

Karl Marx
Marx, Karl
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Frederick Engels, ed. Ernest Untermann, trans.
First Pub. Date
Chicago: Charles H. Kerr and Co.
Pub. Date
Das Kapital, based on the 1st edition.
39 of 55

Part V, Chapter XXXVI


INTEREST bearing capital, or usurer's capital, as we may call it in its ancient form, belongs like its twin brother, commercial capital, to the antediluvian forms of capital, which long precede the capitalist mode of production and are found in the most diverse economic formations of society.


The existence of usurer's capital requires merely that at least a portion of the products should be converted into commodities, and that money with its various functions should have developed along with the trade in commodities.


The development of capital attaches itself to that of merchant's capital, more particularly to financial capital. In ancient Rome, starting from the last stages of the republic, when manufacture stood far below its ancient average development, merchants' capital, financial capital, and usurers' capital had reached their highest point within that ancient form.


We have seen that hoarding necessarily appears with money. But the professional hoarder does not become important until he becomes transformed into a usurer.


The merchant borrows money in order to make a profit with it, in order to use it as capital, that is, to spend it as such. Hence the money lender stands in the same relation to him in former stages of society as he does to the modern capitalist. This specific relation was felt also by the Catholic universities. "The universities of Alcala, of Salamanca, of Ingolstadt, of Freiburg in the Breisgau, Mayence, Cologne, Treves, one after another recognized the legality of interest for commercial loans. The first five of these approbations were deposited in the archives of the Consulate of the city of Lyons and published in the appendix of the Traité de l'usure et des intérêts, at Lyons, by Bruyset-Ponthus." (M. Augier, Le Crédit Public, etc., Paris, 1842, p. 206.)


In all forms, in which slave economy (not the patriarchal kind, but that of later Grecian and Roman times) serves as a means of amassing wealth, where money is a means of appropriating the labor of others by purchase of slaves, land, etc., there money becomes useful as capital, brings interest, for the reason that it may be so invested.


However, the most characteristic forms, in which usurers' capital exists in times antedating capitalist production, are two. I say purposely characteristic forms. The same forms repeat themselves on the basis of capitalist production, but as mere subordinate forms. They are then no longer the forms which determine the character of interest-bearing capital. These two forms are: First, usury by lending money to extravagant persons of the higher classes, particularly to land owners; secondly, usury by lending money to the small producer who is in possession of his own means of employment, which includes the artisan, but more particularly the peasant, since under precapitalist conditions, so far as they permit of independent individual producers, the peasant class must form the overwhelming majority.


Both the ruin of rich land owners by usury and the spoilation of the small producers leads to the formation and concentration of large money-capitals. But to what extent this process does away with the old mode of production, as happened in modern Europe, and whether it places in its stead the capitalist mode of production, depends entirely upon the stage of historical development and the circumstances surrounding it.


Usurers' capital as the characteristic form of interest-bearing capital corresponds to the predominance of small scale production, of selfemploying peasants and small craft masters. When the laborer is confronted by the means of employment and by the product of labor in the shape of capital, as he is under the capitalist mode of production, he has no occasion to borrow any money as a producer. When he does any borrowing of money, he does it to secure personal necessities, for instance, at the pawnshop. But wherever the laborer is the owner, whether actual or nominal, of his means of employment and of his product, he is confronted as a producer by the capital of the money lender, which stands in his way as a usurer's capital. Newman expresses the matter weakly, when he says that the banker is respected while the usurer is hated and despised, because the banker lends to the rich, whereas the usurer lends to the poor. (J. W. Newman, Lectures on Political Economy, London, 1851, p. 44.) He overlooks the fact that the difference of two modes of social production and of the corresponding social orders intervenes here and that the matter is not exhausted by the distinction between rich and poor. On the contrary, the usury which sucks the life out of the small producer goes hand in hand with the usury which sucks the rich owner of large estates dry. As soon as the usury of the Roman patricians had completely ruined the Roman plebeians, the small peasants, this form of exploitation had an end and slave economy undisguised took the place of small peasant economy.


Under the form of interest the whole of the surplus over the necessary means of subsistence (the amount of what becomes wages later on) of the producers may here be devoured by usury (this assumes later the form of profit and ground rent), and hence it is very absurd to compare the level of this interest, which assimilates all the surplus-value with the exception of the share claimed by the state, with the level of the modern rate of interest, which gives to the interest normally no more than a part of the surplus-value. Such a comparison forgets that the wage worker gives to the capitalist, who employs him, profit, interest and ground rent, that is, the whole surplus-value produced by him. Carey makes this absurd comparison in order to show, how advantageous the development of capital and the fall in the rate of interest, that goes with it, is for the laborer. When it is said that the usurer, not content with squeezing the surplus-labor out of his victim, gradually acquires possession of the means of employment, house and land, of this victim and is thus continually engaged in expropriating him, it is forgotten that this complete expropriation of the laborer from his means of employment is not a result which the capitalist mode of production seeks to accomplish, but rather the established condition from which it starts out. The wage slave is barred from becoming a creditor's slave just as the real slave was, at least in his capacity as a producer. The wage slave may eventually become a creditor's slave in his capacity as a consumer. Usurer's capital in this form, in which it appropriates indeed all surplus-labor of the direct producers, does not alter the mode of production. The ownership, or at least the possession of the means of employment by the producers, and small scale production corresponding to this, are its essential prerequisites. Here capital does not subordinate labor to itself directly, and does not confront the laborer as industrial capital, while usurer's capital merely impoverishes this mode of production, paralyzes the productive forces instead of developing them, and at the same time perpetuates these miserable conditions, in which the social productivity of labor is not developed at the expense of labor itself, as it is under the capitalist mode of production.


On the one hand, usury thus exerts an undermining and destructive influence on ancient and feudal wealth and ancient and feudal property. On the other hand it undermines and ruins small peasants' and small burghers' production, in short all forms, in which the producer still appears as the owner of his conditions of production. Under the developed capitalist mode of production, the laborer is not the owner of his means of employment, of the field which he cultivates, of the raw materials which he works up, etc. But under this system the separation of the producer from the means of employment is the expression of an actual revolution of the mode of production itself. The individual laborers are brought together in large workshops for the purpose of a division of labor, which dovetails one man's activity into another's. The tool becomes a machine. The mode of production no longer permits this dislocation of the means of production, which goes with small property, nor does it permit the isolation of the laborer himself. Under the capitalist mode of production, usury can no longer separate the producer from his means of production, for the simple reason that they have already been separated.


Usury centralises money wealth, where the means of production are disjointed. It does not alter the mode of production, but attaches itself to it as a parasite and makes it miserable. It sucks its blood, kills its nerve, and compels reproduction to proceed under even more disheartening conditions. Hence the popular hatred against usurers, which was most pronounced in the ancient world, where the ownership of the means of production by the producer himself was at the same time the basis of the political conditions, of the independence of the citizen. To the extent that slavery prevails, or to the extent that the surplus product is consumed by the feudal lord and his retinue, while either the slave owner or the feudal lord fall into the clutches of the usurer, the mode of production remains the same. Only, it becomes harder on the laborer. The indebted slave holder or feudal lord becomes more oppressive, because he is himself more oppressed. Or he makes finally room for the usurer, who becomes a landed proprietor or a slave holder himself, like the knights in ancient Rome. Into the place of the old exploiters, whose exploitation was more or less patriarchal, because it was largely a means of political power, steps a hard, money-mad parvenue, But the mode of production itself is not altered thereby.


Usury works revolutionary effects in all precapitalist modes of production only so far as it destroys and dissolves those forms of property, which form the solid basis of the political organisation, and which must be continually reproduced in order that the political organisation may endure. Under the Asiatic forms usury may last for a long time, without producing anything else but economic disintegration and political rottenness. Not until the other prerequisites of capitalist production are present, does usury become a means of assisting in the formation of the new mode of production, by ruining the feudal lord and small scale production on the one hand, and centralising the means of production into capital on the other.


In the Middle Ages no country had any general rate of interest. The Church forbade all lending at interest from the outset. Laws and courts protected loans but very little. Interest was so much higher in individual cases. The limited circulation of money, the necessity of making most payments in cash, compelled people to borrow money, so much more the less the business of exchanging money was developed. There was a great deal of difference, both in the rates of interest and the conceptions of usury. In the time of Charlemagne it was considered usury to charge 100%. In Lindau on Lake Boden some resident burghers took 216 2/3% in 1348. In Zurich the City Council decreed that 43 1/3% should be the legal rate of interest. In Italy 40% had to be paid sometimes, although the ordinary rate did not exceed 20% from the 12th to the 14th century. Verona ordered that 12½% should be the legal rate. Emperor Frederick II. fixed the rate at 10%, but only for Jews. He did not care to speak for the Christians. In the Rhine provinces 10% was the rule as early as the 13th century. (Hüllmann, Geschichte des Städtewesens, II, pp. 55-57.)


Usurer's capital uses a capital's method of exploitation without its mode of production. This state of affairs repeats itself also inside of bourgeois economy, in backward lines of industry or in those lines, which resist the transition to the modern mode of production. For instance, if we wish to compare the English rate of interest with the Indian, we should not take the rate of interest of the Bank of England, but rather that, say, of the lenders of small machinery to small producers in domestic industry.


Usury as an enemy of consuming wealth is historically important inasmuch as it is itself a process generating capital. Usurer's capital and merchant's wealth promote the formation of moneyed wealth independent of landed property. The less products assume the character of commodities, and the less exchange-value seizes the whole breadth and depth of production, the more does money appear as real wealth, that, is, as wealth in general compared to its limited existence in use-values. This is the basis of hoarding. Aside from money as world money and a hoard, it assumes the absolute form of commodities particularly as a means of payment. And it is especially its function as a means of payment, which develops interest and with it money-capital. What squandering and corrupting wealth wants is money as such, money as a means of buying everything (also as a means of paying debts). The small producer needs money above all to make payments. (The conversion of tithes in kind and service in kind to landlords and to the state into money rent and money taxes plays a great role in this.) In either case money is used as money proper. On the other hand hoarding becomes real only in this way, and thus fulfills the dreams of the usurer. What the owner of a hoard demands is not capital, but money as such; but by means of interest he converts his hoard of money into capital for himself, that is, into a means of grabbing surplus-labor in part or entirely, and with it securing a hold on a part of the requirements of production itself, even though this may remain separate from him as a nominal property of others. Usury lives apparently in the pores of production in the same way as the gods live in the spaces between worlds according to Epicurus. Money is obtainable so much harder, the less products assume the general form of commodities. Hence the usurer acknowledges no other barrier but the capacity or resistive power of those who need money. In small peasants' and small burghers' production money serves as a means of purchase mainly, whenever the laborer (who is still to a predominant extent the owner of his means of production under these modes of production) loses his means of employment by accident or by extraordinary upheavals, or at least does not become able to recover them in the ordinary course of reproduction. Means of subsistence and raw materials constitute the essential part of these requirements of production. If these become dearer, it may be impossible to reproduce them out of the returns for the product, just as mere crop failures may prevent the peasant from reproducing his seed grain in its natural form. The same wars, by which the Roman patricians ruined the plebeians, by compelling them to serve as soldiers and thus preventing them from reproducing the requirements of their productive activity and making paupers of them (and pauperization, depletion or loss of the prerequisites of reproduction is here the predominent form), filled the sheds and cellars of the patricians with looted copper, the money of that time. Instead of giving to the plebeians directly the necessary commodities, grain, horses, cattle, they loaned to them this copper, for which they had no use themselves, and availed themselves of this condition for the purpose of enforcing enormous interest by usury, thereby turning the plebeians into their debtor slaves. Under the reign of Charlemagne the Frankish peasants were likewise ruined by wars, so that nothing remained to them but to become serfs instead of debtors. In the Roman empire it happened frequently that famines caused the sale of children, or the voluntary sale of free men by themselves, into slavery to the rich. So much for general turning points. In individual cases the maintenance or loss of the requirements of production on the part of the small producers depend on a thousand accidents, and everyone of such accidents or losses signifies impoverishment and becomes an opening, into which the parasite of usury may enter. The mere death of a cow may render the small producer unable to renew his reproduction on the former scale. Then he falls into the clutches of the usurer, and once he is in the usurer's power he never extricates himself.


The typical great and peculiar domain of the usurer, however, is the function of money as a means of payment. Every payment of money, ground rent, tribute, tax, etc., which becomes due at a certain date, carries with it the necessity of securing money for such a purpose. Hence usury attaches itself from the days of the ancient Romans to those of modern times to the tax renters, the fermiers généraux, the receveurs généraux. Furthermore, commerce and the extension of commodity-production carry with them the separation of purchase and payment by an interval of time. The money has to be on the spot at a definite date. In what manner this may lead to circumstances, in which the money-capitalist and usurer may merge into one even nowadays, is shown by the modern money panics. This same usury, however, becomes one of the principal means of further developing the necessity of using money as a means of payment, by getting the producer ever more deeply into debt and destroying his usual means of payment in such a way that the burden of interest makes even his normal reproduction impossible. In that case usury sprouts up out of money as a means of payment and extends this function of money into its own peculiar domain.


The development of the credit system takes place as a reaction against usury. But this should not be misunderstood, nor interpreted in the manner of the ancient writers, the church fathers, Luther, or the older socialists. It signifies no more and no less than the subordination of interest-bearing capital to the conditions and requirements of the capitalist mode of production.


On the whole, interest-bearing capital under the modern credit-system is adapted to the conditions of the capitalist mode of production. Usury as such does not merely perpetuate itself, but is even freed by nations with a developed capitalist production from those fetters, which were imposed upon it by the old legislation. Interest-bearing capital retains the form of usurer's capital in its transactions with such persons or classes, or those in such circumstances, as do not borrow in the sense corresponding to the capitalist mode of production, or in which borrowing cannot take place in that sense. This applies to borrowing from individual want at the pawnshop; to lending money for the purpose of squandering on the part of wealthy spendthrifts; or to borrowing money on the part of producers who are not capitalist producers, such as small farmers, craftsmen, etc., who are still the owners of their own requirements of production; finally to borrowing on the part of capitalist producers, who still operate on such a small scale, that they approach those self-employing producers.


What distinguishes the interest-bearing capital, so far as it is an essential element of the capitalist mode of production, from usurer's capital is in no way the nature or the character of this capital itself. It is merely the altered conditions, under which it operates, and consequently the totally changed character of the borrower, who transacts business with the money lender. Even in cases where a man without wealth receives credit in his capacity as an industrial or merchant, it is done for the confident expectation, that he will perform the function of a capitalist and appropriate some unpaid labor with the borrowed capital. He receives credit in his capacity as a potential capitalist. This circumstance, that a man without wealth, but with energy, solidity, ability and business sense may become a capitalist in this way, is very much admired by the apologists of the capitalist system, and the commercial value of each individual is pretty accurately estimated under the capitalist mode of production. Although this circumstance continually brings an unwelcome number of new soldiers of fortune into the field and into competition with the already existing individual capitalists, it also secures the supremacy of capital itself, expands its basis, and enables it to recruit ever new forces for itself out of the lower layers of society. In a similar way the circumstance, that the Catholic Church in the Middle Ages formed its hierarchy out of the best brains of people without regard to estate, birth, or wealth, was one of the principal means of fortifying priest rule and suppressing the laity. The more a ruling class is able to assimilate the most prominent men of a ruled class, the more solid and dangerous is its rule.


Instead of the anathema against interest-bearing capital in general, it is on the contrary its explicit recognition, from which the initiators of the modern credit system take their start.


We are not speaking here of such reactions against usury, as tried to protect the poor against it, like the Monts-de-piété (1350 in Sarlins of the Franche-Comté, later in Perugia and Savona of Italy, 1400 and 1479). These are remarkable mainly because they show the irony of history, which turns pious wishes into their very opposite as soon as they are realised. According to a moderate estimate the English working class pays 100% to the pawnshops, those modern successors of the Monts-de-piété.*114 Neither are we speaking of the credit phantasies of a man like Dr. Hugh Chamberleyne or John Briscoe, who attempted during the last decade of the 17th century to emancipate the English aristocracy from usury by means of a country bank with paper money based on real estate.*115


The credit associations, which were established in the 12th and 14th centuries in Venice and Genoa, arose from the need of marine commerce and wholesale trade connected with it to emancipate themselves from the domination of ancient usury and from the monopolists of the money business. The fact that the bona fide banks, which were founded in those city-republics, assumed at the same time the shape of institutions for public credit, from which the state received loans on future tax revenues, is explained by the circumstance that the merchants forming such associations were the prominent men of those states and as much interested in emancipating their state as themselves from the exactions of usurers,*116 and at the same time getting a better and more secure control of the states themselves. Hence, when the Bank of England was being planned, the Tories raised the objection: "Banks are republican institutions. Flourishing banks exist in Venice, Genoa, Amsterdam, and Hamburg. But who ever heard of a Bank of France or Spain?"


The Bank of Amsterdam, in 1609, did not mark an epoch in the development of the modern credit system any more than that of Hamburg in 1619. It was purely a bank for deposits. The checks issued by the bank were indeed merely receipts for the deposited, coined and uncoined, precious metal, and circulated only with the endorsement of those who received them. But in Holland commercial credit and dealing in money had developed together with commerce and manufacture, and the interest-bearing capital had been subordinated to industrial and commercial capital by the course of development itself. This showed itself even in the lowness of the rate of interest. And Holland was considered in the 17th century as the model country of economic development, as England is now. The monopoly of old-style usury, based on poverty, had been overthrown in that country of its own weight.


During the entire 18th century Holland is pointed out as an example and the cry raised for a compulsory lowering of the rate of interest (and legislation acted on this hint), in order to subordinate the interest-bearing capital to the commercial and industrial capital, instead of maintaining the reverse condition. The main spokesman of this movement is Sir Josiah Child, the father of normal English bankerdom. He declaims against the monopoly of the usurers in much the same way that the wholesale clothing manufacturer Moses & Son do when posing as the leaders of the fight against the monopoly of the private tailors. This Josiah Child is at the same time the father of English stock jobbing. Thus he, the autocrat of the East India Company, defends its monopoly in the name of free trade. About Thomas Manley ("Interest of Money Mistaken") he says: "As the champion of the timid and trembling band of usurers he erects his batteries at that point, which I have declared to be the weakest...he denies point blank that the low rate of interest is the cause of wealth and vows that it is merely its effect." Traités sur le Commerce, etc., 1669, translated in Amsterdam and Berlin, 1754.) "If it is commerce that enriches a country, and if a lowering of interest increases commerce, then a lowering of interest or a restriction of usury is doubtless a fruitful primary cause of the wealth of a nation. It is not at all absurd to say that the same thing may be simultaneously a cause under certain circumstances, and an effect under others." (L. c., p. 55.) "The egg is the cause of the hen, and the hen is the cause of the egg. The lowering of interest may cause an increase of wealth, and the increase of wealth may cause a still greater reduction of interest." (L. c., p. 156.) "I am the defender of industry and my opponent defends laziness and sloth." (P. 179.)


This violent fight against usury, this demand for the subordination of the interest-bearing under the industrial capital, is but the herald of the organic creations, that establish these prerequisites of capitalist production in the modern banking system, which on the one hand robs usurer's capital of its monopoly by concentrating all fallow money reserves and throwing them on the money-market, and on the other hand limits the monopoly of the precious metals themselves by creating credit-money.


The same opposition to usury, the demand for emancipation of commerce, industry and of the state from usury, which we observe here in the case of Child, will be found in all writings on banking during the last third of the 17th and the beginning of the 18th centuries. With them go also colossal illusions about the miraculous effects of credit, the abolition of the monopoly of precious metals, their displacement by paper, etc. The Scotchman William Patterson, the founder of the Bank of England and the Bank of Scotland, is by all odds Law the First.


Against the Bank of England all goldsmiths and pawn-brokers raised a howl of rage. (Macaulay, History of England, IV., p. 499.) During the first ten years the Bank had to struggle with great difficulties; great enmity from without; its notes were only accepted far below their nominal value...the goldsmiths (in whose hands the trade with precious metals served as a basis of a primitive banking business) intrigued considerably against the Bank, because their business was reduced by it, their discount lowered, and their business with the government had fallen into the hands of this antagonist. (J. Francis, l. c., p. 73.)


Even before the establishment of the Bank of England a plan for a national bank of credit was suggested in 1683, which had for its purpose, among others, "that business men, when they possess a considerable quantity of goods, may deposit their goods with the assistance of this bank and take up a credit on their tied-up supplies, employ their hands, and increase their business, until they find a good market, instead of selling at a loss." After many difficulties this Bank of Credit was erected in Devonshire House in Bishopsgate Street. It made loans to industrials and merchants on security of deposited goods to the amount of three quarters of their value, in bills of exchange. In order to make these bills of exchange marketable, a number of people in each branch of business were organised into a society, from whom every possessor of such bills should be able to get goods with the same facility as though he were to offer them cash payment. This bank did not do a flourishing business. Its machinery was too complicated, the risk too great in case of a depreciation of commodities.


If we go by the real content of those writings, which accompany and promote theoretically the formation of the modern credit system in England, we shall not find anything in them but the demand for a subordination of interest-bearing capital, and of loanable means of production in general, under the capitalist mode of production as one of its prerequisites. On the other hand, if we cling to the mere phraseology, we shall be frequently surprised by their agreement, down to the very expressions, with the banking and credit illusions of the Saint-Simonists.


Just as the cultivateur in the writings of the physiocrats does not signify the actual tiller of the soil, but the great land owner, so the travailleur with Saint-Simon, and continuing on through his disciples, does not signify the laborer, but the industrial and commercial capitalist. "A travailleur (worker) needs help, backers, laborers; he looks for such as are intelligent, able, devoted; he puts them to work, and their labor is productive." (Religion saint-simonienne, Économie politique et Politique. Paris, 1831, p. 104.)


In fact, one should not forget that only in his last work, Le Nouveau Christianisme, does Saint-Simon speak directly for the working class and declare their emancipation to be the end of his efforts. All his former writings are, indeed, mere glorifications of modern bourgeois society against feudal society, or of industrials and bankers against marshals and jurist law-makers of the Napoleonic era. What a difference compared with the contemporaneous writings of Owen!*117


Among his followers, like wise, the industrial capitalist remains the travailleur par excellence, as the above quoted passage indicates. After reading their writings critically, one will not be surprised, that the realization of their dreams of banks and the upshot of their critique materialised in the Crédit mobilier founded by the Ex-Saint-Simonist Emile Pereire. This form of credit could become prevalent only in a country like France, where neither the credit system nor great industries had become developed to a modern scale.


In the following passage of the "Doctrine de Saint-Simon, Exposition, Première année, 1828-29" (Third edition, Paris, 1831), the germ of the Crédit mobilier is already contained. It is easy to understand, that the banker can lend money more cheaply than the capitalist and the private usurer. The bankers are, therefore, "able to procure tools to the industrials far more cheaply, that is, at a lower interest than the real estate owners and capitalists can, who may be more easily mistaken in their choice of borrowers." (P. 202.) But the authors themselves add in a footnote: "The advantage that would follow from an intervention of bankers between the idle and the travailleurs is often balanced, or even annulled, by the opportunities offered by our disorganized society to Egoism, which may manifest itself in various forms of fraud and charlatanry. The bankers often come between the idle and the travailleurs for the purpose of exploiting both of them to the injury of society." Travailleur means here industrial capitalist. For the rest it is a mistake to consider the means at the command of banks merely as means of idle people. In the first place the banks hold that portion of capital, which industrials and merchants own temporarily in the form of unemployed money, as a money reserve or as capital to be invested. It is idle capital, but not capital of idle people. In the second place the banks hold that portion of the revenues and savings of all kinds which is to be temporarily or permanently accumulated. Both things are essential for the character of the banking system.


But it should never be forgotten, that money, in the first place, in the form of precious metals, remains the basis from which the credit system naturally can never detach itself. In the second place, it must be kept in mind that the credit system has for its premise the monopoly of the social means of production in the hands of private people (in the form of capital and landed property), that it is itself on the one hand an immanent form of the capitalist mode of production, and on the other hand one of the impelling forces of the development of this mode of production to its highest and ultimate form.


The banking system, so far as its formal organisation and centralisation is concerned, is the most artificial and most developed product turned out by the capitalist mode of production, a fact already expressed in 1697 in "Some Thoughts of the Interests of England." This accounts for the immense power of such an institution as the Bank of England over commerce and industry, although their actual movements remain quite outside of its sphere and it is passive toward them. It presents indeed the form of universal bookkeeping and of a distribution of products on a social scale, but only the form. We have seen that the average profit of the individual capitalist, or of every individual capital, is determined, not by the surplus-labor appropriated at first hand by each capital, but by the total quantity of surplus-labor appropriated by the total capital, whereof each individual capital receives a dividend as an aliquot part of the total capital. This social character of capital is promoted and fully realised by the complete development of the credit and banking system. On the other hand this goes still farther. It places at the disposal of the industrial and commercial capitalists all the available, or even potential, capital of society, so far as it has not been actively invested, so that neither the lender nor the user of such capital are its real owners or producers. This does away with the private character of capital and implies in itself, to that extent, the abolition of capital. By means of the banking system the distribution of capital as a special business, as a social function, is taken out of the hands of the private capitalists and usurers. But at the same time banking and credit thus become the most effective means of driving capitalist production beyond its own boundaries, and one of the most potent instruments of crises and swindle.


The banking system shows, furthermore, by putting different forms of circulating credit in the place of money, that money is in reality nothing but a special expression of the social character of labor and its products, so that this character, as distinguished from the basis of individual production, must present itself in the last analysis as a thing, as a peculiar commodity by the side of the other commodities.


Finally, there is no doubt that the credit system will serve as a powerful lever during the transition from the capitalist mode of production to the production by means, of associated labor; but only as one element in connection with other great organic revolutions of the mode of production itself. On the other hand, the illusions concerning the miraculous power of the credit and banking system, as nursed by some socialists, arise from a complete lack of familiarity with the capitalist mode of production and the credit system as one of its forms. As soon as the means of production have ceased to be converted into capital (which includes also the abolition of private property in land), credit as such has no longer any meaning. This was understood also by the advocates of Saint-Simonism. But so long as the capitalist mode of production lasts, interest-bearing capital as one of its forms also continues and constitutes actually the basis of the credit system. Only that sensational writer, Proudhon, who wanted to perpetuate the production of commodities and yet abolish money*118, was capable of dreaming of a crédit gratuit, this monster which was supposed to realise the pious wish of small capitalist production.


In the "Religion saint-simonienne, Économie et Politique," we read on page 45: "Credit serves the purpose, in a society in which some own the instruments of industry without the ability or the will to employ them, and in which other industrious people have no instruments of labor, of transferring these instruments in the easiest manner possible from the hands of the former, their owners, to the hands of the others who know how to use them. Note that this definition regards credit as a result of the way in which property is constituted." Therefore credit disappears with this constitution of property. We read, furthermore, on page 98, that the present banks "consider it their business to yield to that movement which is started by the transactions taking place outside of their domain, not to give them an impulse on their part; in other words, the banks perform the role of capitalists in their transactions with those travailleurs, to whom they loan money." The idea that the banks themselves should take the lead and distinguish themselves "through the number and usefulness of the organised establishments and of the promoted works" (p. 101) contains the Crédit mobilier in embryo. In the same way Charles Pecqueur demands that the banks (or what the Saint-Simonists call a Système général des banques) "should rule production." Pecqueur is essentially a Saint-Simonist, only much more radical. He desires that "the credit institute...should control the entire movement of national production."—"Try to create a national credit institute, which shall advance means to propertyless talent and merit, without, however, knitting these borrowers by compulsion into a close solidarity in production and consumption, but on the contrary rather enabling them to determine their own exchanges and production. In this way you will accomplish only what the private banks accomplish even now, that is, anarchy, a disproportion between production and consumption, the sudden ruin of one, and the sudden enrichment of another; so that your institute will never get any farther than the point of producing a great deal of welfare for one, which amounts to a great deal of suffering endured by another...only that you will have given to the wage laborers assisted by you the means of competing among one another in the same way that their capitalist masters do now." (Ch. Pecqueur, Théorie Nouvelle d' Économie Sociale et Politique, Paris, 1842, p. 434.)


We have seen that merchants' capital and interest-bearing capital are the most ancient forms of capital. In the nature of the case, interest-bearing capital assumes in the popular conception the form of capital par excellence. In the case of merchants' capital, the activity of a middle man is performed, no matter whether it be rated as cheating, labor, or anything else. But in the case of interest-bearing capital the self-reproducing character of capital, the self-expansion of value, the production of surplus-value, surrounds itself with the qualities of the the occult. This accounts for the fact that even a part of the political economists, particularly in countries in which industrial capital is not yet fully developed, as in France, cling to interest-bearing capital as the fundamental form of capital and regard, for instance, ground rent merely as a modified form of it, because the form of lending predominates also in it. In this way the internal articulation of the capitalist mode of production is completely misunderstood, and the fact is entirely overlooked that land, like capital, is loaned only to capitalists. Of course, natural means of production, such as machines, business buildings, etc., may also be loaned instead of money. But they always represent a certain sum of money, and the fact that not only interest, but also wear and tear has to be paid for them, is due to their use-value, the specific natural form of these elements of capital. The thing which decides in this case is whether they are loaned to the direct producers, which would imply the non-existence of the capitalist mode of production, at least in the sphere in which this takes place, or whether they are loaned to the industrial capitalists, which is the basic assumption under the capitalist mode of production. It is still more improper and meaningless to drag the lending of houses, etc., for individual consumption into this part of the discussion. That the working class is swindled to an enormous extent, in this way as well as in others, is an evident fact; but this is done also by the retail dealer, who sells them means of subsistence. It is a secondary exploitation, which runs parallel with the primary one taking place in the process of production itself. The distinction between selling and loaning is quite immaterial in this case and merely formal, and cannot appear as essential to any one, unless he be wholly unfamiliar with the actual condition of the problem.


Both usury and commerce exploit the various modes of production. They do not create it, but attack it from the outside. Usury tries to maintain it directly, in order to be able to exploit it ever anew, but it is conservative and makes it only more miserable. The less the elements of production enter the process of production as commodities and come out of it as commodities, the more does their descent from money appear as a separate act. The more significant the role played by circulation in the social reproduction, the more does usury flourish.


That moneyed wealth develops as a special kind of wealth means with reference to usurer's capital that it collects all its claims in money. It develops so much more in any country, the more the mass of production limits itself to natural services, etc., that is, to use-values.


To that extent usury has a double effect. First, it frames up an independent moneyed wealth by the side of the merchant class. In the second place it appropriates to itself the prerequisites of labor, that is, it ruins the owners of the old requisites of production. Thus it becomes a powerful lever for the formation of the requirements of industrial capital.

Interest in the Middle Ages.


In the Middle Ages the population was purely agricultural. And there, as under feudal rule, commerce can be but small and consequently profit but slight. Hence the laws against usury were justified in the Middle Ages. Moreover, in an agricultural country one has rarely any occasion for borrowing money, except when reduced by poverty and misery....Henry VIII limits interest to 10%, Jacob I. to 8%, Charles II, to 6%, Anne to 5%....In those days the money-lenders, if not legally, were at least in fact monopolists, and therefore it was necessary to place them under restriction like other monopolists....In our times the rate of profit regulates the rate of interest; in those times the rate of interest regulated the rate of profit. If the money-lender loaded a heavy rate of interest on the merchant, then the merchant had to add a higher rate of profit to the price of his commodities. Consequently a large sum of money was taken out of the pockets of the buyers in order to put it into the pockets of the money-lenders. (Gilbart, History and Principles of Banking, pp. 164, 165.)


"I have been told that 10 gulden are now taken annually on every Leipsic fair, that is 30 on each hundred; some add the Neuenburg fair and make it 40 per hundred; whether that is so, I don't know. For shame, where the devil is that going to end?...Whoever has now 100 florins at Leipsic, takes 40 annually, which is the same as devouring one peasant or burgher each year. If one has 1,000 florins, he takes 400 annually, which means devouring a knight or a rich noble per year. If one has 10,000 florins, he takes 4,000 per year, which means devouring a rich count each year. If one has 100,000 florins, as the great merchants must have, he takes 40,000 annually, which means devouring one great rich prince each year. If one has 1,000,000 florins, he takes 400,000 annually, which means devouring one great king each year. And he does not run any risks, either in his person or his wares, does not work, sits near his fireplace and roasts apples; so might a petty robber be sitting at home and devour a whole world in ten years." (Bücher vom Kaufhandel und Wucher, 1524. Luther's Works, Wittenberg, 1589, Part VI.)


"Fifteen years ago I wrote against usury, when it had spread so alarmingly, that I did not hope for any improvement. Since then it has become so proud, that it does not care to be classed as a vice, sin, or shame, but gets itself praised as a pure virtue and honor, just as though it were doing people a great favor and Christian service. What are we going to do now that shame has become honor and vice virtue? (Martin Luther, An die Pfarherrn wider den Wucher zu predigen. Wittenberg,1540.)


Jews, Lombards, usurers and bloodsuckers were our first bankers, our original bank sharks, their character being such as to be called almost infamous....They were joined by the London goldsmiths. On the whole...our original bankers...were a very bad crowd, they were greedy usurers, stony-hearted vampires. (J. Hardcastle, Banks and Bankers. Second edition, London, 1843, pages 19 and 20.)


The example given by Venice (in the matter of establishing a bank) was quickly imitated; all sea towns, and in general all towns which had made a name for themselves by their independence and their commerce, founded their first banks. The return of their ships, which often took a long time, led inevitably to the custom of giving credit, which was further intensified by the discovery of America and the commerce with it. (This is one of the main points.) The freighting of ships made the taking of heavy loans necessary, a thing already occuring in ancient Athens and Greece. In 1380 the Hansa town of Bruges had an insurance company. (M. Augier, l. c., pages 202 and 203.)


To what extent the making of loans to land owners, and to wealth consumers in general, still prevailed in the last third of the 17th century, even in England, before the development of the modern credit system, may be seen in the works of Sir Dudley North, among others. He was not only one of the first English merchants, but also one of the most prominent theoretical economists of his time. And he says: The money loaned among our people at interest is not even to a tenth part given to business people for carrying on their affairs; it is loaned for the greater part for articles of luxury, and for the expenditures of people, who, although great real estate owners, nevertheless spend money faster than is made by their real estate; and since they hate to sell their estates, prefer to mortgage them. (Discourses upon Trade. London, 1691, pages 6 and 7.)


Poland in the 18th century: "Warsaw did a great business in exchange, which, however had for its principal basis and aim the usury of its bankers. In order to secure money, which they might lend to spendthrift nobles at 8% and more, they sought and obtained abroad an exchange credit in blank, that is, it had no commerce with commodities at all for a foundation, but the foreign endorser of the bill stood it patiently, so long as the returns from swindling with bills of exchange did not fail. However, they paid heavily for this by the bankruptcies of men like Tapper and other highly respected Warsaw bankers." (J. G. Büsch, Theoretisch-praktische Darstellung der Handlung, etc., third edition, Hamburg, 1808, volume II, pages 232 and 233.)

Advantage of the Prohibition of Interest for the Church.


"The taking of interest had been forbidden by the church. But the sale of property for the purpose of getting out of a tight place had not been forbidden. It had not even been forbidden to transfer property for a certain period to the money lender as a security, until such time as the debtor should repay his loan, so that the money lender might have the use of the property as a reward for the absence of his money....The church itself and the various corporations and communes belonging to it derived much profit from this practice, particularly during the period of the crusades. This brought a very large portion of the national wealth into the possession of the so-called 'dead hand,' all the more so because the Jews were barred from engaging in such usury, the possession of such fixed liens not being concealable....Without the ban on interest the churches and cloisters would never have become so rich." (L. c., p. 55.)

Notes for this chapter

"It is in consequence of frequent pawning and redeeming within the same month, and of pawning one article in order to redeem another, and of thus obtaining a small difference in money, that the pawnshop interest becomes so excessive. In London there are 240 authorized pawnshop owners, and in the provinces about 1450. The employed capital is estimated at about one million. It is turned over at least three times per year, and every time at an average of 33½%; so that the lower classes of England pay 100% annually for the temporary loan of one million, aside from losses due to lapses of pawned articles." (J. J. Tuckett, A History of the Past and Present State of the Labouring Population. London, 1846, I, p. 114.)
Even in the titles of their works they state as their principal purpose "the general welfare of the landed proprietors, the great appreciation of the value of real estate, the liberation of the nobility and of the gentry, etc., from taxation, the augmentation of their annual income, etc." Only the usurers were to lose, those worst enemies of the nation, who had done more injury to the nobility and yeomanry than an army of invasion from France could have done.
"Charles II. of England, for instance, still had to pay enormous interest of usury and agios to the gold smiths" (the precursors of the bankers), "as much as 20 to 30%." A business so profitable induced "the gold smiths to make more and more loans to the King, to anticipate the entire income on taxes to get a lien on every concession of Parliament in the way of money as soon as it had been made, also to compete against one another in buying up and giving pawn on bills, orders and tallies, so that in reality all incomes of the state passed through their hands." (John Francis, History of the Bank of England, London, 1848, I p. 31.) "The erection of a bank had been suggested several times before that. It was at last a necessity" (L. c., p. 38). "The bank was a necessity for the government itself, sucked dry by usurers, in order to obtain money at a reasonable rate of interest, on the security of parliamentary concessions." (L. c., p. 59 and 60.)
Marx would surely have modified this passage considerably, if he had worked his manuscript over. It was inspired by the role of the ex-Saint-Simonists under the second empire in France, where just at the time when Marx wrote the above the world-redeeming credit-phantasies of this school, by force of history as irony, were being realised in the shape of a swindle of a magnitude never witnessed before. Later Marx spoke only with admiration of the genius and encyclopedic brain of Saint-Simon. The peculiarity of this writer in ignoring the antagonism between the bourgeoisie and the proletariat that was just then coming into existence in France, and of counting that part of the bourgeoisie, which was active in production, among the travailleurs, corresponds to Fourier's conception, who wanted to reconcile capital and labor. This explains itself out of the economic and political conditions of France in those days. The fact that Owen was more farseeing in this respect is due to his different environment, for he lived in a period of industrial revolution and of class antagonism which were becoming acute.—F. E.
Karl Marx, The Poverty of Philosophy, 1847.—Karl Marx, Critique of Political Economy, p. 107.

Part VI, Chapter XXXVII.

End of Notes

39 of 55

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