Marx quotes Newman,
““The great premium attached to the possession of Gold and Silver, by the power it gives of selecting advantageous moments of purchasing, gradually gave rise to the trade of the Banker.” The Banker “differs from the old Usurer in this respect, that he lends to the rich and seldom or never to the poor. Hence he lends with less risk, and can afford to do it on cheaper terms; and for both reasons, he avoids the popular odium which attended the Usurer” (Francis William Newman, Lectures on Political Economy, London, 1851, p. 44).” (p 537)
This highlights the earlier point that interest rates are high under usury, because of the small number of lenders, who hold a monopoly, and the desperation of the borrowers. Under capitalism, the capitalist always has their own profits as a source of funds, and, as commercial credit develops as a means of conducting trade, between firms, the requirement for money itself, and for borrowing is reduced. It is only when such credit is restricted, and during crises, when firms must borrow to pay bills and stay afloat, that these old conditions reappear, and interest rates rise to their highest level. But, in normal times, money-lending capital is subordinated to industrial capital, and a growing mass of realised profit, along with a growing mass of other money reserves, means that the potential supply of loanable money-capital grows over time, causing a gradual, long-term tendency for the average rate of interest to fall.
Marx cites a number of other writers who describe the way that usury results in a dissolution of feudal landed property.
““The introduction of money which buys all things, and in consequence of that, the favour due to creditors, who have lent their money to a possessor of land, brings in the necessity of legal alienation for the payment of what has been thus lent…” (John Dalrymple, An Essay towards a General History of Feudal Property in Great Britain, London, 1759, fourth ed., p. 124).
“According to Thomas Culpeper (1641), Josiah Child (1670) and Paterson (1694) wealth depends on the self-imposed reduction in the rate of interest on gold and silver.” [This rule] “was observed in England for almost two centuries” (Charles Ganilh, (Des systémes d’économie politique…, seconde éd., tome premier, Paris, 1821, pp. 58-59]).” (p 537-8)
Hume understood that the rate of interest is regulated by the rate of profit. When the rate of profit rises, this encourages a greater demand for capital, as existing businesses expand, and new potential capitalists seek to enter production. But, a higher rate of profit, resulting in a larger mass of realised profits, is also the main source of supply of money-capital. The rate of interest is then determined by these two counteracting forces, rising where the increased demand for capital exceeds the additional supply and vice versa.
Hume sets out his theory as against Locke, but Hume was basing his theory on the more highly developed capitalism.
“This was even more true of Bentham when he wrote his defence of usury towards the end of the eighteenth century.” (p 538)
In the Middle Ages, high rates of interest were paid by the feudal aristocracy, but also existed in the towns, where they were made possible by the very high rates of profit made by the town bourgeoisie in their dealings with the country people who they cheated.
“In Rome, as in the entire ancient world—apart from merchant cities, like Athens and others, which were particularly developed industrially and commercially—[high interest was] a means used by the big landowners not only for expropriating the small proprietors, the plebeians, but for appropriating their persons.” (p 538)
Marx quotes from Gilbart's The History and Principles of Banking (London, 1834).
“That a man who borrows money with a view of making a profit by it, should give some portion of his profit to the lender, is a self-evident principle of natural justice. A man makes a profit usually by means of traffick. But in a country purely agricultural, and under such government as was the feudal system, there can be but little traffick, and hence but little profit.” Legislation against extortionate interest is therefore justified in the Middle Ages. “Besides, in an agricultural country a person seldom wants to borrow money except he be reduced to poverty or distress by misfortune” (p. 163).” (p 539)
Gilbart goes on to explain that, in these precapitalist economies, the rate of interest regulated the rate of profit, whereas under capitalism, the rate of profit regulates the rate of interest. So, the town merchants who made large profits from their dealings with the countryside, handed over a large portion of those profits in interest to the money lenders. During the period of Mercantilism, and colonialism, a similar relation exists, with money-lending capital financing expeditions and trade, whilst the feudal aristocracy and merchants scooped up large rents and profits from their plantations and trade.
“In the seventeenth century, Josiah Child in his Brief Observations concerning Trade and Interest of Money, and Thomas Culpeper in his Traité contre l’usure (1621) likewise, attacks Thomas Manley (author of the tract Interest of Money Mistaken) whom he calls the “champion of the usurers”. Naturally the point of departure—like that of all the arguments of English economists of the seventeenth century—was the wealth of Holland where there was a low rate of interest. Child considers that this low rate of interest is the cause of wealth. Manley declares that it is only the result [of wealth].” (p 539-40)
Marx gives a number of citations from Child and Culpepper to that effect. Culpepper write,
“the abatement of interest causeth an increase of wealth, and the increase of wealth may cause a further abatement of interest. But that is best done by the midwifery of good laws…” ([A New Discourse…, p. 59;] Traités, p. 156).
… I am an advocate for industry, he for idleness…” ([A New Discourse…, p.71;] Traités, p. 179).( p 540)
Marx concludes,
“He appears here as the direct champion of industrial and commercial capital.” (p 540)
And that concludes my reading of Marx's Capital, and Theories of Surplus Value, and my commentary on it, begun on 22nd July 2012. It is like saying farewell to a long-time friend. However, its now time to move on to an early application of the historical materialist method that Marx employs and validates in Capital. That is Lenin's application of that method to analyse the development of capitalism in Russia.
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