Interest-Bearing
Capital
Capital Volume 3, Part 5,
Division of Profit into Interest and Profit of Enterprise. Interest-Bearing
Capital.
This is a long part of Volume
3 and is really too much with its sixteen chapters (21 – 36), almost a book in
itself, to be covered in a single discussion. Therefore let us concentrate as
before on the question of whether Volume 1 of Capital is undermined or
over-ruled by Volume 3.
Marx makes it clear that this
is not the case at the beginning of Chapter 23 where he writes:
“Interest, as
we have seen in the two preceding chapters, appears originally, is originally,
and remains in fact merely a portion of
the profit, i.e., of the surplus-value, which the
functioning capitalist, industrialist or merchant has to pay to the owner and
lender of money-capital whenever he uses loaned capital instead of his own.”
These pages contain great
good sense and a lot of assistance to people trying to understand the “Global
Economic Meltdown” that has been going on since 2008, and is now also generally
referred to as “the debt crisis”, or just “the crisis”. As an example, here are
some paragraphs from our sample Chapter
29, Component Parts of Bank Capital, (download linked below).
“We shall now
consider labour-power in contrast to the capital of the national debt, where a
negative quantity appears as capital — just as interest-bearing capital, in
general, is the fountainhead of all
manner of insane forms, so that debts, for instance, can appear to the
banker as commodities. Wages are conceived here as interest, and therefore
labour-power as the capital yielding this interest. For example, if the wage
for one year amounts to £50 and the rate of interest is 5%, the annual
labour-power is equal to a capital of £1,000. The insanity of the capitalist mode of conception reaches its
climax here, for instead of explaining the expansion of capital on the basis of
the exploitation of labour-power, the matter is reversed and the productivity
of labour power is explained by attributing this mystical quality of
interest-bearing capital to labour-power itself. In the second half of the 17th
century, this used to be a favourite conception (for example, of Petty), but it
is used even nowadays in all seriousness by some vulgar economists and more
particularly by some German statisticians.[1] Unfortunately two disagreeably
frustrating facts mar this thoughtless conception. In the first place, the
labourer must work in order to obtain this interest. In the second place, he cannot
transform the capital-value of his labour-power into cash by transferring it.
Rather, the annual value of his labour-power is equal to his average annual
wage, and what he has to give the buyer in return through his labour is this
same value plus a surplus-value, i.e., the increment added by his labour. In a
slave society, the labourer has a capital-value, namely, his purchase price.
And when he is hired out, the hirer must pay, in the first place, the interest
on this purchase price, and, in addition, replace the annual wear and tear on
the capital.
“The
formation of a fictitious capital is called capitalisation. Every periodic
income is capitalised by calculating it on the basis of the average rate of
interest, as an income which would be realised by a capital loaned at this rate
of interest. For example, if the annual income is £100 and the rate of interest
5%, then the £100 would represent the annual interest on £2,000, and the £2,000
is regarded as the capital-value of the legal title of ownership on the £100
annually. For the person who buys this title of ownership, the annual income of
£100 represents indeed the interest on his capital invested at 5%. All
connection with the actual expansion process of capital is thus completely
lost, and the conception of capital as
something with automatic self-expansion properties is thereby strengthened.
“Even when
the promissory note — the security — does not represent a purely fictitious capital, as it does in the case of state debts,
the capital-value of such paper is
nevertheless wholly illusory. We
have previously seen in what manner the credit system creates associated
capital. The paper serves as title of ownership which represents this capital.
The stocks of railways, mines, navigation companies, and the like, represent
actual capital, namely, the capital invested and functioning in such
enterprises, or the amount of money advanced by the stockholders for the
purpose of being used as capital in such enterprises. This does not preclude
the possibility that these may represent pure swindle. But this capital does
not exist twice, once as the capital-value of titles of ownership (stocks) on
the one hand and on the other hand as the actual capital invested, or to be
invested, in those enterprises. It exists only in the latter form, and a share
of stock is merely a title of ownership to a corresponding portion of the
surplus-value to be realised by it. A may sell this title to B, and B may sell
it to C. These transactions do not alter anything in the nature of the problem.
A or B then has his title in the form of capital, but C has transformed his
capital into a mere title of ownership to the anticipated surplus-value from
the stock capital.”
It remains the case that in
Volume 3, Karl Marx is constantly referring back to Volume 1, and reminding us
that whatever “financial” profits (as we would now call them) there may be,
these are only portions of the surplus value generated at the point of
production by the capitalistic exploitation of living human labour-power.
Picture: Max
Keiser, of Russia Today’s “Keiser Report” television programme, in a London
taxi. Keiser is particularly eloquent about the insane role of “fictitious
capital” in present conditions, which appear not to have changed at all from
the time of Karl Marx, where finance capital is concerned. RT is on DSTV
channel 405.
·
The above is to
introduce the original reading-text: Capital Volume 3, Chapter 29, Component Parts of Bank Capital.
