Capital III, Chapter 21 - Part 8

A certain amount of value is continually thrown into circulation, as money-capital, which goes through these various purchases of commodities, and at the end of the process, throws commodities into circulation, whilst drawing out the original value plus the surplus value.

“The actual acts of exchange do not, at any rate, reveal how this process is promoted. And it is precisely this process of M as capital, on which the interest of the money-lending capitalist rests, and from which it is derived.” (p 346)

Proudhon did not understand the basis of surplus value, and so, contrasting the position of a hatter with a money lending capitalist, he says that the former receives in return for their hats only their value, whereas the latter as well as receiving back their capital also receives the interest. But, of course, the former, although they do only obtain the value of the hats, in exchange for the hats, do also thereby receive back both the capital they originally advanced plus the profit.

If the price of production of the hats, is £115, which includes £15 profit, then the capital advanced is £100, whilst the hatter receives back this capital plus £15 profit. Assuming all the capital advanced belonged to the capitalist, they would pocket all of this £15, but if they borrowed the £100 then they may pay £5 interest, as the price for using the use value of the capital, for the period, keeping the other £10 as industrial profit.

The interest does not, as Proudhon believed, constitute an additional cost, raising the value of the commodities. This is the ultimate problem that capital faces with the solution it adopted, in the 1980's and 90's, particularly in the US and UK, of developing low wage/high debt economies. On the one hand, real wages were stagnant, but in order to maintain aggregate demand, workers were encouraged to sustain and extend their consumption by taking on increasing levels of debt. But, that involves workers then having to pay increasing levels of interest on that debt. To the extent that they have to expend income to pay interest, they do not have income to buy commodities.

But, in the long run, as Marx sets out, wages must equal the value of labour-power, which amounts to a given quantum of means of consumption. Therefore, the sellers of those means of consumption must reduce their prices by an equal amount to the interest that workers have to pay, or else wages must rise so as to cover those interest payments, in which case the surplus value will fall by the same amount.

In short, the strategy of encouraging rising levels of private debt results ultimately in an increased share of surplus value going to money-lending capitalists, and a smaller share of surplus value going to industrial capital. That is not surprising given the historical, social and political links of the Conservatives in Britain, and the Republicans in the US with the financial oligarchy, as opposed to the similar links of social-democracy with big industrial capital.

Back To Part 7

Forward To Part 9