The industrial capitalist borrowed £1,000 and used it to acquire £1,000 of productive-capital, which they advance to production. They buy £500 of materials and £500 of labour-power, but, now, the workers create only £500 of new value, equal to the value of their labour-power. The value of output is then c 500 + v 500 + s 0 = £1,000. The capitalist must repay the £1,000 of borrowed capital plus £50 of interest, which means they must now pay this from their own personal wealth rather than from profits. There has been no self-expansion of value from which the interest could be paid, and so the interest can only be paid as a transfer of existing wealth. This, in fact, is the way interest-bearing capital stripped away wealth from the landed aristocracy, which borrowed to finance consumption. Something similar occurs where large creditor economies, like China, strip wealth in interest payments from debtor countries, like the US, which borrows to finance its consumption, and its manifestation in huge budget and trade deficits. Similarly, in conditions prior to capitalism, usury stripped away wealth from peasant and artisan producers, and nascent capitalist production, reducing the producers to debt slaves, and appropriating their means of production. In conditions when capitalist production becomes possible, this same process enables the means of production to be concentrated, and primary accumulation of capital to take place.
“The movement between lender and borrower only expresses the starting-point and the final point of capital. It is money when it passes from the hands of A into those of B. It becomes capital in B’s hands, and as such, after undergoing a certain revolution, it returns with profit. This interlude, the real process, which comprises both the circulation process and the production process, is not connected with the transaction between borrower and lender. It [the transaction] recommences only after the money has been realised as capital.” (p 524)
In other words, the movement M – M, and M` - Mi, is not a movement of capital, but only a movement of money. It has he appearance of a movement of capital, because a sum of money, M, returns as a bigger sum of money, Mi, but this was not a self-expansion of value. It was dependent on the real movement of capital, which starts only with M – C, and concludes with C` - M`.
“The money now passes back into the hands of the lender along with a surplus, which, however, comprises only part of the surplus realised by the borrower. The equivalent which the borrower receives is industrial profit, that is, the part of the surplus which he retains and which he appropriates only by means of the money borrowed. All this is not visible in the transaction between him and the lender. This is limited to two acts. Transfer from A’s hands into those of B. Interval during which the money remains in B’s hands. After this interval the money along with interest returns into A’s hands.” (p 524)
This is why interest-bearing capital is the fully fetishised form of capital, and forms a basis for vulgar economy. It appears, superficially, that it is capital itself, in this form, that somehow self-expands value. But, value can only expand if new value is created. It appears from the form of interest-bearing capital that it creates this new value simply by its existence, and the act of it being loaned.
“If one examines merely this form—the transaction between A and B—then one regards the mere form of capital without the intervening stage: a certain amount of money a is handed over and after a certain period returns as a+1/xa without the assistance of any intermediate link apart from the period of time which elapses between the departure of the sum of money a and its return as a+1/xa.” (p 524)
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