Interest-bearing capital, as its name suggests, is capital which bears interest, as opposed to producing profit. Because, interest-bearing capital exists in all precapitalist modes of production, it lends to the appearance that it is the form of capital par excellence, capital whose nature is self-expanding value, and which produces interest in the same way that a pear tree produces pears. It is what leads to bourgeois political economy seeing interest, not profit, as the natural fruit of capital, with profit being merely a form of wage obtained by the entrepreneur. Capital, seen as interest-bearing capital, expands without any reference to the production and exchange of commodities, or circuit of capital.
It even simplifies the circuit of merchant capital, M – C – M`, to just M – M`, removing the tiresome requirement of having to buy and sell commodities, so as to obtain a greater sum of value as a consequence of unequal exchange. The money-lending capitalist does not receive anything in exchange for the money they hand to the borrower, but retains ownership of the money, handing over only its possession, and its use value, for a given period of time. Similarly, when the borrower hands back the money at the end of the loan, they do not get back anything in return. The whole use value, bought by the borrower resides in the use value of the money itself as capital. It is that use value they buy, and whose price is the rate of interest.
Because money is always potentially capital – it can be used by merchant capital to buy commodities to sell at a profit, or by a productive-capitalist to buy productive-capital to produce the average profit, or can simply be loaned out at interest – the owner of money is always likewise potentially a capitalist. Money always has the potential to be used as capital, and thereby to self-expand, and so loanable money-capital is capital par excellence. Simply the ownership of money gives the potential to obtain this increase in value, whether the money is used by the owner productively or not, or indeed, by the borrower or not.
Although interest-bearing capital is thought of as loanable money-capital, any capital that can be loaned is interest-bearing capital. A machine, for example, can be loaned at interest via a lease. The borrower of the machine, at the end of the lease, pays to the lender an amount equal to the wear and tear of the machine, plus an amount of interest. Although the loan appears to be the loan of a machine, what it actually is is the loan of capital. It is only the payment of the amount to cover the wear and tear that represents a payment for the use value of the machine as a commodity. If the borrower had leased the machine for a period covering its normal lifespan, they would have paid – either by regular instalments, or else by a single payment at the end of the lease – an amount covering the full value of the machine, as though they would have simply bought it as a commodity. But, they will also pay an additional amount in addition to that, as interest, which is an amount to cover the price not of the machine as a commodity, but as capital, as something whose use value is to self expand in value.
When other commodities are bought, their use value is measured as a quantity of some physical property. For example, if I buy linen, what I buy is, say, a metre, of the use value of linen. If I buy wine, I buy, say, a litre of the use value of wine. What I pay for these quantities of use value is an amount of value, manifest in a quantity of exchange-value, usually represented as a money price, say £10. But, the use value of capital is its ability to self-expand. The measure of capital, and of its self-expansion, i.e. the measure of its use value, is not in metres, litres, or kilograms, but in money. The only way to measure an amount of capital, as use value, is itself as a quantity of money, and the only way to measure its expansion, is again as an amount of money. In other words, if the average rate of profit is 10%, the value of £100 is £110, which appears to be an absurdity.
However, this absurdity disappears when we consider that money is the general commodity, it represents all other commodities, and in this sense, is a commodity itself. The value of £100 as money, as commodity, is £100, just as the value of a £100 machine is £100. But, here, what is being considered is not the value of a £100 machine as a commodity, but as £100 of capital, and its value as capital is not the same as its value as a commodity. What is being considered is not the value of the use value of the machine, but the value of the use value of capital, its use value as self-expanding value. And, because £100, as the general commodity, always has the potential to buy a £100 machine or other type of capital, when £100 is considered, not as commodity, but as capital, its value too is greater than its value as merely commodity.
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