704 Capitalist Production.
one of such accidents or losses signifies impoverishment and becomes an opening, into which the parasite of usury may enter. The mere death of a cow may render the small pro- ducer unable to renew his reproduction on the former scale. Then he falls into the clatches of the usurer, and once he is in the usurer's power he never extricates himself.
The typical great and peculiar domain of the usurer, how- ever, is the function of money as a means of payment. Ev- ery payment of money, ground rent, tribute, tax, etc., which becomes due at a certain date, carries with it the necessity of securing money for such a purpose. Hence usury attaches it- self from the days of the ancient Romans to those of modern times to the tax renters, the fermiers generaux, the receveurs generaux. Furthermore, commerce and the extension of com- modity-production carry with them the separation of purchase and payment by an interval of time. The money has to be on the spot at a definite date. In wdiat manner this may lead to circumstances, in which the money-capitalist and usurer may merge into one even nowadays, is shown by the modern money panics. This same usuiy, however, becomes one of the principal means of further developing the necessity of using money as a means of papnent, by getting the producer ever more deeply into debt and destroying his usual means of payment in such a way that the burden of interest makes even his normal reproduction impossible. In that case usury sprouts up out of money as a means of payment and extends this function of money into its o^\^l peculiar domain.
The development of the credit system takes place as a ,/ reaction against usury. But this should not be misunderstood, L^nor interpreted in the manner of the ancient waiters, the church fathers, Luther, or the older socialists. It signifies no more and no less than the subordination of interest-bearing capital to the conditions and requirements of the capitalist mode of production.
On the whole, interest-bearing capital under the modem credit-system is adapted to the conditions of the capitalist mode of production. Usury as such does not merely per- petuate itself, but is even freed by nations with a developed Precapitalist Conditions. 705 capitalist production from those fetters, which were imposed upon it by the old legislation. Interest-bearing capital retains the form of usurer's capital in its transactions with such persons or classes, or those in such circumstances, as do not borrow in the sense corresponding to the capitalist mode of production, or in which borrowing cannot take place in that sense. This applies to borrowing from individual want at the pawnshop; to lending money for the purpose of squandering on the part of wealthy spendthrifts; or to bor- rowing money on the part of producers who are not capitalist producers, such as small farmers, craftsmen, etc., who are still the owners of their own requirements of production; finally to borrowing on the part of capitalist producers, who still operate on such a small scale, that they approach those self-employing producers.
What distinguishes the interest-bearing capital, so far aX it is an essential element of the capitalist mode of pro4 duction, from usurer's capital is in no way the nature or thel character of this capital itself. It is merely the altered con- \ ditions, under which it operates, and consequently the totally I changed character of the borrower, who transacts business / with the money lender. Even in cases where a man without^ wealth receives credit in his capacity as an industrial or merchant, it is done for the confident expectation, that he will perform the function of a capitalist and appropriate some unpaid labor with the borrowed capital. He receives credit in his capacity as a potential capitalist. This circum- stance, that a man without wealth, but with energy, solidity, ability and business sense may become a capitalist in this way, is very much admired by the apologists of the capitalist system, and the commercial value of each individual is pretty accurately estimated under the capitalist mode of produc- tion. Although this circumstance continually brings an unwelcome number of new soldiers of fortune into the field and into competition with the already existing individual capitalists, it also secures the supremacy of capital itself, expands its basis, and enables it to recruit ever new forces for itself out of the lower layers of society. In a similar way the 2S 7o6 Capitalist Production.
circumstance, that the Catholic Church in the Middle Ages formed its hierarchy out of the best brains of people without regard to estate, birth, or wealth, was one of the principal means of fortifying priest rule and suppressing the laity. The more a ruling class is able to assimilate the most prominent men of a ruled class, the more solid and dangerous is its rule.
Instead of the anathema against interest-bearing capital in general, it is on the contrary its explicit recognition, from which the initiators of the modern credit system take their start.
We are not speaking here of such reactions against usm*y, as tried to protect the poor against it, like the Monts-de-piete (1350 in Sarlins of the Franche-Comte, later in Perugia and Savona of Italy, 1400 and 1479). These are remarkable mainly because they show the irony of history, which turns pious wishes into their very opposite as soon as they are realised. According to a moderate estimate the English working class pays 100% to the pawnshops, those modern successors of the Monts-de-piete. ^^^ IS^either are we speaking of the credit phantasies of a man like Dr. Hugh Chamber- leyne or John Briscoe, who attempted during the last decade of the I7th century to emancipate the English aristocracy from usury by means of a country bank with paper money based on real estate. ^^^ The credit associations, which were established in the 12th and llrth centuries in Venice and Genoa, arose from the need *'* " It is in consequence of frequent pawning and redeeming within the same month, and of pawning one article in order to redeem another, and of thus obtain- ing a small difference in money, that the pawnshop interest becomes so excessive. In London there are 240 authorized pawnshop owners, and in the provinces about 1450. The employed capital is estimated at about one million. It is turned over at least three times per year, and every time at an average of 33^^%; so that the lower classes of England pay 100% annually for the temporary loan of one million, aside from losses due to lapses of pawned articles." (J. J. Tuckett, A History of the Past and Present State of the Labouring Population. London, '" Even in the titles of their works they state as their principal purpose " the general welfare of the landed proprietors, the great appreciation of the value of real estate, the liberation of the nobility and of the gentry, etc., from taxation, the augmentation of their annual income, etc." Only the usurers were to lose, those worst enemies of the nation, who had done more injury to the nobility and yeomanry than an army of invasion from France could have done.
Precapitalist Conditions. yoy of marine commerce and wholesale trade connected with it to emancipate themselves from the domination of ancient usury and from the monopolists of the money business. The fact that the bona fide banks, which were founded in those city-republics, assumed at the same time the shape of in- stitutions for public credit, from which the state received loans on future tax revenues, is explained by the circumstance that the merchants forming such associations were the prominent men of those states and as much interested in emancipating their state as themselves from the exactions of usurers, ^^^ and at the same time getting a better and more secure control of the states themselves. Hence, when the Bank of England was being planned, the Tories raised the objection: "Banks are republican institutions. Flourishing banks exist in Venice, Genoa, Amsterdam, and Hamburg. But who ever heard of a Bank of France or Spain? " The Bank of Amsterdam, in 1609, did not mark an epoch in the development of the modern credit system any more than that of Hamburg in 1619. It was purely a bank for deposits. The checks issued by the bank were indeed merely receipts for the deposited, coined and uncoined, precious metal, and circulated only with the endorsement of those who received them. But in Holland commercial credit and deal- ing in money had developed together with commerce and manufacture, and the interest-bearing capital had been subordinated to industrial and commercial capital by the course of development itself. This showed itself even in the lowniess of the rate of interest. And Holland was considered in the 17th century as the model country of economic develop- '" " Charles II. of England, for instance, still had to pay enormous interest of usury and agios to the gold smiths " (the precursors of the bankers), " as much as 20 to 30%." A business so profitable induced " the gold smiths to make more and more loans to the King, to anticipate the entire income on taxes to get a lien on every concession of Parliament in the way of money as soon as it had been made, also to compete against one another in buying up and giving pawn on bills, orders and tallies, so that in reality all incomes of the state passed through their hands." (John Francis, History of the Bank of England, London, 1848, I p. 31.) " The erection of a bank had been suggested several times before that. It was at last a necessity" (L. c, p. 38). "The bank was a necessity for the government itself, sucked dry by usurers, in order to obtain money at a reasonable rate of interest, on the security of parliamentary concessions." (L. c, p. 59 7o8 Capitalist Production.
ment, as England is now. The monopoly of old-style usurj", based on poverty, had been overthrown in that country of its own weight.
During the entire 18th century Holland is pointed out as an example and the cry raised for a compulsory lowering of the rate of interest (and legislation acted on this hint), in order to subordinate the interest-bearing capital to the com- mercial and industrial capital, instead of maintaining the reverse condition. The main spokesman of this movement is Sir Josiah Child, the father of normal English bankerdom. He declaims against the monopoly of the usurers in much the same way that the wholesale clothing manufacturer Moses & Son do when posing as the leaders of the fight against the monopoly of the private tailors. This Josiah Child is at the same time the father of English stock jobbing. Thus he, the autocrat of the East India Company, defends its monopoly in the name of free trade. About Thomas Mauley {" Interest of Money Mistaken ") he says: "As the champion of the timid and trembling band of usurers he erects his batteries at that point, which I have declared to be the weakest...he denies point blank that the low rate of interest is the cause of wealth and vows that it is merely its effect." Traites sur le Commerce, etc., 1669, translated in Amsterdam and Berlin, 1754.) " If it is commerce that enriches a country, and if a lowering of interest increases commerce, then a lowering of interest or a restriction of usury is doubtless a fruitful primary cause of the wealth of a nation. It is not at all absurd to say that the same thing may be simultaneously a cause under certain circumstances, and an effect under others." (L. c, p. 55.) " The egg is the cause of the hen, and the hen is the cause of the egg. The lowering of interest may cause an increase of wealth, and the increase of wealth may cause a still greater reduction of interest." (L. c, p. 156.) " I am the defender of industry and my opponent defends laziness and sloth." (P. 179.)
Tliis violent fight against usury, this demand for the subordination of the interest-bearing under the industrial capital, is but the herald of the organic creations, that Precapitalist Conditions. 709 establish these prerequisites of capitalist production in the modern banking system, which on the one hand robs usurer's capital of its monopoly by concentrating all fallow money reserves and throwing them on the money-market, and on the other hand limits the monopoly of the precious metals them- selves by creating credit-money.
The same opposition to usury, the demand for emancipation of commerce, industry and of the state from usury, which we observe here in the case of Child, will be found in all writings on banking during the last third of the 17th and the beginning of the 18th centuries. With them go also colossal illusions about the miraculous effects of credit, the abolition of the monopoly of precious metals, their displacement by paper, etc. The Scotchman William Patterson, the founder of the Bank of England and the Bank of Scotland, is by all odds Law the First.
Against the Bank of England all goldsmiths and pawn- brokers raised a howl of rage. (Maeaulay, History of Eng- land, IV., p. 499.) During the first ten years the Bank had to struggle with great difficulties; great enmity from without; its notes were only accepted far below their nominal value the goldsmiths (in whose hands the trade with precious metals served as a basis of a primitive banking business) intrigued considerably against the Bank, because their business was reduced by it, their discount lowered, and their business with the government had fallen into the hands of this antagonist. (J. Francis, 1. c, p. 73.)
Even before the establishment of the Bank of England a plan for a national bank of credit was suggested in 1G83, which had for its purpose, among others, " that business men, when they possess a considerable quantity of goods, may deposit their goods with the assistance of this bank and take up a credit on their tied-up supplies, employ their hands, and increase their business, until they find a good market, instead of selling at a loss," After many difficulties this Bank of Credit was erected in Devonshire House in Bishops- gate Street. It made loans to industrials and merchants on security of deposited goods to the amount of three quarters 710 Capitalist Production.
of their value, in bills of exchange. In order to make these bills of exchange marketable, a nmnber of people in each branch of business were organised into a society, from whom every possessor of such bills should be able to get goods with the same facility as though he were to offer them cash pay- ment. This bank did not do a flourishing business, its machinery was too complicated, the risk too great in case of a depreciation of commodities.
If we go by the real content of those writings, which ac- company and promote theoretically the formation of the modern credit system in England, we shall not find anything in them but the demand for a subordination of interest-bearing capital, and of loanable means of production in general, under the capitalist mode of production as one of its prerequisites. On the other hand, if we cling to the mere phraseology, we shall be frequently surprised by their agi-eement, down to the very expressions, with the banking and credit illusions of the Saint-Simonists.
Just as the cultivateur in the writings of the physiocrats does not signify the actual tiller of the soil, but the great land owner, so the travailleur with Saint-Simon, and continuing on through his disciples, does not signify the laborer, but the industrial and commercial capitalist. " A travailleur (worker) needs help, backers, laborers; he looks for such as are intelligent, able, devoted; he puts them to work, and their labor is productive." (Religion saint-simonienne, Economic politique et Politique. Paris, 1831, p. lOi.)
In fact, one should not forget that only in his last work, Le Nouveau Chrlstianisme, does Saint-Simon speak directly for the working class and declare their emancipation to be the end of his efforts. All his former writings are, indeed, mere glorifications of modern bourgeois society against feudal society, or of industrials and bankers against marshals and jurist law-makers of the jSTapoleonic era. What a difference compared with the contemporaneous writings of Owen!^^^ "* Marx would surely have modified thi.^ p?ssage considerably, if he had worked hts manuscript over. It was inspired by the rc'e if *he ex-Saint-Simonists under the second empire in France, where iust at the tin»e wh«n M?rx wrote the above the world-redeeming credit-phantasies c< *^'s sc^jooI. hs force of history as Precapitalist Conditions. 711 Among his followers, like wise, the industrial capitalist remains the travailleur par excellence, as the above quoted passage indicates. After reading their writings critically, one will not be surprised, that the realization of their dreams of banks and the upshot of their critique materialised in the Credit mobilier founded by the Ex-Saint-Simonist Emile Pereire. This form of credit could become prevalent only in a country like France, wdiere neither the credit system nor great industries had become developed to a modern scale.
In the following passage of the " Doctrine de Saint-Simon, Exposition, Premiere annee, 1828-29 " (Third edition, Paris, 1831), the germ of the Credit mobilier is already contained. It is easy to understand, that the banker can lend money more cheaply than the capitalist and the private usurer. The bankers are, therefore, " able to procure tools to the industrials far more cheaply, that is, at a lower interest than the real estate o\vners and capitalists can, who may be more easily mistaken in their choice of borrowers," (P. 202.) But the authors themselves add in a footnote: " The advantage that would follow from an intervention of bankers between the idle and the travailleurs is often balanced, or even annulled, by the opportunities offered by our disorganized society to Egoism, which may manifest itself in various forms of fraud and charlatanry. The bankers often come between the idle and the travailleurs for the purpose of exploiting both of them to the injury of society." Travailleur means here industrial capitalist. For the rest it is a mistake to consider the means at the command of banks merely as means of idle people. In the first place the banks hold that portion of capital, which industrials and merchants own temporarily in irony, were being realised in the shape of a swindle of a magnitude never wit- nessed before. Later Marx spoke only with admiration of the genius and ency- clopedic brain of Saint-Simon. The peculiarity of this writer in ignoring the antagonism between the bourgeoisie and the proletariat that was just then coming into existence in France, and of counting that part of the bourgeoisie, which was active in production, among the travailleurs, corresponds to Fourier's conception, who wanted to reconcile capital and labor. This explains itself out of the eco- nomic and political conditions of France in those days. The fact that Owen was more farseeing in this respect is due to his different environment, for he lived in a period of industrial revolution and of class antagonism which were becoming acute. — F. E.
712 Capitalist Production.
the form of unemployed money, as a money reserve or as cap- ital to be invested. It is idle capital, but not capital of idle people. In the second place the banks hold that portion of the revenues and savings of all kinds which is to be tem- porarily or permanently accumulated. Both things are es- sential for the character of the banking system.
But it should never be forgotten, that money, in the first place, in the form of precious metals, remains the basis from which the credit system naturally can never detach itself. In the second place, it must be kept in mind that the credit system has for its premise the monopoly of the social means of production in the hands of private people (in the form of capital and landed property), that it is itself on the one hand an immanent form of the capitalist mode of production, and on the other hand one of the impelling forces of the development of this mode of production to its highest and ultimate form.
The banking system, so far as its formal organisation and centralisation is concerned, is the most artificial and most de- veloped product turned out by the capitalist mode of produc- tion, a fact already expressed in 1697 in '' Some Thoughts of the Interests of England." This accounts for the immense power of such an institution as the Bank of England over commerce and industry, although their actual movements re- main quite outside of its sphere and it is passive toward them. It presents indeed the form of universal bookkeeping and of a distribution of products on a social scale, but only the form. We have seen that the average profit of the individual capitalist, or of every individual capital, is determined, not by the surplus-labor appropriated at first hand by each capital, but by the total quantity of surplus-labor appropriated by the total capital, whereof each individual capital receives a dividend as an aliquot part of the total capital. This social character of capital is promoted and fully realised by the complete development of the credit and banking system. On the other hand this goes still farther. It places at the disposal of the industrial and commercial capitalists all the available, or even potential, capital of society, so far as it Precapitalist Conditions. 713 has not been actively invested, so that neither the lender nor the user of such capital are its real owners or producers. This does away with the private character of capital and implies in itself, to that extent, the abolition of capital. By means of the banking system the distribution of capital as a special business, as a social function, is taken out of the hands of the private capitalists and usurers. But at the same time banking and credit thus become the most effective means of driving capitalist production beyond its own boundaries, and one of the most potent instruments of crises and swindle.
The banking system shows, furthermore, by putting dif- ferent forms of circulating credit in the place of money, that money is in reality nothing but a special expression of the social character of labor and its products, so that this char- acter, as distinguished from the basis of individual produc- tion, must present itself in the last analysis as a thing, as a peculiar commodity by the side of the other commodities.
Finally, there is no doubt that the credit system will serve as a powerful lever during the transition from the capitalist mode of production to the production by means of associated labor; but only as one element in connection with other great organic revolutions of the mode of production itself. On the other hand, the illusions concerning the miraculous power of the credit and banking system, as nursed by some socialists, arise from a complete lack of familiarity with the capitalist mode of production and the credit system as one of its forms. As soon as the means of production have ceased to be converted into capital (which includes also the abolition of private property in land), credit as such has no longer any meaning. This was understood also by the advocates of Saint-Simonism. But so long as the capitalist mode of production lasts, in- terest-bearing capital as one of its forms also continues and constitutes actually the basis of the credit system. Only that sensational writer, Proudhon, who wanted to perpetuate the production of commodities and yet abolish money ^^", was capable of dreaming of a credit gratuit, this monster which "' Karl Marx, The Poverty of Philosophy, 1847. — I-Carl Marx, Critique of Political Economy, p. 107.
714 Capitalist Production.
was supposed to realise the pious wish of small capitalist pro- duction., In the '' Religion saint-simonienne, Economie et Politi- que," we read on page 45: " Credit serves the purpose, in a society in which some own the instruments of industry without the ability or the will to employ them, and in which other industrious people have no instruments of labor, of transferring these instruments in the easiest manner possible from the hands of the former, their owners, to the hands of the others who know how to use them. Xote that this defini- tion regards credit as a result of the Avay in which property is constituted." Therefore credit disappears with this con- stitution of property. We read, furthemiore, on page 98, that the present banks " consider it their business to yield to that movement which is started by the transactions taking place outside of their domain, not to give them an impulse on their part; in other words, the banks perform the role of capitalists in their transactions with those travailleurs, to whom they loan money." The idea that the banks themselves should take the lead and distinguish themselves " through the number and usefulness of the organised establishments and of the promoted works " (p. 101) contains the Credit mohilier in embryo. In the same way Charles Pecqueur demands tliat the banks (or what the Saint-Simonists call a Systeme general des- hanques) " should rule production." Pecqueur is es- sentially a Saint-Simonist, only much more radical. He de- sires that " the credit institute...should control the entire movement of national production." — '' Try to create a national credit institute, which shall advance means to propertyless talent and merit, without, however, knitting thes-^ borrowers by compulsion into a close solidarity in production and consumption, but on the contrary rather enabling them to determine their own exchanges and production. In this way you will accomplish only what the private banks accomplish even now, that is, anarchy, a disproportion between produc- tion and consumption, the sudden ruin of one, and the sudden enrichment of another; so that your institute will never get any farther than the point of producing a great deal of Precapitalist Conditions. 715 welfare for one, which amounts to a great deal of suffering endured by another...only that you will have given to the wage laborers assisted by you the means of competing among one another in the same way that their capitalist masters do now." (Ch. Pecqueur, Theorie Nouvelle d'Econ- omie Sociale et Politique, Paris, 1842, p. 434.)