Marx then makes a detour to specify that his analysis, here, is in relation to interest-bearing capital, in so far as its relation to capitalist production is concerned. In other words, its obvious that a money-lender can lend money to a spendthrift rather than to an industrial capitalist. As discussed previously, this amounts to a transfer of wealth from one set of hands to another. The landed aristocracy had wealth in the form of their estates. As soon as land is bought and sold as a commodity, it obtains a price. Price is exchange value expressed in money. Money is the universal equivalent form of value. Value is labour. All wealth, thereby, becomes a reservoir of value, of congealed labour. The landed aristocracy borrowed money to finance their lavish consumption, levering their borrowing against their estates. When they needed to repay the money-lenders, they did so by selling off parts of their estates. In this way, the interest amounts not to a deduction from profit, but a transfer of wealth, congealed labour, from the hands of the borrower to the lender.
“The position may be similar when money is borrowed in order to make payments. In both cases it is loaned as money, not as capital, but it becomes capital to its owner through the mere act of lending it out.” (p 486)
In so far as payments are concerned, it depends on the nature of these payments. Industrial capitalists sometimes contract out the collection of payments to specific money-dealing capitalists called factors. These factors take the invoices of firms and pay the firm an amount of money equal to the value of the invoice less an amount of commission. This means the firm gets paid straight away, rather than having to wait for their customer to pay them. It amounts to the factor lending this money to them for the duration. The same thing happens when a bank or discount house takes in Bills of Exchange, and pays cash against them, less a discount.
To the extent that all of these payments of what amounts to credit act to speed up the circulation process, the provider of the credit essentially acts as a money-dealing capitalist. Money-dealing capital is a form of merchant capital. In the same way that the productive-capitalist sells commodities to the merchant capitalist below their value, because the merchant is able to reduce the costs of circulation and thereby increases the realised profit of the productive-capitalist, so this is the case with the factor or the bank or discount house. It is as though the producer sells their commodities to them, at a discount, in return for early payment, so as to metamorphose the commodity-capital more quickly.
By reducing the circulation period, this also means that the rate of turnover of capital is increased. So, a given amount of advanced capital is then able to employ a lager mass of labour, and so produce more surplus value. Consequently, money loaned in this way, by increasing the mass of surplus value, and profit, acts as capital.
“Insofar as the acceleration of this conversion process—such acceleration is a general feature of credit—speeds up reproduction, and therefore the production of surplus-value, the money lent is capital. On the other hand, insofar as it only serves to pay debts without accelerating the reproduction process, perhaps even limiting it or making it impossible, it is a mere means of payment, only money for the borrower, and for the lender it is, in fact, capital independent of the process of capital.” (p 486-7)
In other words, in the latter case, suppose firm B has bought goods and services from A with an exchange-value of £1,000. Then B finds that its own takings are inadequate to cover the payment of the debt. It then borrows £1,000 from the bank so as to cover this payment. The £1,000 here is merely money, a means of making this payment. As Marx sets out in Capital III, in the crisis phase of the cycle, firms are increasingly in this position. As profits are squeezed, the supply of money-capital generated internally dries up. Credit becomes contracted so that the demand for money itself rises, as a credit crunch unfolds. As a cascade of payments failures unfolds, firms must borrow money, not to use as money-capital, but as money/currency to make payments and stay afloat. The demand for money rises sharply as the supply of money from realised profits dries up, so that interest rates hit their highest levels.
“In this case interest, like profit upon expropriation, is a fact independent of capitalist production—the production of surplus-value. It is in these two forms of money—money as means of purchase of commodities intended for consumption and as means of payment of debts—that interest, like profit upon expropriation, constitutes a form which, although it is reproduced in capitalist production, is nevertheless independent of it and [represents] a form of interest which belongs to earlier modes of production.” (p 487)
In other words, in previous modes of production, profit exists as profit on alienation, i.e. profit from unequal exchange. Interest too exists in previous modes of production, as interest paid to usurers. Rent too exists in previous modes of production, e.g. feudal rent, as well as with share-cropping etc. However, these earlier forms are not capitalist profit, interest or rent, all of which only arise under capitalism itself. Under capitalism too there is profit on alienation, arising from unequal exchange, but it is not the characteristic form of profit under capitalism.
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