[6. The Struggle of Vulgar Socialism Against Interest (Proudhon). Failure to Understand the Inner Connection Between Interest and the System of Wage-Labour]
“Proudhon’s polemic against Bastiat on the question of interest is characteristic both of the manner in which the vulgarian defends the categories of political economy and of the way in which superficial socialism (Proudhon’s polemic hardly deserves the name) attacks them.” (p 523)
Capital involves surplus value. A sum of value is advanced. As Marx explains in Capital II, the difference between money being advanced as capital, rather than spent as currency, is that the first implies that its return is envisioned, and on its return it also contains a supplement, a surplus value. When money is spent as currency no return of the money is envisioned. Either the money is exchanged for some commodity or service, of equal value, immediately, or the money is paid to clear a debt incurred from some previous receipt of goods or services.
When capital is advanced, therefore, the owner of the capital does so not in order to obtain something of equal value in exchange, but in order to have the capital flow back to them, having been supplemented by an amount of surplus value.
“The return movement [of money] should not have shocked Proudhon as being something peculiar if he understood anything at all about the movement of capital. Neither should the surplus-value contained in the returning amount. This is a characteristic feature of capitalist production.” (p 523)
The capitalist who advances machinery, materials and wages to production does not do so in order to obtain something in exchange for their consumption. They do so in order for these commodities to engage in the production process, and it is in that production process that a surplus value is created, because the employed labour creates a greater new value than is paid to it as wages. The point, for the capitalist, of advancing this productive-capital, is to produce this surplus value so that when their capital flows back to them, following the sale of their output, it does so along with this surplus value. They will, thereby, have received an amount of value for which they have given no equivalent value in exchange.
From this surplus value, they finance their personal consumption plus their accumulation of additional capital. When money is spent as currency, just as when commodities are exchanged in barter, the purpose is to obtain some commodity or service of equal value in exchange, for consumption. But, the only point of advancing capital, whether it is money-capital or productive-capital, is with a view to it returning a surplus.
The same is true, therefore, of the owner of loanable money-capital, who advances it only with the intention of its return with a surplus. When the owner of loanable money-capital advances it, and then has it return with a quantity of surplus value in the form of interest, this is no different to the way the industrial capital advances a quantity of productive or commodity-capital, which then returns to them with a quantity of surplus value in the form of profit, which is metamorphosed into a greater quantity of productive-capital or commodity-capital, so that reproduction can proceed on an expanded scale.
Proudhon is outraged that the lender of money-capital can keep receiving interest from having advanced the same capital over and over again. In other words, the money lender lends £1,000 for a year, and at the end of the year gets back the £1,000 plus, say, £100 of interest. They can then lend this same £1,000 for another year, having pocketed the £100 of interest, whilst giving nothing of equal value in exchange. But, he doesn't understand that this is also exactly what the industrial capital does. The industrial capital advances £1,000 in the form of materials and wages, and produces commodities with a value of, say, £1,200, because the employed labour produces a surplus value of £200. So, when the capitalist sells these commodities, the original £1,000 of productive-capital they advanced flows back to them, as money-capital, which they metamorphose into productive-capital, which they advance again, having pocketed the £200 of profit.
“For Proudhon however, as we shall see, the surplus is a surcharge.” (p 523)
Money, in the hands of a lender, acts as capital for them, in that having been advanced it returns with a supplement – interest. But, the money itself does not constitute or act as capital. Money-capital, of itself, has no power of self-expansion. If I have £1,000 that I put in a box, and bury in the ground, in a year's time, when I dig it up, it will still only be £1,000. However I may have abstained from its consumption during the year, and so expressed a time preference, it will have added not one penny of additional value to the £1,000. If I lend the £1,000 to a spendthrift, who simply uses the £1,000 to buy commodities, which they consume, not only will the £1,000 not produce any additional value, which I might then obtain as interest, but the capital will itself have been simply consumed.
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