Saturday, 16 January 2016

Capital III, Chapter 23 - Part 5

The basis of the qualitative division of the total social capital and of capitalists, then resolves itself into a number of factors which flow from the division of the gross profit into interest and profit of enterprise.

Firstly, the majority of industrial capitalists work with their own capital, even though, at different times, they work with more or less borrowed capital. Secondly, whilst the payment of interest results simultaneously in the other portion of the surplus value becoming profit of enterprise, the fact remains that the category of interest existed long before capitalist production. This seems to reinforce the notion that interest is simply a function of the ownership of capital, or even simply of money.

“The fact that loaned capital yields interest whether actually employed as capital or not — even when borrowed only for consumption — lends strength to the idea that this form of capital exists independently. The best proof of the independence which interest possessed during the early periods of the capitalist mode of production in reference to profit, and which interest-bearing capital possessed in reference to industrial capital, is that it was discovered (by Massie [[J. Massie] An Essay on the Governing Causes of the Natural Rate of Interest, London, 1750. — Ed.] and after him by Hume [D. Hume, "On Interest." In: "Essays and Treatises on Several Subjects," Vol. I, London, 1764. — Ed.] ) as late as the middle of the 18th century, that interest is but a portion of the gross profit, and that such a discovery was at all necessary.” (p 376)

But, as stated earlier, in so far as interest did not simply result in the reduction of the existing production potential, and enslavement of the producers, it could only be paid out of the social surplus. As surplus value is the form in which the social surplus exists under capitalism, there is no real difference here. Money-capital is not some kind of magic bean from which springs additional value, in the form of interest. The interest can only be paid because additional value has been created in production.

“Thirdly, whether the industrial capitalist operates on his own or on borrowed capital does not alter the fact that the class of money-capitalists confronts him as a special kind of capitalists, money-capital as an independent kind of capital, and interest as an independent form of surplus-value peculiar to this specific capital.” (p 377)

The more capital develops and the mass of capital, in the form of money-capital, grows the more this is the case. The industrial capitalist seeks to maximise the amount of their capital, in the form of productive-capital, by minimising the amount held as money-capital. One way of doing this is to advance their working capital out of money-capital, loaned from the bank, for example, to cover wages, as well as buying materials on credit from suppliers.

This also means that when the industrial capitalist wants to adjust their level of activity, and consequently the amount of productive-capital advanced, they only have to adjust their level of borrowing accordingly. This is also one means of capital moving more effectively in response to changes in the rate of profit. If the rate of profit falls, in one area, capitalists in this area hire fewer workers, and buy less material, so borrowing falls. But, the bank then lends these funds to the other area where the rate of profit is rising and more workers are being hired and more material bought.

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