When we first examined the general rate of profit, or average rate of profit (Part Two of this volume), it was not yet in its finished shape: the equalization still showed up as nothing more than industrial capitals in different spheres being levelled together. That was filled out in Part Four, where the share taken by commercial capital in this equalization was discussed, along with commercial profit. Average profit, and the general rate of profit, now appear within narrower limits than they did before. As the analysis goes on, remember that from this point any talk of the general rate of profit, or of average profit, refers to that finished version — to the average rate in its completed form. Since industrial and commercial capital now get the same rate, there is no longer any need to tell industrial and commercial profit apart, so long as only this average profit is at issue. Whether capital is at work industrially in production or commercially in circulation, the average profit it throws off over the year is the same, and it is proportional to the capital's size.
Under capitalist production, money — taken here as value standing on its own, whether it actually exists as money or as commodities — can be turned into capital; and through that change it goes from a given value to a self-valorizing value, one that increases itself. It produces profit: that is, it puts the capitalist in a position to draw a definite amount of unpaid labour, of surplus product, of surplus-value out of the workers and to appropriate it.
With that, money acquires a use-value beyond the one it has as money: the extra use-value of working as capital. Its use-value here is exactly this: the profit it produces once it has been turned into capital. As potential capital — as a means of producing profit — it turns into a commodity, though one of a very peculiar kind. Or, put the same point another way, capital as capital becomes a commodity.
Suppose the average rate of profit for the year is 20 per cent. A machine worth £100, used as capital under average conditions and with the usual skill and effort for the job, would then bring in £20 of profit. So someone with £100 to his name has the power in his hands to turn that £100 into £120 — to produce £20 of profit. He holds a potential capital of £100. Say he lets another man have the £100 for a year, and that man really does use it as capital. He hands him the power to make £20 of profit. That is surplus-value that costs the borrower nothing, and for which he pays no equivalent. Say the second man pays the owner £5 when the year is up — part of the profit produced. What he is paying for is what the £100 is worth in use. That use-value is its use-value as capital: its function of producing £20 of profit. What he pays over out of that profit is called interest. Interest is nothing but a special name, a special rubric, for one share of the profit — the share that the capital actually at work has to hand over to the owner of the capital instead of putting it into its own pocket.
Clearly, merely possessing the £100 puts its owner in a position to draw in the interest — one particular part of the profit produced by that capital. If he did not hand the £100 over to the other man, that man could not produce this profit at all, nor could he act as a capitalist with regard to this £100.
To talk about natural justice here, the way Gilbart does, is nonsense. What makes the transactions between the agents of production just is that they are a natural outgrowth of the relations of production. How these transactions show up in law — as the free acts of the parties, as expressions of a will they share, as contracts the state will enforce against either side — those legal forms are mere forms; as forms, they cannot determine the content. They only express it. The content is just whenever it answers to the mode of production and fits it. It is unjust the moment it contradicts that mode. Slavery is unjust under the capitalist mode of production; and so is cheating about the quality of a commodity.
The £100 produces the £20 of profit by functioning as capital, industrial or commercial. But this functioning as capital cannot happen at all unless the money is really spent as capital — laid out to buy means of production (with industrial capital) or commodities (with commercial capital). And to be spent, it has to be there in the first place. If A, the owner of the £100, either spent it on his own consumption or kept it lying as a hoard, then B, the functioning capitalist, could not spend it as capital. He is not spending his own capital, but A's; and he cannot lay out A's capital unless A is willing. So the £100 are originally spent as capital by A himself, even though A's whole function as a capitalist comes down to that single spending of the £100 as capital. As far as these £100 go, B only functions as a capitalist because A hands them over to him and thereby spends them as capital.
Let us look first at the peculiar circulation of interest-bearing capital. After that, the second thing to examine is the peculiar way in which this capital is sold as a commodity — it is lent, so that its ownership is never ceded, rather than handed over for good.
We begin with A's advance of money to B. It can be made with or without security; the first form is the older one, apart from advances on commodities or on papers like bills and stocks. These particular forms are none of our concern here. What concerns us here is interest-bearing capital in its usual form.
In B's hands the money really does turn into capital: it goes through the movement M–C–M′, and then it comes back to A as M′ — as M plus ΔM, where ΔM stands for the interest. For simplicity, we set aside for now the case in which the capital lies in B's hands for a longer stretch and the interest falls due at regular intervals.
The movement is therefore:
M–M–C–M′–M′.
What appears doubled here is, first, the money being spent as capital, and second, the same money coming back as capital that has been realized — as M′, that is, M plus ΔM.
Take the movement of commercial capital, M–C–M′. Here one and the same commodity changes hands twice, or more often if one merchant sells to another. But every such change of place marks a metamorphosis — a purchase or a sale of that commodity, no matter how many times the process may repeat before the commodity finally drops into consumption.
In C–M–C, by contrast, the same money changes place twice — but this shows the commodity going through its full metamorphosis: first it becomes money, and then money becomes some other commodity.
Interest-bearing capital is different. Here M's first move to another hand does no work at all — it is no stage in the metamorphosis of a commodity, and no stage in the reproduction of capital. That only comes with the second spending, when the functioning capitalist has it and uses it to trade or turns it into productive capital. At this first change of place, M says nothing except that A has handed it over to B — a handing over that usually happens under particular legal forms and conditions.
The money is spent as capital twice over, and the first of those spendings is a bare transfer from A to B. Its return happens twice over as well. As M′, that is M + ΔM, it comes back out of the movement to B, the functioning capitalist. B then passes it on to A again, this time together with part of the profit, as realized capital, as M + ΔM — where ΔM is not the whole profit but only a part of it, the interest. It comes back to B only as what he paid out: functioning capital, but A's property. So for its return to be complete, B has to hand it over to A once more. And besides the capital sum, B has to give A a share of the profit he made on that sum, under the name of interest — since A gave him the money only as capital, that is, as value that not only holds its own in the movement but creates a surplus-value for its owner. It stays in B's hands only while it goes on functioning as capital. And when it comes back — after the agreed interval — it stops functioning as capital. But once it is capital that no longer does that work, it must go back to A, who has never stopped being its legal owner.
The form of lending — which belongs peculiarly to this commodity, capital as a commodity, and which incidentally turns up in other transactions as well — stands where the form of sale would stand. And this already follows from the fact that capital here steps forward as a commodity, or, put it another way, that money, when it works as capital, becomes a commodity.
A distinction has to be drawn here.
We have seen this already — in Volume 2, Chapter 1 — and it is worth recalling it briefly: in the circulation process, capital does two jobs, as commodity capital and as money capital. But in neither role does capital become a commodity as capital.
As soon as productive capital has turned into commodity capital, that commodity capital has to go to market and be sold as a commodity. There it acts simply as a commodity. The capitalist now appears only as a seller of a commodity, and the buyer only as a buyer of a commodity. As a commodity, the product has to realize its value by being sold in circulation and take on its changed form as money. So it makes no difference at all whether a consumer buys this commodity as a means of subsistence — something to live on — or a capitalist buys it as a means of production, as a component part of capital. Within the act of circulation itself, commodity capital counts only as a commodity, never as capital.
It is commodity capital, and not just a simple commodity, for two reasons. First, it already carries surplus-value inside it, so realizing its value is at the same time realizing surplus-value — but none of that changes the plain fact that it is a commodity, a product with a set price. Second, the job it does as a commodity is one stage of its own reproduction as capital; and so its movement as a commodity — only a part-movement of that process — is also a movement of capital. Yet it does not become capital through the act of selling itself, only through the way that act hangs together with the whole movement of this particular value sum, taken as capital.
The same goes for money capital. As money capital it in fact does nothing but act as money — that is, as a means of buying commodities, the elements of production. That this money is at the same time money capital, one form of capital, does not follow from the act of buying, from the real job it does here as money. It follows from the connection between this act and the whole movement of capital — because this act, which the money performs, opens the capitalist production process.
But as far as they really function, as far as they really play their part in the process, commodity capital does the work of a plain commodity here, and money capital the work of plain money. Take any single moment of the metamorphosis on its own: nowhere does the capitalist sell the commodity to the buyer as capital — although for him it does stand for capital — and nowhere does he hand his money to the seller as capital. In both cases he parts with the commodity simply as a commodity, and with the money simply as money — money to buy commodities with.
Only within the whole course, at the moment when the starting point also appears as the point of return — in M–M′ or C–C′ — does capital come on the scene in circulation as capital. In the production process, by contrast, it is capital because the worker is subordinated to the capitalist and surplus-value gets produced.
At this moment of return, though, the mediation has gone. What is there is M′ or M + ΔM (whether that larger sum by ΔM is held as money, as commodities, or as elements of production) — a money sum equal to what was advanced at the start, plus an excess over it, the realized surplus-value. And it is precisely at the return point, where capital is realized capital, value that has been valorized, in this shape — insofar as that point is fixed as a point of rest, imaginary or real — that capital never enters circulation; it looks instead like something pulled back out of circulation, the outcome of the whole process.
Once it is spent again, it is never alienated to a third party as capital; it is sold to him as an ordinary commodity, or handed over to him as plain money in exchange for a commodity. In its circulation process it never shows up as capital, only as commodity or as money; and for other people that is the only existence it has here. Here, what makes commodity and money count as capital is neither that commodity turns into money and money into commodity, nor any real relation they have to a buyer or a seller; it is only their ideal relations — whether to the capitalist himself, looked at subjectively, or as stages of the reproduction process, looked at objectively. In its real movement, capital exists as capital not in the circulation process but only in production — in the exploitation of labour-power.
Interest-bearing capital is a different case, and that difference is exactly what makes it what it is. Someone who owns money and wants it to function as interest-bearing capital hands the money over to a third party, throws it into circulation, and makes of it a commodity — a commodity that is capital. It is capital for him, and for the other man too. And it is not only capital for the one who parts with it: it is handed over to the other man as capital from the very outset, as a value whose use-value is to create surplus-value, profit. It is a value that keeps going through the movement and comes back, once it has functioned, to the person who first put it out — here, the money owner. So it leaves him only for a time; it passes out of its owner's possession and into the hands of the functioning capitalist only temporarily. So it is not paid out and not sold either — it is only lent; it is alienated only on condition that it returns to its starting point after a set period, and that it returns as realized capital, so that its use-value of producing surplus-value has actually been realized.
When a commodity is lent out as capital, it goes as fixed capital or as circulating capital, depending on what it is. Money can go out in either of the two forms. It counts as fixed capital, for instance, when the repayment comes as an annuity, so that every payment of interest brings a piece of the capital back with it. Some commodities can only ever be lent as fixed capital, because their use-value allows nothing else — houses, boats, machines, and so on. But all loan capital, whatever form it takes and however much the nature of its use-value modifies the repayment, is always nothing more than one particular form that money capital takes. For the thing lent is always a definite sum of money, and the interest is reckoned on that sum. Where the loan is neither money nor circulating capital, it comes back the way fixed capital comes back. The lender gets interest at intervals, plus a share of the fixed capital's used-up value, standing in for the wear over that period. When the term finally runs out, whatever is left unused of the fixed capital comes back in kind. If the capital lent is circulating capital, it comes back to the lender in the way circulating capital comes back.
The reflux takes its shape each time from the real cyclical movement of the self-reproducing capital and of its particular kinds. But when the capital has been lent, that return takes the shape of a repayment, because the advance — the parting with it — had the shape of a loan.
This chapter is about money capital proper alone; the other forms of lent capital are derived from it.
The lent capital flows back twice. Inside the reproduction process it comes back to the functioning capitalist; then it comes back a second time, when the money capitalist — the lender — is paid: a repayment to the real owner, to the legal point it started from.
In the real circulation process, capital always shows up as commodity or as money, and its movement splits into a long series of buying and selling. The circulation process, in short, comes apart into the metamorphosis of the commodity.
Things look different once we take the whole reproduction process together. Begin with money (and beginning with the commodity comes to the same thing, because then we begin with its value, and so look at the commodity itself under the aspect of money): a sum of money is paid out and comes back after a certain period with an increment. What comes back is a replacement for the sum advanced, plus a surplus-value. It has kept itself up and grown as it went through a certain cyclical movement.
But in so far as money is lent as capital, it is lent precisely as this self-maintaining, self-increasing sum of money — a sum that returns larger after a while, and that can run through the same cycle again and again. It is handed over neither as money nor as a commodity: not swapped for a commodity when the advance is money, and not sold for money when the advance is a commodity. It is handed over as capital. The relation capital has to itself — the one that shows when we look at capitalist production as a whole, as a unity, and in which capital appears as money that breeds money — is here simply built into it as its character, as its determination, with the mediating movement in between left out. And it is with this determination upon it that the sum is alienated, whenever it is lent out as money capital.
Proudhon has an odd way of seeing what money capital does, and he sets it out in Gratuité du crédit, his debate with M. F. Bastiat (Paris, 1850). To him lending looks like a bad thing, since it is not selling at all. Lending money at interest…
…is the ability to keep selling the same object over and over, and to be paid its price over and over, without ever giving up ownership of what is sold (p. 9).
What is lent — money, a house, anything — does not change owners the way it does in a sale. What Proudhon fails to see is that when money is handed over as interest-bearing capital, no equivalent for it comes back. In every sale or purchase — wherever an exchange really goes on — the object does pass out of hand, that's true. Ownership of a thing that is sold is always ceded. But the value is not given away. In a sale the commodity goes, but not its value: that comes back as money, or — here just a different form of the same thing — as a bill or a claim to payment. In a purchase the money goes, but not its value, which is replaced by commodities. All through the reproduction process the industrial capitalist still holds the same value (setting surplus-value aside) — just in changing forms.
As far as exchange goes — that is, the exchange of objects — no value changes. The same capitalist keeps the same value in his hand. But as far as the capitalist produces surplus-value, no exchange is going on; by the time any exchange happens, the surplus-value is already sitting inside the commodities. And if we stop looking at single acts of exchange and look instead at the total circuit of capital, M–C–M′, then a definite sum of value keeps being advanced, and that same sum plus the surplus-value or profit is drawn back out of circulation. That this happens by way of a mediation is not something the bare acts of exchange show. And it is exactly this process of M acting as capital that the lending money-capitalist's interest rests on and grows out of.
'As a matter of fact,' says Proudhon, 'the man who makes hats and sells them … gets their value for them, neither more nor less. But the lending capitalist … receives his capital back undiminished — and more: more than the capital, more than he throws into the exchange. Over and above the capital, he receives an interest' (p. 69).
Here the hat-maker stands for the productive capitalist, as opposed to the lending one. Proudhon plainly never got to the bottom of how a productive capitalist can sell commodities at what they are worth (the levelling-out into prices of production makes no difference to his version) and, by that very act, take a profit over and above the capital he throws into the exchange. Suppose 100 hats had a price of production of £115, and suppose that price happened to equal the value of the hats — that is, the capital that produces hats is of average social composition. If profit is 15 per cent, the hat-maker sells the hats at their value of £115 and so realizes £15 of profit. They cost him only £100. If he produced with his own capital, he pockets the whole £15 excess; if with borrowed capital, he may have to hand over £5 of it as interest. None of this changes the value of the hats; it changes only how the surplus-value that the hats' value already carries is divided among different people. And since paying interest leaves the value of the hats untouched, it is nonsense when Proudhon says:
'Since in trade the interest on capital gets added to the worker's wage, to make up the commodity's price, the worker is left unable to buy back what his own labour produced. Living by one's work is a principle that carries a contradiction inside it under the rule of interest' (p. 105).
How little Proudhon understood what capital is comes out in this sentence, where he describes capital's movement in general as though it were peculiar to interest-bearing capital:
'Because money capital, exchange after exchange, always comes back to its source with the interest piled up on it, it follows that lending it out again — always done by the same hand — always brings a gain to the same person' [p. 154].
So what is it that stays a riddle to him in the peculiar movement of interest-bearing capital? The categories: buying, price, handing objects over — and the unmediated form in which surplus-value appears here. In short, the puzzle is that here capital has turned into a commodity as capital, so that selling has turned into lending and price into a share in the profit.
Capital's coming back to where it started is the characteristic movement of capital in its total circuit. It is in no way something only interest-bearing capital does. What marks out interest-bearing capital is the external form of that return, cut off from the mediating circuit. The lending capitalist hands his capital over — passes it to the industrial capitalist — and gets no equivalent in return. His handing over is not an act of the capital's real circuit process at all; it only sets that circuit going, the circuit the industrial capitalist is to carry through. This first change of place of the money expresses no act of metamorphosis, neither buying nor selling. Ownership is not ceded: nothing is exchanged and no equivalent comes back. The money's return from the industrial capitalist's hand into the lender's merely completes the first act, the handing over of the capital. Advanced in money form, the capital comes back to the industrial capitalist in money form again through the circuit process. But the capital was not his when he paid it out, so it cannot be his when it comes back. Its passage through the reproduction process cannot possibly make it his property. So he has to return it to the lender. The first outlay, which moves the capital from the lender's hand into the borrower's, is a juridical transaction with nothing to do with the capital's real reproduction process; it only introduces that process. The repayment, which moves the returned capital out of the borrower's hand back into the lender's, is a second juridical transaction, the complement of the first: one introduces the real process, the other is a later act that follows it. So the starting point and the point of return, the handing out and the handing back of the lent capital, appear as arbitrary movements arranged through juridical transactions, which happen before and after the capital's real movement and which that movement has no part in. None of that real movement would change if the capital had been the industrial capitalist's from the outset, so that it came back only to him, as his own property.
In the first, introductory act, the lender passes his capital to the borrower. In the second, later and concluding act, the borrower returns it to the lender. As far as the transaction between the two is concerned — leaving interest aside for the moment — and so as far as only the movement of the borrowed capital itself between lender and borrower goes, these two acts (separated by a longer or shorter stretch of time, in which the capital's real reproduction movement falls) between them cover the whole movement. And this movement — handing something over on condition that it comes back — is simply what lending and borrowing is: the distinctive form in which money or commodities are alienated only on condition.
Capital's characteristic movement in general — money coming back to the capitalist, capital coming back to where it started — takes a wholly external shape in interest-bearing capital, a shape cut loose from the real movement it is the form of. A gives his money away, not as money but as capital. Nothing happens to the capital here. It only changes hands. Its real transformation into capital takes place only in B's hands. But for A it has become capital by the mere act of handing it over to B. The real flowing-back of the capital out of production and circulation happens only for B. For A, the reflux takes place in the same form as the alienation. Handing money out, lending it for a set period, and getting it back with interest (surplus-value) — that is the whole form of the movement that belongs to interest-bearing capital as such. The real movement of the lent money as capital is an operation lying on the far side of the transactions between lender and borrower. Within those transactions this mediation is wiped out, not visible, not directly contained. As a commodity of its own kind, capital also has a way of being alienated peculiar to itself. So here the return shows up not as what follows from a particular chain of economic events, but as what follows from a special juridical arrangement between buyer and seller. The time of the reflux depends on how the reproduction process goes; with interest-bearing capital, its coming back as capital seems to hang on nothing but the agreement between lender and borrower. So as far as this transaction goes, the capital's coming back no longer looks like something the production process decided, but as if the money form had never left the capital that was lent. Of course, these transactions are in fact determined by the real refluxes. But this does not show in the transaction itself. And in practice things by no means always work out that way. If the real reflux does not come in on time, the borrower has to see what other sources he can draw on to pay what he owes the lender. The mere form of capital — money given out as a sum A and returning as a sum A + 1/x A after a certain stretch of time, with no other mediation than that interval — is only the form that capital's real movement takes once the concept of it is left out.
When capital really moves, the return is one moment of the circulation process. Money is first turned into means of production; then the production process turns it into a commodity; selling the commodity turns it back into money, and in that form it comes back into the hands of the capitalist who had first put the capital forward as money. With interest-bearing capital, by contrast, both the return and the handing out are nothing more than an outcome of a juridical arrangement between the capital's owner and someone else. All we see is the handing out and the repayment. Everything that goes on in between is wiped out.
But because money that is advanced as capital has the property of coming back to whoever put it forward, to whoever spends it as capital, and because the movement of capital has M–C–M′ as its immanent form, for that very reason the owner of the money is able to lend it out as capital — as a thing that carries the property of coming back to where it started, of holding its value and adding to it in the movement it passes through. He gives it away as capital because, once it has been used as capital, it flows back to where it began; and it can be repaid by the borrower after a certain time precisely because it flows back to the borrower himself.
So the lending of money as capital — handing it over on condition that it is repaid after a certain time — presupposes that the money really is used as capital, really does come back to where it started. The way money really moves in a circuit when it serves as capital is therefore what the juridical transaction presupposes, the transaction by which the borrower has to give the money back to the lender. If the borrower does not use the money as capital, that is his own business. The lender lends it as capital, and that is how it has to pass through capital's functions — including the circuit of money capital, all the way back to its starting point in money form.
The two acts of circulation, M–C and C–M′, in which a sum of value acts as money or as a commodity, are only steps that mediate, single moments in the movement as a whole. As capital it goes through the total movement M–M′. The sum is put forward as money, or as value in some other shape, and it comes back as value. The person who lends the money does not spend it buying a commodity; or, if the sum of value exists in commodities, he does not sell them for money — he puts it forward as capital, as M–M′: as value that comes back to its starting point on a fixed date. He does not buy and he does not sell; he lends. And so lending is the fitting form in which to alienate it as capital rather than as money or as a commodity. None of this means that lending could not equally serve as the form of dealings that have no connection with capitalist reproduction at all.
So far we have looked at just one thing: how borrowed capital moves between the person who owns it and the industrial capitalist. Now the question is interest itself.
The lender lays his money out as capital. The sum of value he alienates to another person is capital — and that is why it comes back to him. But if it simply came back, that would not be the return of a lent sum as capital; it would only be a lent sum of value paid back. For the sum advanced to come back as capital, it must do more than hold its own through the movement: it must have been valorized, must have grown in value, so that it comes back carrying a surplus-value, as M + ΔM. And this ΔM is interest here — that is, the part of the average profit that the functioning capitalist does not keep and that goes to the money capitalist instead.
That he alienates it as capital means it has to be given back to him as M + ΔM. There is a separate form we still have to look at afterwards: interest coming back at fixed dates in the meantime, while the capital itself is repaid only at the end of a longer period.
What is it that the money capitalist gives the borrower, the industrial capitalist? What does he actually alienate to him? Only the act of alienation turns a loan of money into money alienated as capital — that is, into capital alienated as a commodity.
Only through this act of alienation does the money-lender's capital go out as a commodity — only through it does the commodity he has at his disposal get handed to a third person as capital.
On an ordinary sale, what is really alienated? Not the value of the thing sold — that only switches form. As a price, the value is marked into the commodity before it turns into actual money in the seller's hands. The same value, the same amount of value, only changes shape here: one moment it is there as a commodity, the next as money. What the seller really parts with, and what therefore passes into the buyer's personal or productive consumption, is the commodity's use-value — the commodity viewed simply as a use-value.
So what use-value does the money capitalist part with for the length of the loan, and hand over to the productive capitalist who borrows it? It is the use-value money gets from being able to be turned into capital, from being able to work as capital — so that in its movement it brings forth a definite surplus-value, the average profit (anything above or below that appears here as a matter of chance), and on top of that keeps its original amount of value intact. With other commodities the use-value is used up in the end, and so the commodity's substance vanishes and its value along with it. Capital as a commodity, by contrast, has this peculiar property: consuming its use-value not only keeps its value and its use-value but increases them.
So what the money capitalist alienates to the industrial capitalist is money's use-value as capital — its capacity to produce the average profit. He alienates it for as long as the loan runs, that is, for as long as he gives the borrower control of the capital he has lent him.
To that extent, money lent in this way has a certain analogy with labour-power in how it stands towards the industrial capitalist. Only this: with labour-power he pays its value, whereas with the capital he borrows he simply gives back its value. For the industrial capitalist, the use-value of labour-power is that using it produces more value (profit) than the labour-power itself has or costs. That excess value is its use-value for him. And in the same way, the use-value of the lent money capital appears as a capacity to create value and to increase it.
The money capitalist really does alienate a use-value, and that is why what he hands over is handed over as a commodity. And up to that point the analogy with a commodity as such is complete.
First, it is a value that passes from one hand into another. With a plain commodity — the commodity as such — buyer and seller each keep the same value in hand, only in a different shape; both still hold the same value they alienated, one of them as a commodity, the other as money. What is different with a loan is that here only the money capitalist hands value out in the transaction; and he keeps it safe, because it is paid back later. In a loan, only one side receives value, because only one side gives value out.
Second, on one side a real use-value is alienated, and on the other it is received and used up. But here, unlike an ordinary commodity, the use-value is a value in its own right — the extra value that using the money as capital yields over and above its original amount. And this use-value is the profit.
Money that is lent out has this use-value: it can work as capital, and as such it can produce the average profit where conditions are average.
So what does the industrial capitalist pay? And what, then, is the price of the borrowed capital?
Massie's version: what a man pays as interest, for the use of whatever he has borrowed, is a part of the profit that thing is able to produce.
When someone buys an ordinary commodity, he is buying its use-value; what he hands over is its value. The borrower of money buys the same thing — its use-value as capital. But what does he pay? He does not pay its price or its value, the way a buyer of other commodities does.
Between lender and borrower, no change of form takes place in the value, as happens between a buyer and a seller — where the same value stands once as money and once as a commodity. The sameness of the value given out and the value received back shows up here in quite a different way. The money — this sum of value — goes out with nothing given in return, and comes back after a certain time. The lender stays the owner of that value the whole time, even after it has passed out of his hands into the borrower's.
In a plain exchange of commodities, it is the buyer who has the money; in a loan, it is the seller who has it. He is the one who lets the money go for a time, and the one who buys the capital is the one who receives it as a commodity. But that can only happen where the money works as capital, which means it has to be advanced as such. The borrower borrows the money as capital — as value that valorizes itself. But at the start, at the moment it is advanced, it is only capital in itself, as every capital is at its starting point. Only by being used does it grow in value and realize itself as capital. But the borrower has to pay it back as realized capital — as value plus surplus-value, that is, interest. And that interest can only be one part of the profit he has realized — one part, not the whole. Because the use-value for the borrower is that the money brings him a profit; without that, no use-value would have been alienated by the lender at all. And the borrower cannot get the whole profit either. If he did, he would be paying nothing for the use-value handed over to him, and he would give the money back as plain money, not as capital, not as realized capital — and capital is realized only as M + ΔM.
Both of them, the lender and the borrower, lay out that same one sum of money as capital. But it works as capital only in the borrower's hands. Profit is not doubled just because the same money exists twice over as capital, for two people. The only way it can work as capital for both at once is if the profit is divided. The part that falls to the lender is called interest.
The whole transaction runs, according to our assumptions, between two sorts of capitalist — the money capitalist on one side, the industrial or commercial capitalist on the other.
Never forget this: the commodity we are dealing with here is capital, and capital as capital is itself a commodity. So all the relations that show up here would be irrational seen from the standpoint of the simple commodity — and irrational too from the standpoint of capital, in so far as capital acts as commodity capital inside its own reproduction process.
Here lending and borrowing stand in place of selling and buying; that distinction grows out of the special nature of this commodity, capital. And so does the fact that what gets paid here is interest, not the price of the commodity. If you want to call interest the price of money capital, that is an irrational form of price — flatly at odds with what the price of a commodity means. Price is pared down here to its bare, empty form: just a definite sum of money handed over for something that in one way or another counts as a use-value — whereas by its concept, price is the value of that use-value expressed in money.
To call interest the price of capital is a thoroughly irrational expression from the very outset. Here a commodity carries two values: first a value, and then a price that differs from that value — even though price is the money expression of value. Money capital is at first nothing but a sum of money, or the value of a definite mass of commodities fixed as a sum of money. And if a commodity is lent as capital, it is only a sum of money in disguise. What is lent as capital is not so many pounds of cotton, but so much money that exists in the cotton as the cotton's value. The price of capital therefore attaches to it as a sum of money — though not as currency, as Mr Torrens believes.
How is a sum of value supposed to have a price over and above its own price, over and above the price its own money form already expresses? A price just is the commodity's value, set apart from its use-value — and that holds for market price too, whose difference from value is not a difference in kind but only in amount, a matter of the magnitude of value alone. It is an absurd contradiction for a price to be qualitatively different from value.
Capital shows itself to be capital through its valorization, and how far it is valorized says how far it has been realized as capital. The surplus-value or profit it produces — its rate, or its level — can be measured only against the value of the capital advanced. In the same way, the greater or lesser valorization of interest-bearing capital can be measured only by setting the amount of interest, the part of the total profit that falls to this capital, against the value of the capital advanced.
So if price expresses the value of a commodity, interest expresses the valorization of money capital, and it therefore appears as the price paid to the lender for it. From this you can see how absurd it is from the start to want to apply the simple relations of money-mediated exchange, buying and selling, straight to this case, as Proudhon does. The basic presupposition is precisely that money functions as capital, and hence can be handed over to a third person as capital in itself, as potential capital.
But capital itself appears as a commodity here, to the extent that it is put on the market and money's use-value as capital is genuinely alienated. That use-value is: to produce profit. The value of money or of commodities as capital is not fixed by their value as money or as commodities, but by the quantity of surplus-value they produce for their owner. The product of capital is profit.
On the basis of capitalist production, whether money is spent as money or advanced as capital is only a difference in how it is applied. Money, or a commodity, is in itself, potentially, capital — exactly as labour-power is potentially capital. For one thing, money can be turned into the elements of production, and just as it stands it is only the abstract expression of them, their existence as value. For another, the material elements of wealth have the property of already being potential capital, because their complementary opposite — the thing that makes them capital, namely wage-labour — is there once capitalist production is assumed.
The opposed social character of material wealth — its opposition to labour as wage-labour — is already expressed in capital ownership as such, apart from the production process. And now this one moment, split off from the capitalist production process itself, of which it is the constant result and, as that constant result, the constant presupposition — expresses itself in this: that money, and commodities just as much, are in themselves, latently, potentially, capital; that they can be sold as capital; and that in this form they are command over the labour of others, a claim to appropriate the labour of others, and therefore self-valorizing value.
It also comes out clearly here that this relation is the title to, and the means of, appropriating the labour of others — and not any labour put up by the capitalist as an equivalent.
Capital appears as a commodity in a further respect too, in so far as the division of profit into interest and profit proper is regulated by demand and supply — that is, by competition — just as the market prices of commodities are. But here the difference stands out as sharply as the resemblance.
If supply and demand coincide, the market price of the commodity matches its price of production — that is, its price now appears as regulated by the inner laws of capitalist production, independently of competition, since the ups and downs of supply and demand explain nothing but how far market prices depart from prices of production. Those departures cancel each other out, so that over certain longer periods the average market prices equal the prices of production. As soon as the two coincide, these forces stop acting, they cancel each other out, and the general law of price determination then comes forward as the law of the individual case too: market price then matches the price of production in its immediate existence, and not merely as an average of market price movements — and that price of production is itself governed by the immanent laws of the mode of production. The same with wages: if supply and demand coincide, their effect is called off, and wages equal the value of labour-power.
But with interest on money capital it is different. Here competition does not determine the departures from the law — there is no law of the division at all except the one competition dictates, because, as we shall see further on, no 'natural' rate of interest exists. What is called the natural rate of interest really means the rate fixed by free competition. Nor does the rate of interest have any 'natural' limits. Where competition does not merely determine deviations and fluctuations — where, then, with its opposing forces in balance, all determination ceases altogether — the thing that is to be determined is in itself something without law, something arbitrary. More on this in the next chapter.
With interest-bearing capital everything appears in an external way: the advance of the capital as a mere transfer of it from lender to borrower; the return of the realized capital as a mere transfer back, a repayment with interest from borrower to lender.
The same happens to a determination that belongs to the capitalist mode of production itself: that the rate of profit is fixed not only by the ratio of the profit made in a single turnover to the capital value advanced, but also by the length of that turnover time itself — that is, as the profit that industrial capital yields over definite periods of time. And here too, with interest-bearing capital, this appears in a wholly external way: that for definite periods of time a definite interest is paid to the lender.
The romantic Adam Müller, with his usual insight (such as it is) into how things really connect, writes (Elements of Statecraft, Berlin, 1809, part III, page 138):
'When the price of things is determined, no one asks about time; when interest is determined, time is the main thing reckoned in.'
He does not see how production time and circulation time enter into the fixing of the prices of commodities, and how precisely through this the rate of profit is fixed for a given turnover time of capital — and how, through the fixing of profit for a given time, interest is fixed in turn.
His profundity here, as always, consists only in seeing the dust clouds on the surface and pretentiously giving out this dusty stuff as something mysterious and significant.
When we first examined the general rate of profit, or average rate of profit (Part Two of this volume), it was not yet in its finished shape: the equalization still showed up as nothing more than industrial capitals in different spheres being levelled together. That was filled out in Part Four, where the share taken by commercial capital in this equalization was discussed, along with commercial profit. Average profit, and the general rate of profit, now appear within narrower limits than they did before. As the analysis goes on, remember that from this point any talk of the general rate of profit, or of average profit, refers to that finished version — to the average rate in its completed form. Since industrial and commercial capital now get the same rate, there is no longer any need to tell industrial and commercial profit apart, so long as only this average profit is at issue. Whether capital is at work industrially in production or commercially in circulation, the average profit it throws off over the year is the same, and it is proportional to the capital's size.
Under capitalist production, money — taken here as value standing on its own, whether it actually exists as money or as commodities — can be turned into capital; and through that change it goes from a given value to a self-valorizing value, one that increases itself. It produces profit: that is, it puts the capitalist in a position to draw a definite amount of unpaid labour, of surplus product, of surplus-value out of the workers and to appropriate it.
With that, money acquires a use-value beyond the one it has as money: the extra use-value of working as capital. Its use-value here is exactly this: the profit it produces once it has been turned into capital. As potential capital — as a means of producing profit — it turns into a commodity, though one of a very peculiar kind. Or, put the same point another way, capital as capital becomes a commodity.
Suppose the average rate of profit for the year is 20 per cent. A machine worth £100, used as capital under average conditions and with the usual skill and effort for the job, would then bring in £20 of profit. So someone with £100 to his name has the power in his hands to turn that £100 into £120 — to produce £20 of profit. He holds a potential capital of £100. Say he lets another man have the £100 for a year, and that man really does use it as capital. He hands him the power to make £20 of profit. That is surplus-value that costs the borrower nothing, and for which he pays no equivalent. Say the second man pays the owner £5 when the year is up — part of the profit produced. What he is paying for is what the £100 is worth in use. That use-value is its use-value as capital: its function of producing £20 of profit. What he pays over out of that profit is called interest. Interest is nothing but a special name, a special rubric, for one share of the profit — the share that the capital actually at work has to hand over to the owner of the capital instead of putting it into its own pocket.
Clearly, merely possessing the £100 puts its owner in a position to draw in the interest — one particular part of the profit produced by that capital. If he did not hand the £100 over to the other man, that man could not produce this profit at all, nor could he act as a capitalist with regard to this £100.
To talk about natural justice here, the way Gilbart does, is nonsense. What makes the transactions between the agents of production just is that they are a natural outgrowth of the relations of production. How these transactions show up in law — as the free acts of the parties, as expressions of a will they share, as contracts the state will enforce against either side — those legal forms are mere forms; as forms, they cannot determine the content. They only express it. The content is just whenever it answers to the mode of production and fits it. It is unjust the moment it contradicts that mode. Slavery is unjust under the capitalist mode of production; and so is cheating about the quality of a commodity.
The £100 produces the £20 of profit by functioning as capital, industrial or commercial. But this functioning as capital cannot happen at all unless the money is really spent as capital — laid out to buy means of production (with industrial capital) or commodities (with commercial capital). And to be spent, it has to be there in the first place. If A, the owner of the £100, either spent it on his own consumption or kept it lying as a hoard, then B, the functioning capitalist, could not spend it as capital. He is not spending his own capital, but A's; and he cannot lay out A's capital unless A is willing. So the £100 are originally spent as capital by A himself, even though A's whole function as a capitalist comes down to that single spending of the £100 as capital. As far as these £100 go, B only functions as a capitalist because A hands them over to him and thereby spends them as capital.
Let us look first at the peculiar circulation of interest-bearing capital. After that, the second thing to examine is the peculiar way in which this capital is sold as a commodity — it is lent, so that its ownership is never ceded, rather than handed over for good.
We begin with A's advance of money to B. It can be made with or without security; the first form is the older one, apart from advances on commodities or on papers like bills and stocks. These particular forms are none of our concern here. What concerns us here is interest-bearing capital in its usual form.
In B's hands the money really does turn into capital: it goes through the movement M–C–M′, and then it comes back to A as M′ — as M plus ΔM, where ΔM stands for the interest. For simplicity, we set aside for now the case in which the capital lies in B's hands for a longer stretch and the interest falls due at regular intervals.
The movement is therefore:
M–M–C–M′–M′.
What appears doubled here is, first, the money being spent as capital, and second, the same money coming back as capital that has been realized — as M′, that is, M plus ΔM.
Take the movement of commercial capital, M–C–M′. Here one and the same commodity changes hands twice, or more often if one merchant sells to another. But every such change of place marks a metamorphosis — a purchase or a sale of that commodity, no matter how many times the process may repeat before the commodity finally drops into consumption.
In C–M–C, by contrast, the same money changes place twice — but this shows the commodity going through its full metamorphosis: first it becomes money, and then money becomes some other commodity.
Interest-bearing capital is different. Here M's first move to another hand does no work at all — it is no stage in the metamorphosis of a commodity, and no stage in the reproduction of capital. That only comes with the second spending, when the functioning capitalist has it and uses it to trade or turns it into productive capital. At this first change of place, M says nothing except that A has handed it over to B — a handing over that usually happens under particular legal forms and conditions.
The money is spent as capital twice over, and the first of those spendings is a bare transfer from A to B. Its return happens twice over as well. As M′, that is M + ΔM, it comes back out of the movement to B, the functioning capitalist. B then passes it on to A again, this time together with part of the profit, as realized capital, as M + ΔM — where ΔM is not the whole profit but only a part of it, the interest. It comes back to B only as what he paid out: functioning capital, but A's property. So for its return to be complete, B has to hand it over to A once more. And besides the capital sum, B has to give A a share of the profit he made on that sum, under the name of interest — since A gave him the money only as capital, that is, as value that not only holds its own in the movement but creates a surplus-value for its owner. It stays in B's hands only while it goes on functioning as capital. And when it comes back — after the agreed interval — it stops functioning as capital. But once it is capital that no longer does that work, it must go back to A, who has never stopped being its legal owner.
The form of lending — which belongs peculiarly to this commodity, capital as a commodity, and which incidentally turns up in other transactions as well — stands where the form of sale would stand. And this already follows from the fact that capital here steps forward as a commodity, or, put it another way, that money, when it works as capital, becomes a commodity.
A distinction has to be drawn here.
We have seen this already — in Volume 2, Chapter 1 — and it is worth recalling it briefly: in the circulation process, capital does two jobs, as commodity capital and as money capital. But in neither role does capital become a commodity as capital.
As soon as productive capital has turned into commodity capital, that commodity capital has to go to market and be sold as a commodity. There it acts simply as a commodity. The capitalist now appears only as a seller of a commodity, and the buyer only as a buyer of a commodity. As a commodity, the product has to realize its value by being sold in circulation and take on its changed form as money. So it makes no difference at all whether a consumer buys this commodity as a means of subsistence — something to live on — or a capitalist buys it as a means of production, as a component part of capital. Within the act of circulation itself, commodity capital counts only as a commodity, never as capital.
It is commodity capital, and not just a simple commodity, for two reasons. First, it already carries surplus-value inside it, so realizing its value is at the same time realizing surplus-value — but none of that changes the plain fact that it is a commodity, a product with a set price. Second, the job it does as a commodity is one stage of its own reproduction as capital; and so its movement as a commodity — only a part-movement of that process — is also a movement of capital. Yet it does not become capital through the act of selling itself, only through the way that act hangs together with the whole movement of this particular value sum, taken as capital.
The same goes for money capital. As money capital it in fact does nothing but act as money — that is, as a means of buying commodities, the elements of production. That this money is at the same time money capital, one form of capital, does not follow from the act of buying, from the real job it does here as money. It follows from the connection between this act and the whole movement of capital — because this act, which the money performs, opens the capitalist production process.
But as far as they really function, as far as they really play their part in the process, commodity capital does the work of a plain commodity here, and money capital the work of plain money. Take any single moment of the metamorphosis on its own: nowhere does the capitalist sell the commodity to the buyer as capital — although for him it does stand for capital — and nowhere does he hand his money to the seller as capital. In both cases he parts with the commodity simply as a commodity, and with the money simply as money — money to buy commodities with.
Only within the whole course, at the moment when the starting point also appears as the point of return — in M–M′ or C–C′ — does capital come on the scene in circulation as capital. In the production process, by contrast, it is capital because the worker is subordinated to the capitalist and surplus-value gets produced.
At this moment of return, though, the mediation has gone. What is there is M′ or M + ΔM (whether that larger sum by ΔM is held as money, as commodities, or as elements of production) — a money sum equal to what was advanced at the start, plus an excess over it, the realized surplus-value. And it is precisely at the return point, where capital is realized capital, value that has been valorized, in this shape — insofar as that point is fixed as a point of rest, imaginary or real — that capital never enters circulation; it looks instead like something pulled back out of circulation, the outcome of the whole process.
Once it is spent again, it is never alienated to a third party as capital; it is sold to him as an ordinary commodity, or handed over to him as plain money in exchange for a commodity. In its circulation process it never shows up as capital, only as commodity or as money; and for other people that is the only existence it has here. Here, what makes commodity and money count as capital is neither that commodity turns into money and money into commodity, nor any real relation they have to a buyer or a seller; it is only their ideal relations — whether to the capitalist himself, looked at subjectively, or as stages of the reproduction process, looked at objectively. In its real movement, capital exists as capital not in the circulation process but only in production — in the exploitation of labour-power.
Interest-bearing capital is a different case, and that difference is exactly what makes it what it is. Someone who owns money and wants it to function as interest-bearing capital hands the money over to a third party, throws it into circulation, and makes of it a commodity — a commodity that is capital. It is capital for him, and for the other man too. And it is not only capital for the one who parts with it: it is handed over to the other man as capital from the very outset, as a value whose use-value is to create surplus-value, profit. It is a value that keeps going through the movement and comes back, once it has functioned, to the person who first put it out — here, the money owner. So it leaves him only for a time; it passes out of its owner's possession and into the hands of the functioning capitalist only temporarily. So it is not paid out and not sold either — it is only lent; it is alienated only on condition that it returns to its starting point after a set period, and that it returns as realized capital, so that its use-value of producing surplus-value has actually been realized.
When a commodity is lent out as capital, it goes as fixed capital or as circulating capital, depending on what it is. Money can go out in either of the two forms. It counts as fixed capital, for instance, when the repayment comes as an annuity, so that every payment of interest brings a piece of the capital back with it. Some commodities can only ever be lent as fixed capital, because their use-value allows nothing else — houses, boats, machines, and so on. But all loan capital, whatever form it takes and however much the nature of its use-value modifies the repayment, is always nothing more than one particular form that money capital takes. For the thing lent is always a definite sum of money, and the interest is reckoned on that sum. Where the loan is neither money nor circulating capital, it comes back the way fixed capital comes back. The lender gets interest at intervals, plus a share of the fixed capital's used-up value, standing in for the wear over that period. When the term finally runs out, whatever is left unused of the fixed capital comes back in kind. If the capital lent is circulating capital, it comes back to the lender in the way circulating capital comes back.
The reflux takes its shape each time from the real cyclical movement of the self-reproducing capital and of its particular kinds. But when the capital has been lent, that return takes the shape of a repayment, because the advance — the parting with it — had the shape of a loan.
This chapter is about money capital proper alone; the other forms of lent capital are derived from it.
The lent capital flows back twice. Inside the reproduction process it comes back to the functioning capitalist; then it comes back a second time, when the money capitalist — the lender — is paid: a repayment to the real owner, to the legal point it started from.
In the real circulation process, capital always shows up as commodity or as money, and its movement splits into a long series of buying and selling. The circulation process, in short, comes apart into the metamorphosis of the commodity.
Things look different once we take the whole reproduction process together. Begin with money (and beginning with the commodity comes to the same thing, because then we begin with its value, and so look at the commodity itself under the aspect of money): a sum of money is paid out and comes back after a certain period with an increment. What comes back is a replacement for the sum advanced, plus a surplus-value. It has kept itself up and grown as it went through a certain cyclical movement.
But in so far as money is lent as capital, it is lent precisely as this self-maintaining, self-increasing sum of money — a sum that returns larger after a while, and that can run through the same cycle again and again. It is handed over neither as money nor as a commodity: not swapped for a commodity when the advance is money, and not sold for money when the advance is a commodity. It is handed over as capital. The relation capital has to itself — the one that shows when we look at capitalist production as a whole, as a unity, and in which capital appears as money that breeds money — is here simply built into it as its character, as its determination, with the mediating movement in between left out. And it is with this determination upon it that the sum is alienated, whenever it is lent out as money capital.
Proudhon has an odd way of seeing what money capital does, and he sets it out in Gratuité du crédit, his debate with M. F. Bastiat (Paris, 1850). To him lending looks like a bad thing, since it is not selling at all. Lending money at interest…
…is the ability to keep selling the same object over and over, and to be paid its price over and over, without ever giving up ownership of what is sold (p. 9).
What is lent — money, a house, anything — does not change owners the way it does in a sale. What Proudhon fails to see is that when money is handed over as interest-bearing capital, no equivalent for it comes back. In every sale or purchase — wherever an exchange really goes on — the object does pass out of hand, that's true. Ownership of a thing that is sold is always ceded. But the value is not given away. In a sale the commodity goes, but not its value: that comes back as money, or — here just a different form of the same thing — as a bill or a claim to payment. In a purchase the money goes, but not its value, which is replaced by commodities. All through the reproduction process the industrial capitalist still holds the same value (setting surplus-value aside) — just in changing forms.
As far as exchange goes — that is, the exchange of objects — no value changes. The same capitalist keeps the same value in his hand. But as far as the capitalist produces surplus-value, no exchange is going on; by the time any exchange happens, the surplus-value is already sitting inside the commodities. And if we stop looking at single acts of exchange and look instead at the total circuit of capital, M–C–M′, then a definite sum of value keeps being advanced, and that same sum plus the surplus-value or profit is drawn back out of circulation. That this happens by way of a mediation is not something the bare acts of exchange show. And it is exactly this process of M acting as capital that the lending money-capitalist's interest rests on and grows out of.
'As a matter of fact,' says Proudhon, 'the man who makes hats and sells them … gets their value for them, neither more nor less. But the lending capitalist … receives his capital back undiminished — and more: more than the capital, more than he throws into the exchange. Over and above the capital, he receives an interest' (p. 69).
Here the hat-maker stands for the productive capitalist, as opposed to the lending one. Proudhon plainly never got to the bottom of how a productive capitalist can sell commodities at what they are worth (the levelling-out into prices of production makes no difference to his version) and, by that very act, take a profit over and above the capital he throws into the exchange. Suppose 100 hats had a price of production of £115, and suppose that price happened to equal the value of the hats — that is, the capital that produces hats is of average social composition. If profit is 15 per cent, the hat-maker sells the hats at their value of £115 and so realizes £15 of profit. They cost him only £100. If he produced with his own capital, he pockets the whole £15 excess; if with borrowed capital, he may have to hand over £5 of it as interest. None of this changes the value of the hats; it changes only how the surplus-value that the hats' value already carries is divided among different people. And since paying interest leaves the value of the hats untouched, it is nonsense when Proudhon says:
'Since in trade the interest on capital gets added to the worker's wage, to make up the commodity's price, the worker is left unable to buy back what his own labour produced. Living by one's work is a principle that carries a contradiction inside it under the rule of interest' (p. 105).
How little Proudhon understood what capital is comes out in this sentence, where he describes capital's movement in general as though it were peculiar to interest-bearing capital:
'Because money capital, exchange after exchange, always comes back to its source with the interest piled up on it, it follows that lending it out again — always done by the same hand — always brings a gain to the same person' [p. 154].
So what is it that stays a riddle to him in the peculiar movement of interest-bearing capital? The categories: buying, price, handing objects over — and the unmediated form in which surplus-value appears here. In short, the puzzle is that here capital has turned into a commodity as capital, so that selling has turned into lending and price into a share in the profit.
Capital's coming back to where it started is the characteristic movement of capital in its total circuit. It is in no way something only interest-bearing capital does. What marks out interest-bearing capital is the external form of that return, cut off from the mediating circuit. The lending capitalist hands his capital over — passes it to the industrial capitalist — and gets no equivalent in return. His handing over is not an act of the capital's real circuit process at all; it only sets that circuit going, the circuit the industrial capitalist is to carry through. This first change of place of the money expresses no act of metamorphosis, neither buying nor selling. Ownership is not ceded: nothing is exchanged and no equivalent comes back. The money's return from the industrial capitalist's hand into the lender's merely completes the first act, the handing over of the capital. Advanced in money form, the capital comes back to the industrial capitalist in money form again through the circuit process. But the capital was not his when he paid it out, so it cannot be his when it comes back. Its passage through the reproduction process cannot possibly make it his property. So he has to return it to the lender. The first outlay, which moves the capital from the lender's hand into the borrower's, is a juridical transaction with nothing to do with the capital's real reproduction process; it only introduces that process. The repayment, which moves the returned capital out of the borrower's hand back into the lender's, is a second juridical transaction, the complement of the first: one introduces the real process, the other is a later act that follows it. So the starting point and the point of return, the handing out and the handing back of the lent capital, appear as arbitrary movements arranged through juridical transactions, which happen before and after the capital's real movement and which that movement has no part in. None of that real movement would change if the capital had been the industrial capitalist's from the outset, so that it came back only to him, as his own property.
In the first, introductory act, the lender passes his capital to the borrower. In the second, later and concluding act, the borrower returns it to the lender. As far as the transaction between the two is concerned — leaving interest aside for the moment — and so as far as only the movement of the borrowed capital itself between lender and borrower goes, these two acts (separated by a longer or shorter stretch of time, in which the capital's real reproduction movement falls) between them cover the whole movement. And this movement — handing something over on condition that it comes back — is simply what lending and borrowing is: the distinctive form in which money or commodities are alienated only on condition.
Capital's characteristic movement in general — money coming back to the capitalist, capital coming back to where it started — takes a wholly external shape in interest-bearing capital, a shape cut loose from the real movement it is the form of. A gives his money away, not as money but as capital. Nothing happens to the capital here. It only changes hands. Its real transformation into capital takes place only in B's hands. But for A it has become capital by the mere act of handing it over to B. The real flowing-back of the capital out of production and circulation happens only for B. For A, the reflux takes place in the same form as the alienation. Handing money out, lending it for a set period, and getting it back with interest (surplus-value) — that is the whole form of the movement that belongs to interest-bearing capital as such. The real movement of the lent money as capital is an operation lying on the far side of the transactions between lender and borrower. Within those transactions this mediation is wiped out, not visible, not directly contained. As a commodity of its own kind, capital also has a way of being alienated peculiar to itself. So here the return shows up not as what follows from a particular chain of economic events, but as what follows from a special juridical arrangement between buyer and seller. The time of the reflux depends on how the reproduction process goes; with interest-bearing capital, its coming back as capital seems to hang on nothing but the agreement between lender and borrower. So as far as this transaction goes, the capital's coming back no longer looks like something the production process decided, but as if the money form had never left the capital that was lent. Of course, these transactions are in fact determined by the real refluxes. But this does not show in the transaction itself. And in practice things by no means always work out that way. If the real reflux does not come in on time, the borrower has to see what other sources he can draw on to pay what he owes the lender. The mere form of capital — money given out as a sum A and returning as a sum A + 1/x A after a certain stretch of time, with no other mediation than that interval — is only the form that capital's real movement takes once the concept of it is left out.
When capital really moves, the return is one moment of the circulation process. Money is first turned into means of production; then the production process turns it into a commodity; selling the commodity turns it back into money, and in that form it comes back into the hands of the capitalist who had first put the capital forward as money. With interest-bearing capital, by contrast, both the return and the handing out are nothing more than an outcome of a juridical arrangement between the capital's owner and someone else. All we see is the handing out and the repayment. Everything that goes on in between is wiped out.
But because money that is advanced as capital has the property of coming back to whoever put it forward, to whoever spends it as capital, and because the movement of capital has M–C–M′ as its immanent form, for that very reason the owner of the money is able to lend it out as capital — as a thing that carries the property of coming back to where it started, of holding its value and adding to it in the movement it passes through. He gives it away as capital because, once it has been used as capital, it flows back to where it began; and it can be repaid by the borrower after a certain time precisely because it flows back to the borrower himself.
So the lending of money as capital — handing it over on condition that it is repaid after a certain time — presupposes that the money really is used as capital, really does come back to where it started. The way money really moves in a circuit when it serves as capital is therefore what the juridical transaction presupposes, the transaction by which the borrower has to give the money back to the lender. If the borrower does not use the money as capital, that is his own business. The lender lends it as capital, and that is how it has to pass through capital's functions — including the circuit of money capital, all the way back to its starting point in money form.
The two acts of circulation, M–C and C–M′, in which a sum of value acts as money or as a commodity, are only steps that mediate, single moments in the movement as a whole. As capital it goes through the total movement M–M′. The sum is put forward as money, or as value in some other shape, and it comes back as value. The person who lends the money does not spend it buying a commodity; or, if the sum of value exists in commodities, he does not sell them for money — he puts it forward as capital, as M–M′: as value that comes back to its starting point on a fixed date. He does not buy and he does not sell; he lends. And so lending is the fitting form in which to alienate it as capital rather than as money or as a commodity. None of this means that lending could not equally serve as the form of dealings that have no connection with capitalist reproduction at all.
So far we have looked at just one thing: how borrowed capital moves between the person who owns it and the industrial capitalist. Now the question is interest itself.
The lender lays his money out as capital. The sum of value he alienates to another person is capital — and that is why it comes back to him. But if it simply came back, that would not be the return of a lent sum as capital; it would only be a lent sum of value paid back. For the sum advanced to come back as capital, it must do more than hold its own through the movement: it must have been valorized, must have grown in value, so that it comes back carrying a surplus-value, as M + ΔM. And this ΔM is interest here — that is, the part of the average profit that the functioning capitalist does not keep and that goes to the money capitalist instead.
That he alienates it as capital means it has to be given back to him as M + ΔM. There is a separate form we still have to look at afterwards: interest coming back at fixed dates in the meantime, while the capital itself is repaid only at the end of a longer period.
What is it that the money capitalist gives the borrower, the industrial capitalist? What does he actually alienate to him? Only the act of alienation turns a loan of money into money alienated as capital — that is, into capital alienated as a commodity.
Only through this act of alienation does the money-lender's capital go out as a commodity — only through it does the commodity he has at his disposal get handed to a third person as capital.
On an ordinary sale, what is really alienated? Not the value of the thing sold — that only switches form. As a price, the value is marked into the commodity before it turns into actual money in the seller's hands. The same value, the same amount of value, only changes shape here: one moment it is there as a commodity, the next as money. What the seller really parts with, and what therefore passes into the buyer's personal or productive consumption, is the commodity's use-value — the commodity viewed simply as a use-value.
So what use-value does the money capitalist part with for the length of the loan, and hand over to the productive capitalist who borrows it? It is the use-value money gets from being able to be turned into capital, from being able to work as capital — so that in its movement it brings forth a definite surplus-value, the average profit (anything above or below that appears here as a matter of chance), and on top of that keeps its original amount of value intact. With other commodities the use-value is used up in the end, and so the commodity's substance vanishes and its value along with it. Capital as a commodity, by contrast, has this peculiar property: consuming its use-value not only keeps its value and its use-value but increases them.
So what the money capitalist alienates to the industrial capitalist is money's use-value as capital — its capacity to produce the average profit. He alienates it for as long as the loan runs, that is, for as long as he gives the borrower control of the capital he has lent him.
To that extent, money lent in this way has a certain analogy with labour-power in how it stands towards the industrial capitalist. Only this: with labour-power he pays its value, whereas with the capital he borrows he simply gives back its value. For the industrial capitalist, the use-value of labour-power is that using it produces more value (profit) than the labour-power itself has or costs. That excess value is its use-value for him. And in the same way, the use-value of the lent money capital appears as a capacity to create value and to increase it.
The money capitalist really does alienate a use-value, and that is why what he hands over is handed over as a commodity. And up to that point the analogy with a commodity as such is complete.
First, it is a value that passes from one hand into another. With a plain commodity — the commodity as such — buyer and seller each keep the same value in hand, only in a different shape; both still hold the same value they alienated, one of them as a commodity, the other as money. What is different with a loan is that here only the money capitalist hands value out in the transaction; and he keeps it safe, because it is paid back later. In a loan, only one side receives value, because only one side gives value out.
Second, on one side a real use-value is alienated, and on the other it is received and used up. But here, unlike an ordinary commodity, the use-value is a value in its own right — the extra value that using the money as capital yields over and above its original amount. And this use-value is the profit.
Money that is lent out has this use-value: it can work as capital, and as such it can produce the average profit where conditions are average.
So what does the industrial capitalist pay? And what, then, is the price of the borrowed capital?
Massie's version: what a man pays as interest, for the use of whatever he has borrowed, is a part of the profit that thing is able to produce.
When someone buys an ordinary commodity, he is buying its use-value; what he hands over is its value. The borrower of money buys the same thing — its use-value as capital. But what does he pay? He does not pay its price or its value, the way a buyer of other commodities does.
Between lender and borrower, no change of form takes place in the value, as happens between a buyer and a seller — where the same value stands once as money and once as a commodity. The sameness of the value given out and the value received back shows up here in quite a different way. The money — this sum of value — goes out with nothing given in return, and comes back after a certain time. The lender stays the owner of that value the whole time, even after it has passed out of his hands into the borrower's.
In a plain exchange of commodities, it is the buyer who has the money; in a loan, it is the seller who has it. He is the one who lets the money go for a time, and the one who buys the capital is the one who receives it as a commodity. But that can only happen where the money works as capital, which means it has to be advanced as such. The borrower borrows the money as capital — as value that valorizes itself. But at the start, at the moment it is advanced, it is only capital in itself, as every capital is at its starting point. Only by being used does it grow in value and realize itself as capital. But the borrower has to pay it back as realized capital — as value plus surplus-value, that is, interest. And that interest can only be one part of the profit he has realized — one part, not the whole. Because the use-value for the borrower is that the money brings him a profit; without that, no use-value would have been alienated by the lender at all. And the borrower cannot get the whole profit either. If he did, he would be paying nothing for the use-value handed over to him, and he would give the money back as plain money, not as capital, not as realized capital — and capital is realized only as M + ΔM.
Both of them, the lender and the borrower, lay out that same one sum of money as capital. But it works as capital only in the borrower's hands. Profit is not doubled just because the same money exists twice over as capital, for two people. The only way it can work as capital for both at once is if the profit is divided. The part that falls to the lender is called interest.
The whole transaction runs, according to our assumptions, between two sorts of capitalist — the money capitalist on one side, the industrial or commercial capitalist on the other.
Never forget this: the commodity we are dealing with here is capital, and capital as capital is itself a commodity. So all the relations that show up here would be irrational seen from the standpoint of the simple commodity — and irrational too from the standpoint of capital, in so far as capital acts as commodity capital inside its own reproduction process.
Here lending and borrowing stand in place of selling and buying; that distinction grows out of the special nature of this commodity, capital. And so does the fact that what gets paid here is interest, not the price of the commodity. If you want to call interest the price of money capital, that is an irrational form of price — flatly at odds with what the price of a commodity means. Price is pared down here to its bare, empty form: just a definite sum of money handed over for something that in one way or another counts as a use-value — whereas by its concept, price is the value of that use-value expressed in money.
To call interest the price of capital is a thoroughly irrational expression from the very outset. Here a commodity carries two values: first a value, and then a price that differs from that value — even though price is the money expression of value. Money capital is at first nothing but a sum of money, or the value of a definite mass of commodities fixed as a sum of money. And if a commodity is lent as capital, it is only a sum of money in disguise. What is lent as capital is not so many pounds of cotton, but so much money that exists in the cotton as the cotton's value. The price of capital therefore attaches to it as a sum of money — though not as currency, as Mr Torrens believes.
How is a sum of value supposed to have a price over and above its own price, over and above the price its own money form already expresses? A price just is the commodity's value, set apart from its use-value — and that holds for market price too, whose difference from value is not a difference in kind but only in amount, a matter of the magnitude of value alone. It is an absurd contradiction for a price to be qualitatively different from value.
Capital shows itself to be capital through its valorization, and how far it is valorized says how far it has been realized as capital. The surplus-value or profit it produces — its rate, or its level — can be measured only against the value of the capital advanced. In the same way, the greater or lesser valorization of interest-bearing capital can be measured only by setting the amount of interest, the part of the total profit that falls to this capital, against the value of the capital advanced.
So if price expresses the value of a commodity, interest expresses the valorization of money capital, and it therefore appears as the price paid to the lender for it. From this you can see how absurd it is from the start to want to apply the simple relations of money-mediated exchange, buying and selling, straight to this case, as Proudhon does. The basic presupposition is precisely that money functions as capital, and hence can be handed over to a third person as capital in itself, as potential capital.
But capital itself appears as a commodity here, to the extent that it is put on the market and money's use-value as capital is genuinely alienated. That use-value is: to produce profit. The value of money or of commodities as capital is not fixed by their value as money or as commodities, but by the quantity of surplus-value they produce for their owner. The product of capital is profit.
On the basis of capitalist production, whether money is spent as money or advanced as capital is only a difference in how it is applied. Money, or a commodity, is in itself, potentially, capital — exactly as labour-power is potentially capital. For one thing, money can be turned into the elements of production, and just as it stands it is only the abstract expression of them, their existence as value. For another, the material elements of wealth have the property of already being potential capital, because their complementary opposite — the thing that makes them capital, namely wage-labour — is there once capitalist production is assumed.
The opposed social character of material wealth — its opposition to labour as wage-labour — is already expressed in capital ownership as such, apart from the production process. And now this one moment, split off from the capitalist production process itself, of which it is the constant result and, as that constant result, the constant presupposition — expresses itself in this: that money, and commodities just as much, are in themselves, latently, potentially, capital; that they can be sold as capital; and that in this form they are command over the labour of others, a claim to appropriate the labour of others, and therefore self-valorizing value.
It also comes out clearly here that this relation is the title to, and the means of, appropriating the labour of others — and not any labour put up by the capitalist as an equivalent.
Capital appears as a commodity in a further respect too, in so far as the division of profit into interest and profit proper is regulated by demand and supply — that is, by competition — just as the market prices of commodities are. But here the difference stands out as sharply as the resemblance.
If supply and demand coincide, the market price of the commodity matches its price of production — that is, its price now appears as regulated by the inner laws of capitalist production, independently of competition, since the ups and downs of supply and demand explain nothing but how far market prices depart from prices of production. Those departures cancel each other out, so that over certain longer periods the average market prices equal the prices of production. As soon as the two coincide, these forces stop acting, they cancel each other out, and the general law of price determination then comes forward as the law of the individual case too: market price then matches the price of production in its immediate existence, and not merely as an average of market price movements — and that price of production is itself governed by the immanent laws of the mode of production. The same with wages: if supply and demand coincide, their effect is called off, and wages equal the value of labour-power.
But with interest on money capital it is different. Here competition does not determine the departures from the law — there is no law of the division at all except the one competition dictates, because, as we shall see further on, no 'natural' rate of interest exists. What is called the natural rate of interest really means the rate fixed by free competition. Nor does the rate of interest have any 'natural' limits. Where competition does not merely determine deviations and fluctuations — where, then, with its opposing forces in balance, all determination ceases altogether — the thing that is to be determined is in itself something without law, something arbitrary. More on this in the next chapter.
With interest-bearing capital everything appears in an external way: the advance of the capital as a mere transfer of it from lender to borrower; the return of the realized capital as a mere transfer back, a repayment with interest from borrower to lender.
The same happens to a determination that belongs to the capitalist mode of production itself: that the rate of profit is fixed not only by the ratio of the profit made in a single turnover to the capital value advanced, but also by the length of that turnover time itself — that is, as the profit that industrial capital yields over definite periods of time. And here too, with interest-bearing capital, this appears in a wholly external way: that for definite periods of time a definite interest is paid to the lender.
The romantic Adam Müller, with his usual insight (such as it is) into how things really connect, writes (Elements of Statecraft, Berlin, 1809, part III, page 138):
'When the price of things is determined, no one asks about time; when interest is determined, time is the main thing reckoned in.'
He does not see how production time and circulation time enter into the fixing of the prices of commodities, and how precisely through this the rate of profit is fixed for a given turnover time of capital — and how, through the fixing of profit for a given time, interest is fixed in turn.
His profundity here, as always, consists only in seeing the dust clouds on the surface and pretentiously giving out this dusty stuff as something mysterious and significant.