*" How overweening fishing, manufacture, and agriculture were as a basis in the development of Holland, aside from other circumstances, has already been explained by writers of the 18th century, for instance, by Massie. In contradis- tinction to the former view, which underrated the volume and importance of the commerce of Asia, of antiquity, and of the Middle Ages, it has now become the custom to overestimate it extraordinarily. The best remedy against this conception is a study of the imports and exports of England in the beginning of the 18th century and their comparison with modern imports and exports. And yet this 18th century commerce was incomparably greater than that of any former trading nation. (See Anderson, History of Commerce.)
" If any nation's history, then it is the history of the English management of Historical Data. 393 exerts a revolutionaiy influence on these organisations and tears tliem apart only to the extent that it destroys by the low prices of its goods the spinning and weaving industries, which are an archaic and integral part of this unity. And even so this work of dissolution is proceeding very slowly. It pro- ceeds still more slowly in China, where it is not backed up by any direct political power on the part of the English. The great economy and saving in time resulting from the direct connection of agriculture and manufacture offer here the most dogged resistance to the products of great industries, whose prices are everywhere perforated by the dead expenses of their process of circulation. On the other hand, Russian com- merce, unlike the English, leaves the economic basis of Asiatic production untouched.^^ The transition from the feudal mode of production takes tw;o roads. The^^xrodtwer becomes a merchant and capitalist, in contradistinction from agricultural natural economy and tha_guil_(^€ncircled handicrafts of medieval town industry. This is the really revolutionary way. Or, the merchant takes possession in a direct way o£_production. WhileJ;his way serves historically as a mode of transition — instance the Eng- lish~cIothier of the 17th century, who brings tlie_ weavers, al- thougHjthey remain independently at work, under his control by selling^ wool to them and buying cloth from them — never- theless it cannot by itself ^o much for the overthrow of the old iaode_oX,pxaduction, but rather preserves it and uses it as its/ premise. For example, even up to the middle of the 19tli century the manufacturer in the French silk industry and in the English hosiery and lace industries was but nominally a manufacturer, and merely a merchant in point of fact, who permitted the weavers to continue their Avork in the old un- India which is a string of unsuccessful and really absurd (and in practice in- famous) experiments in economics. In Bengal they created a caricature of Eng- lish landed property on a large scale; in southeastern India a caricature of small a'lotment property; in the Northwest they transformed to the utmost of their ability the Indian commune with common ownership of the soil into a caricature of itself.
'^ Since Russia has begun making frantic exertions to develop its own capitalist production, which is exclusively dependent upon its home market and the neigh- boring Asiatic states, this is also gradually changing.— F. E.
394 Capitalist Production.
organised way and exerted only the control of the merchant, for whom thej work in reality. ^^ This method is everywhere an obstacle to a real cajjitalist mode of production and de- clines with the development of the latter. Without revolu- tionising the mode of production, it deteriorates merely the condition of the direct producers, transforms them into mere wage workers and proletarians under worse conditions than those who have already been placed under the immediate con- trol of capital and absorbs their surplus-labor on the basis of the old mode of production. The same conditions exist in a somewhat modified form in the London furniture industry, so far as it is carried on by handicrafts. Particularly in the Tower hamlets it is practised on a very extensive scale. The whole production is divided into numerous separate lines in- dependent of one another. One business makes only chairs, another only tables, a third only bureaus, etc. But these lines of business themselves are run more or less like crafts, by one small master with a few journeymen. ^^Tevertheless the output is too large to work directly for private persons. The products are bought by owners of furniture stores. On Sat- urdays the master sees them and sells his product, and the transaction is closed with as much haggling as is done in a pawnshop over the loan on this or that piece. The masters need this weekly sale, were it for no other reason than to buy more raw materials for next week and pay wages. Under these circumstances, they are really only middlemen be- tween their employes and the merchants. The merchant is the real capitalist, who pockets the largest share of the sur- plus-value.^^ A similar condition exists in the transition to manufacture from lines, which were formerly carried on as handicrafts or as sidelines to rural industries. According to the development ^^ The same is true of the ribhon and basting makers and silk weavers in the Rhine districts. Near Crefeld even a railroad has been built for the intercourse of these rural hand weavers with the "manufacturer" in the city, but has ' later been tied up, together with the handloom weavers themselves, by the mechanical weaving industry. — F. E.
"This system has been developed since 1865 on a still larger scale. Details concerning it are contained in the First Report of the Select Committee of the House of Lords on the Sweating System, London, 1S88. — F. E.
Historical Data.
of such small independent businesses — which may even em- ploy machinery that admits of a craftslike operation — the transition to large scale industry takes place. The machine is driven by steam, instead of by hand. This is the case, for in- stance, of late in the English hosiery industry.
T4iere-J^^_jionsequently^_a^Jhreefoldjtransition. Eirat,^ the merchant becomes directly an industrial capitalist. This is the case in crafts conditioned on jwmrierce, especially indus- tijes producing luxuries, which are^importeTlpy the merchants together with the raw materials and laborers _frqni foreign ' count ries^^as they were in Italy from Constantinople in the "^ 15th century. In the s^ond ^lace, tha mercliantjconsBrts the sniaTT masters into his middlemen or, perhajps^ buys direct from the self-producer, leaying_himjioininally independent and his mode_of production unchanged. In the third place, the in- dustrial becomes' a merchant and produces immediately on a large scale for commerce.
In the Middle Ages, the merchant is merely the man who, as Poppe correctly says, " removes " the goods produced by the guilds or the peasants. The merchant becomes an industrial capitalist, or rather, he lets the craftsmen, particularly the small rural producers, work for him. On the other hand, the producer becomes a merchant. The mastiiiusEeayer, instead of receiving his wool in installments from the merchant ~HTrdr" working for-Wm witTi hia.40urnej[nien buys wool or yarn him- self and sejjsjiis cloth to the merchant. The elements of pro- duction pass into~Tlis process of production as commodities bought by himself. And instead of producing for the indi- vidual merchant, or for definite customers, the master cloth; weaver produces for the commercial world. The producpar^s himself a merchant. The merchants' capital performs no longer anything but the process of circulation. Originally the commerce was the premise for the transformation of the crafts, rural domestic industries, and feudal agriculture into capitalist enterprises. It develops the products into commod- ities, either by creating a market for them, or by carrying new equivalents in the form of goods to them and supplying pro- duction with new raw and auxiliary materials. In this way 396 Capitalist Production.
it opens up new lines of production, which are based at the outset upon commerce, both as concerns the production for the home and world market and as concerns conditions of pro- duction originated by the world market. As soon as manufac- ture gains sufficient strength, and^till more large scale indus- trj7Tt~creates in its turn a market_for itself and captures it with its commodities. ISTow commerce becomes the servant of ind.ustrial production, and a continual expansion of the mar- ket_becomes a vital necessitj~fof^ industrial production. An ever more extended wholesale production floods the existing market and thereby works continually toward a still wider expansion of the market and a bursting of its bonds. What restricts this wholesale production, is not commerce (to the extent that it expresses the existing demand), but the magni- tude of the employed capital and the developed productivity of labor. The industrial capitalist always has the world market before him, compares, and must continually compare, his own cost-prices with those of the whole world, not only with those of his home market. In former periods this comparison falls almost entirely upon the shoulders of the merchants, and thereby secures for merchants' capital the supremacy over in- dustrial capital.
The first theoretical treatment of modem modes of produc- tion — the mercantile system — started out necessarily from the superficial phenomena of the process of circulation, which are presented in an independent form by the movements of merchants' capital. Therefore it grasped only the semblance of things. This^jwas partly due to the fact that merchants' capital is the first free mode of existence of capital in general. Qn_the^her hand, itjwas due to the overwhelming influence exerted by this capital during the first period of revolution of fejidaLpLroduction, the period of genesis of modern production. The real science of modern economy does not begin, until the- oretical analysis passes from the process of circulation to the process of production. It is true, interest-bearing capital is likewise a very old form of capital. But we shall see later, why jnercantilism did not take its departure from it, but as- sumed a controversial attitude towards it.
PART V.
DIVISION OF PEOFIT INTO INTEEEST AND PEOFITS OE ENTEEPEISE.
THE INTEEEST-BEAEING' CAPITAL.
CHAPTEE XXI.
THE INTEREST-BEARING CAPITAL.
In our first discussion of the general, or average, rate of profit in Part II of this volume, we did not have this rate before us in its complete form, since the equalisation of profit appeared there only as an equalisation between the various industrial capitals invested in different spheres. This was further sup- plemented in the preceding Part, in which the participation of merchants' capital in this equalisation and the commercial profit were discussed. By this means the general rate of profit and the average profit presented themselves within more cir- cumscribed limits than before. In the further process of our analysis it should be remembered, that any future refer- ence to the general rate of profit or to the average profit means only this latter, completed, form of the average rate. Since this rate is now the same for the industrial and the mercantile capital, it is no longer necessary, so far as this average profit is concerned, to make any distinction between industrial and commercial profit. Wliether capital is invested industrially in the sphere of production, or commercially in the sphere of circulation, it yields the same average profit an- nually in proportion to its magnitude.
Money — which signifies here any independent expression of a certain amount of value, whether it exists actually as 398 Capitalist Production.
money or as commodities — may be converted into capital on the basis of capitalist production. By this conversion it is transformed from a given value to a self-expanding, increas- ing, value. It produces a profit, that is, it enables a capital- ist to extract a certain amount of unpaid labor, surplus-prod- ucts ani^ surplus-value, from the laborers and to appropriate it to himself. In this way it acquires, aside from its use- value as money, an additionel use-value, namely that of serv- ing as capital. Its use-value consists then precisely in the profit, which it produces when converted into capital. In this capacity of potential capital, of a means for the produc- tion of profit, it becomes a commodity, but a commodity of a peculiar kind. Or, what amounts to the same, capital a§ cap- ital becomes a commodity.^^ Take it that the average rate of profit is 20%. In that case a machine, valued at 100 p.st., employed as capital under the prevailing average conditions and with an average exertion of intelligence and adequate activity, would yield a profit of 20 p.st. In other words, a man having 100 p.st. at his disposal, holds in his hand a power by which 100 p.st. may be turned into 120 p.st., or by which a profit of 20% may be produced. He holds in his hand a potential capital of 100 p.st. If this man relinquishes these 100 p.st. for one year to another man, who uses this sum actually as capital, he gives him the power to produce a profit of 20%, a surplus-value, which costs this other nothing, for which he pays no equivalent. If this man should pay, say 5 p.st. at the close of the year to the owner of the 100 p.st., out of the produced profit, he would be paying for the use-value of the 100 p.st., the use- value of its function as capital, the function of producing 20 p.st. of profit. That part of the profit, which he pays to the owner, is called interest. It is merely another name, a special term, for a certain part of the profit, which capital in process of its function has to give up to its owner, instead of keeping it in its owti pockets.
*° At this place, some passages should be quoted, in which the economists con- ceive the matter in this way. " You (the Bank of England) are very large dealers in the commoditv capital? " is a Question presented to a director of this bank on the witness stana. Cbee Report on Sank Acvs, H. of C, 1857.)
It is evident, that the possession of 100 p.st. gives to their owner the power to absorb the interest, a certain portion of the profit produced by his capital. If he did not give the 100 p.st. to the other man, then this other could not produce any profit, and could not act in the capacity of capitalist at all with reference to these 100 p.st.^^ To speak in such a case of natural justice, as Gilbart is doing (see note), is nonsense. The justice of the transactions between the agents of production rests on the fact that these transactions arise as natural consequences from the conditions of production. The juristic forms, in which these economic transactions appear as activities of the will of the parties con- cerned, as expressions of their common will and as contracts which may be enforced by law against some individual party, cannot determine their content, since they are only forms. They merely express this content. This content is just, when- ever it corresponds, and is adequate, to the mode of produc- tion. It is unjust, whenever it contradicts that mode. Slavery on the basis of capitalist production is unjust; like- wise fraud in the quality of commodities.
The 100 p.st. produce the profit of 20 p.st. by functioning as capital, whether it be industrial or commercial. But the indispensable condition of this function as capital is that this money is used as capital, that this money is invested in the purchase of means of production (in the case of industrial capital), or of commodities (in the case of merchants' cap- ital). But in order to be expended, it must be there. If A, the owner of the 100 p.st., were to spend them for his private expenses, or to keep them as a hoard, they could not be invested by B, in his capacity as a capitalist, as capital. B does riot invest his own capital, but that of A. But he cannot expend the capital of A without the consent of A, Therefore it is really A, who first expends these 100 p.st. as capital, although his whole function as a capitalist is limited to this expenditure of 100 p.st. as capital. So far ^^ " That a man, who borrows money with the intention of making a profit on it, should give a portion of the profit to the lender, is a self-understood principle of natural justice." (Gilbart, The History and Principles of Banking, London, 1834, 400 Capitalist Production.
as these 100 p.st. are concerned, B acts in the capacity of a capitalist only because A lends him this money and thus expends it as capital.
Let us first consider the peculiar circulation of interest- bearing capital. Then we shall analyse in the second place the peculiar manner, in which it is sold as a cotnmodity, being merely lent instead of relinquished for good.
The point of departure is the money, which A advances to B. This may be done with or without security. How- ever, the first named form is the more ancient, with the exception of advances on commodities or on certificates of indebtedness, such as bills of exchange, bonds, etc. These special forms do not concern us here. We are dealing here wdth interest-bearing capital in its ordinary form.
In the hand of B, the money is actually converted into capital, passes through the process M — C — M', and returns as M' to A, as M + increment of M, where the increment of M represents the interest. For the sake of simplicity we leave out of consideration the case, in which capital stays in the hands of B for a long term and interest is paid at period- ical intervals.
The movement, then, is M — M — C — M' — M'. What appears duplicated here is 1) the expenditure of the money as capital, 2) its reflux as realised capital, as M', or as M -f- increment of M.
In the movement of merchants' capital, M — C — M', the same commodity changes hands twice, or even more than twice, if one merchant sells to another. But every change of hand of these commodities indicates a metamorphosis, a purchase or sale of commodities, no matter how often this process may be repeated until it ends in consumption.
On the other hand, the same money changes hands twice in C — M — C, but this indicates the complete metamor- phosis of the commodity, which is first converted into money and then from money back into another^ commodity.
But in the case of interest-bearing capital, the first change of hands of M is not a phase of either the metamorphosis of a commodity or of the reproduction of capital. It does i not become so until the second change of hands, in the hands of the man acting in the capacity of a capitalist, who carries on a trade with it or transforms it into productive capital, ^he first change of hands of M does not express anything else in this case but its transfer, or handing over by contract, from A to B. This is a transfer, which usually takes place under certain juristic forms and stipulations.
This duplicated expenditure of money as capital, the first of which is merely a transfer from A to B, is supplemented by the duplication of its reflux. As M', or M + increment of M, it flows back out of the process to the man acting in the capacity of a capitalist. This man in his turn transfers it back to A, together with a part of the profit, of realised capital, of M + increment of M, which, however, is not equal to the entire profit, but only a part of the profit, the interest. It flows back to B only as the thing which he had invested, as capital in process of function, but as the property of A. In order that its reflux may be complete, B must re- turn it to A. But B has not only to return the amount of the capital, he must also turn over to A a part of the profit, which he made with this capital, and this part is called in- terest. For A gave him this money only as a capital, that is, as a value, which is not only maintained by its move- ments, but brings also a surplus-value to its owner. It re- mains in the hands of B only so long as it is performing its function of capital. And it ceases to be capital as soon as it is returned to its owaier on the stipulated date. When no longer serving as capital, it must be returned to A, who never ceased being its legal owner.
The form of lending, which is peculiar to this commodity, this capital as a commodity, and which also occurs in other transactions instead of that of sale, follows from the simple definition that capital serves here as a commodity, or that money as capital becomes a commodity.
It is necessary to make a distinction here.
We have seen in Volume II, chapter I, and recall at this point, that capital senses in the process of circulation as commodity-capital and money-capital. But in neither ol 402 Capitalist Production.
tliese forms does capital become a commodity as capital.
As soon as the productive capital has transformed itself into commodity-cajDital, it must be thrown upon the market, it must be sold as a commodity. There it serves simply in the capacity of a commodity. The capitalist then appears only as a seller of commodities, just as the buyer is only a buyer of commodities. As a commodity, the j)roduct must realise its value in the process of circulation, by its sale, must assume the form of money. In this respect it is quite immaterial, whether this commodity is bought by a consumer for the purpose of subsistence, or by a capitalist as a means of j)roduction to become a part of his capital. In the act of circulation, the commodity-capital serves only as a com- modity, not as capital. It is a commodity-ca^^'i^aZ^ as dis- tinguished from a simple commodity, 1), because it is preg- nant with surj^lus-value, so that the realisation of its value is simultaneously a realisation of surj)lus-value. But this does not alter in any way its simple existence as a com- modity, as a product of a certain j^rice. 2) It is a com- modit j'Capital^ because its function as a commodity is a phase in its process of reproduction as capital, so that its move- ment as a commodity, being a part of its movement in process, is simultaneously its movement as capital. Yet it does not become capital by the act of selling as such, but only through the connection of this act with the whole movement of this definite amount of value in the capacity of capital.
In like manner it serves only as money pure and simple, when acting in the capacity of money-capital, that is, as a means of buying commodities (the elements of production). The fact that this money is at the same time money-capital, a form of capital, is not due to the act of buying, which is the service performed by it as money. It is due to the con- nection of this act with the total movement of capital, since this act, which it performs as money, inaugurates the capital- ist process of production.
But so far as they perform any service and play any actual role in the process, commodity-capital on the market serves only as a commodity, money-capital only as money. At no time during the metamorphosis, viewed hy itself, does the capitalist sell his commodities as capital to the buyer, al- though they represent a capital for himself, nor does he give up money to the sellers in his capacity as a capitalist. In either case he exchanges his commodities simply as com- modities, and the money simply as money, as a means of purchasing commodities.
It is only in the connection with the whole process, at the moment where the point of departure appears simultaneously as the point of return, in M — M' or C — C, that capital in the process of circulation appears as capital (while it appears as capital in the process of production through the subordina- tion of the laborer under the capitalist and the production of surplus-value). In this moment of return, however, the connection disajDpears. What is present is M', that is money plus increment of money (regardless of whether the amount of value increased by this increment has the form of money, commodities, or elements of production), a certain amount of money equal to the amount originally advanced plus an increment, which is the realised surplus-value. And it is precisely at this point of return, where capital exists as a realised capital, as an expanded value, that capital never passes into circulation — considering this point as a fixed point of rest, whether imaginary or real —, but rather ap- pears to be withdra^Ti from circulation as a result of the whole process. Whenever it is again relinquished, it is never transferred to another as capital, but sold to him as a simple commodity, or given to him as simple money in exchange for commodities. It never appears as capital in its process of circulation, but only as a commodity or as money, and this is the only form in which it exists so far as others are concerned. Commodities and money are here capital, not inasmuch as commodities change into money, or money into commodities, not with reference to their actual relations to sellers or buyers, but only with reference to their ideal relations, that is, subjectively speaking, their relations to the capitalist himself, or objectively speaking, as elements of the process of reproduction. So far as capital is capital, 404 Capitalist Production.
it exists only in its actual function, not in the process of circulation, but only in the process of production, in the process by which labor-power is exploited.
But it is different with interest-bearing capital, and it is precisely this difference, which constitutes its specific char- acter. The owner of money, who desires to invest his money as interest-bearing capital, transfers it to some one else, throws it into circulation, makes a commodity of it as capital. It is not a capital for himself alone, but also for others. It is not capital merely for the man who offers it for invest- ment, but it is handed to others at the outset as capital, as a value endowed with the use-value of creating surplus-value, profit; a value which preserves itself in process and returns to its original owner, in this case the owner of money, after performing its function. It moves away from him only for a certain time, it passes for a while from the possession of its owner into that of a capitalist performing his business, it is neither given up in payment nor sold, but merely loaned. It is relinquished only with the understanding that it shall in the first place return to its point of departure after a cer- tain time, and that it shall return, in the second place, as realised capital, a capital having actually performed its fmic- tion of creating surplus-value.