more scars of its origin. The social relation is perfected into the relation of a thing, of money, to itself. Instead of the actual transformation of money into capital, only an empty form meets us here. As in the case of labor-power, so here in the case of interest-bearing capital the use-value of money becomes that of creating value, and at that a greater value than it contains itself. Money as such is potentially self- expanding value and is loaned as such, and loaning is the form of sale for this peculiar commodity. It becomes a faculty of money to generate value and yield interest, just as it is a faculty of a pear tree to bear pears. And the money li Relations of Capital. 461 lender sells his money as such an interest-bearing thing. But that is not all. The actually invested capital, as we have seen, presents itself in such a light, that it seems to yield the interest, not as a capital performing its function, but as a capital in itself, as money-capital.
And still something else becomes perverted. While inter- est is only a portion of the profit, that is, of surplus-value, which the investing capitalist squeezes out of the laborer, it looks now on the contrary as though the interest were the typical fruit of capital, the primal thing, and profit, in the shape of profit of enterprise, a mere accessory and by-product of the process of reproduction. Thus the fetish form of capital and the conception of a fetish capital are perfect. In M — M' we have the void form of capital, the perversion and individualisation of the relations of production in their high- est degree. The interest-bearing form is the simple form of capital, in which it is assumed to be antecedent to its own process of rej^roduction. It is the faculty of money, or of a commodity, to expand its own value independently of re- production, a mystification of capital in its most flagrant form.
For vulgar political economy, which desires to represent capital as a spontaneous source of value and its creation, this mystic form is, of course, a great boon. It is a form, in which the source of profit is no longer discernible, and in which the result of the capitalist process of production re- ceives an independent existence apart from this process.
It is not until capital becomes money-capital, that it can assume the foi*m of a commodity, whose self -expanding faculty has a definite price, which is quoted in the current rate of interest.
As an interest-bearing capital, in its direct form of interest- bearing money-capital (the other forms of interest-bearing capital, which do not concern us here, are derived from this one and require its existence), capital assumes its pure fetish form, M — M' as a subject and a saleable thing. In the first place, its continual existence as money gives to it a form, in which all its functions are obliterated and its real elements 462 Capitalist Production.
invisible. For money is precisely that form, in which the distinctions of commodities as use-values are concealed, and with them the distinctions of the industrial capital consisting of these commodities and their conditions of production. It is that form, in which value, in tlie present case capital, exists as an independent exchange-value. In the process of reproduction of capital, the money-form is but a transient one, a mere passing link. But on the money-market, capital always exists in this form. In the second place, the surplus- value produced by it, which has here again the form of money, appears as inherent in it. Like the growing of trees, so the breeding of money appears as an innate quality of capital in the form of money-capital.
In the interest-bearing capital, the movement of capital is contracted. The intervening process is omitted. In this way a capital of 1,000 appears with the fixed faculty of being of itself 1,100 and converting itself after a certain period into 1,100, just as wine in a cellar improves its use-value after a certain period. Capital is then a thing, which is of itself capital. The money is then pregnant. As soon as it has been loaned, or invested in the process of reproduction (when it yields interest to its owner separate from profit of enterprise for his function as investing capitalist), the inter- est accumulates, whether it be awake or asleep, at home or abroad, day or night. In the interest-bearing money capital, then, the fervent wish of the hoarding miser is fulfilled (and all capital is money-capital, so far as the expression of its value is concerned, or is considered as the expression of money-capital).
It is this inherent dwelling of interest in money-capital as a thing (and this is the aspect here assumed by the produc- tion of surplus-value by capital), which engages Luther's at- tention so much in his naive thundering against usury. After demonstrating, that interest may be demanded, when failure to pay back a loan to a lender, who has to meet a certain pay- ment himself, caused a loss to him, or when he might have made a profit on a bargain, for instance in buying a garden, but lost it for the reason that the borrower failed to return Relafio)is of Capital. 463 the loan on time, Luther continues: " Now that I have loaned you 100 guilders, you make good my double loss due to the fact that I could not pay on one side and not buy on the other, so that I had to lose on both sides, and this is called double interest, for loss sustained and gain stopped. Having heard that John lost on his loan of 100 guilders and demands just damages, they rush in and charge double inter- est on every 100 guilders, which interest was only charged for the loss due to nonpayment and to inability to make a profit on a bargain, just as though every 100 guilders could naturally groiu double interest, so that whenever they have 100 guilders, they loan them out and charge for two losses, which they have not at all sustained...Therefore you are a usurer, who takes damages out of his neighbor's money for an imaginary loss that you did not sustain at all, and which you can neither prove nor calculate. This sort of loss is called by the jurists not true, hut fantastical interest. It is a loss of which each dreams for himself...It will not do to say that you might incur a loss, because I might not have been able to pay or buy. That would be making some- thing out of a thing that is not so, a thing that is uncertain into a thing that is absolutely sure. Such usury would eat up the world in a few years...If the lender acci- dentally incurs a loss, without his fault, he may demand dam- ages for it, but it is different in trade and just the reverse. There they scheme to profit at the expense of their needy neighbors, how to amass wealth and get rich, to be lazy and idle and live in luxury on the labor of others, without any care, danger and loss. To sit behind the stove and let my 100 guilders gather wealth for me in the country and yet keep them in my pocket, because they are only loaned, with- out any danger or risk, my friend, who would not like to do that! " (Martin Luther, An die Pfarherrn wider den Wncher zu predigen, etc., Wittenberg, 1540.)
The idea of capital as a self-reproducing and thereby self- expanding value, lasting and growing eternally by virtue of its inherent power — by virtue of the hidden faculties of the scholastics — has led to the fabulous fancies of Dr. Price, 464 Capitalist Production.
Avliich far outdo the fantasies of the alchemists; fancies, in which Pitt seriously believed and which he used as pillars of his financial administration in his laws concerning the sink- ing fund.
" Money bearing compound interest grows at first slowly; but since the rate of increase is constantly accelerated, it be- comes so fast after a while as to defy all imagination. A penny, loaned at the birth of our Savior at compound inter- est at 5%, would already have grown into a larger amount than would be contained in 150 million globes, all of solid gold. But loaned at simple interest, it would have grown only to 7 sh. 44 d. in the same time. Hitherto our govern- ment has preferred to improve its finances in the latter in- stead of in the former way." ^^ He flies still higher in his " Ohservaiions on Reversionary Payments, etc., London, 1782." There we read: " 1 sh. in- vested at the birth of our Savior " (presumably in the Tem- ple of Jerusalem) "at 6% compound interest would have grown to a larger amount than the entire solar system could contain, if it were transformed into a globe of the diameter of the orbit of Saturn." " A state need never to be in diffi- culties on this account; for Avith the smallest savings it can pay the largest debt in as short a time as its interests may *^ Richard Price, An Appeal to the Public on the subject of the Na- tional Debt, 2nd ed., London, 1772. He cracks the naive joke: " A man must borrow money at simple interest, in order to increase it at compound in- terest." (R. Hamilton, An Inquiry into the Rise and Progress of the National Debt of Great Britain, 2nd ed., Edinburgh, 1814.) According to this, borrowing would be the safest means for private people to gather wealth. But if I borrow 100 pounds sterling at 5% annual interest, I have to pay 5 pounds at the end of the year, and even if the loan lasts for 100 million years, I have meanwhile only 100 pounds to loan every year and 5 pounds to pay every year. I can never manage by this process to loan 105 pounds sterling when borrowing 100 pounds sterling. And how am I going to pay the 5 pounds? By new loans, or, if it is the state, by new taxes. Now, if the industrial capitalist borrows money, and his profit amounts to 15%, he may pay 5% interest, spend 5% for his private expenses (although his appetite grows with his income), and capitalise 5%. In this case, 15% are the premise on which 5% interest may be paid continually. If this process con- tinues, the rate of profit, for the reasons indicated in former chapters, will fall from 15% to, say, 10%. But Price forgets wholly that the interest of 5% pre- supposes a rate of profit of 15%, and assumes it to continue with the accumulation of capital. He does not take note of the process of accumulation at all, but thinks only of the loaning of money and its return with compound interest. How that is accomplished is immaterial to him, since for him it is the innate faculty of inter- est-bearing capital.
Relations of Capital. 465 demand." (P. 13G.) What a pretty theoretical introduction to the national debt of England!
Price was simply dazzled by the enormousness of the fig- ures arising from geometrical progression. Since he regarded capital, without taking note of the conditions of reproduction and labor, as a self-regulating automaton, as a mere number increasing itself (just as Malthus did with men in their geometrical progression), he could imagine that he had found the law of its growth in the formula s = c(l -f- i)^, in which s stands for the sum of capital plus compound interest, c for the advanced capital, i for the rate of interest expressed in aliquot parts of 100, and n for the number of years in which this process takes place.
Pitt takes this mystification of Price quite seriously. In 1788 the House of Commons had resolved to raise one million pounds sterling for the public benefit. According to Price, in whom Pitt believed, there was, of course, nothing better than to tax the people, in order to " accumulate " this sum after raising it, and thus to spirit the national debt away by the mystery of compound interest. '' The above resolution of the House of Commons was soon followed up by Pitt with a law, which ordered the accumulation of 250,000 pounds sterling, until, with the expired annuities, the fund should have grown to 4,000,000 pounds sterling annually." (Act 26, George III, chap. 22.) In his speech of 1792, in which Pitt proposed that the amount devoted to the sinking fund be increased, he mentioned among the causes of the commer- cial supremacy of England machines, credit, etc., as " the most wide-spread and enduring cause of accumulation." This principle, he said, was completely developed in the work of Smith, that genius, etc...And this accumulation, he continued, was accomplished by laying aside at least a portion of the annual profit for the purpose of increasing the prin- cipal, which was to be employed in the same manner next year, and which thus yielded a continual profit. By the help of Dr. Price, Pitt thus converted Smith's theory of accu- mulation in an increase of popular wealth by means of the accumulation of debts, and in this way he gets into the pleas- 2D 466 Capitalist Production.
aut progress of infinite loans, made for the purpose of paying- loans.
Already Josiali Child, the father of modern banking, tells ns that 100 pounds sterling at 10% will produce in TO years by compound interest 102,400 pounds sterling. Traite sur le commerce, etc., par J. Child, traduit, etc., Amsterdam et Berlin, 1754, p. 115. Written in 1C69.)
How thoughtlessly the conception of Dr. Price is applied by modern economists, is shown by the following passage of the ''Economist": "Capital, with compound interest on every portion of capital saved, is so all-engrossing that all the wealth in the world from which income is derived, has long ago become interest of capital...all rent is now the payment of interest on capital previously invested in the land." {Economist, July 19th, 1859.) In its capacity of interest-bearing capital capital claims the ownership of all wealth which can ever be produced, and everything it has received so far is but an instalment for its all-engrossing ap- petite. By its innate laws, all surplus-labor belongs to it, which the human race can ever perform. Moloch.
In conclusion we present the following hodge-podge of the romantic Miiller: " Dr. Price's immense increase of com- pound interest, or of the self-accelerating forces of man, pre- suppose an undivided or unbroken order for several centuries, if they are to produce such enormous effects. As soon as capital is divided, cut up into several independently growing slips, the total process of accumulating forces begins anew. Xature has distributed the progression of power over a course of about 20 to 25 years, which fall on an average to the share of every laborer (!). After the lapse of this time the laborer leaves his track and must transfer the capital accumulated by the compound interest of labor to a new laborer, having to distribute it as a rule among several laborers or children. These must first learn to vitalise and employ their share of capital, before they can draw any actual compound interest out of it. Purthermore, an enormous quantity of capital gained by bourgeois society is accumulated for many years, even in the* most restless communities, and is not employed Relations of Capital. 467 for any immediate expansion of labor, but rather entrusted to another individual, a laborer, a bank, a state, under the term of a loan, whenever a considerable amount has been gathered together. And in that case the one who receives it sets the capital into actual motion and draws compound interest out of it, so that he can easily agree to pay simple interest to the lender. Finally the laws of consumption, greed, waste, op- pose those immense progressions, in which the forces of man and their products might increase, if the law of production or thrift were alone effective." (A Miiller, 1. c, II, p.
It is impossible to concoct a more hair-raising nonsense in a few lines. Leaving aside the droll confusion of laborer and capitalist, of value of labor-power and interest of capital, etc., the decrease of compound interest is supposed to be explained by lending capital at compound interest. This procedure of our Miiller is characteristic of romanticism in all fields. It is made up of current prejudices, skimmed from the most superficial semblance of things. This false and trivial sub- stance is tlien supposed to be " uplifted " and rendered poetical by a mystifying mode of expression.
The process of accumulation of capital may be conceived as an accumulation of compound interest in the sense that that portion of the profit (surplus-value), which is recon- verted into capital, and serves to absorb more surplus-value, may be called interest. But 1) Aside from all accidental irregularities, a large part of the available capital is continually depreciated in the course of the process of reproduction, because the value of the com- modities is not determined by the labor-time originally spent in their production, but by the labor-time spent in their re- production, and this decreases continually in consequence of the development of the productivity of social labor. On a higher stage of development of the social productivity all available capital appears therefore as the result of a relatively short time of reproduction, instead of as the result of a long process of saving capital.^^ *^ See Mill and Carey, and Roscher's mistaken commentary on them.
468 Capitalist Production.
2) As we have proven in Part III of this volume, the rate of profit decreases in proportion as the accumulation of capital and the productivity of social labor corresponding to it in- crease, since these two express themselves precisely in a rela- tive and progressive decrease of tlie variable portion of capital as compared to the constant. In order to produce the same rate of profit, when the constant capital set in motion by one laborer increases tenfold, the surplus labor time would have to increase tenfold, and soon the total labor time, and finally the full 24 hours of a day, would not suffice, even if wholly appropriated by capital. The idea that the rate of profit does not decrease is, on the other hand, the basis of the progression of Price, as it is in general the basis of " all-engrossing capital with compound interest." ^^ By the identity of surplus-value with surplus-labor a qual- itative limit is imposed upon the accumulation of capital. This is formed by the total working day, the prevailing de- velopment of the productive forces and of the population, which limit the number of the simultaneously exploitable working days. But if surplus value is conceived of in the meaningless form of interest, then the limit is merely quan- titative and defies all fantasy.
ISTow, in the interest-bearing capital the idea of a capital- ist fetish is perfected, the idea, which attributes to the accumulated product of labor, and at that in the fixed form of money, the power of creating surj^lus-value by its inherent secret qualities, in a purely automatic manner, and in geometrical progression, so that the accumulated product of labor, as the " Economist " thinks, has long discounted all the w^ealth of the world for all times as belonging to it and coming to it by right. The product of past labor, the past labor itself, is here pregnant in itself with a portion of pres- ent or future living surplus-labor. We know, on the contrary, that as a matter of fact the preservation, and to that extent ^ " It IS clear, that no labor, 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 labor refuses to satisfy them. A sort of balance is, therefore, constantly struck." {.Labour defended against the Claims of Capital, p. 23. By Hodgskin.)
Relations of Capital. 469 the reproduction, of the value of the products of past labor is only the result of their contact with living labor; and sec- ondly, that the control exerted by the products of past labor over living surplus-labor lasts only as long as the relations of capital, which rest on the definite social relation, in which past labor dominates independently over living labor.
CHAPTER XXV.
CREDIT AND FICTITIOUS CAPITAL.
An exhaustive analysis of the credit system and of the in- struments created by it for its own use (credit money, etc.) is beyond the scope of our plan. We merely wish to dwell here upon a few particular points, which are necessary for a characterisation of the capitalist mode of production in gen- eral. To this end we shall deal only wutli commercial and bank credit. The connection between the development of this form of credit and that of public credit is not considered here.
I have shown previously (in volume I, chapter III, 3b.), in what manner the function of money as a medium of pay- ment, and consequently a relation of creditors and debtors, is formed among the producers of commodities and the traders, as the outcome of the simple circulation of commodities. With the development of commerce and of the capitalist mode of production, which has an eye only to the circulation, this natural basis of the credit system is extended, generalised, elaborated. Money serves here on the whole merely as a means of payment, that is to say, commodities are not sold for money, but for a written promise to pay for them at a certain date. We may comprise all these promises to pay for brevity's sake under the general category of bills of ex- change. Such bills of exchange in their turn circulate as means of payment until the day on which they fall due; and they form commercial money in the strict meaning of the term. To the extent that they ultimately balance one another by the compensation of credits and debts, they serve abso- 470 Capitalist Production.
hitelj as money, since no transformation into actnal money- takes place. Just as these mutual advances of the producers and merchants to one another form the real foundation of credit, so their instrument of circulation, the bill of exchange, forms the basis of credit money proper, of bank notes, etc. These do not rest upon the circulation of money, whether it be metallic money or government paper money, but upon the circulation of bills of exchange.
W. Leatham, a banker of Yorkshire, writes in his "^ Letters on the Currency/' 2nd edition, London, 1840: " I find, that the total amount in bills of exchange for the entire year 1839 was 528,493,842 pounds sterling" (he assumed that the foreign bills of exchange composed about one-fifth of the whole) " and the amount of bills of exchange simultaneously current in the same year to 132,123,460 pounds sterling" (p. 56). " The bills of exchange make up a greater part of the amount in circulation than all the rest together" (p. 3). " This enormous superstructure of bills of exchange rests (!) upon a basis formed by the amount of bank notes and gold; and if in the course of events this basis is too much contracted, its solidity, and even its existence, become en- dangered " (p. 8). " Estimating the entire circulation " (he means of the bank notes) " and the amount of the obligations of all banks for which immediate payment may be demanded, I find a sum of 153 millions, whose conversion into gold might be demanded according to law, and to offset it only 14 millions in gold to satisfy this demand " (p. 11). The bills of exchange cannot be placed under control, unless the super- fluity of money and the low rate of interest, or discount, can be prevented, which create a part of them and encourage this dangerous expansion. It is impossible to decide, how much of them is due to actual business, for instance, to real pur- chases and sales, and what part of them is fictitious and con- sists only of prolonged bills, that is, when a bill of exchangg is drawn for the purpose of taking up a current one before it becomes due, and thus of creating fictitious capital by the manufacture of mere means of circulation. In times of superfluous and cheap money I know this is done to an enor- Credit and Fictitious Capital. 471 mous degree" (p. 43, 44). J. W. Bosanquet, Metallic, Paper, and Credit Currency, London, 1842: The average amount of the payments settled on every business day in the Clearing House (where the London bankers mutually ex- change the due bills and filed checks) exceeds 3 millions of pounds sterling, and the daily supply of money required for this purpose is little more than 200,000 pounds sterling (p. S(S). [In the year 1889, the total turn-over of the Clearing House amounted to 7,618 and f millions of pounds sterling, which, in 300 business days, averages 25 and \ millions of pounds sterling daily. — F.E.] "Bills of exchange are un- doubtedly currency, independent of money, inasmuch as they transfer property from hand to hand by endorsement " (p. 92). " On an average it may he assumed that every cir- culating bill of exchange bears two endorsements, and that on an average every bill thus performs two payments, before it becomes due. Accordingly it seems that alone by endorse- ment the bills of exchange promoted a transfer of property to the amount of twice 528 millions, or 1,056 millions of pounds sterling, more than 3 millions daily, in the course of the year 1839. It is, therefore, certain the bills of exchange and de- posits together, by transferring property from hand to hand and without the assistance of money, perform the functions of money to a daily amount of at least 18 millions of pounds sterling" (p. 93).