. So that he can classify commercial capital as production capital, Ramsay confuses it with the transport industry and calls commerce ‘the transport of commodities from one place to another’ (An Essay on the Distribution of Wealth, p.19). The same confusion can already be found in Verri (Meditazioni sulla economia politica, § 4, p. 32) and Say (Traité d’ économie politique, I, pp. 14, 15).* S. P. Newman says in his Elements of Political Economy (Andover and New York, 1835): ‘In the existing economical arrangements of society, the very act, which is performed by the merchant, of standing between the producer and the consumer, advancing to the former capital and receiving products in return, and then handing over these products to the latter, receiving back capital in return, is a transaction which both facilitates the economical processes of the community, and adds value to the products in relation to which it is performed’ (p. 174). Thus producer and consumer each save time and money by the intervention of the merchant. This service requires an advance of capital and labour and has to be paid for, ‘since it adds value to products, for the same products in the hands of consumers are worth more than in the hands of producers’. And in this way commerce appears to him, just as to Mr Say, as ‘strictly an act of production’ (p. 175). Newman’s view is fundamentally false. The use-value of a commodity is greater in the hands of the consumer than it is in those of the producer, because it is only here that it is at all realized. For the use-value of a commodity is realized, and begins to function, only when the commodity passes into the sphere of consumption. In the hands of the producer, it exists only in potential form. But a commodity is not paid for twice over, first for its exchange-value and then for its use-value as something extra. By paying its exchange-value, I appropriate its use-value. And the exchange-value does not increase in the slightest by the fact that the commodity passes from the hands of the producer or the middleman into those of the consumer.
39. John Bellers [Essays about the Poor, Manufactures, Trade, Plantations, and Immorality, London, 1699, p. 10].
39 [a] We can give an example of this prognosis, written in 1865, of the fate of the commercial proletariat since this time, in the form of the hundreds of German clerks skilled in all commercial operations and in three or four languages, who are offering their services in vain in the City of London for a weekly wage of 25 shillings – well below the wage of a skilled mechanic. A gap of two pages in the manuscript here indicates that this point was to be further developed. Reference should also be made to Volume 2, Chapter 6 (‘The Costs of Circulation’), pp. 207–14, which already touches on various points pertinent here. – F.E.
40. ‘Profit, on the general principle, is always the same, whatever be price; keeping its place like an incumbent body on the swelling or sinking tide. As, therefore, prices rise, a tradesman raises price; as prices fall, a tradesman lowers price’ (Corbet, An Inquiry into the Causes, etc. of the Wealth of Individuals, London, 1841, p. 20). Here, as throughout the text, attention is paid only to ordinary trade, not to speculation, the examination of which lies outside the ambit of our discussion, together with everything that pertains to the division of commercial capital. ‘The profit of trade is a value added to capital which is independent of price, the second’ (speculation) ‘is founded on the variation in the value of capital or in price itself’ (ibid., p. 128).
41. The following observation, if very naïve, is at the same time quite correct. ‘Thus the fact that one and the same commodity is to be obtained from different sellers at essentially different prices also has its basis very frequently in an incorrect calculation’ (Feller and Odermann, Dos Ganze der kaufmânnischen Arithmetik, 7th edn, [Leipzig] 1859, [p. 451].) This shows how the determination of price becomes purely theoretical, i.e. abstract.
42.A Contribution to the Critique of Political Economy [p. 50]. [See also Capital Volume 1, Chapter 2.]
43.‘The great differences among coins as regards their weight and standard, and the imprints stamped on them by the many princes and cities that had minting rights, made it always necessary, in businesses where settlement in one particular form of coin was needed, to make use of the local currency. In order to make cash payments, merchants who travelled to a foreign market provided themselves with uncoined pure silver, or even gold. They similarly exchanged the local coins they received for uncoined silver or gold when they set out to return home. Exchange dealing, the conversion of uncoined precious metal into local coin and vice versa, consequently became a very widespread and profitable business’ (Hüllmann, Stêdtewesen des Mittelalters, Bonn 1826–9, I, pp. 437–8). ‘Exchange banks do not owe their name… to exchange in the sense of bills of exchange, but rather to the exchange of different kinds of money. Long before the establishment of the Amsterdam Exchange Bank in 1609, there were already money-changers and exchange businesses in the trading cities of the Netherlands, and even exchange banks… The business of a money-changer was to exchange the many different kinds of coin that were brought into the country by foreign traders for the current legal tender… The orbit of their activity gradually widened… They became the cashiers and bankers of their day. But the Amsterdam government saw a danger in the combination of cashier activity with exchange activity, and so as to combat this danger, it took the decision to establish a big institution which was to undertake both exchange and cashier business on behalf of the public authority. This was the celebrated Amsterdam Exchange Bank of 1609. The exchange banks of Venice, Genoa, Stockholm and Hamburg similarly owe their foundation to the continuous need for converting different varieties of money. Out of all these, the Hamburg bank is the only one still in existence today, since the need for an institution of this kind is still felt in this trading city, having as it does no coinage of its own…’ (S. Vissering, Handboek van Praktische Staathuishoudkunde, Amsterdam, 1860, 1, pp. 247–8).
44. ‘The institution of cashier has perhaps nowhere kept its original and independent character in so pure a form as in the trading cities of the Netherlands’ (on the origin of the cashier business in Amsterdam see E. Luzac, Hollands Rijkdom, Part III). ‘Its functions overlap to a certain extent with those of the old Amsterdam Exchange Bank. The cashier receives a certain sum of money from the merchants who make use of his services, opening a “credit” for them in his accounts; they also send him their claims for payment, which he collects for them and credits them with; on the other hand he makes payments against their drafts (kassiers brief jes) and debits the sums involved to their current account. For these entries and payments he makes a small charge, gaining an appropriate wage for his labour, simply on the strength of the size of turnover between the parties involved. If there are payments to be settled between two merchants, both of whom use the same cashier, then these are adjusted very simply by entries on both accounts, while the cashiers settle their mutual claims among themselves each day. The cashier business as such thus consists in this making of payments; it excludes industrial undertakings, speculation and the opening of overdrafts; for the rule here must be that the cashier does not permit any payment by his clients over and above their credit’ (Vissering, op. cit., pp. 243–4). On the cashiers’ associations in Venice: ‘Because of Venice’s needs, and its peculiar geography, which made it more troublesome to carry cash around than in other places, the merchants of this city set up cashiers’ associations with appropriate safeguards, supervision and management. The members of such an association subscribed certain sums on which they drew drafts for their creditors, whereupon the sum paid was deducted from the debtor’s account on the page of the book set aside for that purpose, and the sum with which the creditor was credited was added to his account. Such were the first beginnings of the so-called giro banks. These associations are certainly old. But to relate them to the twelfth century is to confuse them with the State Loan Institution set up in 1171’ (Hüllmann, op. cit., pp. 453–4).
45. Our wise Roscher has cleverly worked out that if certain features characterize trade as a ‘mediation’ between producers and consumers, ‘one’ must equally well be able to characterize production itself as a ‘mediation’ of consumption (between whom?). From this it naturally follows that commercial capital is a part of productive capital, just like agricultural and industrial capital. Thus because one can say that man can only mediate his consumption by production (and he has to do this even without a Leipzig education), or that labour is necessary for the appropriation of nature (which you can if you like call ‘mediation’), it follows as a matter of course that a social ‘mediation’ that arises from a specific social form of production – precisely because it is a mediation – has the same absolute and necessary character, the same status. The term mediation settles everything. Besides, merchants are not mediators between producers and consumers (we ignore here for the time being those consumers who do not produce), but rather mediate the exchange of products between these producers; they are simply intermediaries in an exchange that would still go on in thousands of cases even without them.
46. W. Kiesselbach (Der Gang des Welthandels in Mittelalter, [Stuttgart] 1860) is still living in a mental world where commercial capital is the general form of capital. He has not the slightest suspicion of the modern meaning of capital, as little as Herr Mommsen when he speaks of ‘capital’ and the rule of capital in his Römische Geschichte. In modern English history, the actual merchant estate and the trading cities also appear to be politically reactionary and in league with the landed and financial aristocracies against industrial capital. Compare for example the political role of Liverpool as against Manchester and Birmingham. The complete domination of industrial capital has been acknowledged by English commercial capital and by the ‘moneyed interest’ (financial aristocracy) only since the abolition of the corn duties.
47.‘The inhabitants of trading cities, by importing the improved manufactures and expensive luxuries of richer countries, afforded some food to the vanity of the great proprietors, who eagerly purchased them with great quantities of the rude produce of their own lands. The commerce of a great part of Europe in those times, accordingly, consisted chiefly in the exchange of their own rude for the manufactured produce of more civilized nations… But when this taste became so general as to occasion a considerable demand, the merchants, in order to save the expense of carriage, naturally endeavoured to establish some manufactures of the same kind in their own country’ (Adam Smith, [The Wealth of Nations,] Book Three, Chapter III [pp. 503–4]).
48. ‘Now there is a great complaint among the merchants about the nobles, or robbers, because they have to trade with great danger, and are liable to be imprisoned, beaten, taken hostage or robbed. If they were to suffer such things for the sake of justice, the merchants would be saints… But since the same great injustice and unchristian thieving and robbing are committed by merchants the whole world over, even against one another, is it any wonder that God has arranged things so that such great wealth unjustly made should again be lost or robbed, and the merchants themselves beaten about the head or imprisoned?… And the princes should see to it that such unjust dealing is punished with due penalty, and take care that their subjects should not be so shamefully abused by merchants. Because they fail to do so, God uses knights and robbers as his devils to punish the injustice of the merchants, just as he plagued Egypt and plagues the whole world with devils, or destroys it through enemies. He thus sets one rogue against the other, without in this way implying that knights are lesser robbers than are merchants, although merchants daily rob the whole world, while a knight may rob one or two people once or twice a year… Heed the words of Isaiah: your very rulers are confederate with thieves. For they hang the thieves who have stolen a guilder or half a guilder, but they mingle with those who rob the whole world and steal more surely than any others, so confirming the proverb that big thieves hang little thieves. Or as the Roman senator Cato said,“Mean thieves lie in dungeons and in the stocks, while public thieves go about in gold and silk.” What will God’s final word be? He will do as he said to Ezekiel; he will amalgamate princes and merchants, one thief with another, like lead and iron, as when a city burns down, leaving neither princes nor merchants’ (Martin Luther, Bûcher vont Kaufhandel und Wucher. Vom Jahr 1527).*
49. The predominant role of the basis laid by fishing, manufacture and agriculture for Holland’s development, quite apart from other circumstances, was already being discussed by writers of the eighteenth century. See Massie, for example.* As against the earlier conception that underestimated the scope and significance of Asiatic, ancient and medieval trade, it has now become the fashion to overestimate this to an extraordinary extent. The best antidote to this view is to consider and contrast English exports and imports today with those of the beginning of the eighteenth century. And yet these were already incomparably greater than those of any earlier trading people. (See [Adam] Anderson, History of Commerce [pp. 261 ff.].)
50. More than that of any other nation, the history of English economic management in India is a history of futile and actually stupid (in practice, infamous) economic experiments. In Bengal they created a caricature of English large-scale landed property; in the south-east they created a caricature of peasant smallholdings. In the north-west they did all they could to transform the Indian economic community with common property in the soil into a caricature of itself.
51. Since Russia has been making the most frantic attempts to develop a capitalist production of its own, one that is exclusively directed towards its home market and the adjacent Asiatic one, this is beginning to change. – F.E.
52. The same applies to the ribbon and braid makers of the Rhineland, and also the silk-weavers there. At Krefeld a special railway was built for the commerce between these rural hand-weavers and the urban ‘manufacturer’, but subsequently all the hand-weavers were made redundant by mechanization. – F.E.
53. Since 1865 this system has been put on a much wider basis. Details of it are given in the First Report of the Select Committee of the House of Lords on the Sweating System, London, 1888. – F.E.
54. A few passages could be quoted here in which economists, too, see the matter in this way. – ‘You’ (the Bank of England) ‘are very large dealers in the commodity of capital?’ [Marx’s italics], a director of that Bank was asked when appearing as a witness for the Report on Bank Acts, H. of C. 1857 [p. 104].
55. ‘That a man who borrows money with a view of making a profit by it, should give some portion of this profit to the lender, is a self-evident principle of natural justice’ (James Gilbart, The History and Principles of Banking, London, 1834, p. 163).
56. As Proudhon would have it, then, ‘a house’, ‘money’, etc. should not be lent as ‘capital’, but rather as ‘commodities… at cost price’ (pp. 43, 44). Luther stands somewhat above Proudhon. He already knew that profit-making is independent of the form of lending or buying: ‘They turn buying also into usury. But this is too much to tackle at once. We must confine ourselves for the time being to dealing with usury in lending, and after setting this right (after the day of judgement), we shall go on to give usury in buying its lesson too’ [Marx’s italics]. (M. Luther, An die Pfarrherrn wider den Wucher zu predigen [To the Clergy, to Preach against Usury, etc.], Wittenberg, 1540.)
57. ‘The equitableness of taking interest depends not upon a man’s making or not making profit, but upon its’ (i.e. the sum borrowed’s) ‘being capable of producing profit if rightly employed’ (An Essay on the Governing Causes of the Natural Rate of Interest, wherein the Sentiments of Sir W. Petty and Mr Locke, on that Head, are Considered, London, 1750, p.49. The author of this anonymous work is J. Massie).
58. ‘Rich people, instead of employing their money themselves… let it out to other people for them to make profit of, reserving for the owners a proportion of the profits so made’ (op. cit., pp. 23–4).
59. ‘The term “value”, when applied to currency, has three several meanings… (2) currency, actually in hand… compared with the same amount of currency to be received upon a future day. In this case the value of currency is measured by the rate of interest, and the rate of interest being determined by the ratio between the amount of liable capital and the demand for it’ (Colonel R. Torrens, On the Operation of the Bank Charter Act of 1844, etc., 2nd edn, 1847 [pp. 5, 6]).
60. ‘The ambiguity of the term “value of money” or “of the currency”, when employed indiscriminately as it is, to signify both value in exchange for commodities and value in use of capital, is a constant source of confusion’ (Tooke, Inquiry into the Currency Principle, p. 77). The major confusion here (which in fact lies in the thing itself), i.e. that value as such (interest) comes to be the use-value of capital, is something that Tooke does not see.*
61. ‘The natural rate of interest is governed by the profits of trade to particulars’ (Massie, op. cit., p. SI).
62. The following note occurs at this point in the manuscript: ‘The course of this chapter suggests it is better, before the laws of distribution of profit are investigated, to develop first of all the way in which the quantitative division becomes a qualitative one. No more is needed to make the transition from the previous chapter to this point, than to take interest as a portion of profit that is not yet determined more specifically.’ – F.E
63. ‘In the first period, immediately after pressure, money is abundant without speculation; in the second period, money is abundant and speculations abound; in the third period, speculation begins to decline and money is in demand; in the fourth period, money is scarce and a pressure arrives’ (Gilbart, A Practical Treatise on Banking, 5th edn, Vol. I, London, 1849, p. 149).
64. Tooke explains this ‘by the accumulation of surplus-capital necessarily accompanying the scarcity of profitable employment for it in previous years, by the release of hoards, and by the revival of confidence in commercial prospects’ (History of Prices from 1839 till 1847, London, 1848, p. 54).
65. ‘An old customer of a banker was refused a loan upon a £200,000 bond; when about to leave to make known his suspension of payment, he was told there was no necessity for the step, under the circumstances the banker would buy the bond at £150,000’ ([H. Roy] The Theory of the Exchanges. The Bank Charter Act of 1844, etc., London, 1869, p. 80).
66. Since the rate of interest is determined by and large by the average profit rate, extraordinary swindling can very often go together with a low rate of interest. For example the railway swindle of summer 1844. The Bank of England’s interest rate was only raised to 3 per cent on 16 October 1844.
67. J. G. Opdyke, for example, in his Treatise on Political Economy (New York, 1851) makes a most unsuccessful attempt to explain the general phenomenon of a 5 per cent rate of interest in terms of eternal laws. But incomparably more naive is Herr Karl Arnd in Die naturgemässe Volkswirth-schaft gegeniiber dem Monopoliengeist and dem Kommunismus, etc. [Natural Economics Opposed to the Spirit of Monopoly and Communism], Hanau, 1845. Here we may read: ‘In the natural course of the production of goods, there is only one phenomenon which seems to regulate to some extent the rate of interest, at least in fully developed countries; this is the ratio by which the volume of timber in European forests increases through its annual growth. This growth takes place, quite independently of its exchange-value’ (how curious of the trees to arrange their growth independently of their exchange-value!) ‘in the ratio of 3 or 4 to 100. Accordingly, therefore’ (since the growth of trees is quite independent of their exchange-value, however much their exchange-value may depend on their growth) ‘we should not expect a reduction below the level which it’ (the rate of interest) ‘has at present in the richest countries’ (pp. 124–5). This deserves to be known as the ‘primordial forest rate of interest’, and its discoverer makes a further praiseworthy contribution to ‘our science’ in this work as the ‘philosopher of the dog tax’ [pp. 420–21],
68. The Bank of England raises and lowers its discount rate according to the inflow and outflow of gold, though always of course with regard to the rate prevailing in the open market. ‘By which gambling in discounts, by anticipation of the alterations in the bank-rate, has now become half the trade of the great heads of the money centre’ – i.e. the London money market ([H. Roy] The Theory of the Exchanges, etc., p. 113).
69. ‘The price of commodities fluctuates continually; they are all made for different uses; the money serves for all purposes. The commodities, even those of the same kind, differ according to quality; cash money is always of the same value, or at least is assumed to be so. Thus it is that the price of money, which we designate by the term interest, has a greater stability and uniformity than that of any other thing’ (J. Steuart, Principles of Political Economy, French translation, 1789, IV, p. 27).
70. ‘This rule of dividing profits is not, however, to be applied particularly to every lender and borrower, but to lenders and borrowers in general… remarkably great and small gains are the reward of skill and the want of understanding, which lenders have nothing at all to do with; for as they will not suffer by the one, they ought not to benefit by the other. What has been said of particular men in the same business is applicable to particular sorts of business; if the merchants and tradesmen employed in any one branch of trade get more by what they borrow than the common profits made by other merchants and tradesmen of the same country, the extraordinary gain is theirs, though it required only common skills and understanding to get it; and not the lenders’, who supplied them with money… for the lenders would not have lent their money to carry on any branch of trade upon lower terms than would admit of paying so much as the common rate of interest; and therefore they ought not to receive more than that, whatever advantages may be made by their money’(Massie, op. cit., pp. 50, 51).
71.
The above figures for interest rates on the London money market on 9 December 1889, taken from the financial page of the Daily News of 10 December, show how large this variation may be on one and the same day. The minimum here is 1 per cent and the maximum 5 per cent. – F. E.
72‘The profits of enterprise depend upon the net profits of capital, not the latter upon the former’ (Ramsay, Essay on the Distribution of Wealth, p. 214). For Ramsay, net profits always means interest.
73. ‘Superintendence is here’ (in the case of the peasant proprietor) ‘completely dispensed with’ (J. E. Cairnes, The Slave Power, London, 1862, pp. 48–9).*
74. ‘If the nature of the work requires that the workmen’ (i.e. the slaves) ‘should be dispersed over an extended area, the number of overseers, and, therefore, the cost of the labour which requires this supervision, will be proportionately increased’ (Cairnes, op. cit., p. 44).
75. A. Ure, Philosophy of Manufactures, French translation, 1836, I, p. 67. Here this Pindar of the manufacturers also testifies that most of the latter have not the slightest understanding of the machinery they use.
76. In one case of which I have personal knowledge, a manufacturer whose business failed in the crisis of 1868 subsequently became the paid employee of his own former workers. After it went bankrupt, the factory had been taken over by a workers’ cooperative and the former owner employed as a manager. –F.E.
77. The accounts referred to here only go up to 1864, since the above was written in 1865. –F. E.
78. ‘Masters are labourers as well as their journeymen. In this character their interest is precisely the same as that of their men. But they are also either capitalists, or the agents of the capitalists, and in this respect their interest is decidedly opposed to the interests of the workmen’ (p. 27). ‘The wide spread of education among the journeymen mechanics of this country diminishes daily the value of the labour and skill of almost all masters and employers by increasing the number of persons who possess their peculiar knowledge’ (p. 30; Thomas Hodgskin, Labour Defended against the Claims of Capital, etc., London, 1825).*
79. ‘The general relaxation of conventional barriers, the increased facilities of education tend to bring down the wages of skilled labour instead of raising those of the unskilled’ (J. S. Mill, Principles of Political Economy, 2nd edn, London, 1849,1, p. 479).
80. Richard Price, An Appeal to the Public on the Subject of the National Debt, London, 1772 [p. 19]. He makes the naive wisecrack: ‘It is borrowing money at simple interest, in order to improve it at compound interest’ (R. Hamilton, An Inquiry into the Rise and Progress of the National Debt of Great Britain, 2nd edn, Edinburgh, 1814 [p. 133]). According to this, borrowing would be the most secure means of enrichment for private persons too. But if I borrow £100 at an annual interest of 5 per cent, for example, and assuming that this advance is for 100 million years, in the meantime I still have only £100 to lend out each year, and similarly £5 to pay. This process never enables me to lend out £105 simply by having borrowed £100. How would I then be able to pay the 5 per cent? By a new loan, or, if I am the state, by taxation. If the industrial capitalist borrows money and has to pay 5 per cent as interest out of a profit of say 15 per cent, he might consume 5 per cent (although his appetite grows with his income) and capitalize 5 per cent. In other words, 15 per cent profit is already presupposed, if 5 per cent interest is to be regularly paid. If the process continues, the profit rate will fall for the reasons already developed, say from 15 per cent to 10 per cent. But Price forgets completely that the interest of 5 per cent presupposed a rate of profit of 15 per cent, and he lets this rate continue with the accumulation of capital. He does not have to bother with the real process of accumulation at all, but only to lend money out, for it to return to him with interest. How it accomplishes this is quite immaterial to him, since this is in fact the innate quality of interest-bearing capital.
81. See Mill and Carey, and Roscher’s uncomprehending commentary on them.*
82. ‘It is clear, that no labour, no productive power, no ingenuity, and no art, can answer the overwhelming demands of compound interest. But all saving is made from the revenue of the capitalist, so that actually these demands are constantly made and as constantly the productive power of labour refuses to satisfy them. A sort of balance is, therefore, constantly struck’ (Labour Defended Against the Claims of Capital, p. 23. By Hodgskin).
83. In other words, they previously used first to fix the dividend, and then deduct the income tax as the dividend was paid to the individual shareholders. After 1844, however, the Bank first paid income tax on its total profit, and the dividend was then paid ‘free of income tax’. The same nominal percentages, therefore, are higher in the latter case by the amount of tax paid. – F. E.
84. More on Overstone’s confusion of concepts where capital is concerned is to be found at the end of Chapter 32. – F. E.
85. ØThe average of notes in circulation during the year was, in 1812, 106,538,000 francs; in 1818,101,205,000 francs; whereas the movement of the currency, or the annual aggregate of disbursements and receipts upon all accounts, was, in 1812,2,837,712,000 francs; in 1818,9,665,030,000 francs. The activity of the currency in France, therefore, during the year 1818, as compared with its activity in 1812, was in the proportion of three to one. The great regulator of the velocity of circulation is credit… This explains, why a severe pressure upon the money-market is generally coincident with a full circulation’ (The Currency Theory Reviewed, etc., p. 65). – ‘Between September 1833 and September 1843 nearly 300 banks were added to the various issuers of notes throughout the United Kingdom; the result was a reduction in the circulation to the extent of two million and a half; it was £36,035,244 at the close of September 1833, and £33,518,554 at the close of September 1843’ (ibid., p. 53). – ‘The prodigious activity of Scottish circulation enables it, with £100, to effect the same quantity of monetary transactions, which in England it requires £420 to accomplish’ (ibid., p. 55. This last refers only to the technical side of the operation).
86. ‘Before the establishment of the banks… the amount of capital withdrawn for the purposes of currency was greater, at all times, than the actual circulation of commodities required’ (The Economist, 1845, p. 238).
87. See for example the list of bankruptcies for a crisis year like 1857 in The Times, and compare the actual assets of those declared bankrupt with the amount of their debts. ‘The truth is that the power of purchase by persons having capital and credit is much beyond anything that those who are unacquainted practically with speculative markets have any idea of’ (Tooke,Inquiry into the Currency Principle, p. 79). ‘A person having the reputation of capital enough for his regular business, and enjoying good credit in his trade, if he takes a sanguine view of the prospect of a rise of price of the article in which he deals, and is favoured by circumstances in the outset and progress of his speculation, may effect purchases to an extent perfectly enormous compared with his capital’ (ibid., p. 136). ‘Merchants, manufacturers, etc., carry on operations much beyond those which the use of their own capital alone would enable them to do… Capital is rather the foundation upon which a good credit is built than the limit of the transactions of any commercial establishment’ (The Economist, 1847, p. 1333).
88. Thomas Chalmers.
89. We reproduce here the pertinent passage from Tooke, already quoted on pp. 529–30, in his original words. [Earlier Marx had quoted this passage in German translation.] ‘The business of bankers, setting aside the issue of promissory notes payable on demand, may be divided into two branches, corresponding with the distinction pointed out by Dr (Adam) Smith of the transactions between dealers and dealers, and between dealers and consumers. One branch of the bankers’ business is to collect capital from those who have not immediate employment for it, and to distribute or transfer it to those who have. The other branch is to receive deposits of the incomes of their customers, and to pay out the amount, as it is wanted for expenditure by the latter in the objects of their consumption… the former being a circulation of capital, the latter of currency’ (Tooke, Inquiry into the Currency Principle, London, p. 36). The first is ‘the concentration of capital on the one hand and the distribution of it on the other’; the latter is ‘administering the circulation for local purposes of the district’ (ibid., p. 37).
90. ‘It is a great error, indeed, to imagine that the demand for pecuniary accommodation’ (that is, for the loan of capital) ‘is identical with a demand for additional means of circulation, or even that the two are frequently associated. Each demand originates in circumstances peculiarly affecting itself, and very distinct from each other. It is when everything looks prosperous, when wages are high, prices on the rise, and factories busy, that an additional supply of currency is usually required to perform the additional functions inseparable from the necessity of making larger and more numerous payments; whereas it is chiefly in a more advanced stage of the commercial cycle, when difficulties begin to present themselves, when markets are overstocked, and returns delayed, that interest rises, and a pressure comes upon the Bank for advances of capital. It is true that there is no medium through which the Bank is accustomed to advance capital except that of its promissory notes; and that to refuse the notes, therefore, is to refuse the accommodation. But the accommodation once granted, everything adjusts itself in conformity with the necessities of the market; the loan remains, and the currency, if not wanted, finds its way back to the issuer. Accordingly, a very slight examination of the Parliamentary Returns may convince any one, that the securities in the hands of the Bank of England fluctuate more frequently in an opposite direction to its circulation than in concert with it, and that the example, therefore, of that great establishment furnishes no exception to the doctrine so strongly pressed by the country bankers, to the effect that no bank can enlarge its circulation, if that circulation be already adequate to the purposes to which a banknote currency is commonly applied; but that every addition to its advances, after that limit is passed, must be made from its capital, and supplied by the sale of some of its securities in reserve, or by abstinence from further investment in such securities. The table compiled from the Parliamentary Returns for the interval between 1833 and 1840, to which I have referred in a preceding page, furnishes continued examples of this truth; but two of these are so remarkable that it will be quite unnecessary for me to go beyond them. On the 3rd of January, 1837, when the resources of the Bank were strained to the uttermost to sustain credit and meet the difficulties of the money-market, we find its advances on loan and discount carried to the enormous sum of £17,022,000, an amount scarcely known since the war, and almost equal to the entire aggregate issues which, in the meanwhile, remain unmoved at so low a point as £17,076,000! On the other hand, we have on the 4th of June, 1833, a circulation of £18,892,000, with a return of private securities in hand, nearly, if not the very lowest on record for the last half-century, amounting to no more than £972,000!’ (Fullarton, op. cit., pp. 97, 98).
We can see from the following evidence of Mr Weguelin, Governor of the Bank of England, that a ‘demand for pecuniary accommodation’ need in no way be identical with a ‘demand for gold’ (what Wilson, Tooke and the others call capital): ‘The discounting of bills to that extent’ (one million daily for three successive days) ‘would not reduce the reserve’ (of banknotes), ‘unless the public demanded a greater amount of active circulation. The notes issued on the discount of bills would be returned through the medium of the bankers and through deposits. Unless these transactions were for the purpose of exporting bullion, and unless there were an amount of internal panic which induced people to lock up their notes, and not to pay them into the hands of the bankers… the reserve would not be affected by the magnitude of the transactions.’ – ‘The Bank may discount a million and a half a day, and that is done constantly, without its reserve being in the slightest degree affected, the notes coming back again as deposits, and no other alteration taking place than the mere transfer from one account to another’ (Report on Bank Acts, 1857, Evidence, nos. 241, 500). The notes therefore serve here merely as means of transferring credits.
91. The passage now following was incomprehensible in the original manuscript and has been newly drafted by the editor, up to the end of the parentheses. This point has already been dealt with in a different context in Chapter 26 [pp. 557–9] – F. E.
11. Average number of days for which a banknote remains in circulation:
Year |
£5 note |
£10 note |
£20–100 |
£200–500 |
£1,000 |
1792 |
— |
236 |
209 |
31 |
22 |
1818 |
148 |
137 |
121 |
18 |
13 |
1846 |
79 |
71 |
34 |
12 |
8 |
1856 |
70 |
58 |
27 |
9 |
7 |
(Table compiled by Marshall, the Bank of England cashier; in Report on Bank Acts. 1857, II, Appendix, pp. 300, 301.)*