Spring 1999

Capital, Volume 3

Part Five


The central thing I want to emphasize is the role that interest-bearing capital and credit play in the transitions from one mode of production to another.  In Chapter 36, "Pre-Capitalist Relations," Marx explains how usury in Europe paved the way for the transition to the capitalist mode of production and in Chapter 27, "The Role of Credit in Capitalist Production," he argues that the credit system is an important lever in the transition from capitalist production to the subsequent social mode, communism.



I want to start with usury (even though it comes later in the text) because it comes first historically.  We should by now be used to Marx’s rhetorical strategy whereby he gives the logical or conceptual development of present phenomena and then in the final chapter gives the historical development of that same phenomena.  The function of usury in feudal Europe, and Marx argues its function in any pre-capitalist society, is to impoverish the mode of production and destroy the productive forces.  In medieval Europe, the usurer lent money to both the large-scale landed proprietor and the small producers who possessed their own conditions of labor, such as peasants and artisans.  What usury does is simply deprive those producers of a portion of their profits and thus erode the viability of that mode of production.  "It does not change the mode of production, but clings on to it like a parasite and impoverishes it.  It sucks it dry, emasculates it and forces reproduction to proceed under ever more pitiable conditions" (731).  Usury thus impoverished the independent feudal peasant and the landed proprietor.  The usurer does not really want to destroy the mode of production.  It wants that mode of production to continue living so it can continue to suck its profits.

·Usury's effects, however, are really contrary to its interests.  Its interests are conservative but its effects are revolutionary.  Usury contributes to primitive accumulation and prepares for the construction of the capitalist mode of production.  Specifically, by impoverishing the small, independent producers, usury has the effect of separating the producers from the means of production and thus on one hand creating a class of free potential proletarians and on the other forming a concentration of wealth in the hands of the few.  "Usury has a revolutionary effect on pre-capitalist modes of production only in so far as it destroys and dissolves the forms of ownership which provide a firm basis for the articulation of political life and whose constant reproduction in the same form is a necessity for that life" (732).  Usury thus had a revolutionary effect in medieval Europe to the extent that it destroyed the feudal forms of ownership, and Marx claims that it plays or can play a similar role in other non-capitalist societies.

·Even when we are talking about usury's revolutionary effects, we should be clear that the effects of usury are purely negative.  It only destroys the old mode of production and has no power to contribute to the construction of the new.  It's relation to capitalist production, then, is a purely negative one.  "Usurer's capital has capital's mode of exploitation without its mode of production" (732).  Usury can destroy precapitalist forms and it can exploit from an external position but it has nothing to say about capitalist production itself.

·The question then is how is this usury that functions are part of the process of primitive accumulation different from the interest-bearing capital in capitalist production?  "What distinguishes interest- bearing capital in so far as it forms an essential element of the capitalist mode of production, from usurer's capital is in no way the nature or character of this capital itself.  [Money is lent and paid back with interest.]  It is simply the changed conditions under which it functions, and hence also the totally transformed figure of the borrower who confronts the money-lender" (735 mid).  The changed conditions and the transformed borrower can be explained in large part, it seems to me, by the fact that within the capitalist mode of production interest-bearing capital is subordinated to or dependent upon industrial capital.  "This violent struggle against usury, the demand for the subjection of interest-bearing capital to industrial capital, is simply the prelude to the organic creations that these conditions of capitalist production produce in the form of the modern banking system" (738).   In effect, the subordination of all forms of capital to industrial capital, which is characteristic of the capitalist mode of production, is what determines the passage from usury to interest-bearing capital and the entire modern banking and credit system.



What I see as important in Marx's discussion of interest-bearing capital is that he defines interest as a portion of the profit on productive capital that is shared out in much the same way that the profit is shared out to commercial capital, rent, and so forth.  In other words, capitalist money lending and the profits of interest-bearing capital has to be considered not separately but within the entire cycle of capitalist production.  This is I think a conceptual consequence of saying that money-lending capital is subordinated to industrial capital. 

            It’s interesting here that Marx poses an analogy here between the lender of money and the worker (a lender of labor-power): “Money or a commodity is already potential capital in itself, just as labour-power is potential capital” (477 top).  So, the industrial capitalist pays the exchange value of this commodity money (interest) and gets from it its use-value.  "It is this use-value that money has as capital -- the capacity to produce the average profit -- that the money capitalist alienates to the industrial capitalist for the period during which he gives him control of the capital loaned" (473).  One of the things this analogy accomplishes is emphasize the fact that capitalist money-lending and interest are entirely dependent on industrial production.  That is the use-value of the money as capital, its engaging in the productive process.  Without that production and its average rate of profit as foundation, interest would have no basis.

            This leads to the notion of interest as a share of the rate of profit.  Let’s say the general rate of profit is 20%.  How is this general rate of profit determined?  Review.

Read p. 489 bottom: “The general rater of profit is determined . . . their relative size.”

Now, the rate of interest must be a portion of the rate of profit, so in this case its minimum limit is 0% and its maximum 20%.  Within these limits, however, we can no way of determined any necessary or natural rate of interest.  As Marx says, “there is no natural rate of interest” (478).  Within these limits, the rate of interest is simply determined by competition among the different capitals, really between money-bearing capital and industrial capital.  (Say, for instance, the 20% rate of profit is divided up as 5% interest and 15% profit to industrial capital.)  One thing I find interesting about the contrast between these two rates, rate of profit and interest, is that the first is a fuzzy quantity based on a necessary, real foundation, whereas the latter is a clear quantity based on an accidental, contingent foundation.  Read p. 491 mid: “the general rate of profit presents a blurred and hazy picture compared with the sharply defined rate of interest.”

            The fact that interest is merely a part of the general rate of profit helps us understand why Marx thinks Proudhon is so naïve when he rails against interest and money-lending.  “Lending appears to Proudhon as evil because it is not selling” (p. 466).  Or really, Proudhon seems to think that interest is entirely responsible for surplus value: “it is impossible for the worker to buy back the product of his own labor” (p. 468).  Marx’s response to Proudhon is that interest and money-bearing capital can only be considered within the context of capitalist production.  Destroying interest while leaving capitalist production intact will solve nothing.  Proudhon falls victim to a common misconception: “In the popular mind, therefore, money capital or interest-bearing capital is still seen as capital as such, capital par excellence” (499). 

Capital fetish: “Interest-bearing capital . . . displays the conception of the capital fetish in its consummate form, the idea that . . . pure automaton” (523 bottom).



            Another interesting effect of this division of profit into interest and profit of enterprise is the other half of the equation.  Marx explains that there is a qualitative distinction between these two parts of profit.

Read 498 top: “One part of the profit . . . active capitalist exercises.”  The first is capital outside the production process, which yields an interest, and the second capital within the production process, which yields profit of enterprise.

What does it mean to say that interest expresses capital as property?  Read pp. 502-503.  Or rather, “Interest represents mere ownership of capital as a means of appropriating the product of other people’s labor” (p. 506 top). 

            Now, consolidating in this one pole, money-bearing capital, the role of capital as property, as a kind of parasitical exploitation, frees up the other pole, enterprise, capital as function.  In other words, the money-bearing capitalist clearly does no work and therefore let’s say has no just claim on interest, but the industrial capitalist (borrowing from the money-bearing capitalist and putting that money to work) does work for the profit of enterprise. 

Read p. 503 bottom: “The exploitation of productive labor takes effort . . . as a worker.”

The work of the capitalist goes under the name of “wages of superintendence of labor.”  This gives rise to the idea that the profit of enterprise is a wage for supervising labor.  “The labor of exploiting and the labor exploited are identical, both being labor” (506 bottom). 

            Marx gives three responses to this in rather compact form.

1)      all forms of domination (including slavery) take work and that work of dominating is often presented as a justification of the system itself.  Read p. 509 bottom: “this function arising from the servitude . . . owner of capital.”

2)      The profits of enterprise are not “wages of superintendence” and they are not wages at all because they derive from surplus labor not from any calculation of the value of the labor-power involved.  The negative proof of this is the social demand.  Read p. 513 mid: “The socialists then raised the demand . . . wages of supervision.”

3)      The functional role of capitalist supervision in the cooperation of labor is decreasing so that industrial capital too is becoming increasingly parasitic or superfluous.  Read p. 512 mid: “But since on the one hand . . . someone superfluous.”  In other words, the industrial capitalist comes to be just as parasitical as the money-bearing capitalist.



The credit system is the vehicle for the transition beyond the capitalist mode of production just like usury was the vehicle for the transition beyond feudalism, but credit's relation to capitalist production is exactly opposite to usury's relation to feudal production.  Usury destroyed feudal productive forces but the credit system generates a huge expansion of capitalist productive forces, and in particular the credit system brings about the conditions of cooperation and the development of social labor.  Or really, the credit system plays a double role, both productive and destructive.

            Marx sees the productive face of the credit system at work in the formation of joint-stock companies.  "Capital, which is inherently based on a social mode of production and presupposes a social concentration of means of production and labour-power, now receives the form of social capital (capital of directly associated individuals) in contrast to private capital, and its enterprises appear as social enterprises as opposed to private ones.  This is the abolition of capital as private property within the confines of the capitalist mode of production itself" (567).  "This result of capitalist production in its highest development is a necessary point of transition towards the transformation of capital back into the property of the producers, though no longer as the private property of individual producers, but rather as their property as associated producers, as directly social property" (568).

·At the same time that the credit system operates a socialization of production it also extends the command of individual capitalists over huge quantities of social capital.  Credit is extended to individual capitalists, "or to the person who can pass as a capitalist" (570), in such a way that the individual capitalist can widely extend its command over social labor beyond the power of its own capital.  "The actual capital that someone possesses ... now becomes simply the basis for a superstructure of credit" (570).  [NB: how the luxury or representation as capitalist is here the means of credit necessary for the individual capitalist (570).  Capitalist representation is basis of the confidence of the creditor.] 

            The negative face of the credit system is also how it can lead to larger and larger crises of overproduction while at the same time it develops the productive forces.  Read p. 572 bottom: “The credit system . . . old mode of production.”

·The formation of joint-stock companies on one hand and the growth of private wealth on the other, both accomplished through the credit system, deepens one of the contradictions of the capitalist mode of production.  "In the joint-stock system, there is already a conflict with the old form, in which the means of social production appear as individual property.  But the transformation into the form of shares still remains trapped within the capitalist barriers; instead of overcoming the opposition between the character of wealth as something social, and private wealth, this transformation only develops this opposition in a new form" (571).

Lenin: "Capitalism in its imperialist stage arrives at the threshold of the most complete socialisation of production.  In spite of themselves, the capitalists are dragged, as it were, into a new social order, a transitional social order from complete free competition to complete socialisation.  Production becomes social, but appropriation remains private" (Imperialism 25).