Interest-bearing capital — or, to name it in its archaic form, usurer's capital — belongs, along with its twin, merchant's capital, to the antediluvian forms of capital. These forms long predate the capitalist mode of production, and they turn up in the most diverse economic formations.
All that usurer's capital needs in order to exist is that at least part of the products has turned into commodities, and that money, along with trade in commodities, has developed in its various functions.
The growth of usurer's capital is tied to the growth of merchant's capital, and specifically of money-dealing capital. In ancient Rome, from the last years of the Republic onwards, manufacture stood far below the average level of the ancient world — yet merchant's capital, money-dealing capital and usurer's capital had reached their highest point, within the ancient form.
We have seen how hoarding necessarily comes along with money. But the professional hoarder only becomes important once he turns into a money-lender.
The merchant borrows money in order to make a profit with it — to use it as capital, that is, to lay it out. So even in the earlier forms the money-lender faces him exactly as he faces the modern capitalist. This specific relation was felt by the Catholic universities too.
According to Augier, the universities of Alcalá, Salamanca, Ingolstadt, Freiburg im Breisgau, Mainz, Cologne and Trier acknowledged, one after another, that interest on commercial loans was lawful. The earliest five of their approvals have been laid down in the archives of the Lyon consulate and printed in the appendix of the Traité de l'usure et des intérêts (Lyon, Bruyset-Ponthus). (M. Augier, Le Crédit public etc., Paris 1842, p. 206.)
In every form in which the slave economy (not the patriarchal kind, but the kind found in the later Greek and Roman periods) exists as a means of enrichment — where money is therefore a means of appropriating other people's labour by buying slaves, land and so on — money becomes usable as capital and bears interest, precisely because it can be invested in this way.
The forms in which usurer's capital exists in the times before the capitalist mode of production are of two kinds, and both are characteristic. I say characteristic: the same forms repeat themselves on the basis of capitalist production, but only as subordinate forms. There they are no longer the forms that determine the character of interest-bearing capital. The two are: first, usury by lending money to extravagant magnates, essentially landed proprietors; second, usury by lending money to the small producer who holds his own conditions of labour — artisans included, but above all peasants, since wherever pre-capitalist conditions allow small independent individual producers, the peasant class has to form their great majority.
Both of these — rich landed proprietors ruined by usury, and small producers sucked dry — lead to the formation and concentration of large money capitals. But how far this process abolishes the old mode of production, as it did in modern Europe, and whether it puts the capitalist mode of production in its place, depends entirely on the historical level of development and the circumstances that come with it.
Usurer's capital, as the characteristic form of interest-bearing capital, answers to the predominance of small production — peasants working for themselves and small master craftsmen. Where the worker's conditions of labour and the product of his labour confront him as capital, as in the developed capitalist mode of production, he has no need to borrow money as a producer. Where he does borrow, it is for personal necessity, as at the pawnshop. Where the worker is instead the owner of his conditions of labour and of his product — in reality or only in name — he stands as a producer in relation to the money-lender's capital, which confronts him as usurer's capital.
Newman states the thing insipidly: the banker is respected while the usurer is hated and despised, because the one lends to the rich and the other to the poor (F. W. Newman, Lectures on Political Economy, London, 1851, p. 44). He overlooks that what lies between here is the difference between two social modes of production and the social orders that answer to them, and that the matter is not settled by the contrast of rich and poor. On the contrary, the usury that sucks the poor small producer dry goes hand in hand with the usury that sucks the rich great landowner dry. As soon as the usury of the Roman patricians had completely ruined the Roman plebeians, the small peasants, that form of exploitation came to an end, and a pure slave economy took the place of the petty-bourgeois one.
Under the form of interest, the usurer can swallow up everything the producers have above their barest means of subsistence (the amount that later becomes wages) — what later shows up as profit and ground rent. So it is utterly absurd to compare the level of this interest, which appropriates all surplus-value except what goes to the state, with the level of the modern rate of interest, where interest — at least the normal interest — forms only one part of that surplus-value. What gets forgotten there is that the wage-labourer produces and hands over to the capitalist who employs him profit, interest and ground rent, in short the whole surplus-value. Carey makes this absurd comparison in order to show how advantageous the development of capital, and the fall in the rate of interest that accompanies it, is for the workers.
And if the usurer, not content with squeezing out his victim's surplus labour, gradually acquires the title deeds to his conditions of labour themselves — land, house and so on — and works steadily at expropriating him in this way, it is forgotten in turn that this complete expropriation of the worker from his conditions of labour is not a result the capitalist mode of production strives towards, but the finished presupposition from which it starts. The wage-slave is excluded by his position, just as the actual slave is, from becoming a debt-slave — at least in his quality as producer; at most he can become one in his quality as consumer. Usurer's capital in this form — where it really does appropriate all the surplus labour of the direct producers without changing the mode of production; where the producers' ownership or possession of their conditions of labour, and the isolated small production corresponding to it, is an essential presupposition; where capital therefore does not directly subordinate labour, and so does not confront it as industrial capital — this usurer's capital makes that mode of production wretched, cripples the productive forces instead of developing them, and at the same time perpetuates these miserable conditions, in which the social productivity of labour does not get developed at all - not even, as in capitalist production, at the cost of labour itself.
Usury works two ways. On one side it undermines and destroys the wealth and the property of the ancient and the feudal world. On the other side it undermines and ruins small peasant and petty-bourgeois production — in short, every form in which the producer still appears as the owner of his means of production.
Under developed capitalist production, the worker is not the owner of his conditions of production: not of the field he tills, not of the raw material he works up. But here the separation of the producer from his conditions of production goes together with a real upheaval in the mode of production itself. Workers who used to work on their own are brought together in one large workshop for divided tasks that interlock; the tool turns into the machine. This mode of production no longer allows the instruments of production to be split up and scattered the way they were when they went along with small property, any more than it allows the workers themselves to be isolated. In capitalist production, usury can no longer separate the producer from his conditions of production, because they are already separated.
Where the means of production lie scattered, usury concentrates monetary wealth. It does not change the mode of production; it fastens onto it like a parasite and makes it wretched. It sucks it dry, saps its nerve, and forces reproduction to go on under ever more pitiable conditions. That is why usury is so popularly hated — most of all in the ancient world, where the producer's ownership of his conditions of production was at the same time the basis of political life, of the citizen's independence.
As long as slavery prevails, or as long as the surplus product is eaten up by the feudal lord and his retinue, the mode of production stays the same even if the slaveowner or the feudal lord falls into the usurer's hands; it only becomes harsher on the workers. The slaveowner or feudal lord who is in debt squeezes more out of them, because more is being squeezed out of him. Or in the end he makes way for the usurer himself, who becomes a landowner or slaveowner in his turn, as the knights did in ancient Rome. In place of the old exploiters, whose exploitation was more or less patriarchal — largely because it was a means of political power — there comes a hard, money-grubbing upstart. But the mode of production itself is not changed.
In every pre-capitalist mode of production, usury is revolutionary only in this: it destroys and dissolves the forms of ownership on whose firm basis, and on whose constant reproduction in the same shape, the political order rests. Under Asiatic forms, usury can go on for a long time without producing anything but economic decay and political corruption. Only where and when the other conditions of the capitalist mode of production are present does usury appear as one of the means by which the new mode of production is formed — ruining the feudal lords and petty production on one side, centralizing the conditions of labour into capital on the other.
In the Middle Ages no country had a general rate of interest. The Church forbade every interest transaction outright. Laws and courts gave little security for a loan. All the higher, for that, was the rate in particular cases. The small amount of money in circulation, and the need to make most payments in cash, forced people to borrow — and the more so, the less developed the bill-of-exchange business still was. Both the rate of interest and the notion of what counted as usury varied enormously. In Charlemagne's time, taking 100 per cent was held to be usury. At Lindau on Lake Constance in 1344, local burghers took 216 2/3 per cent. In Zurich the council fixed 43 1/3 per cent as the legal interest. In Italy 40 per cent had sometimes to be paid, though from the twelfth to the fourteenth century the usual rate did not go above 20 per cent. Verona set 12 1/2 per cent as the legal interest. Emperor Frederick II fixed 10 per cent, but only for the Jews; for the Christians he would not decree. By the thirteenth century 10 per cent was already the usual rate in the German Rhineland. (Hüllmann, Geschichte des Städtewesens, II, pp. 55-7.)
Usurer's capital has capital's way of exploiting labour without capital's way of producing. The same relation repeats itself inside the bourgeois economy as well, in backward branches of industry or in those that hold out against the transition to the modern mode of production. In comparing the English rate of interest with the Indian, for example, one must not take the Bank of England's rate, but rather the rate charged, say, by lenders of small machines to petty producers in domestic industry.
Compared with wealth that is simply consumed, usury is historically important as itself a process through which capital comes into existence. Usurer's capital and mercantile wealth between them bring about a monetary wealth independent of landed property. The less the product has developed the character of a commodity, the less exchange-value has taken hold of production in its whole breadth and depth, the more money appears as wealth as such, as wealth in general, set against the narrow shape in which it shows up in use-values. Hoard formation rests on this.
Setting aside money as world money and as hoard, it is particularly in the form of means of payment that money appears as the absolute form of the commodity. And it is particularly money's function as means of payment that develops interest, and with it money capital. What extravagant and corrupting wealth wants is money as money, money as a means of buying everything — including paying off debts. What the petty producer above all needs money for is paying. (The conversion of payments in kind and deliveries to landlords and the state into money rents and money taxes matters a great deal here.) In both cases money is needed as money. On the other side, hoard formation only becomes real, only fulfils its dream, in usury. What the owner of the hoard is asked for is not capital but money as money; but by way of interest he turns this hoard of money into capital for himself — into a means of taking possession, wholly or in part, of the surplus labour of others, and with it of a part of the conditions of production themselves, even if those continue to stand opposite him nominally as someone else's property. Usury seems to live in the pores of production, like the gods in Epicurus's intermundia. Money is harder to get, the less the commodity form has become the general form of the product. So the usurer knows no barrier at all except the ability of those who need money to pay, or their ability to resist.
In small peasant and petty-bourgeois production, money is used chiefly as means of purchase when the worker — still mostly the owner of his conditions of production in these modes of production — loses those conditions through accidents or extraordinary upheavals, or at least when they are not replaced in the ordinary course of reproduction. Means of subsistence and raw materials are an essential part of these conditions. A rise in their price can make it impossible to replace them out of what the product brings in, just as a simple bad harvest can stop a peasant replacing his seed corn in kind. The very wars through which the Roman patricians ruined the plebeians — forcing them into war service, which kept them from reproducing their conditions of labour, and so impoverishing them (and impoverishment, stuntedness or loss of the conditions of reproduction is the prevailing form here) — filled the patricians' granaries and cellars with plundered copper, the money of the time. Instead of giving the plebeians the goods they needed directly — corn, horses, cattle — they lent them this copper, which was of no use to themselves, and used the situation to extort enormous usurious interest, which turned the plebeians into their debt slaves. Under Charlemagne the Frankish peasants were likewise ruined by wars, so that nothing was left to them but to pass from debtors into serfs. In the Roman Empire it often happened, as is well known, that famine led free men to sell their children and themselves as slaves to the richer sort. So much for the general turning points. Looked at in detail, whether the petty producer keeps or loses his conditions of production depends on a thousand accidents, and each such accident or loss means impoverishment and becomes a place where the usury parasite can fasten on. The small peasant has only to lose one cow, and he can no longer begin his reproduction again on the old scale. Then he falls into the hands of usury, and once fallen he never gets free again.
Yet the real, great and peculiar terrain of usury is money in its function as means of payment. Any payment that falls due on a fixed date — ground rent, tribute, tax and the like — carries with it the need to hand over money. That is why usury, on a large scale, attaches to the tax farmers — the fermiers généraux and receveurs généraux, the men who bought the right to collect the taxes — from the ancient Romans right down to modern times.
Then trade grows and commodity production becomes general, and buying and paying part company in time. The money has to be delivered on a fixed date. How far this can lead to situations in which money capitalist and usurer still merge into one today is shown by the modern money crises. But this same usury becomes a main means of developing further the need for money as means of payment: it drags the producer deeper and deeper into debt, and it destroys his ordinary means of payment by making his regular reproduction impossible through the burden of interest alone. Here usury shoots up out of money as means of payment, and widens this function of money, its very own terrain.
The credit system takes shape as a reaction against usury. That must not be misread, though, and it is by no means to be taken the way the ancient authors, the Fathers of the Church, Luther or the older socialists took it. It means nothing more and nothing less than this: interest-bearing capital is placed under the conditions and needs of the capitalist mode of production.
By and large, in the modern credit system interest-bearing capital is made to fit the conditions of capitalist production. Usury proper does not merely go on existing: among peoples with developed capitalist production it is freed from the barriers that all earlier legislation had drawn around it.
Interest-bearing capital keeps the form of usurer's capital towards persons and classes, or in relations, where the borrowing is not — and cannot be — in the sense of the capitalist mode of production. That covers the case where someone borrows out of individual need, as at the pawnshop; the case where money is lent to consuming wealth, for extravagance; the case of the producer who is not a capitalist producer, the small peasant, the artisan and so on, and so is still, as a direct producer, the owner of his own conditions of production; and finally the case of the capitalist producer himself, where he operates on so small a scale that he comes close to those producers who work for themselves.
What sets interest-bearing capital apart from usurer's capital — in so far as interest-bearing capital forms an essential element of the capitalist mode of production — is in no way the nature or the character of that capital itself. It is only the changed conditions under which it works, and so too the wholly transformed figure of the borrower who faces the money-lender.
Even when a man without means gets credit as an industrialist or a merchant, it is given in the confidence that he will work as a capitalist, that with the borrowed capital he will appropriate unpaid labour. He is given credit as a potential capitalist.
And this circumstance, which the economic apologists admire so much — that a man with no wealth, but with energy, solidity, ability and business sense, can turn himself into a capitalist in this way, just as under the capitalist mode of production anyone's commercial value is assessed more or less correctly — however much it keeps bringing an unwelcome crop of new fortune-hunters onto the field against the individual capitalists already there, reinforces the rule of capital itself, widens its basis, and lets it recruit ever new forces out of the lower layers of society. Likewise, the fact that the Catholic Church in the Middle Ages built its hierarchy out of the best heads among the people, with no regard to rank, birth or wealth, was a chief means of strengthening the rule of the priests and the oppression of the laity. The more a ruling class can take the most outstanding men of the ruled classes into itself, the more solid and the more dangerous its rule.
So it is not a curse pronounced against interest-bearing capital in general. The other way round: what the founders of the modern credit system start from is its express recognition.
We are not talking here about the reaction against usury that tried to shield the poor from it — the Monts-de-piété, for instance (1350 at Sarlins in Franche-Comté, later at Perugia and Savona in Italy, 1400 and 1479). They are worth noticing for one thing only: the historical irony they show, in which pious wishes turn into their exact opposite once they are realized. By a conservative estimate the English working class pays 100 per cent to the pawnshops, the descendants of the Monts-de-piété.
Nor are we talking about the credit fantasies of men like Dr Hugh Chamberleyne or John Briscoe, who in the last decade of the seventeenth century tried to free the English aristocracy from the usurer by a land bank whose paper money rested on landed property.
The credit associations that formed in Venice and Genoa in the twelfth and fourteenth centuries grew out of what the sea trade needed, and the wholesale trade built on it: to free itself from the grip of old-fashioned usury and from the men who monopolized money-dealing. The banks proper founded in those city republics may look like institutions of public credit — the state got advances from them against taxes still to be collected — but it should not be forgotten that the merchants who put those associations together were themselves the leading men of those states. They were just as interested in freeing their government from usury as themselves, and at the same time in binding the state more securely under their own control.
So when the Bank of England was about to be founded, the Tories objected in turn:
Banks, they said, were republican institutions. Venice, Genoa, Amsterdam and Hamburg all had flourishing banks. But a Bank of France, or of Spain — who had ever heard of one?
The Bank of Amsterdam, founded in 1609, marks no epoch in the development of the modern credit system, and neither does Hamburg's (1619). It was purely a deposit bank. The cheques it issued were in fact simply receipts for the coined and uncoined precious metal deposited with it, and they circulated only with the endorsement of the person who had received them. In Holland, though, commercial credit and the money trade had grown up along with trade and manufacture, and interest-bearing capital had become subordinate to industrial and commercial capital through the course of development itself. The lowness of the interest rate already showed this. In the seventeenth century, however, Holland passed for the model country of economic development, the way England does today. The old-style usurers' monopoly, which rested on poverty, had been thrown over there of itself.
All through the eighteenth century the shout went up — and the law-makers acted in that spirit — that the interest rate should be forcibly pushed down, with Holland held up as the model. The aim was to put interest-bearing capital under commercial and industrial capital, instead of the other way round. The loudest voice was Sir Josiah Child, the father of ordinary English private banking. He rails at the monopoly of the usurers, just as the cheap ready-made tailors Moses and Son shout that they are fighting the monopoly of the "private tailors". The same Josiah Child also fathered English stock-jobbing. So this autocrat of the East India Company speaks up for its monopoly in the name of free trade. Against Thomas Manley (Interest of Money Mistaken) he says:
Child answers him this way. As champion of the timid, trembling band of usurers, his opponent plants his main battery at the point Child had declared the weakest: he denies outright that a low rate of interest is the cause of wealth, and insists it is merely the effect. If commerce is what enriches a country, and a lowering of interest increases commerce, then a lowering of interest, or a restriction of usury, is without doubt one fruitful main cause of a nation's wealth — and it is not at all absurd to say that one and the same thing can be a cause under certain circumstances and an effect under others. The hen comes from the egg and the egg from the hen; a reduction of interest can bring an increase of wealth, and an increase of wealth a still greater reduction of interest. He is the defender of industry; his opponent defends laziness and idleness.
This violent struggle against usury, and the demand that interest-bearing capital be put under industrial capital, is only the prelude to the organic creations that produce these conditions of capitalist production within the modern banking system. On one side that system robs usurer's capital of its monopoly, by concentrating every dormant money reserve and casting it onto the money market; on the other it limits the monopoly of the precious metals themselves, by creating credit money.
As with Child here, so in every English writing on banking from the last third of the seventeenth century and the beginning of the eighteenth you will find the same opposition to usury, the same demand that trade and industry, and the state as well, be freed from the usurer. Alongside it, colossal illusions about the miraculous working of credit, about taking the precious metals out of their monopoly, about replacing them with paper, and so on. The Scot William Paterson, founder of the Bank of England and of the Bank of Scotland, is in every way Law the First.
Against the Bank of England, in Macaulay's words, all the goldsmiths and pawnbrokers raised a howl of rage (Macaulay, History of England, IV, p. 499).
Francis describes the first ten years: the Bank had to struggle with great difficulties and with great hostility from outside, and its notes were accepted only far below their nominal value. The goldsmiths — in whose hands the trade in precious metals served as the basis of a primitive banking business — schemed hard against the Bank, because their business was reduced by it, their discounts pushed down, and their dealings with the government had passed into the hands of this rival (J. Francis, op. cit., p. 73).
Even before the Bank of England was founded, a plan for a National Bank of Credit was drawn up in 1683. Its purpose was, among other things:
that a tradesman holding a considerable quantity of goods might, with this bank's help, deposit them and raise a credit on his dead stock, so as to keep his employees at work and increase his trade until he finds a good market, rather than sell at a loss.
After a great deal of trouble, this Bank of Credit was set up in Devonshire House in Bishopsgate Street. It lent to industrialists and merchants, on the security of goods deposited, three quarters of their value in bills of exchange. To make these bills circulate, a number of people in each branch of business were joined into a company, from which anyone holding such a bill was to receive goods for it as easily as if he were offering cash. The bank did no flourishing business. The machinery was too complicated, and the risk that the goods would lose value too great.
If one keeps to the real content of those writings — the ones that accompanied the shaping of the modern credit system in England in theory and helped it along — one finds in them nothing but the demand that interest-bearing capital, and loanable means of production in general, be subordinated to the capitalist mode of production as one of its own conditions. If one keeps to the bare phrase, then the agreement with the banking and credit illusions of the Saint-Simonists, down to the wording itself, is often astonishing.
Just as the Physiocrats' cultivateur means not the man who actually works the land but the big farmer, so Saint-Simon's travailleur — and his disciples still carry the word on — means not the worker but the industrial and commercial capitalist.
The passage quoted from Enfantin runs: a travailleur — the industrial capitalist, in the school's usage — needs helpers, seconds, workmen; he looks for ones who are intelligent, skilful and devoted; he puts them to work, and their labour is productive (Enfantin, Religion Saint-Simonienne. Économie politique et politique, Paris 1831, p. 104).
It should not be forgotten in general that only in his last writing, the Nouveau Christianisme, does Saint-Simon come forward directly as spokesman for the working class and declare its emancipation the final end of his striving. All his earlier writings are in fact nothing but a glorification of modern bourgeois society against the feudal one, or of the industrialists and bankers against the marshals and the legal draughtsmen of Napoleon's time. What a difference, compared with Owen's writings of the same years!
Even among Saint-Simon's followers, as the passage quoted shows, the industrial capitalist remains the travailleur par excellence — the worker in the true and proper sense, in their usage. A critical reading of their writings leaves no surprise that the realization of their credit and banking dreams was the Crédit Mobilier, founded by the ex-Saint-Simonist Émile Péreire — a form that could become dominant only in a country like France, where neither the credit system nor large-scale industry had reached the modern level. In England and America such a thing was impossible.
In the passages that follow, taken from the Doctrine de Saint-Simon. Exposition. Première année, 1828/29, third edition, Paris 1831, the Crédit Mobilier is already there in embryo. A banker can plainly advance money more cheaply than a capitalist and a private usurer. So it is possible for these bankers to do the following.
The text goes on: the bankers can 'provide the industrialist with his tools far more cheaply, that is at a lower rate of interest, than the landowners and capitalists could, since these can more easily be mistaken in their choice of borrower' (p. 202).
But the authors themselves add, in a note:
'The advantage that was supposed to follow from the banker's mediation between the idle and the travailleurs is often outweighed, and even destroyed, by the opportunity that our disorganized society offers to egoism, to make itself felt in the various forms of fraud and charlatanry; the bankers often push themselves between the travailleurs and the idle, in order to exploit both to the harm of society.'
Travailleur here stands for capitaliste industriel, the industrial capitalist. It is also wrong to see the resources the modern banking system commands simply as the resources of the idle.
First, they include the part of capital that industrialists and merchants keep temporarily unoccupied in money form, as a money reserve or as capital still to be invested — idle capital, but not the capital of the idle. Second, the part of everyone's revenues and savings that is permanently or transitionally destined for accumulation. And both are essential to the character of the banking system.
Two things, though, must never be forgotten. First, money — precious metal — is still the ground under everything, and by the nature of the case the credit system can never get free of it. Second, the credit system assumes from the start that private people hold a monopoly over society's means of production, in the form of capital and landed property. And the system is itself, on one side, an immanent form of the capitalist mode of production; on the other, a driving force in that mode's development towards the highest form it can reach, the very last one open to it.
The banking system, in its formal organization and centralization, is the most artificial and the most highly developed product the capitalist mode of production manages to turn out at all. That was said already in 1697, in Some Thoughts of the Interests of England. Hence the immense power a body like the Bank of England has over trade and industry, even though their real movement lies wholly outside the bank's sphere, and the bank just sits passive towards it. So we do get the form of a general book-keeping, and of a distribution of society's means of production on a social scale — but only the form.
We have seen that the average profit of a single capitalist, or of any particular capital, is fixed not by the surplus labour that this capital grabs at first hand, but by the quantity of total surplus labour grabbed by the total capital; out of that, each particular capital simply draws its dividend, as a proportional part of the whole. Capital's social character is mediated and fully realized only once credit and banking have developed completely. But the system goes further than that. It hands the industrial and commercial capitalists the whole of society's capital that is available, and even capital that is only potential, not yet actively committed — so that neither the lender nor the user of this capital owns or produces it. That does away with the private character of capital, and so the system holds within itself — though, again, only within itself — the abolition of capital as such. Banking takes the distribution of capital out of the hands of the private capitalists and the usurers and turns it into a trade of its own, a function of society. At the same time, bank and credit become the strongest means of driving capitalist production past its own barriers, and one of the most effective vehicles of crises and swindling.
The banking system further shows, by putting various forms of circulating credit in the place of money, that money really is nothing but a special expression of the social character of labour and of its products — an expression which, however, standing in opposition to the basis of private production, must in the last instance always present itself as a thing, as a particular commodity alongside other commodities.
Finally, there is no doubt that the credit system will serve as a powerful lever during the transition from the capitalist mode of production to the mode of production of associated labour — but only as one element, in connection with other great organic upheavals of the mode of production itself. The illusions about the miraculous power of credit and banking, in the socialist sense, come from complete ignorance of the capitalist mode of production and of credit as one of its forms.
As soon as the means of production have ceased to turn into capital (which includes the abolition of private landed property), credit as such has no meaning any more — something even the Saint-Simonists saw. As long as the capitalist mode of production lasts, on the other hand, interest-bearing capital lasts as one of its forms, and in fact forms the basis of its credit system.
Only the same sensationalist writer, Proudhon, who wanted commodity production to continue while money was abolished, was capable of dreaming up the monster of a crédit gratuit — the ostensible realization of the pious wish of the petty-bourgeois standpoint.
In Religion Saint-Simonienne, Économie et Politique, we read on p. 45:
The Saint-Simonian writers said that the point of credit is this: in a society where one set of people own the tools of industry but have neither the ability nor the will to use them, while another set, industrious people, own no instruments of labour at all, those instruments should pass, in the easiest possible way, out of the hands of the first set, their owners, into the hands of the others, who know how to use them. They add that, on this definition, credit is a consequence of the way in which property is constituted.
So credit disappears along with this constitution of property. It is said further, at p. 98, that the banks of today ...
They 'consider themselves destined to follow the movement that transactions carried on outside their sphere have set going, and not to give the impulse themselves; in other words, towards the travailleurs to whom they advance capital, the banks play the part of capitalists'.
Latent in the idea that the banks themselves should take over this leadership and should stand out
'by the number and the usefulness of the firms they control and of the works they have set going' (p. 101)
lies the Crédit Mobilier. In the same way Constantin Pecqueur demands that the banks — what the Saint-Simonists call a 'general system of banks' — should 'govern production'. Pecqueur is essentially a Saint-Simonist, though far more radical. What he wants is this.
Pecqueur said that the credit institution ... should govern the whole movement of national production. He asked his readers to try creating a national credit institution that advances funds to talent and merit holding no property — but without tying these borrowers together by force in a close solidarity of production and consumption; on the contrary, so that they themselves would determine their exchanges and their production. That way, he said, they would only reach what the private banks reach already: anarchy, a disproportion between production and consumption, the sudden ruin of one set of people and the sudden enrichment of another. Their institution, he went on, would never get past producing for some a sum of well-being equal to the sum of misfortune borne by others ... except that they would have given the wage-labourers they backed with advances the means to compete among themselves in just the way their capitalist masters do now. (C. Pecqueur, "Théorie Nouvelle d'Économie Soc. et Pol.", Paris 1842, pp. 433, 434.)
We have seen that merchant's capital and interest-bearing capital are the oldest forms of capital. But it lies in the nature of the matter that interest-bearing capital presents itself to the popular mind as the form of capital par excellence. In merchant's capital a mediating activity takes place, whether one interprets it as cheating, as labour or as whatever else. In interest-bearing capital, by contrast, the self-reproducing character of capital, value valorizing itself, the production of surplus-value, presents itself purely as an occult quality.
That is also why even a section of the political economists, especially in countries where industrial capital is not yet fully developed, as in France, cling to this as the basic form of capital and treat ground-rent as merely another form of it, since here too the form of lending predominates. In this way the inner articulation of the capitalist mode of production is completely misconstrued, and it is entirely overlooked that land, just like capital, is only ever lent out to capitalists. Instead of money, means of production can of course be lent in kind — machines, business premises and so on. But then they represent a definite sum of money, and the fact that a part is paid for wear and tear, over and above the interest, follows from the use-value, from the specific natural form, of these elements of capital.
What is decisive here, again, is whether they are lent to the immediate producer — which presupposes that the capitalist mode of production does not exist, at least in the sphere in which this happens — or whether they are lent to the industrial capitalist, which is precisely the presupposition on the basis of the capitalist mode of production. It is still more improper, and more thoughtless, to drag in the lending of houses and the like for individual consumption. That the working class is also swindled in this form, and crying shame it is, is plain fact; but the small trader who supplies it with means of subsistence does exactly the same. This is a secondary exploitation, running alongside the original one that takes place directly in the production process itself. The difference between selling and lending is here a quite indifferent and formal one, which, as already shown, appears essential only to complete ignorance of the real context.
Usury, like trade, exploits a given mode of production; it does not create it, and both stand external to it. Usury seeks to preserve it directly, so as to exploit it ever anew — it is conservative, and only makes the mode more wretched. The less the elements of production enter the production process as commodities and come out of it as commodities, the more does their establishment by means of money appear as a special act. And the less important the part circulation plays in social reproduction, the more usury flourishes.
To say that monetary wealth develops as a special kind of wealth means, as far as usurer's capital goes, that it holds all its claims in the form of money claims. And it develops in a country the more, the more the mass of production is confined to payments in kind and the like — that is, to use-value.
In so far as usury brings about two things — first, forming an independent monetary wealth alongside the class of merchants, and second, appropriating the conditions of labour, that is, ruining the owners of the old conditions of labour — it is a powerful lever in forming the preconditions for industrial capital.
Gilbart's history of banking sets out the old law on interest. In the Middle Ages the population lived purely by farming. Under a government like the feudal one there can be little traffic, and so little profit — which is why the laws against usury were justified in the Middle Ages. Besides, in a farming country a man seldom comes into a position to borrow money unless he has been brought down to poverty and distress. Henry VIII capped interest at 10 per cent, James I at 8, Charles II at 6 and Anne at 5. In those times the money-lenders were monopolists in fact, if not in law, and so they had to be restrained, like any other monopolists. Gilbart's own formula for the two eras runs: in our times the rate of profit sets the rate of interest; in those times the rate of interest set the rate of profit. If a money-lender saddled a merchant with a high rate of interest, the merchant had to put a higher rate of profit on his goods — and so a great sum of money was taken out of the buyers' pockets to be put into the money-lenders'.
Luther, preaching in 1540, works through the arithmetic. He has heard it said that at every Leipzig fair 10 gulden are now taken in the year, which is 30 on the hundred; some add the Neuenburg fair, making it 40 on the hundred — whether that is so, he does not know. For shame, where is it all to end? Whoever has 100 florins at Leipzig takes 40 a year: that means a peasant or a burgher eaten up in one year. 1,000 florins brings 400 a year: a knight or a rich nobleman eaten up. 10,000 brings 4,000: a rich count eaten up. 100,000, as the big dealers must have, brings 40,000: a great rich prince eaten up in a year. 1,000,000 brings 400,000: a great king eaten up in a year. And he runs no risk in it, neither of body nor of goods, does no work, sits behind the stove and bakes apples — so a common robber could sit at home and devour the whole world in ten years.
Luther's second tirade, fifteen years later. He had written against usury fifteen years before, when it had already broken in so violently that he could hope for no improvement. Since then it has raised itself so high that it will no longer even be a vice, a sin or a shame; it lets itself be praised as sheer virtue and honour, as though it were showing people great love and a Christian service. And what good are advice and remedy now that shame has become honour and vice has become virtue?
Hardcastle, writing the history of banking in his own day, calls our first bankers Jews, Lombards, usurers and bloodsuckers, our original bank-sharks, and says their character was almost infamous. The London goldsmiths then joined them. As a body, those original bankers were, he says, a very bad set: greedy usurers, iron-hearted extortioners.
The example Venice gave — founding a bank — was quickly imitated, Augier writes: every sea city, and in general every city that had made a name for itself by its independence and its trade, founded its first bank. The return of their ships, often long delayed, unavoidably bred the habit of extending credit, and the discovery of America and the trade there strengthened it further. (This, Marx notes in passing, is the main point.) Fitting out ships forced people to take up large advances, as had already happened in antiquity at Athens and in Greece. In 1308 the Hanseatic city of Bruges had an insurance chamber.
How far lending to landed proprietors — and with that to consuming wealth in general — was still the prevailing form, even in England, in the last third of the seventeenth century, before the modern credit system developed, can be seen among others from Sir Dudley North, not only one of the first English merchants but also one of the most important economic theorists of his time:
North's own testimony: the money put out at interest in this nation is nowhere near a tenth of it lent to trading people to carry on their trade; the greater part is lent to supply luxury and to meet the spending of men who, though great landowners, spend faster than their land brings in, and who, unwilling to sell, would rather mortgage their estates.
In Poland in the eighteenth century:
Büsch reports that Warsaw did a large trade in bills of exchange, but one whose basis and purpose was chiefly the usury of its bankers. To get hold of money that they could lend to the extravagant magnates at 8 per cent and more, they sought and found open exchange credit abroad — credit with no commodity trade behind it at all — which the foreign drawee accepted patiently as long as the remittances conjured up by drawing one bill against another kept coming in. They paid dearly for it through the bankruptcies of Tepper and of other Warsaw bankers held in great esteem.
A last witness, cited by page alone, reports: the Church forbade the taking of interest, but not the selling of property to help oneself out of need; nor did it forbid handing that property over to the money-lender for a fixed period, until repayment, so that he could find his security in it and, while he held it, enjoy the use of it as compensation for the money he had lent ... The Church itself, and the communities and pious corporations belonging to it, drew great advantage from this, especially in the time of the crusades. It brought a very great part of the national wealth into the possession of the so-called dead hand, all the more since the Jew was not allowed to practise usury by this road, because possession of so firm a pledge could not be kept hidden ... Without the ban on interest, the churches and monasteries could never have grown so rich.
Interest-bearing capital — or, to name it in its archaic form, usurer's capital — belongs, along with its twin, merchant's capital, to the antediluvian forms of capital. These forms long predate the capitalist mode of production, and they turn up in the most diverse economic formations.
All that usurer's capital needs in order to exist is that at least part of the products has turned into commodities, and that money, along with trade in commodities, has developed in its various functions.
The growth of usurer's capital is tied to the growth of merchant's capital, and specifically of money-dealing capital. In ancient Rome, from the last years of the Republic onwards, manufacture stood far below the average level of the ancient world — yet merchant's capital, money-dealing capital and usurer's capital had reached their highest point, within the ancient form.
We have seen how hoarding necessarily comes along with money. But the professional hoarder only becomes important once he turns into a money-lender.
The merchant borrows money in order to make a profit with it — to use it as capital, that is, to lay it out. So even in the earlier forms the money-lender faces him exactly as he faces the modern capitalist. This specific relation was felt by the Catholic universities too.
According to Augier, the universities of Alcalá, Salamanca, Ingolstadt, Freiburg im Breisgau, Mainz, Cologne and Trier acknowledged, one after another, that interest on commercial loans was lawful. The earliest five of their approvals have been laid down in the archives of the Lyon consulate and printed in the appendix of the Traité de l'usure et des intérêts (Lyon, Bruyset-Ponthus). (M. Augier, Le Crédit public etc., Paris 1842, p. 206.)
In every form in which the slave economy (not the patriarchal kind, but the kind found in the later Greek and Roman periods) exists as a means of enrichment — where money is therefore a means of appropriating other people's labour by buying slaves, land and so on — money becomes usable as capital and bears interest, precisely because it can be invested in this way.
The forms in which usurer's capital exists in the times before the capitalist mode of production are of two kinds, and both are characteristic. I say characteristic: the same forms repeat themselves on the basis of capitalist production, but only as subordinate forms. There they are no longer the forms that determine the character of interest-bearing capital. The two are: first, usury by lending money to extravagant magnates, essentially landed proprietors; second, usury by lending money to the small producer who holds his own conditions of labour — artisans included, but above all peasants, since wherever pre-capitalist conditions allow small independent individual producers, the peasant class has to form their great majority.
Both of these — rich landed proprietors ruined by usury, and small producers sucked dry — lead to the formation and concentration of large money capitals. But how far this process abolishes the old mode of production, as it did in modern Europe, and whether it puts the capitalist mode of production in its place, depends entirely on the historical level of development and the circumstances that come with it.
Usurer's capital, as the characteristic form of interest-bearing capital, answers to the predominance of small production — peasants working for themselves and small master craftsmen. Where the worker's conditions of labour and the product of his labour confront him as capital, as in the developed capitalist mode of production, he has no need to borrow money as a producer. Where he does borrow, it is for personal necessity, as at the pawnshop. Where the worker is instead the owner of his conditions of labour and of his product — in reality or only in name — he stands as a producer in relation to the money-lender's capital, which confronts him as usurer's capital.
Newman states the thing insipidly: the banker is respected while the usurer is hated and despised, because the one lends to the rich and the other to the poor (F. W. Newman, Lectures on Political Economy, London, 1851, p. 44). He overlooks that what lies between here is the difference between two social modes of production and the social orders that answer to them, and that the matter is not settled by the contrast of rich and poor. On the contrary, the usury that sucks the poor small producer dry goes hand in hand with the usury that sucks the rich great landowner dry. As soon as the usury of the Roman patricians had completely ruined the Roman plebeians, the small peasants, that form of exploitation came to an end, and a pure slave economy took the place of the petty-bourgeois one.
Under the form of interest, the usurer can swallow up everything the producers have above their barest means of subsistence (the amount that later becomes wages) — what later shows up as profit and ground rent. So it is utterly absurd to compare the level of this interest, which appropriates all surplus-value except what goes to the state, with the level of the modern rate of interest, where interest — at least the normal interest — forms only one part of that surplus-value. What gets forgotten there is that the wage-labourer produces and hands over to the capitalist who employs him profit, interest and ground rent, in short the whole surplus-value. Carey makes this absurd comparison in order to show how advantageous the development of capital, and the fall in the rate of interest that accompanies it, is for the workers.
And if the usurer, not content with squeezing out his victim's surplus labour, gradually acquires the title deeds to his conditions of labour themselves — land, house and so on — and works steadily at expropriating him in this way, it is forgotten in turn that this complete expropriation of the worker from his conditions of labour is not a result the capitalist mode of production strives towards, but the finished presupposition from which it starts. The wage-slave is excluded by his position, just as the actual slave is, from becoming a debt-slave — at least in his quality as producer; at most he can become one in his quality as consumer. Usurer's capital in this form — where it really does appropriate all the surplus labour of the direct producers without changing the mode of production; where the producers' ownership or possession of their conditions of labour, and the isolated small production corresponding to it, is an essential presupposition; where capital therefore does not directly subordinate labour, and so does not confront it as industrial capital — this usurer's capital makes that mode of production wretched, cripples the productive forces instead of developing them, and at the same time perpetuates these miserable conditions, in which the social productivity of labour does not get developed at all - not even, as in capitalist production, at the cost of labour itself.
Usury works two ways. On one side it undermines and destroys the wealth and the property of the ancient and the feudal world. On the other side it undermines and ruins small peasant and petty-bourgeois production — in short, every form in which the producer still appears as the owner of his means of production.
Under developed capitalist production, the worker is not the owner of his conditions of production: not of the field he tills, not of the raw material he works up. But here the separation of the producer from his conditions of production goes together with a real upheaval in the mode of production itself. Workers who used to work on their own are brought together in one large workshop for divided tasks that interlock; the tool turns into the machine. This mode of production no longer allows the instruments of production to be split up and scattered the way they were when they went along with small property, any more than it allows the workers themselves to be isolated. In capitalist production, usury can no longer separate the producer from his conditions of production, because they are already separated.
Where the means of production lie scattered, usury concentrates monetary wealth. It does not change the mode of production; it fastens onto it like a parasite and makes it wretched. It sucks it dry, saps its nerve, and forces reproduction to go on under ever more pitiable conditions. That is why usury is so popularly hated — most of all in the ancient world, where the producer's ownership of his conditions of production was at the same time the basis of political life, of the citizen's independence.
As long as slavery prevails, or as long as the surplus product is eaten up by the feudal lord and his retinue, the mode of production stays the same even if the slaveowner or the feudal lord falls into the usurer's hands; it only becomes harsher on the workers. The slaveowner or feudal lord who is in debt squeezes more out of them, because more is being squeezed out of him. Or in the end he makes way for the usurer himself, who becomes a landowner or slaveowner in his turn, as the knights did in ancient Rome. In place of the old exploiters, whose exploitation was more or less patriarchal — largely because it was a means of political power — there comes a hard, money-grubbing upstart. But the mode of production itself is not changed.
In every pre-capitalist mode of production, usury is revolutionary only in this: it destroys and dissolves the forms of ownership on whose firm basis, and on whose constant reproduction in the same shape, the political order rests. Under Asiatic forms, usury can go on for a long time without producing anything but economic decay and political corruption. Only where and when the other conditions of the capitalist mode of production are present does usury appear as one of the means by which the new mode of production is formed — ruining the feudal lords and petty production on one side, centralizing the conditions of labour into capital on the other.
In the Middle Ages no country had a general rate of interest. The Church forbade every interest transaction outright. Laws and courts gave little security for a loan. All the higher, for that, was the rate in particular cases. The small amount of money in circulation, and the need to make most payments in cash, forced people to borrow — and the more so, the less developed the bill-of-exchange business still was. Both the rate of interest and the notion of what counted as usury varied enormously. In Charlemagne's time, taking 100 per cent was held to be usury. At Lindau on Lake Constance in 1344, local burghers took 216 2/3 per cent. In Zurich the council fixed 43 1/3 per cent as the legal interest. In Italy 40 per cent had sometimes to be paid, though from the twelfth to the fourteenth century the usual rate did not go above 20 per cent. Verona set 12 1/2 per cent as the legal interest. Emperor Frederick II fixed 10 per cent, but only for the Jews; for the Christians he would not decree. By the thirteenth century 10 per cent was already the usual rate in the German Rhineland. (Hüllmann, Geschichte des Städtewesens, II, pp. 55-7.)
Usurer's capital has capital's way of exploiting labour without capital's way of producing. The same relation repeats itself inside the bourgeois economy as well, in backward branches of industry or in those that hold out against the transition to the modern mode of production. In comparing the English rate of interest with the Indian, for example, one must not take the Bank of England's rate, but rather the rate charged, say, by lenders of small machines to petty producers in domestic industry.
Compared with wealth that is simply consumed, usury is historically important as itself a process through which capital comes into existence. Usurer's capital and mercantile wealth between them bring about a monetary wealth independent of landed property. The less the product has developed the character of a commodity, the less exchange-value has taken hold of production in its whole breadth and depth, the more money appears as wealth as such, as wealth in general, set against the narrow shape in which it shows up in use-values. Hoard formation rests on this.
Setting aside money as world money and as hoard, it is particularly in the form of means of payment that money appears as the absolute form of the commodity. And it is particularly money's function as means of payment that develops interest, and with it money capital. What extravagant and corrupting wealth wants is money as money, money as a means of buying everything — including paying off debts. What the petty producer above all needs money for is paying. (The conversion of payments in kind and deliveries to landlords and the state into money rents and money taxes matters a great deal here.) In both cases money is needed as money. On the other side, hoard formation only becomes real, only fulfils its dream, in usury. What the owner of the hoard is asked for is not capital but money as money; but by way of interest he turns this hoard of money into capital for himself — into a means of taking possession, wholly or in part, of the surplus labour of others, and with it of a part of the conditions of production themselves, even if those continue to stand opposite him nominally as someone else's property. Usury seems to live in the pores of production, like the gods in Epicurus's intermundia. Money is harder to get, the less the commodity form has become the general form of the product. So the usurer knows no barrier at all except the ability of those who need money to pay, or their ability to resist.
In small peasant and petty-bourgeois production, money is used chiefly as means of purchase when the worker — still mostly the owner of his conditions of production in these modes of production — loses those conditions through accidents or extraordinary upheavals, or at least when they are not replaced in the ordinary course of reproduction. Means of subsistence and raw materials are an essential part of these conditions. A rise in their price can make it impossible to replace them out of what the product brings in, just as a simple bad harvest can stop a peasant replacing his seed corn in kind. The very wars through which the Roman patricians ruined the plebeians — forcing them into war service, which kept them from reproducing their conditions of labour, and so impoverishing them (and impoverishment, stuntedness or loss of the conditions of reproduction is the prevailing form here) — filled the patricians' granaries and cellars with plundered copper, the money of the time. Instead of giving the plebeians the goods they needed directly — corn, horses, cattle — they lent them this copper, which was of no use to themselves, and used the situation to extort enormous usurious interest, which turned the plebeians into their debt slaves. Under Charlemagne the Frankish peasants were likewise ruined by wars, so that nothing was left to them but to pass from debtors into serfs. In the Roman Empire it often happened, as is well known, that famine led free men to sell their children and themselves as slaves to the richer sort. So much for the general turning points. Looked at in detail, whether the petty producer keeps or loses his conditions of production depends on a thousand accidents, and each such accident or loss means impoverishment and becomes a place where the usury parasite can fasten on. The small peasant has only to lose one cow, and he can no longer begin his reproduction again on the old scale. Then he falls into the hands of usury, and once fallen he never gets free again.
Yet the real, great and peculiar terrain of usury is money in its function as means of payment. Any payment that falls due on a fixed date — ground rent, tribute, tax and the like — carries with it the need to hand over money. That is why usury, on a large scale, attaches to the tax farmers — the fermiers généraux and receveurs généraux, the men who bought the right to collect the taxes — from the ancient Romans right down to modern times.
Then trade grows and commodity production becomes general, and buying and paying part company in time. The money has to be delivered on a fixed date. How far this can lead to situations in which money capitalist and usurer still merge into one today is shown by the modern money crises. But this same usury becomes a main means of developing further the need for money as means of payment: it drags the producer deeper and deeper into debt, and it destroys his ordinary means of payment by making his regular reproduction impossible through the burden of interest alone. Here usury shoots up out of money as means of payment, and widens this function of money, its very own terrain.
The credit system takes shape as a reaction against usury. That must not be misread, though, and it is by no means to be taken the way the ancient authors, the Fathers of the Church, Luther or the older socialists took it. It means nothing more and nothing less than this: interest-bearing capital is placed under the conditions and needs of the capitalist mode of production.
By and large, in the modern credit system interest-bearing capital is made to fit the conditions of capitalist production. Usury proper does not merely go on existing: among peoples with developed capitalist production it is freed from the barriers that all earlier legislation had drawn around it.
Interest-bearing capital keeps the form of usurer's capital towards persons and classes, or in relations, where the borrowing is not — and cannot be — in the sense of the capitalist mode of production. That covers the case where someone borrows out of individual need, as at the pawnshop; the case where money is lent to consuming wealth, for extravagance; the case of the producer who is not a capitalist producer, the small peasant, the artisan and so on, and so is still, as a direct producer, the owner of his own conditions of production; and finally the case of the capitalist producer himself, where he operates on so small a scale that he comes close to those producers who work for themselves.
What sets interest-bearing capital apart from usurer's capital — in so far as interest-bearing capital forms an essential element of the capitalist mode of production — is in no way the nature or the character of that capital itself. It is only the changed conditions under which it works, and so too the wholly transformed figure of the borrower who faces the money-lender.
Even when a man without means gets credit as an industrialist or a merchant, it is given in the confidence that he will work as a capitalist, that with the borrowed capital he will appropriate unpaid labour. He is given credit as a potential capitalist.
And this circumstance, which the economic apologists admire so much — that a man with no wealth, but with energy, solidity, ability and business sense, can turn himself into a capitalist in this way, just as under the capitalist mode of production anyone's commercial value is assessed more or less correctly — however much it keeps bringing an unwelcome crop of new fortune-hunters onto the field against the individual capitalists already there, reinforces the rule of capital itself, widens its basis, and lets it recruit ever new forces out of the lower layers of society. Likewise, the fact that the Catholic Church in the Middle Ages built its hierarchy out of the best heads among the people, with no regard to rank, birth or wealth, was a chief means of strengthening the rule of the priests and the oppression of the laity. The more a ruling class can take the most outstanding men of the ruled classes into itself, the more solid and the more dangerous its rule.
So it is not a curse pronounced against interest-bearing capital in general. The other way round: what the founders of the modern credit system start from is its express recognition.
We are not talking here about the reaction against usury that tried to shield the poor from it — the Monts-de-piété, for instance (1350 at Sarlins in Franche-Comté, later at Perugia and Savona in Italy, 1400 and 1479). They are worth noticing for one thing only: the historical irony they show, in which pious wishes turn into their exact opposite once they are realized. By a conservative estimate the English working class pays 100 per cent to the pawnshops, the descendants of the Monts-de-piété.
Nor are we talking about the credit fantasies of men like Dr Hugh Chamberleyne or John Briscoe, who in the last decade of the seventeenth century tried to free the English aristocracy from the usurer by a land bank whose paper money rested on landed property.
The credit associations that formed in Venice and Genoa in the twelfth and fourteenth centuries grew out of what the sea trade needed, and the wholesale trade built on it: to free itself from the grip of old-fashioned usury and from the men who monopolized money-dealing. The banks proper founded in those city republics may look like institutions of public credit — the state got advances from them against taxes still to be collected — but it should not be forgotten that the merchants who put those associations together were themselves the leading men of those states. They were just as interested in freeing their government from usury as themselves, and at the same time in binding the state more securely under their own control.
So when the Bank of England was about to be founded, the Tories objected in turn:
Banks, they said, were republican institutions. Venice, Genoa, Amsterdam and Hamburg all had flourishing banks. But a Bank of France, or of Spain — who had ever heard of one?
The Bank of Amsterdam, founded in 1609, marks no epoch in the development of the modern credit system, and neither does Hamburg's (1619). It was purely a deposit bank. The cheques it issued were in fact simply receipts for the coined and uncoined precious metal deposited with it, and they circulated only with the endorsement of the person who had received them. In Holland, though, commercial credit and the money trade had grown up along with trade and manufacture, and interest-bearing capital had become subordinate to industrial and commercial capital through the course of development itself. The lowness of the interest rate already showed this. In the seventeenth century, however, Holland passed for the model country of economic development, the way England does today. The old-style usurers' monopoly, which rested on poverty, had been thrown over there of itself.
All through the eighteenth century the shout went up — and the law-makers acted in that spirit — that the interest rate should be forcibly pushed down, with Holland held up as the model. The aim was to put interest-bearing capital under commercial and industrial capital, instead of the other way round. The loudest voice was Sir Josiah Child, the father of ordinary English private banking. He rails at the monopoly of the usurers, just as the cheap ready-made tailors Moses and Son shout that they are fighting the monopoly of the "private tailors". The same Josiah Child also fathered English stock-jobbing. So this autocrat of the East India Company speaks up for its monopoly in the name of free trade. Against Thomas Manley (Interest of Money Mistaken) he says:
Child answers him this way. As champion of the timid, trembling band of usurers, his opponent plants his main battery at the point Child had declared the weakest: he denies outright that a low rate of interest is the cause of wealth, and insists it is merely the effect. If commerce is what enriches a country, and a lowering of interest increases commerce, then a lowering of interest, or a restriction of usury, is without doubt one fruitful main cause of a nation's wealth — and it is not at all absurd to say that one and the same thing can be a cause under certain circumstances and an effect under others. The hen comes from the egg and the egg from the hen; a reduction of interest can bring an increase of wealth, and an increase of wealth a still greater reduction of interest. He is the defender of industry; his opponent defends laziness and idleness.
This violent struggle against usury, and the demand that interest-bearing capital be put under industrial capital, is only the prelude to the organic creations that produce these conditions of capitalist production within the modern banking system. On one side that system robs usurer's capital of its monopoly, by concentrating every dormant money reserve and casting it onto the money market; on the other it limits the monopoly of the precious metals themselves, by creating credit money.
As with Child here, so in every English writing on banking from the last third of the seventeenth century and the beginning of the eighteenth you will find the same opposition to usury, the same demand that trade and industry, and the state as well, be freed from the usurer. Alongside it, colossal illusions about the miraculous working of credit, about taking the precious metals out of their monopoly, about replacing them with paper, and so on. The Scot William Paterson, founder of the Bank of England and of the Bank of Scotland, is in every way Law the First.
Against the Bank of England, in Macaulay's words, all the goldsmiths and pawnbrokers raised a howl of rage (Macaulay, History of England, IV, p. 499).
Francis describes the first ten years: the Bank had to struggle with great difficulties and with great hostility from outside, and its notes were accepted only far below their nominal value. The goldsmiths — in whose hands the trade in precious metals served as the basis of a primitive banking business — schemed hard against the Bank, because their business was reduced by it, their discounts pushed down, and their dealings with the government had passed into the hands of this rival (J. Francis, op. cit., p. 73).
Even before the Bank of England was founded, a plan for a National Bank of Credit was drawn up in 1683. Its purpose was, among other things:
that a tradesman holding a considerable quantity of goods might, with this bank's help, deposit them and raise a credit on his dead stock, so as to keep his employees at work and increase his trade until he finds a good market, rather than sell at a loss.
After a great deal of trouble, this Bank of Credit was set up in Devonshire House in Bishopsgate Street. It lent to industrialists and merchants, on the security of goods deposited, three quarters of their value in bills of exchange. To make these bills circulate, a number of people in each branch of business were joined into a company, from which anyone holding such a bill was to receive goods for it as easily as if he were offering cash. The bank did no flourishing business. The machinery was too complicated, and the risk that the goods would lose value too great.
If one keeps to the real content of those writings — the ones that accompanied the shaping of the modern credit system in England in theory and helped it along — one finds in them nothing but the demand that interest-bearing capital, and loanable means of production in general, be subordinated to the capitalist mode of production as one of its own conditions. If one keeps to the bare phrase, then the agreement with the banking and credit illusions of the Saint-Simonists, down to the wording itself, is often astonishing.
Just as the Physiocrats' cultivateur means not the man who actually works the land but the big farmer, so Saint-Simon's travailleur — and his disciples still carry the word on — means not the worker but the industrial and commercial capitalist.
The passage quoted from Enfantin runs: a travailleur — the industrial capitalist, in the school's usage — needs helpers, seconds, workmen; he looks for ones who are intelligent, skilful and devoted; he puts them to work, and their labour is productive (Enfantin, Religion Saint-Simonienne. Économie politique et politique, Paris 1831, p. 104).
It should not be forgotten in general that only in his last writing, the Nouveau Christianisme, does Saint-Simon come forward directly as spokesman for the working class and declare its emancipation the final end of his striving. All his earlier writings are in fact nothing but a glorification of modern bourgeois society against the feudal one, or of the industrialists and bankers against the marshals and the legal draughtsmen of Napoleon's time. What a difference, compared with Owen's writings of the same years!
Even among Saint-Simon's followers, as the passage quoted shows, the industrial capitalist remains the travailleur par excellence — the worker in the true and proper sense, in their usage. A critical reading of their writings leaves no surprise that the realization of their credit and banking dreams was the Crédit Mobilier, founded by the ex-Saint-Simonist Émile Péreire — a form that could become dominant only in a country like France, where neither the credit system nor large-scale industry had reached the modern level. In England and America such a thing was impossible.
In the passages that follow, taken from the Doctrine de Saint-Simon. Exposition. Première année, 1828/29, third edition, Paris 1831, the Crédit Mobilier is already there in embryo. A banker can plainly advance money more cheaply than a capitalist and a private usurer. So it is possible for these bankers to do the following.
The text goes on: the bankers can 'provide the industrialist with his tools far more cheaply, that is at a lower rate of interest, than the landowners and capitalists could, since these can more easily be mistaken in their choice of borrower' (p. 202).
But the authors themselves add, in a note:
'The advantage that was supposed to follow from the banker's mediation between the idle and the travailleurs is often outweighed, and even destroyed, by the opportunity that our disorganized society offers to egoism, to make itself felt in the various forms of fraud and charlatanry; the bankers often push themselves between the travailleurs and the idle, in order to exploit both to the harm of society.'
Travailleur here stands for capitaliste industriel, the industrial capitalist. It is also wrong to see the resources the modern banking system commands simply as the resources of the idle.
First, they include the part of capital that industrialists and merchants keep temporarily unoccupied in money form, as a money reserve or as capital still to be invested — idle capital, but not the capital of the idle. Second, the part of everyone's revenues and savings that is permanently or transitionally destined for accumulation. And both are essential to the character of the banking system.
Two things, though, must never be forgotten. First, money — precious metal — is still the ground under everything, and by the nature of the case the credit system can never get free of it. Second, the credit system assumes from the start that private people hold a monopoly over society's means of production, in the form of capital and landed property. And the system is itself, on one side, an immanent form of the capitalist mode of production; on the other, a driving force in that mode's development towards the highest form it can reach, the very last one open to it.
The banking system, in its formal organization and centralization, is the most artificial and the most highly developed product the capitalist mode of production manages to turn out at all. That was said already in 1697, in Some Thoughts of the Interests of England. Hence the immense power a body like the Bank of England has over trade and industry, even though their real movement lies wholly outside the bank's sphere, and the bank just sits passive towards it. So we do get the form of a general book-keeping, and of a distribution of society's means of production on a social scale — but only the form.
We have seen that the average profit of a single capitalist, or of any particular capital, is fixed not by the surplus labour that this capital grabs at first hand, but by the quantity of total surplus labour grabbed by the total capital; out of that, each particular capital simply draws its dividend, as a proportional part of the whole. Capital's social character is mediated and fully realized only once credit and banking have developed completely. But the system goes further than that. It hands the industrial and commercial capitalists the whole of society's capital that is available, and even capital that is only potential, not yet actively committed — so that neither the lender nor the user of this capital owns or produces it. That does away with the private character of capital, and so the system holds within itself — though, again, only within itself — the abolition of capital as such. Banking takes the distribution of capital out of the hands of the private capitalists and the usurers and turns it into a trade of its own, a function of society. At the same time, bank and credit become the strongest means of driving capitalist production past its own barriers, and one of the most effective vehicles of crises and swindling.
The banking system further shows, by putting various forms of circulating credit in the place of money, that money really is nothing but a special expression of the social character of labour and of its products — an expression which, however, standing in opposition to the basis of private production, must in the last instance always present itself as a thing, as a particular commodity alongside other commodities.
Finally, there is no doubt that the credit system will serve as a powerful lever during the transition from the capitalist mode of production to the mode of production of associated labour — but only as one element, in connection with other great organic upheavals of the mode of production itself. The illusions about the miraculous power of credit and banking, in the socialist sense, come from complete ignorance of the capitalist mode of production and of credit as one of its forms.
As soon as the means of production have ceased to turn into capital (which includes the abolition of private landed property), credit as such has no meaning any more — something even the Saint-Simonists saw. As long as the capitalist mode of production lasts, on the other hand, interest-bearing capital lasts as one of its forms, and in fact forms the basis of its credit system.
Only the same sensationalist writer, Proudhon, who wanted commodity production to continue while money was abolished, was capable of dreaming up the monster of a crédit gratuit — the ostensible realization of the pious wish of the petty-bourgeois standpoint.
In Religion Saint-Simonienne, Économie et Politique, we read on p. 45:
The Saint-Simonian writers said that the point of credit is this: in a society where one set of people own the tools of industry but have neither the ability nor the will to use them, while another set, industrious people, own no instruments of labour at all, those instruments should pass, in the easiest possible way, out of the hands of the first set, their owners, into the hands of the others, who know how to use them. They add that, on this definition, credit is a consequence of the way in which property is constituted.
So credit disappears along with this constitution of property. It is said further, at p. 98, that the banks of today ...
They 'consider themselves destined to follow the movement that transactions carried on outside their sphere have set going, and not to give the impulse themselves; in other words, towards the travailleurs to whom they advance capital, the banks play the part of capitalists'.
Latent in the idea that the banks themselves should take over this leadership and should stand out
'by the number and the usefulness of the firms they control and of the works they have set going' (p. 101)
lies the Crédit Mobilier. In the same way Constantin Pecqueur demands that the banks — what the Saint-Simonists call a 'general system of banks' — should 'govern production'. Pecqueur is essentially a Saint-Simonist, though far more radical. What he wants is this.
Pecqueur said that the credit institution ... should govern the whole movement of national production. He asked his readers to try creating a national credit institution that advances funds to talent and merit holding no property — but without tying these borrowers together by force in a close solidarity of production and consumption; on the contrary, so that they themselves would determine their exchanges and their production. That way, he said, they would only reach what the private banks reach already: anarchy, a disproportion between production and consumption, the sudden ruin of one set of people and the sudden enrichment of another. Their institution, he went on, would never get past producing for some a sum of well-being equal to the sum of misfortune borne by others ... except that they would have given the wage-labourers they backed with advances the means to compete among themselves in just the way their capitalist masters do now. (C. Pecqueur, "Théorie Nouvelle d'Économie Soc. et Pol.", Paris 1842, pp. 433, 434.)
We have seen that merchant's capital and interest-bearing capital are the oldest forms of capital. But it lies in the nature of the matter that interest-bearing capital presents itself to the popular mind as the form of capital par excellence. In merchant's capital a mediating activity takes place, whether one interprets it as cheating, as labour or as whatever else. In interest-bearing capital, by contrast, the self-reproducing character of capital, value valorizing itself, the production of surplus-value, presents itself purely as an occult quality.
That is also why even a section of the political economists, especially in countries where industrial capital is not yet fully developed, as in France, cling to this as the basic form of capital and treat ground-rent as merely another form of it, since here too the form of lending predominates. In this way the inner articulation of the capitalist mode of production is completely misconstrued, and it is entirely overlooked that land, just like capital, is only ever lent out to capitalists. Instead of money, means of production can of course be lent in kind — machines, business premises and so on. But then they represent a definite sum of money, and the fact that a part is paid for wear and tear, over and above the interest, follows from the use-value, from the specific natural form, of these elements of capital.
What is decisive here, again, is whether they are lent to the immediate producer — which presupposes that the capitalist mode of production does not exist, at least in the sphere in which this happens — or whether they are lent to the industrial capitalist, which is precisely the presupposition on the basis of the capitalist mode of production. It is still more improper, and more thoughtless, to drag in the lending of houses and the like for individual consumption. That the working class is also swindled in this form, and crying shame it is, is plain fact; but the small trader who supplies it with means of subsistence does exactly the same. This is a secondary exploitation, running alongside the original one that takes place directly in the production process itself. The difference between selling and lending is here a quite indifferent and formal one, which, as already shown, appears essential only to complete ignorance of the real context.
Usury, like trade, exploits a given mode of production; it does not create it, and both stand external to it. Usury seeks to preserve it directly, so as to exploit it ever anew — it is conservative, and only makes the mode more wretched. The less the elements of production enter the production process as commodities and come out of it as commodities, the more does their establishment by means of money appear as a special act. And the less important the part circulation plays in social reproduction, the more usury flourishes.
To say that monetary wealth develops as a special kind of wealth means, as far as usurer's capital goes, that it holds all its claims in the form of money claims. And it develops in a country the more, the more the mass of production is confined to payments in kind and the like — that is, to use-value.
In so far as usury brings about two things — first, forming an independent monetary wealth alongside the class of merchants, and second, appropriating the conditions of labour, that is, ruining the owners of the old conditions of labour — it is a powerful lever in forming the preconditions for industrial capital.
Gilbart's history of banking sets out the old law on interest. In the Middle Ages the population lived purely by farming. Under a government like the feudal one there can be little traffic, and so little profit — which is why the laws against usury were justified in the Middle Ages. Besides, in a farming country a man seldom comes into a position to borrow money unless he has been brought down to poverty and distress. Henry VIII capped interest at 10 per cent, James I at 8, Charles II at 6 and Anne at 5. In those times the money-lenders were monopolists in fact, if not in law, and so they had to be restrained, like any other monopolists. Gilbart's own formula for the two eras runs: in our times the rate of profit sets the rate of interest; in those times the rate of interest set the rate of profit. If a money-lender saddled a merchant with a high rate of interest, the merchant had to put a higher rate of profit on his goods — and so a great sum of money was taken out of the buyers' pockets to be put into the money-lenders'.
Luther, preaching in 1540, works through the arithmetic. He has heard it said that at every Leipzig fair 10 gulden are now taken in the year, which is 30 on the hundred; some add the Neuenburg fair, making it 40 on the hundred — whether that is so, he does not know. For shame, where is it all to end? Whoever has 100 florins at Leipzig takes 40 a year: that means a peasant or a burgher eaten up in one year. 1,000 florins brings 400 a year: a knight or a rich nobleman eaten up. 10,000 brings 4,000: a rich count eaten up. 100,000, as the big dealers must have, brings 40,000: a great rich prince eaten up in a year. 1,000,000 brings 400,000: a great king eaten up in a year. And he runs no risk in it, neither of body nor of goods, does no work, sits behind the stove and bakes apples — so a common robber could sit at home and devour the whole world in ten years.
Luther's second tirade, fifteen years later. He had written against usury fifteen years before, when it had already broken in so violently that he could hope for no improvement. Since then it has raised itself so high that it will no longer even be a vice, a sin or a shame; it lets itself be praised as sheer virtue and honour, as though it were showing people great love and a Christian service. And what good are advice and remedy now that shame has become honour and vice has become virtue?
Hardcastle, writing the history of banking in his own day, calls our first bankers Jews, Lombards, usurers and bloodsuckers, our original bank-sharks, and says their character was almost infamous. The London goldsmiths then joined them. As a body, those original bankers were, he says, a very bad set: greedy usurers, iron-hearted extortioners.
The example Venice gave — founding a bank — was quickly imitated, Augier writes: every sea city, and in general every city that had made a name for itself by its independence and its trade, founded its first bank. The return of their ships, often long delayed, unavoidably bred the habit of extending credit, and the discovery of America and the trade there strengthened it further. (This, Marx notes in passing, is the main point.) Fitting out ships forced people to take up large advances, as had already happened in antiquity at Athens and in Greece. In 1308 the Hanseatic city of Bruges had an insurance chamber.
How far lending to landed proprietors — and with that to consuming wealth in general — was still the prevailing form, even in England, in the last third of the seventeenth century, before the modern credit system developed, can be seen among others from Sir Dudley North, not only one of the first English merchants but also one of the most important economic theorists of his time:
North's own testimony: the money put out at interest in this nation is nowhere near a tenth of it lent to trading people to carry on their trade; the greater part is lent to supply luxury and to meet the spending of men who, though great landowners, spend faster than their land brings in, and who, unwilling to sell, would rather mortgage their estates.
In Poland in the eighteenth century:
Büsch reports that Warsaw did a large trade in bills of exchange, but one whose basis and purpose was chiefly the usury of its bankers. To get hold of money that they could lend to the extravagant magnates at 8 per cent and more, they sought and found open exchange credit abroad — credit with no commodity trade behind it at all — which the foreign drawee accepted patiently as long as the remittances conjured up by drawing one bill against another kept coming in. They paid dearly for it through the bankruptcies of Tepper and of other Warsaw bankers held in great esteem.
A last witness, cited by page alone, reports: the Church forbade the taking of interest, but not the selling of property to help oneself out of need; nor did it forbid handing that property over to the money-lender for a fixed period, until repayment, so that he could find his security in it and, while he held it, enjoy the use of it as compensation for the money he had lent ... The Church itself, and the communities and pious corporations belonging to it, drew great advantage from this, especially in the time of the crusades. It brought a very great part of the national wealth into the possession of the so-called dead hand, all the more since the Jew was not allowed to practise usury by this road, because possession of so firm a pledge could not be kept hidden ... Without the ban on interest, the churches and monasteries could never have grown so rich.