Sunday, 12 June 2016

Capital III, Chapter 36 - Part 8

Marx refers to previous attempts in history to protect the poor from usury, which fell prey to the law of unintended consequences. The real answer to usury is not to ban it, or try to limit it, but to remove the conditions, which force the poor to have to resort to it.

But, for these new bourgeois elements to be able to establish such businesses, it was necessary to develop credit and banking, so as to break the old monopoly of usury, just as it was necessary to break all of the feudal monopolies.

“The credit associations established in the 12th and 14th centuries in Venice and Genoa arose from the need for marine commerce and the wholesale trade associated with it to emancipate themselves from the domination of outmoded usury and the monopolization of the money business. While the actual banks founded in those city-republics assumed simultaneously the shape of public credit institutions from which the state received loans on future tax revenues, it should not be forgotten that the merchants founding those associations were themselves prominent citizens of those states and as much interested in emancipating their government as they were in emancipating themselves from the exactions of usurers, and at the same time in getting tighter and more secure control over the state. Hence, when the Bank of England was to be established, the Tories also protested: 

"Banks are republican institutions. Flourishing banks existed in Venice, Genoa, Amsterdam, and Hamburg. But who ever heard of a Bank of France or Spain?"” (p 601-2)

Holland, which was the first major mercantile economy developed the bank of Amsterdam in 1609. It took in deposits of precious metal for which it gave receipts. The receipts circulated on endorsement only to the extent others would accept them. This was just part of the development of commercial credit that arose in the economy along with the development of commerce. But, this development was enough to break the monopoly of usury, and thereby subordinate credit and money capital to the needs of commerce and production. That was indicated by the low interest rates which existed.

“The monopoly of old-style usury, based on poverty, collapsed in that country of its own weight.” (p 602)

As the commercial and industrial bourgeoisie gained in economic, social and political strength, during the 18th century, there is an increasing demand for legal limits on the interest rate, so that money-capital is subordinated to the needs of industry. The low interest rates of Holland were used as a basis for these arguments.

“The main spokesman for this movement is Sir Josiah Child, the father of ordinary English private banking. He declaims against the monopoly of usurers in much the same way as the wholesale clothing manufacturers, Moses & Son, do when leading the fight against the monopoly of "private tailors." This same Josiah Child is simultaneously the father of English stock-jobbing. Thus, this autocrat of the East India Company defends its monopoly in the name of free trade. Versus Thomas Manley (Interest of Money Mistaken — Thomas Manley was not the author of this book. It was published anonymously in London in 1668. — Ed.) he says: 

"As the champion of the timid and trembling band of usurers he erects his main batteries at that point which I have declared to be the weakest he denies point-blank that the low rate of interest is the cause of wealth and vows that it is merely its effect." (Traitès sur le Commerce, etc., 1669, trad. Amsterdam et Berlin, 1754.)” (p 602-3)

Child goes on to argue that it is commerce which creates the wealth of the nation, and if low interest rates stimulate commerce, they thereby help to create wealth. Similarly, he continues, increased wealth may also generate lower interest rates.

“This violent battle against usury, this demand for the subordination of interest-bearing capital to industrial capital, is but the herald of the organic creations that establish these prerequisites of capitalist production in the modern banking system, which on the one hand robs usurer's capital of its monopoly by concentrating all idle money reserves and throwing them on the money market, and on the other hand limits the monopoly of the precious metal itself by creating credit-money.” (p 603)

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