This superficial appearance of interest-bearing capital or money as synonymous with capital, on the one hand leads the vulgar economists to equate it with either being capital, or at least the basic form of capital. Something similar can be seen in the arguments of the proponents of historic pricing for whom it is this circuit of money-capital – M – C … P … C` - M` that is characteristic, rather than Marx's insistence that it is the circuit of industrial capital P … C` - M`.M – C … P that is determinate. And, in the form of interest-bearing capital, the most obviously parasitical form of capital, it provides an obvious easy target for vulgar critics of capitalism. That was not always the case. Initially, it was the proponents of capitalism that sought to attack the usurers, whose rate of interest threatened to prevent real capital accumulation.
“The polemic waged by the bourgeois economists of the seventeenth century (Child, Culpeper and others) against interest as an independent form of surplus-value merely reflects the struggle of the rising industrial bourgeoisie against the old-fashioned usurers, who monopolised the pecuniary resources at that time. Interest-bearing capital in this case is still an antediluvian form of capital which has yet to be subordinated to industrial capital and to acquire the dependent position which it must assume—theoretically and practically—on the basis of capitalist production. The bourgeoisie did not hesitate to accept State aid in this as in other cases, where it was a question of making the traditional production relations which it found, adequate to its own.” (p 467)
Interest-bearing capital, unlike merchant capital, does not increase the mass of realised profit. It does not share in the mass of surplus value, by obtaining the average rate of profit. Indeed, as Marx says, the rate of interest can never be as high as the average rate of profit, because, if it were, it would neutralise the profit of the industrial capital. In other words, if the average rate of profit is 10%, and the rate of interest is 10% there would be no point the industrial capitalist borrowing, say, £1,000, because the £100 profit they make on it would all be consumed as payment of interest. But, interest-bearing capital does perform a useful function for industrial capital. Firstly, where commercial credit is not available, bank credit can take its place, enabling production and circulation to go beyond the bounds it would otherwise have been constrained by. Holding reserves of money-capital itself is seen as unproductive by industrial capital. On the one hand, any unused money reserves from realised profits can be thrown into the money markets – and this is the source of the main additions to the supply of money-capital – so as to earn interest. On the other hand, when they need additional money capital, to finance accumulation, they do not have to wait until their own reserves of money-capital have grown sufficiently, because they can themselves go into the money markets to borrow the required funds. Moreover, as the banks act to centralise all of the numerous reserves of money-capital and savings throughout the economy, they thereby create larger reserves of such money-capital than could otherwise have been mobilised.
The development of interest-bearing capital is then, like credit, an integral aspect of the development of industrial capitalism itself. It makes little sense then to pick out interest-bearing capital, or as it has more recently been termed, financialisation, for criticism rather than a critique of capital itself, of which it is merely a manifestation, and one particular aspect.
“It is clear that any other kind of division of profit between various kinds of capitalists, that is, increasing the industrial profit by reducing the rate of interest and vice versa, does not affect the essence of capitalist production in any way. The kind of socialism which attacks interest-bearing capital as the “basic form” of capital not only remains completely within the bounds of the bourgeois horizon. Insofar as its polemic is not a misconceived attack and criticism prompted by a vague notion and directed against capital itself, though identifying it with one of its derived forms, it is nothing but a drive, disguised as socialism, for the development of bourgeois credit and consequently only expresses the low-level of development of the existing conditions in a country where such a polemic can masquerade as socialist and is itself only a theoretical symptom of capitalist development although this bourgeois striving can assume quite startling forms such as that of “crédit gratuit” for example. The same applies to Saint-Simonism with its glorification of banking (Crédit mobilier later).” (p 467-8)
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