Mike seems to have fallen into the trap set by the bourgeois apologists of money-capital, into the idea that additional money-capital is somehow injected into the system, by a class of money-capitalists, who provide this money from their own savings, rather than the actual situation, which is that those money-capitalists only have their own revenues, because they obtain interest on the money-capital they lend, and that interest is only payable because productive-capital generates surplus value. The existence of money-capital is no more attributable to the existence of money-lending capitalists than is the existence of land attributable to the existence of landlords.
Rather than the money-capitalists – shareholders, bondholders, lending institutions – being providers of money-capital, they are actually leeches, who remove potential money-capital from the circuit of productive-capital, in interest, transforming increasing amounts of potential capital into mere revenue. What is worse is the fact that the vast majority of the potential money-capital at the disposal of these money-capitalists, goes not to finance additional productive investment, but goes into financial speculation, buying up existing paper assets and land, and thereby inflating the prices of those assets, without creating any additional wealth. That has particularly been the case over the last 30 years, which has resulted in sequential asset price bubbles, which then lead to financial crises, which in turn may impact the real economy, as in 2008.
It is, however, quite easy to see why the owners of these paper assets (fictitious capital) are quite happy for their prices to be inflated, because it gives the appearance of increased wealth and power, and on the back of it, is established a whole series of ideas that are based upon this illusion. It is upon those illusions that conservatism rests. Yet, as the above analysis has demonstrated, and as Marx sets out in Capital III, the reality is that the surplus value created by productive-capital, divides into a number of revenues. In analysing the class relation of the recipients of these revenues, it is necessary to distinguish between the economic relations, the legal relations, and the actual power relations.
If we take the economic relations then the laws determining the mass and rate of profit are objectively determined. As Marx says, what this comes down to is the value of commodities. The value of labour-power is objectively determined, because the length and intensity of a normal working day is objectively determined, and on the basis of it, the quantum of commodities required by workers to reproduce their labour-power is also objectively determined. If workers work for longer than this normal working-day, or work more intensively, then the value of their labour-power rises, because they need more to reproduce it, and they themselves wear out more quickly, which itself causes its value to rise.
The value of the commodities produced by workers is also objectively determined by the labour-time currently required for the reproduction of the constant capital contained in them, and by the actual labour-time currently expended to create new value. The difference between the value of the labour-power, and the new value produced by it, objectively determines the mass of surplus value produced. The ratio of this surplus to the value of the capital then gives an objectively determined rate of profit.
If we ignore the question of rent, the revenue obtained by the money-lending capitalist, then depends upon the rate of interest, and this in turn depends upon the demand and supply for capital – not to be confused with the demand for the commodities that comprise the physical elements of capital. The demand for money-capital will rise as the rate of profit rises, but also reaches a peak temporarily during crises, when firms need money to pay bills and stay afloat. The supply of capital rises itself as a consequence of increased economic activity, which increases the rate of turnover of capital, and also as a result of a higher rate of profit, which produces increased masses of surplus value, to be realised. The supply of money-capital can also be increased out of the stock of potential money-capital, held by money-capitalists, and from the banks mobilising large numbers of small savings. A major element today comes from workers savings into their pension schemes, all of which are controlled by the banks and financial institutions, rather than by the workers themselves.
That in itself demonstrates an important starting point for any strategy designed to overcome the power of capital, which is to ask the question why it is that even where capital itself is no longer the private property of capitalists, workers themselves do not exercise control over that capital, and yet money-lending capitalists, who do not own that socialised capital, do exercise control over it.
On the one hand, therefore, there is a significant class of money-lending capitalists, who privately own large amounts of loanable money-capital. On the other, there are the banks and financial institutions, who not only amass the money hoards of productive and commercial capital, but also the mass of small savings of the workers and middle classes. In order for it to act as interest-bearing capital, however, it must be lent. If for now, we ignore the form of this lending, what we have is a demand for money-capital by productive-capital and commercial capital, confronting a supply of money-capital from money-lending capitalists. It is the relation of these two opposing forces that determines the average rate of interest. But, as Marx says,
“It is indeed only the separation of capitalists into money-capitalists and industrial capitalists that transforms a portion of the profit into interest, that generally creates the category of interest; and it is only the competition between these two kinds of capitalists which creates the rate of interest.” (Capital III, Chapter 23, p 370)
Moreover, later, Marx points out that these money-capitalists, stand in no relation to the workers, but only to the industrial capitalists. The money-capitalists, like the landlords, pump surplus value, not from the workers, but from the productive and merchant capitalists. Moreover, because wages, as the value of labour-power, are objectively determined, and because the mass of profit is similarly objectively determined, any increase in interest payments (or rent to landlords) can only come at the expense of the profit of enterprise, i.e. the profit purloined by the productive and commercial capitalists. A direct conflict of material interest thereby exists between them.
This becomes even more significant, when, as Marx describes, in Chapter 27, the productive and merchant capital takes on the form of socialised capital, whether in the form of the joint stock company, or even more obviously, in the form of the worker-owned co-operative. Then, not only is the productive-capital, socialised, becoming the property of the “associated producers”, but the personification of this productive-capital, the functioning capitalists, are professional managers, who are themselves increasingly drawn from the ranks of the working-class, and, as such, are paid wages for the labour-power they provide. In these companies there is,
“Transformation of the actually functioning capitalist into a mere manager, administrator of other people's capital, and of the owner of capital into a mere owner, a mere money-capitalist. Even if the dividends which they receive include the interest and the profit of enterprise, i.e., the total profit (for the salary of the manager is, or should be, simply the wage of a specific type of skilled labour, whose price is regulated in the labour-market like that of any other labour), this total profit is henceforth received only in the form of interest, i.e., as mere compensation for owning capital that now is entirely divorced from the function in the actual process of reproduction, just as this function in the person of the manager is divorced from ownership of capital.” (Capital III, Chapter 27)
Moreover, as Marx pointed out earlier, the extension of public education, and the welfare state extends this process even further, increases the supply of such labour-power, so that the wages of these “functioning capitalists” fall, sometimes even below that of other skilled workers.
“With few exceptions, the labour-power of these people is therefore devaluated with the progress of capitalist production. Their wage falls, while their labour capacity increases.” (Capital III, Chapter 17)
It is on this basis that a shared material interest arises between these managers and workers, as both form part of the associated producers, who now are the real owners of the socialised productive-capital, and stand in opposition to the lenders of money-capital. It is, in fact, the material basis of social democracy. To use an analogy used by Marx, the managers are like the conductor of an orchestra, whose job is to get the best performance out of its musicians, whilst the workers are like the musicians. But, both the conductor and the musicians comprise the orchestra itself, and stand in opposition to the money-lender, who provides the funds for them to buy their instruments, and screws interest out of them. As Marx says,
“... profit of enterprise is not related as an opposite to wage-labour, but only to interest.” (Capital III, p 379)
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