““The stock which is lent at interest is always considered as a capital by the lender. He expects that in due time it is to be restored to him, and that in the meantime the borrower is to pay him a certain annual rent for the use of it. The borrower may use it either as a capital, or as a stock reserved for immediate consumption. If he uses it as a capital, he employs it in the maintenance of productive labourers, who reproduce the value with a profit. He can, in this case, both restore the capital and pay the interest without alienating or encroaching upon any other source of revenue. If he uses it as a stock reserved for immediate consumption, he acts the part of a prodigal, and dissipates in the maintenance of the idle, what was destined for the support of the industrious. He can, in this case, neither restore the capital nor pay the interest, without either alienating or encroaching upon some other source of revenue, such as the property or […] rent of land” (Vol. II, b. II, ch. IV, p. 127 edit. McCulloch)” (p 83)
So, interest is payable only in so far as the borrowed money-capital is used as real productive-capital, which generates surplus value. Alternatively, interest is paid out of other revenues, which themselves derive from the production of surplus value, or finally represents merely a transfer of the title of existing wealth.
“Thus whoever borrows money, which here means capital, either uses it himself as capital, and makes a profit with it. In this case the interest which he pays to the lender is nothing but a part of the profit under a special name. Or he consumes the borrowed money. Then he increases the wealth of the lender by reducing his own. What takes place is only a different distribution of the wealth that passes from the hand of the spendthrift into that of the lender, but there is no generation of surplus-value. In so far therefore as interest in any way represents surplus-value, it is nothing but a part of profit, which itself is nothing but a definite form of surplus-value, that is, unpaid labour.” (p 83)
The other form of revenue is that received by those who live on the proceeds of taxes. That includes all those employed by the state for its operation as a state (this is separate from those engaged in the production of commodities, such as education, healthcare, or nationalised industries), it includes the clergy who live on tithes, as well as those who receive welfare from Poor Relief and so on.
Marx quotes Smith,
““All taxes, and all the revenue which is founded upon them, all salaries, pensions, and annuities of every kind, are ultimately derived from some one or other of those three original sources of revenue, and are paid either immediately or mediately from the wages of labour, the profits of stock, or the rent of land ([Wealth of Nations, O.U.P. edition, p. 53], [Garnier] I, ch. VI, p. 106).” (p 84)
Marx comments,
“Thus interest on money, along with taxes or revenues derived from taxes—in so far as they are not deductions from wages themselves —are merely shares in profit and rent, which are themselves in turn reducible to surplus-value, that is, unpaid labour-time.” (p 84)
In practice, of course, things are more complex. A portion of workers' wages must include an insurance provision to cover sickness, old age, and to cover the period of their children's life when they are not producing. Taken at an individual level, this requirement for such insurance is quite high, which is why, in less developed economies, like China, savings rates tend to be higher, in order to make such provision. But, a more developed economy that can afford the provision of a welfare state, can hugely reduce this requirement for social insurance, because it averages out the risk over millions of workers. The social insurance takes the form of taxes deducted from wages, and the revenue the form of welfare benefits. In so doing, it significantly reduces the value of labour-power, and raises the rate of surplus value and profit. But, such insurance should really be seen as part of the wage, i.e. part of the value of labour-power, rather than a tax deduction from surplus value.
Moreover, such welfare systems develop to provide other forms of benefits, including those for the low-paid. These benefits, thereby provide a direct subsidy to the low-paying employers, out of the taxes paid by higher paid workers, and more efficient capitals. In essence this means a transfer from the larger, more efficient and higher paying capitals to the less efficient, lower paying capitals, and consequently represents a misallocation of capital, a reduction in productivity, and a lower rate of capital accumulation, growth and living standards.
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