Capital III, Chapter 26 - Part 6

Norman's view of capital as commodities used in production is a “vulgar conception of capital”, Marx says. They have a different value as capital than as commodities, and that value “is expressed in the profit which is derived from their productive or mercantile employment.” (p 419)

In other words, as soon as we have capitalist production, as was seen earlier, prices of production replace exchange values, for that production, and these prices of production are made up of the cost price plus the average profit. The amount of profit is now simply a function of the quantity of capital employed. If I have a quantity of capital then its value, as capital, is equal to the profit I can make on it, and this is distinct from the value of the actual commodities that comprise this capital.  (This has to be taken in the context of Marx's earlier analysis that capital, as capital, actually has no value, because it is not produced by labour.  The use of the term here merely denotes that this is what it is worth to the owner of that capital, in terms of the profit it can produce.)

The rate of profit will always be a function of what I have to pay for those commodities, as commodities, rather than as capital. For example, if I make £100 profit on my activities as a producer, then, if I only have to pay £1,000 to buy the materials and labour-power, required for production, I will make a 10% rate of profit, but if the price of these commodities rises to £2,000, I will only make a 5% rate of profit. In effect, the value of these commodities, as capital, has halved, whilst their value, as commodities, has doubled.

As described in previous chapters, this rate of profit also limits the rate of interest, because no capital will sustainably pay a higher rate of interest on capital, than the rate of profit they can obtain from its use.

“But Mr. Norman should tell us just how this limit is determined. And it is determined by the supply and demand of money-capital as distinguished from the other forms of capital. It could be further asked: How are demand and supply of money-capital determined? It is doubtlessly true that a tacit connection exists between the supply of material capital and the supply of money-capital; and, likewise, that the demand of industrial capitalists for money-capital is determined by conditions of actual production. Instead of enlightening us on this point, Norman offers us the sage opinion that the demand for money-capital is not identical with the demand for money as such; and this sagacity alone, because he, Overstone, and the other Currency prophets, constantly have pricks of conscience since they are striving to make capital out of means of circulation as such through the artificial intervention of legislation, and to raise the interest rate.” (p 419)

And, this is significant, because today there is a similar confusion between money-capital and money, and a similar attempt, via QE, and other forms of money printing, to “make capital out of means of circulation”, except today this is done in an attempt to reduce the rate of interest. Its because money is not money-capital that these attempts will fail to reduce interest rates.

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