As the last two chapters showed, interest was never anything else and is still nothing else: a part of the profit — the surplus-value — that the capitalist actually running the business owes to whoever owns and lent him the capital, whenever that capital is borrowed rather than his own. If he works only with his own capital, no such division happens; the whole profit is his. And in fact, when owners use their own capital themselves, they play no part at all in setting the rate of interest — which already shows that the category of interest, impossible without some rate of interest being fixed, is foreign to the movement of industrial capital as such.

Tooke defines the rate of interest as the proportional sum a lender is content to receive, and a borrower to pay, for the use of a given amount of money capital over a year or some longer or shorter stretch; and he adds that an owner who employs his capital actively in reproduction does not count among the capitalists whose proportion to the number of borrowers determines the rate of interest.

It's really only the split of capitalists into money capitalists and industrial capitalists — turning part of the profit into interest — that creates the category of interest at all. And it's only the competition between these two kinds of capitalist that sets the rate of interest.

As long as a capital is functioning in the reproduction process — even suppose it belongs to the industrial capitalist himself, with no lender to pay back — what he has at his own disposal as a private person is not the capital itself but only the profit, which he can spend as income. As long as his capital functions as capital, it belongs to the reproduction process and is tied up in it. He does own it, but as long as he is using it as capital to exploit labour, that ownership doesn't let him dispose of it any other way.

It is exactly the same for the money capitalist. As long as his capital is lent out and working as money capital, it brings him interest — a part of the profit — but he cannot get at the principal. That becomes plain the moment he lends it out for a year or more and collects interest at fixed dates without the capital itself coming back. But even getting it back changes nothing: once he has it back, he has to lend it out again straight away if it is to go on working as capital — here, money capital — for him. While it sits in his hands, it earns no interest and isn't working as capital; and whenever it is earning interest and working as capital, it isn't in his hands. That is why capital can be lent out forever.

Tooke's remarks against Bosanquet on this point are therefore simply wrong. He quotes Bosanquet:

Bosanquet's claim is that if the rate of interest were pushed down as low as 1 per cent, borrowed capital would stand almost on a par with capital of one's own.

Tooke's marginal note on Bosanquet's claim runs:

Tooke finds it so strange a claim that capital borrowed at that rate, or even lower, should count as almost on a par with capital of one's own that it would hardly deserve serious notice, did it not come from a writer as intelligent, and on some points of the subject as well informed, as this one; and he asks whether Bosanquet has overlooked, or thinks beside the point, that his own supposition includes the condition that the loan has to be repaid.

If interest were zero, the industrial capitalist working with borrowed capital would be in exactly the same position as one working with his own. Both would pocket the same average profit, since capital — whether borrowed or owned — only works as capital by producing a profit. The requirement to repay it changes nothing here. The closer the rate of interest gets to zero — say it falls to 1 per cent — the more borrowed capital stands on the same footing as capital someone owns outright.

As long as money capital is to go on existing as money capital, it always has to be lent out again, at whatever the going rate is — say 1 per cent — and lent again to that same class of industrial and commercial capitalists. As long as these people are functioning as capitalists, the only difference between the one working with borrowed capital and the one working with his own is that one has to pay interest and the other doesn't: one pockets the whole profit, call it p; the other pockets p minus the interest, i. The closer i gets to zero, the closer p minus i gets to p — so the more the two capitals stand on the same footing. One has to pay the capital back and borrow again; the other, as long as his capital is to keep functioning, likewise has to keep advancing it to the production process over and over, with no say over it apart from that process. The one difference still standing is the obvious one: one of them owns his capital, and the other doesn't.

So the question that now arises is this: how does this purely quantitative division of profit into net profit and interest turn into a qualitative one? Put differently: how does it happen that even a capitalist who works only with his own capital, and no borrowed capital at all, sorts part of his gross profit into the special category of interest and reckons it up separately? And further: how does it happen that all capital, borrowed or not, ends up distinguished from itself — as interest-bearing capital on one side, as capital yielding a net profit on the other?

Not every chance quantitative division of profit turns into a qualitative one this way. Say some industrial capitalists team up to run a business, and split the profit between them by legal agreement. Others run their business alone, without partners. These solo traders don't book their profit under two headings, one part as their own profit and another as 'company profit' for partners who don't exist. So here the quantitative division does not turn into a qualitative one. That quantitative division shows up where the owner happens to be several legal persons at once; it does not show up where that isn't the case.

To answer the question, we need to dwell a little longer on the real starting point of how interest actually forms — that is, we need to start from the assumption that the money capitalist and the productive capitalist really do stand face to face, not merely as two different legal persons, but as people who play completely different roles in the reproduction process, or in whose hands the very same capital really does go through two entirely different movements. One of them only lends the capital; the other puts it to work productively.

For the productive capitalist working with borrowed capital, the gross profit splits into two parts: the interest he owes the lender, and whatever is left over, which is his own share. If the general rate of profit is fixed, that leftover share is set by the rate of interest; if the rate of interest is fixed, it's set by the general rate of profit. And however much the actual gross profit may diverge, in any one case, from the average profit, the part belonging to the capitalist actually running the business is fixed by the interest — because the interest is pinned down in advance, by the general rate of interest (special legal arrangements aside), before the production process even starts, and so before its result, the gross profit, is even in hand.

We've seen that the specific thing capital itself produces is surplus-value, or more exactly profit. But for the capitalist working with borrowed capital, what's his is not the profit but the profit minus the interest — whatever is left once the interest is paid. So that leftover necessarily appears to him as the product of capital only so far as it is functioning — and for him this really is so, because he stands for capital only as functioning capital. He is its personification only in so far as it functions, and it functions in so far as it's invested for profit in industry or trade and, through him, carries out whatever operations that line of business calls for. So, set against the interest he has to pay the lender out of the gross profit, the part of the profit still left to him necessarily takes the form of industrial or commercial profit — or, to use one word that covers both, the form of profit of enterprise. If the gross profit equals the average profit, the size of this profit of enterprise is fixed purely by the rate of interest. If the gross profit diverges from the average, the gap between them (after interest is deducted on both sides) is fixed by every fluctuation that can cause such a temporary divergence — whether it's the profit rate in one particular branch diverging from the general rate, or one capitalist's profit in a given branch diverging from that branch's own average.

Now, we've also seen that the rate of profit, even within the production process itself, does not depend only on surplus-value but on plenty of other things too — the buying prices of the means of production, methods more productive than average, economizing on constant capital, and so on. And quite apart from the production price, it depends on how trade happens to stand, and, in each individual deal, on how much cunning and enterprise the capitalist shows — on whether and how far he buys or sells above or below the production price, and so grabs a bigger or smaller share of the total surplus-value in the process of circulation. Either way, the quantitative division of gross profit turns here into a qualitative one — all the more so because the quantitative division itself depends on what there is to divide, on how the active capitalist manages his capital, and on what gross profit it yields him as functioning capital, that is, as the result of his activity as an active capitalist.

Here the functioning capitalist is assumed to be a non-owner of the capital. Ownership of the capital is represented, as far as he's concerned, by the lender, the money capitalist. So the interest he pays the lender appears as the part of the gross profit that belongs to ownership of capital as such. Against this, the part of the profit that falls to the active capitalist now appears as profit of enterprise, arising purely from the operations or functions he carries out with the capital in the reproduction process — above all the functions he performs as an entrepreneur in industry or trade. So to him, interest appears as the mere fruit of owning capital, of capital in itself, set apart from capital's reproduction process in so far as it isn't 'working', isn't functioning; while profit of enterprise appears to him as the exclusive fruit of the functions he performs with the capital — the fruit of the capital's own movement and activity, an activity that now appears to him as his own doing, as against the money capitalist's inactivity, the money capitalist's having no part at all in the production process.

This qualitative split between the two parts of the gross profit — interest as the fruit of capital in itself, of ownership set apart from the production process, and profit of enterprise as the fruit of capital actually at work in the production process, and so of the active role the person using the capital plays in reproduction — this qualitative split is in no way merely a subjective view held by the money capitalist on one side and the industrial capitalist on the other. It rests on an objective fact: the interest flows to the money capitalist, the lender, who is simply the owner of the capital and so represents mere ownership of capital before and outside the production process; while profit of enterprise flows to the capitalist who merely functions, who does not own the capital.

Take an industrial capitalist who works with borrowed money, or a money capitalist who lets someone else use his money instead of using it himself. In both cases the split of the gross profit between two people with different legal claims on the same capital — and so on the profit it produces — stops being a mere division of an amount and turns into a difference in kind.

One part now seems to belong to capital simply because it is capital: that part is interest. The other part seems to belong to capital in the opposite capacity, as something functioning, being put to work: that part is profit of enterprise. One appears as the mere fruit of owning capital; the other as the fruit of actually using it, of the work the active capitalist does with it.

This hardening of the two parts of gross profit into separate, self-standing shares — as if they came from two essentially different sources — must now take hold for the whole capitalist class and for capital as a whole. It makes no difference whether the capital the active capitalist uses is actually borrowed, or whether the money capitalist's own capital is actually used by someone else or by himself.

So the profit on any capital — including the average profit that comes from capitals being levelled against each other — splits into two parts that differ in kind, stand independent of one another, and are governed by their own separate laws: interest and profit of enterprise. A capitalist who works with his own capital does exactly the same thing: he divides his gross profit into interest, which comes to him as owner, as his own lender of capital to himself, and profit of enterprise, which comes to him as the person actively working the capital. So it stops mattering, for this kind of division, whether the capitalist really does have to share with someone else or not.

The person using the capital — even when it is his own — splits into two: the mere owner of the capital, and its user. And the capital itself, looked at through the kinds of profit it produces, splits into capital-as-property (capital standing outside the production process, which by itself yields interest) and capital-in-process (capital at work, which yields profit of enterprise).

Interest becomes so fixed a feature that it no longer looks like a split in gross profit that has nothing to do with production and only crops up now and then, when an industrialist happens to be working with someone else's money. Even when he works with his own capital, his profit still splits into interest and profit of enterprise.

That is how the merely quantitative division becomes a difference in kind: it happens whether or not the industrialist happens to own his capital — that accidental fact makes no difference. These are not simply different people's shares of one profit; they are two different categories of profit, each standing in a different relation to capital, that is, to a different capacity in which capital acts.

Once this division of gross profit into interest and profit of enterprise has become a difference in kind, it is easy to see why that kind of division holds for the whole capitalist class and for capital as a whole.

First, simply because most industrial capitalists actually work with a mix of their own capital and borrowed capital, in different proportions from one capitalist to another, and that proportion keeps shifting from one period to the next.

Second, turning one part of the gross profit into interest is exactly what turns the rest of it into profit of enterprise. Profit of enterprise is really nothing but the opposite-facing form that the leftover — gross profit minus interest — takes on, once interest exists as a category of its own. So the whole question of how gross profit splits into interest and profit of enterprise really comes down to one question: how does a part of gross profit generally harden into a fixed, independent thing called interest?

Now, historically, capital that bears interest existed as a ready-made form handed down from earlier times — and so did interest itself, as a ready-made piece of the surplus-value capital produces — long before the capitalist way of producing, and the ideas of capital and profit that go with it, ever existed. That is why ordinary opinion still treats money capital, capital that bears interest, as capital in the fullest sense, capital as such. That is also why, right up to Massie's time, people thought it was the money itself that was being paid for when interest was paid. And the fact that lent capital brings in interest whether or not it is actually used as capital — even when it is only borrowed to be spent — reinforces the idea that this form of capital stands on its own. The best proof of just how independent interest looked from profit, and interest-bearing capital from industrial capital, in the early days of capitalist production, is this: only in the middle of the eighteenth century was it discovered, by Massie, and after him Hume, that interest is simply one part of gross profit. That it took a discovery to see this at all is itself telling.

Third, it makes no difference whether the industrial capitalist is working with his own capital or with borrowed capital: either way, he faces the class of money capitalists as a distinct kind of capitalist, money capital as its own distinct kind of capital, and interest as the distinct form that surplus-value takes when it corresponds to that particular kind of capital.

Looked at qualitatively, interest is the surplus-value that mere ownership of capital delivers — what capital as property, in itself and apart from its process, yields even while its owner stands outside the reproduction process altogether. It is surplus-value yielded by capital cut off from its own process.

Looked at quantitatively, the part of profit that makes up interest seems tied not to industrial or commercial capital as such but to money capital — and the rate of this part of surplus-value, the rate of interest, confirms that link. There are two reasons. First, the rate of interest, even though it depends on the general rate of profit, gets fixed on its own, separately. Second, it appears — the way the market price of a commodity does — as something solid and uniform, palpable and always there to be read off, however much it changes, in contrast to the rate of profit, which you can never quite pin down. If every last bit of capital sat in the hands of industrial capitalists, there would be no interest and no rate of interest at all. It is this independent form that the quantitative division of gross profit takes on that produces the qualitative one.

If the industrial capitalist compares himself with the money capitalist, the only thing that marks him off is profit of enterprise — the excess of gross profit over the average interest, which the rate of interest makes look like a given, measurable quantity. If instead he compares himself with an industrial capitalist who works with his own capital rather than borrowed capital, that other capitalist is marked off from him only as a money capitalist, simply because he pockets the interest himself instead of paying it away. Either way, the part of gross profit distinct from interest looks to him like profit of enterprise, and interest itself looks like surplus-value that capital yields purely in and of itself — surplus-value it would therefore go on yielding even with no productive use at all.

For the individual capitalist, this really is how things stand, in practice. He genuinely has a choice: whether his capital — whether it already exists as money capital, or still has to be turned into money capital first — should be lent out as interest-bearing capital, or put to work himself as productive capital.

But take that same idea and generalize it, apply it to the whole of society's capital, the way some vulgar economists do, some even making it the basis of profit itself, and it becomes, of course, absurd. To imagine all capital turned into money capital, with nobody left to buy the means of production and put them to use — when those means of production are what almost the entire capital actually consists of, apart from the small part that exists as money — that is simply nonsense.

And hidden inside that nonsense is a bigger one still: that capital, on the basis of the capitalist way of producing, could yield interest without functioning as productive capital at all, that is, without creating any surplus-value, when interest is only ever a part of that surplus-value; in other words, that the capitalist mode of production could keep going without capitalist production. If an unreasonably large share of capitalists actually tried to turn their capital into money capital, the result would be a huge fall in the value of money capital and a huge drop in the rate of interest; plenty of them would suddenly find they could no longer live off their interest, and would be forced back into being industrial capitalists again.

But as already said, for the individual capitalist this really is how it is. So even when he works with his own capital, he cannot help but treat the part of his average profit equal to the average interest as the fruit of his capital as such, quite apart from the process of production — and, set against that part, now made independent as interest, he treats the excess of gross profit over it as simply profit of enterprise.

Fourthly (a gap in the manuscript).

So it turns out that the part of profit the capitalist actually at work has to pay to the mere owner of the capital he borrowed turns into the independent form taken by a part of the profit that all capital — borrowed or not — yields under the name of interest. How large that part is depends on the level of the average rate of interest. Its origin shows through in only one place: the functioning capitalist, to the extent that he owns his own capital, plays no part, at least no active part, in setting the rate of interest.

The purely quantitative division of profit between two people with different legal claims on it has thus turned into a difference in kind, one that seems to spring straight from the very nature of capital and profit. For, as we have seen, once a part of profit generally takes the form of interest, the difference between average profit and interest — the part of profit left over above interest — turns into a form that stands opposed to interest: profit of enterprise.

These two forms, interest and profit of enterprise, exist only in being opposed to each other. So neither of them is related to the surplus-value of which they are both simply differently named, fixed shares — instead, they are related to one another. It is because one part of profit turns into interest that the other part accordingly shows up as profit of enterprise.

Whenever we speak of profit here, we mean average profit. We are not interested in the ups and downs of an individual capitalist's profit, or of profit in one branch of production against another — the swings that competition and other circumstances produce in how average profit, or surplus-value, gets shared out. That holds for everything that follows.

Interest is what Ramsay called net profit: what ownership of capital as such yields, whether to a lender who stays outside the process of production altogether, or to an owner who puts his own capital to work himself. Even for that second man, it isn't his activity as a working capitalist that brings him this net profit — it's that he is, so to speak, a money-capitalist lending his own capital to himself as a working capitalist.

Turning money, or value generally, into capital is the constant result of capitalist production; capital's existing as capital is just as much its constant precondition. Because it can be turned into means of production, capital is always in a position to command unpaid labour, and so it turns the whole process of producing and circulating commodities into a process of producing surplus-value for whoever owns it. So interest is simply the expression of this: that value as such — labour turned into a thing, in its general social form — once it takes the shape of means of production in the actual process of production, confronts living labour-power as an independent power and is the means of seizing unpaid labour; and that it has this power because it confronts the worker as somebody else's property.

But there is another side. In the form interest takes, that opposition to wage-labour is wiped out. Interest-bearing capital, as such, is not opposed to wage-labour but to functioning capital; the lending capitalist faces the capitalist who is actually at work in production, not the wage-labourer who — precisely because this is capitalist production — has been stripped of the means of production. Interest-bearing capital is capital as property, set against capital as function. But so far as capital is not functioning, it does not exploit workers and stands in no opposition to labour at all.

Profit of enterprise, on the other hand, is not opposed to wage-labour at all — only to interest.

First: taking average profit as given, the rate of profit of enterprise is not fixed by wages but by the rate of interest. It runs high when interest runs low, and low when interest runs high.

Second: the working capitalist bases his claim to profit of enterprise — and so profit of enterprise itself — not on his ownership of capital, but on capital's function, as against the mere inert state in which it exists as property and nothing else. This opposition becomes plain and immediate the moment he works with borrowed capital, where interest and profit of enterprise fall to two different people. Profit of enterprise arises out of capital's function in the process of production — out of the operations, the activity, by which the working capitalist carries out these functions of industrial and commercial capital. But being the one who represents functioning capital is no easy sinecure, the way representing interest-bearing capital is. Under capitalist production it is the capitalist who directs both production and circulation. Exploiting productive labour takes real effort, whether he does it himself or has others do it in his name. So, set against interest, his profit of enterprise presents itself to him as having nothing to do with owning capital — as the result, instead, of his functions as a non-owner, as — a worker.

So the idea necessarily forms in his head that his profit of enterprise — far from being any kind of opposite to wage-labour, far from being simply the unpaid labour of others — is actually itself a wage: wages of superintendence of labour, and a higher wage than the ordinary wage-labourer's, because, first, it is more complicated work, and second, because he pays himself. That his function as a capitalist consists precisely in producing surplus-value, unpaid labour, and doing so as economically as possible — that gets entirely forgotten, buried under the contrast that interest falls to the capitalist even when he performs no capitalist function at all and is a mere owner of capital, while profit of enterprise falls to the working capitalist even when he does not own the capital he works with. Buried under the opposed forms the two parts take is the fact that both are simply parts of surplus-value, and that dividing surplus-value this way cannot change anything about its nature, its origin, or the conditions that make it possible.

In the process of production, the working capitalist stands in for capital as somebody else's property, confronting the wage-labourers; and the money-capitalist, through him, has a share in the exploitation of labour. That the active capitalist can only carry out his function — having the workers work for him, having the means of production act as capital — because he represents the means of production against the workers: this gets forgotten too, buried under the opposition between capital's function inside the process of production and mere ownership of capital outside it.

In fact, the form the two parts of profit — of surplus-value — take, as interest and profit of enterprise, expresses no relation to labour at all, because that relation holds only between labour and profit, or rather surplus-value, taken as the sum, the whole, the unity of both parts. The ratio in which profit gets divided, and the different legal titles under which the division happens, already treat profit as finished, already presuppose that it exists. If the capitalist happens to own the capital he works with, he pockets the whole profit, the whole surplus-value; it makes no difference at all to the worker whether he does this or has to hand part of it over to someone else as the legal owner. So the reasons profit gets divided between two kinds of capitalist quietly turn, without anyone noticing, into the reasons the profit being divided — the surplus-value that capital as such draws out of the process of production, quite apart from any later division — exists at all. From the fact that interest is opposed to profit of enterprise, and profit of enterprise to interest, but neither is opposed to labour, it can seem to follow that profit of enterprise plus interest — that is, profit, and so surplus-value — rests on something. On what? On the opposed form of its two parts! But profit is produced before this division is even made, before there can be any talk of it.

Interest-bearing capital proves itself as such only to the extent that the money lent really is turned into capital and produces a surplus, of which interest is one part. But that does not rule out that bearing interest has grown into it as a property of its own, independent of the process of production. Labour-power, too, proves its value-creating power only when it is set to work and realized in the labour process; but that does not rule out that, in itself, as a potential, as a capacity, it already is value-creating activity, and as such does not first arise out of the process but is rather presupposed by it. It is bought as the capacity to create value. Someone can buy it without putting it to productive work at all — for purely personal ends, for personal service, and so on. It is the same with capital. It is up to the borrower whether he actually uses it as capital, whether he really sets in motion the property inherent in it of producing surplus-value. Either way, what he pays for is the surplus-value already contained, in itself, as a possibility, in capital as a commodity.

Now let's take a closer look at profit of enterprise.

Once capital's specific social mark under capitalism — capital-ownership, which has the power to command other people's labour — gets fixed, and interest therefore appears as the part of surplus-value capital produces in that capacity, the other part of surplus-value, profit of enterprise, necessarily starts to look as though it doesn't come from capital as capital at all. It looks instead as though it comes from the production process on its own, apart from that specific social mark — which has, after all, already found its own separate home in the idea of interest on capital.

But the production process, once separated from capital, is just the labour process in general. So the industrial capitalist, as distinct from the owner of capital, no longer appears as functioning capital. He appears as a functionary quite apart from capital — a plain bearer of the labour process in general, a worker, and specifically a wage-worker.

Interest as such expresses exactly this: the conditions of labour exist as capital, standing in social opposition to labour, turned into personal powers over labour and against it. Interest represents mere ownership of capital as a means of taking hold of the products of other people's labour.

But it presents this character of capital as something that belongs to it from outside the production process — not at all the result of this process's own specifically capitalist character. It presents it not as a direct opposition to labour, but, the other way round, with no relation to labour at all — merely as a relation of one capitalist to another. So it looks like something external and indifferent to the real relation between capital and labour.

In interest, then — the particular shape of profit in which capital's antagonistic character gets an independent expression of its own — that expression is such that the antagonism is completely wiped out in it and abstracted away entirely. Interest is a relation between two capitalists, not between capitalist and worker.

On the other hand, this form of interest gives the other part of profit — profit of enterprise, and beyond that wages of superintendence — a qualitative shape of its own. The special functions the capitalist performs as a capitalist, exactly the functions that set him apart from and against the workers, get presented as nothing but functions of labour. On this view he produces surplus-value not because he works as a capitalist, but because — quite apart from being a capitalist — he also works. So this part of surplus-value is no longer surplus-value at all; it becomes its opposite, an equivalent paid for work actually done.

Because capital's estranged character, its opposition to labour, has been shifted elsewhere — onto interest-bearing capital — the very process of exploitation now looks like a plain labour process, in which the functioning capitalist simply does different work from the worker's. The work of exploiting and the work that gets exploited become identical, both just "labour." Exploiting is just as much work as being exploited is. Interest gets the social form of capital, but expressed in a neutral, indifferent way; profit of enterprise gets capital's economic function, but with that function's specifically capitalist character abstracted away.

Exactly the same thing happens here, in the capitalist's own mind, as happened in Part Two of this volume with the compensating grounds behind the equalization to an average profit. Those grounds really do help settle how surplus-value gets divided up — but in the way the capitalist pictures things, they get twisted around into the grounds that supposedly produce profit in the first place, and into its own (subjective) justification.

The idea that profit of enterprise is really a wage for supervising labour — an idea that grows out of its opposition to interest — gets further backing from a real fact: a part of profit genuinely can separate off, and really does separate off, as wages. Or rather, put the other way round: a part of wages, on the basis of the capitalist mode of production, appears as an integral piece of profit.

As Adam Smith already rightly saw, this part shows up on its own — plainly separate both from profit as a whole (interest and profit of enterprise together), and from the portion left over as so-called profit of enterprise once interest has been deducted — in the salary paid to a manager, wherever a business is large enough, and divided enough in its labour, to support paying one.

The work of overseeing and directing arises necessarily wherever the immediate process of production takes the shape of a socially combined process, rather than appearing as the separate, isolated work of independent producers.

But it is double in nature.

On one side: in any work where many people cooperate, the connection and unity of the whole process necessarily shows up as a directing will, in functions concerned not with the separate tasks but with the workshop's activity as a whole — like the conductor of an orchestra. This is productive labour, work that has to be done in any combined way of producing.

On the other side — leaving the commercial side of business aside entirely — this work of overseeing arises necessarily in every mode of production built on the opposition between the worker as direct producer and the owner of the means of production. The bigger that opposition, the bigger the part this work of overseeing plays. So it reaches its highest point in the slave system.

But it is indispensable under capitalism too, since there the process of production is, at the same time, the capitalist's process of consuming labour-power. It is just like despotic states, where the government's work of overseeing and interfering in everything covers both things at once: carrying out the shared tasks that arise from the nature of any community, and the special functions that arise from the opposition between the government and the mass of the people.

Among ancient writers, who had the slave system before them, we find in their theory — as it was also in practice — both sides of overseeing work fused together just as inseparably as they are with modern economists, who treat the capitalist way of producing as the absolute way.

On the other hand, as I will show in a moment with an example, the apologists of the modern slave system know just as well how to use overseeing work as a ground for justifying slavery as other economists use it as a ground for the wage-labour system.

The villicus in Cato's time:

"At the head of the slave-worked estate stood the manager — the villicus, from villa — who took in and paid out money, bought and sold, took his instructions from the master, and in the master's absence gave the orders and the punishments himself... The manager naturally had more freedom than the other slaves; the Magonian farming manuals advise letting him marry, have children, and keep money of his own, and Cato said he should be married to the female manager; he alone had any real prospect of winning his freedom from the master as a reward for good behaviour. Apart from that, they all formed one shared household... Every slave, including the manager himself, had his needs supplied at the master's expense, at set intervals and in fixed amounts, and had to make do with that... The amount depended on the work, so the manager, whose work was lighter than the other slaves', got a smaller ration than they did." (Mommsen)

Aristotle puts it bluntly. Ruling — in economics just as in politics — forces whoever holds power to know how to work the people under him. In economic terms: he has to know how to consume labour-power. And Aristotle adds that this overseeing job is nothing grand — so once a master can afford it, he hands the 'honour' of this drudgery over to an overseer.

Managing and overseeing labour, so far as it is not the ordinary coordinating work any large joint effort needs, comes instead from something else entirely: the standoff between whoever owns the means of production and whoever owns nothing but labour-power — whether that labour-power is bought together with the worker himself, as under slavery, or the worker sells his own labour-power, so that production itself looks like capital consuming his labour. This second kind of overseeing grows out of the direct producer's subjection, and it gets used, often enough, to justify that very subjection: the exploitation, the seizing of someone else's unpaid labour, gets presented as a wage owed to the owner of capital. Nobody has ever put this more starkly than a defender of slavery in the United States — the lawyer O'Conor, speaking at a New York meeting on 19 December 1859 under the banner 'Justice for the South.'

'Now, gentlemen,' he said to loud applause, 'nature itself assigned the Negro to this condition of bondage. He has strength, and the power to work — but the same nature that gave him that strength denied him both the sense to govern and the will to work.' (Applause.) 'He was denied both! And that same nature which withheld from him the will to work gave him a master, to force that will, and to turn him, in the climate he was made for, into a useful servant — useful to himself, and to the master who governs him. I maintain it is no injustice to leave the Negro in the condition nature placed him; to give him a master to govern him; and a man is robbed of none of his rights when he is compelled, in return, to work, and to pay his master a fair compensation for the labour and skill his master spends governing him and making him useful to himself and to society.'

By this same logic, the wage-worker needs a master too, just like the slave — someone to make him work and to govern him. And once you grant this relationship of ruler and ruled, it is quite in order that the wage-worker be forced to produce not only his own wage but, on top of that, a wage of supervision — compensation for the work of ruling and overseeing him — 'a fair compensation for the labour and skill spent governing him and making him useful to himself and to society.'

The work of overseeing and directing, insofar as it comes from that antagonism — capital's rule over labour — is something capitalism shares with every mode of production built on class opposition. But under capitalism this kind of oversight is also fused, directly and inseparably, with a different thing: the genuinely productive work that any combined social labour assigns to particular people as their special task. The wage of what the Greeks called an epitropos, or what feudal France called a régisseur, splits off completely from profit and becomes an ordinary wage for skilled work, as soon as a business is large enough to pay such a manager — even though that hardly means our industrial capitalists are off 'pursuing affairs of state or philosophizing.'

Mr Ure himself already pointed out that it is not the industrial capitalists but the industrial managers who are 'the soul of our industrial system.' As for the commercial side of the business, what needs saying about it has already been said earlier.

Capitalist production has itself made overseeing work something that can run loose in the world, completely separate from owning capital. So it has become pointless for the capitalist himself to be the one doing it. A conductor does not need to own the instruments of his orchestra, and paying the other musicians' wages is no part of his job as conductor. Cooperative factories prove exactly this: as a functionary of production, the capitalist has become just as unnecessary as, from his own high vantage point, he finds the big landowner to be.

Take only the part of the capitalist's work that does not come from the production process purely as a capitalist process — work that would not simply disappear along with capital; that is not limited to the job of exploiting other people's labour; that comes, instead, from labour's social character, from many people combining and cooperating toward one shared result. That part is just as independent of capital as that social form itself is, once it breaks out of its capitalist shell. To say this labour must, as capitalist labour, be the capitalist's own function is only to say that ordinary opinion cannot picture these forms — grown up inside capitalism — separated and set free from their antagonistic, capitalist character.

Facing the money capitalist, the industrial capitalist is a worker — but a worker as a capitalist, that is, as someone who exploits other people's labour. The wage he claims and pockets for this 'work' is exactly equal to the amount of other people's labour he has appropriated, and — so long as he himself takes on the necessary trouble of exploiting — it depends directly on how hard he exploits that labour, not on how much effort the exploiting costs him, which he can hand off to a manager for a modest payment. After every crisis you can find plenty of former manufacturers in England's factory districts now overseeing their own old factories as managers for the new owners — often their own creditors — for a modest wage.

In both the workers' cooperative factories and capitalist joint-stock companies, the wage of management — commercial and industrial alike — shows up as completely separate from profit of enterprise. Elsewhere this separation can look accidental; here it is constant. In the cooperative factory, the antagonistic side of overseeing disappears, because the manager is paid by the workers instead of standing over against them representing capital. Joint-stock companies generally — grown up with the credit system — tend more and more to split this work of management off, as a function, from the ownership of capital, one's own or borrowed; just as, with the growth of bourgeois society, judicial and administrative functions split off from landed property, of which they had been mere attributes in feudal times. On one side, the functioning capitalist now faces the bare owner of capital, the money capitalist — and as credit develops, this money capital itself takes on a social character, gets concentrated in banks, and is lent out by the banks rather than by its direct owners. On the other side, the plain manager, who holds no title to capital at all, neither by loan nor otherwise, carries out every real function that belongs to the functioning capitalist as such. So only the functionary is left, and the capitalist disappears from the production process as a superfluous person.

Published accounts of England's cooperative factories show that, once you deduct the manager's wage — which is simply part of the variable capital laid out, exactly like the other workers' wages — their profit was bigger than the average, even though in places they paid much higher interest than private manufacturers did. In every one of these cases, the reason for the higher profit was greater economy in using constant capital. What matters for us here is that average profit (interest plus profit of enterprise) shows up, concretely and unmistakably, as a magnitude that has nothing to do with the wages of management. Since profit here ran above average, profit of enterprise was above average too.

The same fact shows up in some capitalist joint-stock companies too — joint-stock banks, for instance. In 1863 the London and Westminster Bank paid an annual dividend of 30 per cent; the Union Bank of London and others paid 15 per cent. Here, besides the managers' salaries, gross profit also has to cover the interest paid on deposits. The high profit is explained by how small the paid-up capital is next to the deposits. At the London and Westminster Bank in 1863, for example: paid-up capital £1,000,000; deposits £14,540,275. At the Union Bank of London in 1863: paid-up capital £600,000; deposits £12,384,173.

This confusion between profit of enterprise and the wages of supervision or management first arose from the antagonistic shape that the surplus of profit over interest takes, set against interest itself. It was then developed further, out of an apologetic aim: to present profit not as surplus-value — that is, not as unpaid labour — but as a wage the capitalist himself earns for work he has done. Against this, the socialists raised their own demand: that profit actually be reduced, in practice, to what it claimed to be in theory — nothing but a wage of supervision.

And this demand became steadily more awkward for the theoretical gloss, because the wages of superintendence, on one side, found their own definite level and market price, just like any other wage, once a large class of industrial and commercial managers had formed; and on the other side, fell — just as wages for skilled work generally do — as the general course of development cut the cost of producing specially trained labour-power.

Then, as cooperation grew on the workers' side and joint-stock companies grew on the bourgeoisie's side, the last pretext for confusing profit of enterprise with the wage of management was pulled out from under it. Profit came to appear in practice as what it undeniably already was in theory: mere surplus-value, value for which no equivalent is paid, unpaid labour turned real. So the functioning capitalist really does exploit labour — and when he works with borrowed capital, the fruit of that exploitation splits into interest and profit of enterprise, the surplus of profit over interest.

On the basis of capitalist production, joint-stock companies breed a new swindle around the wages of management: alongside and above the actual managing director, a whole number of governing and supervisory boards spring up, for whom 'management' and 'supervision' are really just a pretext for plundering the shareholders and enriching themselves. Very nice details on this can be found in The City, or the Physiology of London Business, with Sketches on 'Change and the Coffee Houses, London, 1845.

'What bankers and merchants gain by sitting on the boards of eight or nine different companies can be seen from this example: when Mr Timothy Abraham Curtis went bankrupt, his private balance sheet, submitted to the bankruptcy court, showed an income of £800 to £900 a year under the heading directorships. Since Mr Curtis had been a director of the Bank of England and the East India Company, every joint-stock company counted itself lucky to get him onto its board.' (pp. 81, 82.)

The pay these directors get for each weekly board meeting is at least a guinea (21 shillings). And the hearings before the bankruptcy court show that this wage of supervision usually runs in the opposite direction from the supervision these nominal directors actually carry out.