Precious Metals and Rates of Exchange. 691 takes place when it falls. If the value is 2,000, then 5% of it is 100; if it is 1,000, then 5% of it is 50. This does not alter anything in the rate of interest. The rational part of this matter is merely that a greater pecuniary accommodation is required, when it takes 2,000 pounds sterling to buy the same quantity of commodities, which may be bought for 1,000 pounds sterling at some other time. But this shows at this point merely that profit and interest are inversely proportion- ate to one another. For profit rises with the cheapness of the elements of constant and variable capital, whereas interest falls. But the reverse may also take place, and does often take place. For instance, cotton may be cheap, because no demand exists for yarn and fabrics; and cotton may be rela- tively dear, because a large profit in the cotton industry cre- ates a great demand for it. On the other hand the profits of the industrials may be high, just because the price of cotton is low. That list of Hubbard's proves that the rate of interest and the prices of commodities pass through mutually independ- ent movements, whereas the movements of the rate of interest adapt themselves closely to those of the metal reserve and the rates of exchange.
Says the " Economist ": " If, therefore, commodities are superabundant, then the money interest must be low." It is just the reverse which takes place during crises; the commodi- ties are superabundant, not convertible into money, and there- fore the rate of interest is high; in another phase of the cycle the demand for commodities is large, hence returns are easy, while prices of commodities are rising at the same time, and the rate of interest is low on account of the easy returns. " If they [the commodities] are scarce, it must be high." Once more the opposite is true in times of depression after a crisis. Commodities are scarce, absolutely speaking, not merely with reference to the demand; and the rate of interest is low.
Comment on sentence ^o. 4). It is pretty evident that an o^vner of commodities, provided he can sell them at all, will get rid of them at a lower price when the market is over- crowded than he will when there is a prospect of a rapid ex- 692 Capitalist Production.
haustion of the existing supply. But why the rate of interest should fall on that account is not so clear.
If the market is overcrowded with imported commodities, the rate of interest may rise as a result of an increased de- mand for loan capital on the part of their owners, who may wish to escape the necessity of throwing their commodities on the market. On the other hand, the rate of interest may fall, because the fluidity of commercial credit may keep the demand for bank credit relatively low.
The '' Economist " mentions the rapid effect on the rates of exchange in 1847, as a consequence of the raising of the rate of interest and other circumstances exerting a pressure on the money market. But it should not be forgotten, that the gold continued to be drained off until the end of April, in spite of the turn in the rates of exchange; a change did not take place in this until the beginning of May.
On January 1, 1847, the metal reserve of the Bank was 15,- 066,691 pounds sterling; the rate of interest 3^%; rates of exchange for three months on Paris 25.75; on Hamburg 13.10; on Amsterdam 12. 3. j. On March 5th the metal reserve had dwindled to 11,595,535 pounds sterling; the discount had risen to 4%; the rate of exchange fell to 25.67^^ for Paris; 13.9^ for Hamburg; 12.2^ for Amsterdam. The drain of gold continued. See the following table: Precious Metal Money Market Highest Three Monthl y Rates Date 1847 Reserve of the Bank of England Paris Ham- burg Amster- dam March 20 April 3 April 10 Money very scarce 25.90 April 17 April 24 Pressure Increasing Pressure Highest Pressure is.ibyi In 1847 the total exports of precious metals from England amounted to 8,602,597 pounds sterling.
Precious Metals and Rates of Exchange. 693 Of this amount the United States received 3,226,411 pounds sterling In spite of the change in the rates at the end of March the drain of gold continued for another full month, probably to the United States.
"We see here" [says the "' Ecovomist" 184:7, ip. ^8i], " how rapidly and strikingly the raising of the rate of interest exerted its effect, together with the subsequent money panic, in correcting an unfavorable rate of exchange and turning the tide of gold, so that it flowed once more into England." This effect was produced quite independently of the balance of payment. A higher rate of interest produced a lower price of securities, of English as well as foreign ones, and caused large purchases of them for foreign accounts. This increased the sum of the bills of exchange drawn by way of England, while on the other hand, at the high rate of interest, the diffi- culty of obtaining money was so great, that the demand for these bills of exchange fell, while their sum rose. It was for the same reason that orders for foreign goods were annulled and the investment of English capital in foreign securities realised and the money taken to England for investment. For instance, we read in the '^^ Rio de Janeiro Prices Current " of May 10: " The rate of exchange " [on England] " has ex- perienced a new setback, caused mainly by a pressure on the market for remittances for the realisations on considerable purchases of [Brazilian] government bonds for English account." English capital, which had been invested in foreign countries in various securities, when the rate of interest was very low here, was thus taken back when the rate of interest had risen.
IV. England's Balance of Trade.
India alone has to pay 5 millions in tribute for " good gov- ernment," interest and dividends of British capital, etc., not counting the sums sent home annually by officials as savings of their salaries, or by English merchants as a part of their profit 694 Capitalist Production, in order to be invested in England. Every British colony has to make large remittances continually for the same reason. Most of the banks in Australia, West India, Canada, have been founded with English capital, and the dividends are pay- able in England. In the same way England owns many for- eign securities, European, North and South American, on which it draws interest. In addition to this it is interested in foreign railroads, canals, mines, etc., with the correspond- ing dividends. Eemittance on all these items is made almost exclusively in products, in excess of the amount of the Eng- lish exports. What goes to foreign countries from England to owners of English securities and to be consumed by Eng- lishmen abroad, is a vanishing quantity in comparison.
The question, so far as it concerns the balance of trade and the rates of exchange, is " at every given moment a question of time. As a rule...England gives large credits on its exports, while its imports are paid in cash. In certain moments this difference of habit has considerable influence on the rates of exchange. At a time when our exports increase very considerably, as in 1850, there must take place a contin- ual expansion in the investment of British capital. in this way remittances of 1850 may be made against goods exported in 1849. But if the exports of 1850 exceed those of 1849 by more than 9 millions, the practical effect must be that more money is sent abroad, to this amount, than returned in the same year. And in this way an effect is produced on the rates of exchange and the rate of interest. But as soon as business is depressed by a crisis, and our exports are greatly reduced, the remittances due for large exports of former years considerably exceed the value of our imports; consequently the rates turn in our favor, capital rapidly accumulates in the home country, and the rate of interest falls." (Economist, The foreign rates of exchange may be altered: 1) In consequence of a momentary balance of payment, no matter to what cause this may be due, whether it be a purely mercantile one, or the investment of capital abroad, or gov- Precious Metals and Rates of Exchange. 695 ernment expenditures, wars, etc., so far as cash payments are made to foreign countries.
2) In consequence of a depreciation of money in a certain country, whether it be metal or paper money. This is purely nominal. If one pound sterling should represent only half as much money as formerly, it would naturally be counted as 12.5 francs instead of 25 francs.
3) When it is a question of the rate of exchange between countries, one of which uses silver, the other gold as " money," the rate of exchange depends upon the relative fluctuations of value of these two metals, since these fluctuations necessarily alter the parity between tliem. An illustration of this were the rates of exchange in 1850; they were against England, al- though its export rose enormously. But nevertheless no drain of gold took place. This was the result of a momentary rise in the value of silver as against that of gold. ( See Economist, ISTovember 30, 1857.)
The parity of the rate of exchange is for one pound sterling: on Paris 25.20 francs; Hamburg 13 marks banko 10.5 shill- ings;* Amsterdam 11 florins 97 centimes. In proportion as the rate of exchange on Paris exceeds 25.20 francs, it becomes more favorable to the English debtor of France, or the buyer of French commodities. In either case he needs less pounds sterling in order to accomplish his purpose. — In more remote countries, where precious metals are not easily obtained, when bills of exchange are scarce and insufficient for the remittances to be made to England, the natural effect is a raising of the prices of such products as are generally shipped to England, a greater demand arising for them, in order to send them to England in place of bills of exchange; this is often the case in India.
An unfavorable rate of exchange, or even a drain of gold, may take place, when there is a gi-eat abundance of gold in England, a low rate of interest, and a high price of securities.
In the course of 1848 England received large quantities of silver from India, since good bills of exchange were rare and * Old style German money, now discarded. — Translatok.
696 Capitalist Production.
mediocre ones were not easily accepted, in consequence of the crisis of 1847 and tlie great lack of credit in the Indian business. All this silver, ^vhen hardly arrived, quickly found its way to the continent, where the revolution caused a forma- tion of hoards at all points. The same silver largely made the trip back to India in 1850, since the stand of the rates of ex- change made this profitable.
The monetary system is essentially Catholic, the credit sys- tem essentially Protestant. " The Scotch hate gold." In the form of paper the monetary existence of commodities has only a social life. It is Faith that makes blessed. Faith in mon- ey-value as the imminent spirit of commodities, faith in the prevailing mode of production and its predestined order, faith in the individual agents of production as mere personifications of selfexpanding capitaL But the credit system does not emancipate itself from the basis of the monetary system any more than Protestantism emancipates itself from the founda- tions of Catholicism.
CHAPTER XXXVI.
PRECAPITALIST CONDITIONS.
Interest bearing capital, or usurer's capital, as we may call it in its ancient form, belongs like its twin brother, commer- cial capital, to the antediluvian forms of capital, which long precede the capitalist mode of production and are found in the most diverse economic formations of society.
The existence of usurer's capital requires merely that at least a portion of the products should be converted into com- modities, and that money with its various functions should have developed along with the trade in commodities.
The development of capital attaches itself to that of mer- Precapitalist Conditions. 697 chant's capital, more particularly to financial capital. In ancient Home, starting from the last stages of the republic, when manufacture stood far below its ancient average devel- opment, merchants' capital, financial capital, and usurers' capital had reached their highest point within that ancient form.
We have seen that hoarding necessarily appears with money. But the professional hoarder does not become important un- til he becomes transformed into a usurer.
The merchant borrows money in order to make a profit with it, in order to use it as capital, that is, to spend it as such. Hence the money lender stands in the same relation to him in former stages of society as he does to the modem capitalist. This specific relation was felt also by the Catholic universi- ties. " The universities of Alcala, of Salamanca, of Ingol- stadt, of Freiburg in the Breisgau, Mayence, Cologne, Treves, one after another recognized the legality of interest for com- mercial loans. The first five of these approbations were de- posited in the archives of the Consulate of the city of Lyons and published in the appendix of the Traite de I'usure et des interets, at Lyons, by Bruyset-Ponthus." (M. Augier, Le Credit Public, etc., Paris, 1842, p. 206.)
In all forms, in which slave economy (not the patriarchal kind, but that of later Grecian and Eoman times) serA^es as a means of amassing wealth, where money is a means of ap- propriating the labor of others by purchase of slaves, land, etc., there money becomes useful as capital, brings interest, for the reason that it may be so invested.
Llowever, the most characteristic forms, in which usurers' capital exists in times antedating capitalist production, are two. I say purposely characteristic forms. The same forms repeat themselves on the basis of capitalist production, but as mere subordinate forms. They are then no longer the forms which determine the character of interest-bearing capital. These two forms are: First, usury by lending money to ex- travagant persons of the higher classes, particularly to land owners; secondly, usury by lending money to the small pro- ducer who is in possession of his own means of employment, 698 Capitalist Production.
which includes the artisan, but more particularly the peasant, since under precapitalist conditions, so far as they permit of independent individual producers, the peasant class must form the overwhelming majority.
Both the ruin of rich land o^vners by usury and the spolia- tion of the small producers leads to the formation and concen- tration of large money-capitals. But to what extent this proc- ess does away with the old mode of production, as happened in modern Europe, and whether it places in its stead the cap- italist mode of production, depends entirely upon the stage of historical development and the circumstances surrounding it.
Usurers' capital as the characteristic foi*m of interest-bearing capital corresponds to the predominance of small scale produc- tion, of self employing peasants and small craft masters. When the laborer is confronted by the means of employment and by the product of labor in the shape of capital, as he is under the capitalist mode of production, he has no occasion to bor- row any money as a producer. When he does any borrowing of money, he does it to secure personal necessities, for instance, at the pawnshop. But wherever the laborer is the owner, whether actual or nominal, of his means of employment and of his product, he is confronted as a producer by the capital of the money lender, which stands in his way as a usurer's capital. ISTewman expresses the matter weakly, when he says that the banker is respected Avhile the usurer is hated and de- spised, because the banker lends to the rich, whereas the us- urer lends to the poor. (J. W. N'ewman, Lectures on Politi- cal Economy, London, 1851, p. 44.) He overlooks the fact that the difference of two modes of social production and of the corresponding social orders intervenes here and that the matter is not exhausted by the distinction between rich and poor. On the contrary, the usury which sucks the life out of the small producer goes hand in hand with the usury which sucks the rich owner of large estates dry. As soon as the u?;- ury of the Roman patricians had completely ruined the Roman plebeians, the small peasants, this form of exploita- tion had an end and slave economy undisguised took the place of small peasant economy.
Precapitalist Conditions. 699 Under the form of interest tlie whole of the surplus over the necessary means of subsistence (the amount of what be- comes wages later on) of the producers may here be devoured by usury (this assumes later the form of profit and ground rent), and hence it is very absurd to compare the level of this interest, which assimilates all the surplus-value with the ex- ception of the share claimed by the state, with the level of the modem rate of interest, which gives to the interest normally no more than a part of the surplus-value. Such a comparison forgets that the wage worker gives to the capitalist, who em- ploys him, profit, interest and ground rent, that is, the whole surplus-value produced by him. Carey makes this absurd comparison in order to show, how advantageous the develop- ment of capital and the fall in the rate of interest, that goes with it, is for the laborer. When it is said that the usurer, not content with squeezing the surplus-labor out of his victim, gradually acquires possession of the means of employment, house and land, of this victim and is thus continually engaged in expropriating him, it is forgotten that this complete expro- priation of the laborer from his means of employment is not a result which the capitalist mode of production seeks to accomplish, but rather the established condition from which it starts out. The wage slave is barred from becoming a cred- itor's slave just as the real slave was, at least in his capacity as a producer. The wage slave may eventually become a cred- itor's slave in his capacity as a consumer. Usurer's capital in this form, in which it appropriates indeed all surplus-la- bor of the direct producers, does not alter the mode of produc- tion. The ownership, or at least the possession of the means of employment by the producers, and small scale production corresponding to this, are its essential prerequisites. Here capital does not subordinate labor to itself directly, and does not confront the laborer as industrial capital, while usurer's capital merely impoverishes this mode of production, para- lyzes the productive forces instead of developing them, and at the same time perpetuates these miserable conditions, in which the social productivity of labor is not developed at the expense 700 Capitalist Production.
of labor itself, as it is under the capitalist mode of produc- tion.
On the one hand, usury thus exerts an undermining and destructive influence on ancient and feudal wealth and ancient and feudal proj^erty. On the otlier hand it undermines and ruins small peasants' and small burghers' production, in short all forms, in which the producer still appears as the owner of his conditions of production. Under the developed capitalist mode of production, the laborer is not the owner of his means of employment, of the field which he cultivates, of the raw materials which he works up, etc. But under this system the separation of the producer from the means of em- ployment is the expression of an actual revolution of the mode of production itself. The individual laborers are brought to- gether in large workshops for the purpose of a division of la- bor, which dovetails one man's activity into another's. The tool becomes a machine. The mode of production no longer permits this dislocation of the means of production, which goes with small property, nor does it permit the isolation of the la- borer himself. Under the capitalist mode of production, usury can no longer separate the producer from his means of production, for the simple reason that they have already been separated.
Usury centralises money wealth, where the means of pro- duction are disjointed. It does not alter the mode of produc- tion, but attaches itself to it as a parasite and makes it miser- able. It sucks its blood, kills its neiwe, and compels repro- duction to proceed under even more disheartening conditions. Hence the popular hatred against usurers, which was most pronounced in the ancient w^orld, where the ownership of the means of production by the producer himself was at the same tmie the basis of the political conditions, of the independence ff the citizen. To the extent that slavery prevails, or to the ^extent that the surplus product is consumed by the feudal lord and his retinue, while either the slave owner or the feudal lord fall into the clutches of the usurer, the mode of produc- tion remains the same. Only, it becomes harder on the la- borer. The indebted slave holder or feudal lord becomes more Precapitalist Conditions. 701 r he] prooppressive, because he is himself more oppressed. Or makes finally room for the usurer, who becomes a landed prietor or a slave holder himself, like the knights in ancieni Rome. Into the place of the old exploiters, whose exploita tion was more or less patriarchal, because it was largely i means of political power, steps a hard, money-mad parvenue But the mode of production itself is not altered thereby. J Usury works revolutionary effects in all precapitalist modes of production only so far as it destroys and dissolves those forms of property, which form the solid basis of the political organisation, and which must be continually reproduced in order that the political organisation may endure. Under t Asiatic forms usury may last for a long time, without produ ing anything else but economic disintegration and politic rottenness. Xot until the other prerequisites of capitalist pr duction are present, does usury become a means of assistin in the formation of the new mode of production, by ruiningi the feudal lord and small scale production on the one hand,^ and centralising the means of production into capital on tl other.
In the Middle Ages no country had any general rate of in- terest. The Church forbade all lending at interest from the outset. Laws and courts protected loans but very little. In- terest was so much higher in individual cases. The limited circulation of money, the necessity of making most payments in cash, compelled people to borrow money, so much more the less the business of exchanging money was developed. There was a great deal of difference, both in the rates of interest and the conceptions of usury. In the time of Charlemagne it was considered usury to charge 100%. In Lindau on Lake Boden some resident burghers took 216|% in 1348. In Zurich the City Council decreed that 43^% should be the legal rate of interest. In Italy 40% had to be paid sometimes, although the ordinary rate did not exceed 20% from the 12th to the 14th century. Verona ordered that 12^% should be the legal rate. Emperor Frederick II. fixed the rate at 10%, but only for Jews. He did not care to speak for the Christians. In the Rhine provinces 10% was the rule as earlv as the 13th 702 Capitalist Production.
century. (Hiillmann, Geschichte des Stddtewesens, II, pp.
Usurer's capital uses a capital's method of exploitation with- out its mode of production. This state of affairs repeats it- self also inside of bourgeois economy, in backward lines of in- dustry or in those lines, which resist the transition to the mod- ern mode of production. For instance, if we wish to compare the English rate of interest with the Indian, we should not take the rate of interest of the Bank of England, but rather that, say, of the lenders of small machinery to small producers lomestic industry.
Usury as an enemy of consuming wealth is historically im- portant inasmuch as it is itself a process generating capital. Usurer's capital and merchant's wealth promote the formation of moneyed wealth independent of landed property. The less products assume the character of commodities, and the less \^exchange-value seizes the whole breadth and depth of produc- tion, the more does money appear as real wealth, that, is, as wealth in general compared to its limited existence in use- values. This is the basis of hoarding. Aside from money as world money and a hoard, it assumes the absolute form of com- modities particularly as a means of payment. And it is espe- cially its function as a means of payment, which develops in- terest and with it money-capital. What squandering and cor- rupting wealth wants is money as such, money as a means of buying everything (also as a means of paying debts). The small producer needs money above all to make payments. (The conversion of tithes in kind and service in kind to land- lords and to the state into money rent and money taxes plays a great role in this.) In either case money is used as money proper. On the other hand hoarding becomes real only in this way, and thus fulfills the dreams of the usurer. What the o\vner of a hoard demands is not capital, but money as such; 'but by means of interest he converts his hoard of money into capital for himself, that is, into a means of grabbing surplus- labor in part or entirely, and with it securing a hold on a part of the requirements of production itself, even though this may remain separate from him as a nominal property of others.
Precapitalist Conditions. 703 Usury lives apparently in the pores of production in the samX way as the gods live in the spaces between worlds according! to Epicurus. Money is obtainable so much harder, the lesy products assume the general form of commodities. Hence the usurer acknowledges no other barrier but the capacity or resistive power of those who need money. In small peasants' and small burghers' production money serves as a means of purchase mainly, whenever the laborer (who is still to a pre- dominant extent the owner of his means of production under these modes of production) loses his means of employment by accident or by extraordinary upheavals, or at least does not become able to recover them in the ordinary course of repro- duction. Means of subsistence and raw materials constitute the essential part of these requirements of production. If these become dearer, it may be impossible to reproduce them out of the returns for the product, just as mere crop failures may prevent the peasant from reproducing his seed grain m its natural form. The same wars, by which the Koman patri- cians ruined the plebeians, by compelling them to serve as sol- diers and thus preventing them from reproducing the require- ments of their productive activity and making paupers oi them (and pauperization, depletion or loss of the prerequisite of reproduction is here the predominent form), filled the sheds and cellars of the patricians with looted copper, the money of that time. Instead of giving to the plebeians directly the necessary commodities, grain, horses, cattle, they loaned to them this copper, for wdiich they had no use themselves, and availed themselves of this condition for the purpose of enforc- ing enormous interest by usury, thereby turning the plebeians into their debtor slaves. Under the reign of Charlemagne tHte Frankish peasants were likewise ruined by wars, so thai nothing remained to them but to become serfs instead of debt] ors. In the Roman empire it happened frequently that fan/ ines caused the sale of children, or the voluntary sale of free men by themselves, into slavery to the rich. So much for general turning points. In individual cases the maintenance or loss of the requirements of production on the part of the small producers depend on a thousand accidents, and every