terest forming his own share of the profit. If the general rate of profit is given, then this last portion is determined by the rate of interest; if the rate of interest is given, then this last portion is determined by the general rate of profit. And furthermore: Whatever may be the divergence in any in- dividual case of the gross profit, the actual magnitude of value of the total profit, from the average profit, it does not alter the fact that the portion belonging to the investing capitalist is determined by the interest, since this is fixed by the general rate of interest (aside from special legal stipulations) and assumed to be paid beforehand, before the process of produc- tion begins, and before its result, the gross profit, has been made. We have seen that the peculiar and specific product of capital is surplus-value, or more closely defined, profit. But for the capitalist working with a borrowed capital it is not the profit, but the profit minus the interest, that portion of the profit which remains for him after the interest has been deducted. This portion of the profit necessarily appears to him as the product of a capital performing its function; and so far as he is concerned it is really so, because he is the representative of capital in action. He is its personification to the extent that it is in function, and it performs its function to the extent that it is profitably invested in industry or com- merce and engaged, through its employer, in such operations as are prescribed by the line of its industry. In distinction from interest, which he has to pay out of the gross profits to the lender, the remaining portion of the profit, which he pockets, necessarily assumes the form of industrial or com- mercial profit, or, to designate it by a term comprising both of them, the form of profit of enterprise. If the gross profit is equal to the net profit, then the magnitude of this profit of enterprise is exclusively determined by the rate of in- terest. If the gross profit varies from the average profit, then its difference from the average profit (after deducting the interest from both of them) is determined by all con- stellations causing a temporary deviation, either of the rate of profit in any particular sphere from the general rate of profit, or of the profit made by some individual caj)italist Interest and Profit. 439 in a certain sphere from the average profit of this sphere. Now, we have seen, that the rate of profit within the process of production itself does not depend merely on the surplus- value, but also on many other circumstances, for instance, on the purchase prices of the means of production, on methods more productive than the average, on economies in constant capital, etc. And aside from the price of production, it depends on special constellations of the market, and in every business transaction on the greater or lesser smartness and thrift of the individvial capitalists, whether, and to what extent, a man will buy or sell above or below the price of production and thus appropriate in the process of circulation a greater or smaller portion of the total surplus-value. At any rate the quantitative division of the gross profit turns here into a qualitative one, and it does so all the more as the quantitative division itself depends on the nature of thing that is to be divided, on the manner in which the capitalist manages his capital, and on the amount of gross profit it yields for him in his capacity as active capitalist. The in- vesting capitalist is here assumed not to be the owner of the capital. The ownership of capital is vested in the moneycapitalist, who stands opposed to him. The interest, which he pays to the lender, thus appears as that portion of the gross profit, Avhich is absorbed by the ownership of capital as such. In distinction therefrom, that portion of the profit, which falls to the share of the investing capitalist, appears then as profit of enterprise, arising solely from the opera- tions, or functions, which he performs with the capital in the process of reproduction, particularly of those functions, which he performs as the impersonator of enterprise in industry or commerce. From his point of view, the interest appears merely as the fruit of the ownership of capital, of capital " itself " abstracted from the process of capital in reproduc- tion, of a capital not " working," not performing its func- tion; while profit of enterprise appears to him as the exclusive fruit of the functions, which he performs with the capital, a fruit of the movements and performances of capital, of performances, which appear to him as his own activity as 440 Capitalist Production.
differentiated from the inactivity, the non-participation, of the money-capitalist in the process of production. This qualitative separation of the two portions of gross profit, which makes interest appear as the fruit of abstract capital, of the ownership of capital outside of the process of production, and profit of enterprise as the fruit of capital performing its function in the process of production, of the active role played by the employer of capital in the process of repro- duction, this qualitative separation is by no means merely a subjective point of view of the money-capitalist on one side and of the industrial capitalist on the other. It rests upon an objective fact, for the interest flows into the hands of the money-capitalist, the lender, the mere owner of capital, who represents only capital property before the process of pro- duction and outside of it; while the profit of enterprise flows only into the hands of the investing capitalist, who is not the owner of the capital.
In this way, both the industrial capitalist working with borrowed capital and the money-capitalist not working him- self with his capital play a role, in which a merely quantita- tive division of the gross profit between two persons having two different legal titles to the same capital and to the profit produced by it turns into a qualitative division. One portion of the profit appears now as interest, as a fruit coming to capital in one of its forms; the other portion appears as a specific fruit of capital in an opposite form, and thus as profit of enterprise. One appears as the fruit of mere owner- ship of capital, the other as a fruit of the performance of the function of capital, as a fruit of capital in process, of the functions performed by the active capitalist. And this ossi- fication and individualisation of the two parts of the gross profits among themselves, as though they were derived from two essentially different sources, now becomes a fixture for the entire capitalist class and the total capital. And this takes place regardless of whether the capital employed by the ac- tive capitalist is borrowed or not, and whether the capital belonging to the money-capitalist is employed by himself or not The profit of every capital, and consequently the aver- Interest and Profit. 441 age profit established by a mutual compensation of capitals, is separated into two qualitatively different, separately in- dividualised, and mutually independent parts, to wit, inter- est and profit of enterprise, both of which are determined by particular laws. The capitalist working with his own capital divides the gross profit into interest due to himself as its owner lending it to himself, and into profit of enter- prise due to himself as an active capitalist performing his function, just as does the capitalist working with a borrowed capital. For this division, in its qualitative aspects, it be- comes immaterial whether the capitalist really has to divide his profit with another or not. The employer of capital, even when working with his own capital, falls apart into two per- sonalities, into the mere o^vner of capital and the employer of capital; his capital itself, with reference to the categories of j)rofit which it yields, falls apart into capital property out- side Gi the process of production and yielding interest of itself, and capital in the process of production yielding; profit of enterprise through its function in the process.
Interest, then, becomes so firmly established, that it no longer appears as a division of gross profits, to which produc- tion is indifferent and which takes place only occasionally when the industrial capitalist works with the capital of some other man. Even when he works wdth his own capital, hie profit is separated into interest and profit of enterprise. TiiUL a merely quantitative division turns into a qualitative one. It takes place without regard to the fact, whether the indus- trial capitalist is, or is not, the owner of the capital employed by him. It is no longer a question of different quota of profit assigned to different persons, but of two different categories of profit holding different relations to the capital, being re- lated to different forms of capital.
It is a simple matter, in view of the foregoing remarks, to explain, why this character of qualitative separation becomes established for the total social capital and the entire capitalist class, as soon as the separation of gross profits into interest and profits of enterprise has assumed its qualitative aspect.
1) This follows from the simple empirical circumstance, that the majority of the industrial capitalists, even i-.' in dif-- 442 Capitalist Production.
ferent proportional numbers, work with their own and with borrowed capital, and that the proportion between self-owned and borrowed capital changes in different periods.
2) The transformation of a portion of the gross profits into the shape of interest converts the other portion into profit of enterprise. The latter is indeed but the antagonistic form assumed bj the excess of the gross profit over the interest, as soon as interest exists as an independent category. The entire analysis of the problem, how gross profit is differentiated into interest and profit of enterprise, resolves itself into the in- quiry, how a portion of the gross profits becomes univei'sally ossified and individualised in the shape of interest. Now, historically, interest-bearing capital exists as a complete, tra- ditional form, and with it interest as a ready subdivision of the surplus-value produced by capital, long before the capital- ist mode of production and the conceptions of capital and profit belonging to it existed. Thus it is that popular con- ception still regards money-capital, interest-bearing capital, as typical capital, as capital par excellence. Thus, also, we find up to the time of Massie the prevailing idea, that it is money as such, which is paid in interest. The fact that loaned capital yields interest, whether it is actually employed as interest or not — even when borrowed only for consumption — lends strength to the idea of the independence of this form of capital. The best proof of the independence, which inter- est seemed to have with reference to profit cind interest-bearing capital with reference to industrial capital, during the first periods of the capitalist mode of production, is tiiat it was not until the middle of the 18th jentury that Massie, and after him Hume, discovered the fact that interest is but a portion of the gross profit, and that such a discovery was necessary at all.
3) Whether the industrial capitalist works Avith his own or with borrowed capital, it does not alter the fact that the class ox money-capitalists face him as a special class of capitalists^ money-cupital as an independent form of capital, and interest as the independent form of surplus-value peculiar to this specific capital.
Interest and Profit. 443 Qualitatively speaking, interest is surplus-value supplied by the mere ownership of capital, yielded by capital as such, even though its owner remains outside of the process of re- production. It is surplus-value realised by capital outside of its process.
Quantitatively speaking, that portion of profit, which forms interest, does not seem to be related to industrial or com- mercial capital as such, but to money-capital, and the rate of this portioxx of durplus-value, the rate of interest, fortifies this relation. For, in the first place, the rate of interest, de- spite its dependence upon the general rate of profit, is inde- pendently determined, and, in the second place, it appears with all its variations as a fixed, unifomi, tangible and always given relation, just like the market-prices of commodities, compared t(. the intangible rate of profit. If all capital were in the hands of the industrial capitalists, there would be no interest ^nd no rate of interest. The independent form as- sumed by the quantitative division of gross profit creates the qualitative one. If the industrial capitalist compares him- self to tLie money-capitalist, only his profit of enterprise dis- tinguishes him from the other man, the excess of his gross profit over the average interest, the latter being empirically given by means of the rate of interest. On the other hand, if he compares himself to the industrial capitalist working with his own, instead of borrowed capital, the other differs from him only as a money-capitalist by pocketing the interest instead of paying it over to some one else. On either side the portion of the gross profit differing from the interest appears to him as profit of enterprise, and interest itself as a surplus- value yielded by capital as such, which it would yield even without any productive employment.
This is practically correct for the individual capitalist. Tie has the choice, whether he wants to invest his capital as an interest-bearing one or as a productive one, regardless of whether it exists in the form of money-capital from the out- set, or whether it has to be converted into money-capital. But to make this conception a general one and apply it to the total capital of society, as some vulgar economists do, who even /j/j/j Capitalist Production.
go so far as to regard this capital as the source of profit, is, of course, preposterous. The idea of a conversion of the total capital of society into money-capital without the existence of people, who shall buy and utilise the means of production, which form the total capital with the exception of relatively small portion existing in the shape of money, is sheer non- sense. It implies the additional nonsense, that capital could yield interest on the basis of capitalist production without performing any productive function, in other words, with- out producing any surplus-value, of which interest would be but a part; that the capitalist mode of production could run its course without any capitalist production. If an excessively large number of capitalists were to convert their capital into money-capital, it would result in an extraordinary depre- ciation of money-capital and an extraordinary fall of the rate of interest; many would at once be face to face with the im- possibility of living on their interest, and would be com- pelled to retransform themselves into industrial capitalists. But we repeat that it is a fact for the individual capitalist. For this reason, he necessarily considers that part of his aver- age profit, which is equal to the average interest, as a fruit of his capital as such, apart from the process of production, even when he works with his own capital; and he differ- entiates from this portion, from this interest, that surplus of the gross profit, which constitutes his profit of enterprise.
4) (A blank in the manuscript.)
We have seen that that portion of the profit, which the investing capitalist has to pay to the mere owner of bor- roAved capital, converts itself into the independent form of a portion of profit, which all capital as such^ whether bor- rowed or not, yields under the name of interest. How large that portion shall be is determined by the quotation of the average rate of interest. Its origin does not show itself any more in anything but the fact that the investing capitalist, when owner of his capital, no longer competes in the deter- mination of the rate of interest, at least not actively. The purely quantitative division of profit between two persons having different legal titles to it has turned into a qualitative Interest and Profit. 445 division, which seems to arise from the nature of capital and profit itself. For, as we have seen, as soon as a portion of the profit generally assumes the form of interest, the dif- ference between the average profit and the interest, or the portion of profit exceeding the interest, assumes a form an- tagonistic to interest, that of profit of enterprise. These two forms, interest and profit of enterprise, exist only as oppo- sites. They are not reduced to the surplus-value, of which they represent proportional parts cast in different moulds, but are merely referred to one another. Because one por- tion converts itself into interest, the other portion appears as profit of enterprise.
By profit we always mean average profit here, since the variations of individual profit and of profit in different spheres, due to the fluctuations of the competitive struggle and other circumstances affecting the distribution of the average profit, or surplus-value, do not concern us in this analysis. This applies quite generally to the foregoing inquiry.
Interest is then net profit, as Ramsay calls it, which capital as such yields, either for the mere lender remaining outside of the process of reproduction, or for the owner employing his capital productively. For this latter capitalist also, cap- ital yields this net profit, not in his capacity as a productive capitalist, but of money-capitalist and lender of his own capital as an interest-bearing one to himself as an investing capitalist. Just as the conversion of money, and of value in general, into capital is the constant result of capitalist pro- duction, so its existence in the form of capital is its constant prerequisite. By its ability to transform itself into means of production, it commands continually unpaid labor and thereby transforms the process of production and circulation of commodities into a production of surplus-value for its owner. Interest is, therefore, merely the expression of the fact, that value in general, in other words, value represent- ing materialised labor in its general social form, or value assuming the form of means of production in the actual pro- cess of production, faces living labor-power as an independent power, and is a means of appropriating unpaid labor; and that 44^ Capitalist Production.
it is such a power, because it represents the property of an- other in opposition to the laborer. But on the other hand, this opposition to wage-labor is obliterated in the form of in- terest; for interest-bearing capital as such has not wage-labor, but productive capital for its object. The lending capitalist faces as such the capitalist performing his actual function in the process of reproduction, not the wage-worker, who is ex- propriated from the means of production under capitalist pro- duction. Interest-bearing capital represents capital as owner- ship compared to capital as a function. But to the extent that capital does not perform its function, it does not exploit the laborers and does not come into opposition to labor.
On the other hand, profit of enterprise is not in opposition to wage-labor, but only to interest.
1) Assuming the average j^rofit to be given, the rate of profit on enterprise is not detemiined by wages, but by the rate of interest. It is high or low inversely as the rate of interest is.'^^ 2) The investing capitalist derives his claim to profits of enterprise, and consequently the profit of enterprise itself, not from his ownership of capital, but from its production function as distinguished from the form, in which it is only inert jDroperty. This appears as an obviously existing con- trast, whenever he is working with a borrowed capital, so that interest and profits of enterprise each go to different persons. The profit of enterprise arises from the function of capital in the process of reproduction, it is a result of the operations by which the investing capitalist promotes tliis function of industrial and commercial capital. But to be a representative of invested capital is not a sinecure like the representation of interest-bearing capital. On the basis of capitalist production, the capitalist directs the processes of production and circulation. The exploitation of productive labor requires exertion, whether he performs it himself or has it performed by some one else in his name. In distinction from interest, his profit of enterprise appears to him as in- The profits of enterprise depend upon the net profits of capital, not the latter upon the former." (Ramsay, 1. c, p. 214. Net profits with Ramsay always mean interest.)
Interest and Profit. 447 dependent of the ownership of capital, it seems to be the result of his function as a non-proprietor — a laborer.
Under these circumstances his brain necessarily conceives the idea, that his profit of enterprise, far from being in op- position to wage-labor and representing only the unpaid labor of others, is rather itself wages of lahor, wages of superin- tendence of labor. These wages are superior to those of the common laborer, 1) because they pay for more complicated labor, 2) because the capitalist pays them to himself. The fact that his function as a capitalist consists in creating surplus-value, which is unpaid labor, and to create it under the most economical conditions, is entirely forgotten over the contrast, that the interest falls to the share of the capitalist, even if he does not perform any capitalist function and is merely the owner of capital; and that, on the other hand, the proiit of enterprise falls to the share of the investing capital- ist, even if he is not the owner of the capital, which he em- ploys. The antagonistic form of the two parts, into which profit, or surplus-value is divided, leads him to forget, that both parts are surplus-value, and that this division does not alter the nature, origin, and living conditions of surplus- value.
In the process of reproduction, the investing capitalist rep- resents capital as the property of another in opposition to the wage-laborers, and the money-capitalist, represented by the investing capitalist, shares in the exploitation of labor. The fact, that the investing capitalist can perform his func- tion or employ means of production as capital only as the personification of the means of production in opposition to the laborers, is forgotten over the antagonism between the function of capital in the process of reproduction and the mere ownership of capital outside of the process of reproduc- tion.
In fact, the fomis assumed by the two parts of profit, of surplus-value, when divided into interest and profit of enter- prise, do not express their relation to labor, because their rela- tion refers only to themselves and to the profit, or rather to the surplus-value as a whole compared to them as parts of 448 Capitalist Production.
this unit. The proportion in which the profit is divided, and the different legal titles, by which this division is sanctioned, are based on the assumption that profit is already in existence. If, therefore, the capitalist is the owner of the capital, which he employs, he pockets the whole profit, or surplus-value. It is immaterial to the laborer, whether the capitalist pockets the whole profit, or whether he has to pay over a part of it to some other person, who has a legal claim to it. The rea- sons for dividing the profit among two kinds of capitalists thus turn surreptitiously into reasons for the existence of the surplus-value to be divided, Avhich the capital as such draws out of the process of reproduction quite apart from any subsequent division. Seeing that the interest is opposed to the profit of enterprise, and the profit of enterprise to the interest, that they are both opposed to one another, but not to labor, it follows that both profit of enterprise plus interest, in other words, the total profit, and further the surplus-value, are derived — from what? From the antagonistic form of its two parts! But the profit is produced, before this division takes place, and before there can be any mention of it.
Interest-bearing capital stands the test of such only to the extent that borrowed money is actually converted into capital, and that a surplus is produced with it, of which the interest is a part. But this does not militate against the fact, that the faculty of drawing interest is innate in it outside of the process of production. So does labor-power evince its faculty of producing value only so long as it is employed and ma- terialised in the labor-process; yet this does not argue against the fact, that labor-power is potentially a faculty of creating values, which does not arise out of the mere process of pro- duction, but is rather antecedent to it. As a faculty creat- ing value, it is bought. One might also buy it without set- ting it to work productively. It may be used for purely personal ends, for instance, for personal service, etc. So it is with capital. It is the borrower's affair, whether he em- ploys it as capital, actually setting in motion its inherent faculty of producing surplus-value. What he pays, is in Interest and Profit. 449 either case the surplus-value inherently latent in the com- modity capital.
Let us now consider profit of enterprise more in detail.
Since the specific social faculty of capital under capitalist production, that of being property in the hands of one and yet commanding the labor-power of another, becomes fixed, so that interest appears as a part of the surplus-value pro- duced by capital in this interrelation, the other part of the surplus-value, the profit of enterprise, must necessarily ap- pear as derived, not from capital as such, but from the process of production, separated from its social faculty, which is already expressed as a distinct mode of existence by the term interest in capital. I^ow, separated from capital, the process of production is simply a labor-process. Hence the industrial capitalist as differentiated from the owner of capital does not appear, in this case, as a functionary of capital, but as a functionaiy separated from capital, as a simple agent of the labor -process, as a laborer, and specifically as a wage-laborer.