For the industrial capitalist, interest is a cost of production. If a capitalist borrows £1,000 of capital, and the average rate of profit is 10%, this capital, as capital, as opposed to the commodities that comprise it, has an exchange-value of £1,100. If the industrial capitalist sells the output for £1,100 they make the average profit of £100. In other words, they get back the £1,000 they advanced plus the average profit. But, if they have to pay £100 of interest, they make no industrial profit. It would be just the same to them as if, instead of borrowing the £1,000 of capital, they had provided all the capital themselves, but that, say, wages cost them £100 more, so that their total advanced capital was £1,100 rather than £1,000.
“If the product only yielded interest, this, though it would be a surplus over and above the value of the capital employed, regarded as a mere commodity, would not be a surplus over and above the value of the commodity considered as capital, for the capitalist has to pay out this surplus-value; it is part of his outlay, part of the expenses he has incurred in order to produce the commodities.” (p 478-9)
For the industrial capitalist who uses his own capital, the capital he advances, therefore, is not just the commodity value of that capital, or its money equivalent. If the rate of interest is 5%, then the industrial capitalist who advances £1,000 either as money-capital or as, say, the value of a machine, sees this rather as the advance of £1,050 of capital. Had they simply loaned the machine or money-capital to someone else they would have obtained £1,050 for doing so. This £1,050 is the opportunity cost of the capital.
“Thus, insofar as he advances the £1,000 to himself as capital, he is advancing himself £1,050. Il faut bien se rattraper sur quelqu’un et fusse-t-il sur lui méme! (One must, after all, recover what is due to oneself, even if one takes it out of one’s own pocket.—Ed.)” (p 479)
Marx says,
“The value of commodities worth £1,000 is £1,050 as capital.” (p 479)
But, I don't think this is quite right or tallies with what he says elsewhere. The value of commodities worth £1,000 is £1,000 + p, as capital, where p is the average profit. If the rate of interest is 5%, then the market price of £1,000 of capital, i.e. the price that must be paid to obtain the use value of capital is £50, so that £1,000 becomes worth £1,050. In other words, the market price of capital differs from the value of capital, as determined by the average rate of profit. It necessarily differs, because, whilst the owner of this capital will not lend it for free, the borrower of the capital will not pay all of their profit for it, because if they did there would be no point in borrowing it.
“This means that capital is not a simple quantity. It is not a simple commodity, but a commodity raised to a higher power; not a simple magnitude, but a proportion. It is a proportion of the principal, a given value, to itself as surplus-value. The value of C is C (1+1/x) (for one year) or C+C/x. It is no more possible by means of the elementary rules of calculation to understand capital, that is, the commodity raised to a higher power, or money raised to a higher power, than it is to understand or to calculate the value of x in the equation ax=n.” (p 479)
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