Commodities, which are loaned out as capital, are loaned either as fixed or as circulating capital, according to their constitution. Money may be loaned in either form. For in- stance, it may be loaned as fixed capital in the form of an annuity, whereby a portion of the capital returns with the interest. Some commodities, owing to the nature of their use-values, can be loaned only as fixed capital, such as houses, ships, machines, etc. But all loan capital, whatever be its forms, and no matter in what manner the nature of its use- value may modify its return, is only a specific form of money-capital. For the thing that is loaned here is always a definite sum of money, and it is this sum on which interest is calculated. If the thing that is loaned is neither money nor circulating capital, it is paid back in the same way in which fixed capital returns. The lender receives periodically a certain interest and a portion of the consumed value of the fixed capital itself, an equivalent for the periodical wear and tear. And at the end of the stipulated term the uncon- sumed portion of the loaned fixed capital is retunied in natura. If the loaned capital is circulating capital, it is like- wise returned in the manner peculiar to circulating capital.
The manner of reflux, then, is always determined bj the actual circulation of the capital in process of reproduction and its specific kind. But so far as loan capital is concerned, its reflux assumes the form of return payments, because its advance, by which it is relinquished, has the form of loaning.
In this chapter we treat only of money-capital proper, from which the other forms of loaned capital are derived.
The loaned capital returns in a twofold way. First it re- turns in the process of reproduction to the capitalist per- forming his function, and then its return is duplicated by its transfer to the lender, the money-capitalist, in the form of a return payment to its real owner, its legal point of de- parture.
In the actual process of circulation the capital appears always as a commodity or as money, and its movements are always dissolved into a series of purchases and sales. In short, the process of circulation resolves itself into the meta- morphosis of commodities. It is different, when we consider the process of reproduction as a whole. If we take our de- parture from money (and it is the same, when we start off with commodities, since we then take our departure from their value and look upon them from the point of view of money), we see that a certain sum of money is expended and returns after a certain period with an increment. This sum has preserved itself and expanded itself in the course of a certain rotation. To the extent that money is loaned as capi- tal, it is loaned as just such a sum of money, which preserves and expands itself, returns after a certain period with an in- crement, and is ready to pass through the same process once more. It is not expended either as money or as a commodity, it is neither exchanged for commodities when advanced in the form of money, nor sold in exchange for money, when 4o6 Capitalist Production.
advanced in the form of commodities. It is expended as capital. This reflexive relation to itself, in which capital presents itself when the process of production is viewed in its entirety and as a unit, and in which money appears as self-increasing money, is here imposed upon it as its char- acter and peculiarity without the intervention of any inter- mediary movement. And it is expended in this peculiar fonn, when it is loaned as money-capital.
A very queer conception of the role of money-capital is held by Proudhon '' Gratuite du Credit. Discussion enter M. F. Bastiate et M. Proudhon. Paris, 1850.") Loaning appears as an evil to Proudhon because it is not selling. Loaning at interest is for him " the faculty of always selling the same article over and over, and of receiving its price again and again, without ever relinquishing the ownership of the tilings one is selling " (page 9). The object, such as money, a house, etc., does not change owners, as it does in selling and buying. But Proudhon does not see, that no equivalent is received for money handed over as interest-bearing capital. It is true that objects are passed from one to another in every act of buying and selling, so far as they are at all processes of ex- change. The ownership of the sold object is always relin- quished. But its value is not given up. In selling the com- modity is relinquished, but not its value, which is given in return in the form of money, or in another form which here takes the place of money, namely of certificates of indebted- ness, or of titles of payment. In buying money is given away, but its value, which is recovered in the shape of commodities. The industrial capitalist holds the same value in his hands during the entire process of reproduction (except the surplus- value), only it assumes different forms.
To the extent that exchange takes place, that is, an ex- change of objects, no change of value takes place. The same capitalist always holds the same value in his hands. But so long as surplus-value is produced by the capitalist, no ex- change takes place. As soon as exchange takes place, the surplus-value is already incorporated in the commodities. If we do not have in mind the individual acts of exchange, but the total circulation of capital, M — C — -M', we see that a definite amount of values is continually advanced, and that this amount plus the surplus-value, or the profit, is recovered from the circulation. It is true, the individual acts of ex- change do not reveal the fact that they are promoting this process. And it is precisely this process of M as capital, on which the interest of the money-lending capitalist rests and from which it arises.
" In fact," says Proudhon, '^ the hat maker, who sells hats receives their value, no more and no less. But the money-lending cajDitalist...does not recover merely his capital: he recovers more than his capital, more than he throws into circulation; he receives an interest over and above his capital." (Page 169.) The hatter stands here in the jjlace of the productive capitalist as distinguished from a loan capitalist. Evidently Proudhon did not learn the secret, which enables the capitalist to sell commodities at their value (the equalisation of values by the prices of production is here immaterial for his conception), whereby he receives a profit in addition to the capital, which he throws into circulation. Let us assume that the price of production of 100 hats is 115 pounds sterling, and that this price of production happens to be identical with the value of the hats, which means that the capital invested in the production of hats is of the same composition as the average social capital. If the profit is 15 p.st., or 15%, then the hatter gets this profit of 15 p.st. by selling his hats at their value of 115. They cost him 100 p.st. If he has produced them with his own capital, he pockets the whole surplus of 15 p.st. If he has borrowed the capital, he may have to give up 5 p.st. for interest. This does not alter anything in the value of the hats, but only in the distribution of the surj^lus-value already contained in this value between different persons. Since the value of the hats is not affected by the payment of interest, it is nonsense on the part of Proudhon to say: " As in commerce the interest of capital is added to the wages of laborers in making up the price of commodities, it is impossible that the laborer should be able to buy back the product of his own labor. To live by work- 4o8 Capitalist Production.
ing is a principle, which implies a contradiction under the rule of interest." ^^ How little Proudhon understood the nature of capital, is shown by the following statement, in w^hicli he describes the movement of capital in general as a movement peculiar to interest-bearing capital: " Since money-capital, from ex- change to exchange, comes always back to its source by the i accumulation of interest, it follows that re-investment is al- ways made by the same hand and profit accrues always to the same person."
What is it, now, that remains a riddle to him in the peculiar movement of interest-bearing capital? The categories buy- ing, price, giving up objects, and the spontaneous form, in which surplus-value appears here; in short, the phenomenon that capital as such has become a commodity, so that selling has been turned into lending and price into a share in the profit.
The return of capital to its point of departure is the most general and characteristic movement of capital in its total circulation. This is by no means a peculiarity of interest- bearing capital. Its peculiarity is rather the externalised form of its return without the intervention of any circulation. The loaning caj)italist lets go of his capital, transfers it to some industrial capitalist, without receiving any equivalent. His handing over of capital is not an act of the real circula- tion of capital at all, but serves merely as a prelude for the industrial capitalist who effects this circulation. This first change of place of money does not express any act of metamor- phosis, neither buying nor selling. Its o^vnership is not re- linquished, because no exchange takes place, no equivalent is offered. The return of the money from the hand of the in- dustrial capitalist to that of the loaning capitalist supplements " " A house," " money," etc., are not to be loaned as " capital," if Proudhon can have his way, but to be sold as " commodities...at cost-price " (page 44). Luther stood somewhat higher than Proudhon. He knew at least that the making of profits does not depend on the manner of lending or buying: " They turn buying also into usury. But this is really too much for one bite. We must first confine ourselves to one thing, usury in lending, and after we shall have stopped that (after judgment day), we will not fail to preach against usury in buying." (Martin Luther. An die Pfarherrn wider den Wucher su predigen. Wittenberg, 1525.)
merely the first act of handing over the capital. This capital, after having been advanced in the form of money, returns to the industrial capitalist from the process of circulation in the form of money. But as the capital did not belong to him when he expended it, neither can it belong to him on its re- turn. The passage through the process of reproduction can- not by any means give him the ownership of this capital. Hence he must restore it to its lender. The first transfer of the capital from the hands of the lender to those of the borrower is a legal transaction, which has nothing to do with the actual process of reproduction, but merely inaugurates it. The restoration, which transfers the returned capital from the hands of the borrower back to those of the lender is an- other legal transaction, a supplement of the first. The first inaugurates the actual process, the second takes place after this process. The point of departure and of return, the dis- pensation and recovery of the loaned capital, thus appear as arbitrary movements promoted by legal transactions, which take place before and after the actual process of capital and have nothing to do with it. So far as this actual process is concerned, the industrial capitalist might as well own the capital at the outset, so that it would return to him as his prop- erty.
In the first introductory act the lender gives his capital to the borrower. In the second and closing act after the proc- ess, the. borrower returns the capital to the lender. To the extent that we consider merely the transaction between these two — and leaving aside the question of interest for the pres- ent —, in other words to the extent that we have in mind only the movement of the loan capital itself between the lender and the borrower, the whole movement is comprised within these two acts (separated by a longer or shorter time, during which the process of actual reproduction of capital takes place). And this movement, this dispensing on condi- tion of returning, constitutes per se the movement of lending and borrowing, which is a specific form of a conditional dis- pensation of money or commodities.
The characteristic movement of capital in general, namely 4IO Capitalist Production.
the return of money to the capitalist, the return of capital to its point of departure, assumes in the case of interest-bearing capital a wholly externalised form, separated from the actual movement of which it is an expression. A lets go of his money, not in the sense of money, but of capital. This im- plies no transformation of the capital. It merely changes hands. Its real transformation into capital is not performed until it is in the hands of B. But it has become capital for A as soon as he has given it to B. The actual reflux of capital from the processes of production and circulation takes place only for B. But for A the reflux assumes the same fonn as the dispensation. The capital returns from the hands of B to those of A. Dispensing, loaning money for a certain time and recovering it with interest (surplus-value) make up the com- plete form of the movement, which is peculiar to interest- bearing capital as such. The actual movement of the loaned money as capital constitutes a process, which is outside of the transactions between the lender and the borrower. In these transactions the intermediate process is obliterated, in- visible, not directly comprised.
Being a peculiar sort of commodity, capital has its own peculiar mode of alienation. Its return in the present case is not the expression, not the consequence or result, of a definite series of economic processes, but the outcome of a specific legal agreement between buyer and seller. The time of return depends on the duration of the process of reproduction. But in the case of interest-bearing capital, its return as capital seems to depend on the mere agreement between lender and borrower. The return of capital as a part of this agreement no longer appears as a result due to the process of reproduc- tion, but seems to take place without depriving the loaned capital of the form of money. It is true that these trans- actions are actually determined by the reproductive returns. But this is not evident in the transactions themselves. Nor is it always the case in practice. If the return in reproduc- tion does not take place at the proper time, then the bor- rower has to face the problem, wdiat other resources he can call into j)lay to fulfill his obligations towards the lender. The mere form of this capital — that is, money expended as a certain sum, A, and returning as another sum A + —, after a certain lapse of time, without any other intermediate connection but this lapse of time — is but an abstract image of the actual movement of capital.
In the actual movement of capital, its return is a phase of the process of circulation. The money is first converted into means of production; the process of production trans- forms it into commodities; by the sale of the commodities it is reconverted into money, and in this form it returns to the hands of the capitalist, who originally advanced the capital in the form of money. But in the case of interest-bearing capital, both the alienation and the return are the results of a legal transaction between the owner of capital and another person. We see only the alienation and the return. What- ever passes during the interval is obliterated.
But since money, when advanced as capital, has the faculty of returning to the person, who expended, it as capital, since M — • C — M' is the immanent form of the movement of capital; for this very reason the owner of money can loan it as capital, a thing having the faculty of returning to its point of departure, of preserving its value while under way in proc- ess, and of increasing it. He loans it as capital, because it returns to its point of departure after having been trans- formed into capital, so that the borrower can restore it to the lender after a certain period, because he has recovered it himself.
The loaning of money as capital — its alienation on con- dition that it be returned after a certain time — is therefore conditioned on the requirement that this money be actually employed as capital, so that it may actually flow back to its starting point. The actual cycle of money as capital is there- fore the basic condition of the legal transaction, by which the borrower has to return the money to the lender. If the bor- rower does not invest the money as capital, it is his own business. The lender loans it as capital, and as such it is 412 Capitalist Production!
supposed to perform the capitalist functions, which include the circulation of money-capital until it reaches once more its starting point in the form of money.
The transactions M — C and C — M' in the circulation, in which a certain amount of value serves as money or com- modities, are but intermediary processes, individual phases of a whole movement. As capital, this sum passes through the whole movement M — M'. It is advanced as money, or as a sum of values in some form, and returns as a sum of values. The lender of money does not expend it in the pur- chase of commodities, or, if this sum of values exists in the form of commodities, he does not sell it for money, but he advances it as capital, as M — M', as a value, which returns after a certain lapse of time to its point of departure. In- stead of buying and selling, he loans. This loaning, then, is the form corresponding to its alienation as capital, instead of its alienation as money or commodities. This does not mean, however, that loaning may not be used in transactions, which have nothing to do with the capitalist process of re- production.
\ \ We have so far considered only the movements of loaned capital between its owner and the industrial capitalist. Now we shall have to inquire into interest.
The lender expends his money as capital; the amount of values, which he relinquishes into the hands of another, is capital and returns to him. But the mere return of the loan capital into his hands as the same amount would not be its reflux as capital, but merely the return of a loaned sum of values. In order to return as capital, the advanced sum of values must not only be preserved in process, but must also be expanded, must return with a surplus-value, must be re- covered as M 4~ increment of M. This increment of M is in the present case the interest. It is that portion of the average profit, Avhich does not remain in the hands of the practicing capitalist, but falls to the share of the money capital- ist.
The fact that the money capitalist expends it as capital implies that it must be restored to him as M -|- increment of M. Later Ave shall also have to consider the case, in which interest is paid in fixed intervals without the simultaneous return of the capital, whose definite return does not take i^lace until at the end of,a longer period.
What is it that the money capitalist gives to the borrower, the industrial capitalist? What does he really pass over to him? It is only this transaction of handing over money which makes of the loaning of money a lending of money as capital, that is, the lending of capital as a commodity.
It is only by this act of passing money over to another that the capital is loaned by tlie money lender as a commodity, or that the commodity at his disposal is given to another as cai^itel, Wh?ii; is it that is alienated in ordinaiy sale? It is not the value of the sold commodities, for this changes merely its form. The value exists ideally in a commodity as its price, before it passes" actually into the hands of the seller as money. The same value and the same amount of value merely change their form iu such a case. In one instance they exist in the form of a commodity, in another in the form of money. The thing which is actually alienated by the seller, and which for this leason passes into the individual or productive consump- tion of the buyer, is the use-value of the commodity, is the commodity as a use-value.
What, then, is the use-value, which the money capitalist passes over for the period of the loan and relinquishes into the hands of the borrower, the productive capitalist? It is the use-value, which the money assumes by being capable of being invested as capital and performing the functions of capital, so that it can create a definite surplus-value, the aver- age profit (any excess or fall below this is here a matter of accident), during its process, in addition to preserving its original magnitude of value. In the case of other commodities the use-value is ultimately consumed. Their substance dis- appears in consequence and with it their value. But the com- 414 Capitalist Production, modity capital has the peculiarity, that the consumption of its use-value not only preserves its exchange value and its use-value, but also increases them.
It is this use-value of money as capital, this faculty of pro- ducing an average profit, which the money capitalist relin- quishes to the industrial capitalist for the jjeriod, during which he yields to the latter the use of the loan capital.
The money thus loaned shows in this respect a certain analogy with labor-power in its relation to the industrial capitalist. There is only this difference, that he pays for the value of labor-power, while he simply pays back the value of the loaned capital. The use-value of labor-power consists for the industrial capitalist in the faculty that labor-power creates more value (the profit) by its consumption for the industrial capitalist. And in like manner the use-value of the loan capital appears as its faculty of preserving and in- creasing value.
The money-capitalist alienates indeed a use-value, and for this reason the thing which he gives away is given as a com- modity. And to this extent the analogy with a commodity is complete. In the first place, it is a value, which passes from one hand to another. In the case of a simple commodity, a commodity as such, the same value remains in the hands of the buyer and seller, only it has different forms; both have the same value Avhich they had before the transaction, the one in the form of a commodity, the other in that of money. The difference in the case of loan capital is that the monev capitalist is the only one who gives away a value when loan- ing money; but he preserves it by means of future restoration. In the transaction of loaning only one party receives value, since only one party relinquishes value.
In the second place, it is a real use-value, which is relin- quished on one side and received and consumed on the other. But it differs from the use-value of ordinary commodities in that it is itself a value, namely the excess over the value of the original capital realised by the use of money as capital. The profit is this use-value.
The use-value of the loan capital consists in being able \ to serve as capital and to produce in this capacity the aver- age profit under average conditions.^* What, then, does the industrial capitalist pay, and what is, therefore, the price of the loaned capital? That which men pay as interest for the use of what they borrow is, ac- cording to Massie, a part of the profit it is capable of pro- ducing.^^ What the buyer of an ordinary commodity buys is its use- value; what he pays for is its exchange value. What the borrower of money buys, is likewise its use-value as capital; but what does he pay for? Surely not for its price, or value, as in the case of ordinary commodities. Xo change of form takes place in the value passing between the borrower and the lender, such as takes place between the buyer and the seller, so that this value would exist in one instance in the form of money, in another instance in the form of a commodity. The sameness of the alienated and returned value shows itself here in an entirely different way. The sum of values, the money, is given away without an equivalent, and is returned after the lapse of a certain period. The lender always re- mains the owner of the same value, even after it has passed from his hands into those of the borrower. In the simple exchange of commodities, the money is always on the side of the buyer; but in the lending, the money is on the side of the lender. It is he, who gives away his money for a certain period, and it is the borrower, the buyer of capital, who re- ceives it as a commodity. But this is possible only when the money serves as capital and is advanced for this purpose.
The borrower borrows mdney as capital, as a value producing an increment. But at the moment of borrowing it is as yet only potential capital, and so is any other capital at the mo- ment when it is advanced. Only by its use does it expand *»The equitableness of taking interest depends not upon a man's making or not making profit, but upon its being capable of producing profit, if rightly employed. </}» Essay on the Govcrmng Causes of the Natwal 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.
'"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 sp made. (L. c, p. 23.)
41 6 Capitalist Production.
its value and realise itself as capital. But after it has be- come realised capital, the borrower has to return it, as a value plus a surplus-value (interest). And this interest can be only a portion of the realised profit. Only a portion, not the whole of it. For its use-value for the borrower consists in producing a profit for him. Otherwise there would not have been any alienation of its use-value on the part of the lender. On the other hand, it cannot be the whole profit which falls to the share of the borrower. Otherwise he would not be paying anything for the alienation of the use-value, and he would return the advanced money to the lender as simple money, not as a capital having realised itself. For it is realised capital only when it is M -{- increment of M.