Monday, 18 January 2016

Capital III, Chapter 23 - Part 7

The notion that the interest arises solely as a return to capital is also encouraged by the fact that this is true at the level of individual instances. But, it is clearly not true at the level of the total social capital. The idea that capital could exist solely as money-capital, and thereby expand simply by accruing interest is ridiculous. At an individual level its possible to loan out money-capital, to finance unproductive consumption, and to be paid interest on it, but its impossible for all money-capital to be loaned out at interest, and for none of it to be used as productive-capital, because it is only productive-capital which produces the surplus value out of which the interest is paid.

“It would be still more absurd to presume that capital would yield interest on the basis of capitalist production without performing any productive function, i.e., without creating surplus-value, of which interest is just a part; that the capitalist mode of production would run its course without capitalist production. If an untowardly large section of capitalists were to convert their capital into money-capital, the result would be a frightful depreciation of money-capital and a frightful fall in the rate of interest; many would at once face the impossibility of living on their interest, and would hence be compelled to reconvert into industrial capitalists.” (p 378)

This is why, even when using his own capital, he sees part of the gross profit as interest on that capital, and the other part as profit of enterprise.

In the manuscript, Marx intended to make a fourth point here, but the point was not written. Given the argument above, and that which follows, its possible the point he intended to make was that alluded to earlier, and which he deals with in more detail later. That is that this division between interest and profit of enterprise, capital and entrepreneurship, finds its logical conclusion in the development of the joint stock company, where these two things, are totally divided – the owners of money-capital, in the form of shares, and paid as interest in the form of dividends; the entrepreneur being paid profit of enterprise, which appears as simply a specific type of wages, for a specific type of labour of superintendence. The functioning capitalist – the professional manager – is then reduced to the same kind of status as other workers.

“The purely quantitative division of the profit between two persons who have different legal titles to it has turned into a qualitative division, which seems to spring from the very nature of capital and profit. Because, as we have seen, as soon as a portion of profit universally assumes the form of interest, the difference between average profit and interest, or the portion of profit over and above the interest, assumes a form opposite to interest — the form of profit of enterprise. These two forms, interest and profit of enterprise, exist only as opposites. Hence, they are not related to surplus-value, of which they are but parts placed under different categories, heads or names, but rather to one another. It is because one portion of profit turns into interest, that the other appears as profit of enterprise. (p 378)

This may be a material reason for the change in the attitude of big capital that Engels describes in “The Condition Of The Working Class”, that occurred later in the 19th century. The functioning capitalist, whether they operate with their own capital or not, see their profit of enterprise arising from their ability to run the business efficiently, which means being able to reduce costs. But, in the much larger capitals that characterise this socialised capital, such as the joint stock company, it is the cost of constant capital that is decisive. Particularly, where large amounts of fixed capital stock are employed, it becomes important to keep it working, and not to have it standing idle due to strikes.

The actual functioning capitalists, the day to day managers, are increasingly drawn from the ranks of the working-class themselves, and so the task of increasing efficiency here, becomes one of raising productivity through scientific management, and the introduction of new technologies that raise productivity, and it is also by these means of raising relative surplus value, that real wages can also be raised simultaneously.

But, the shareholders and other money-capitalists see things only in terms of the dividends due on their shares.

“The lending capitalist as such faces the capitalist performing his actual function in the process of reproduction, not the wage-worker, who, precisely under capitalist production, is expropriated of the means of production. Interest-bearing capital is capital as property as distinct from capital as a function. But so long as capital does not perform its function, it does not exploit labourers and does not come into opposition to labour.

On the other hand, profit of enterprise is not related as an opposite to wage-labour, but only to interest.” (p 379)

So, there is an objective material interest between the functioning-capitalist and labour, against interest bearing capital.

This is one material way in which the socialised capitals – be they co-operatives or joint stock companies – differed from the privately owned capitalist enterprises. With the functioning capitalist being reduced to just a special type of productive labourer, their social position becomes more ambiguous, particularly as the extension of public education means that a much increased number of workers are enabled to take on this function of labour of superintendence. This is the material basis of social democracy.

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