Aristotle: " For the master proves himself such not in the huying, but in the employing of slaves." (The capitalist proves himself such, not by the ownership of capital, which gives him the power to buy labor-power, but in the employment of laborers, nowadays of wage laborers in the process of production. ) " But there is nothing great about this knowledge. Tor whatever the slave must be able to perform, the master must be able to order. Whenever the masters are not compelled to drudge at superintendence, the manager assumes tliis honor, while the masters attend to affairs of state or study philosophy." (Aristotle, Repuhllc, Bekker edition, Book I, Y.)
Aristotle says in plain words, that rulership on the political and economic field imposes upon the powers that be the functions of government, and that they must understand the art of consuming labor-power. And he adds, that this labor of superintendence is not a matter of great moment, and that for this reason the master, who is wealthy enough, leaves tlie " honor " of this drudgery to an overseer.
The labor of management and superintendence arising out of the servitude of the direct producers has often been quoted in justification of this relation, not because it is a function due to the nature of all combined social labor, but because it is due to the antagonism between the owmer of means of production and the owner of mere labor-power, regardless of whether this labor-power is bought by buying the laborer himself, as it is under the slave system, or whether the laborer himself sells his labor-power, so that the process of production is the process by which capital consumes his labor-power. And exploitation, the appropriation of the unpaid labor of others, has quite as often been represented as the reward justly due to the owner of capital for his labor. But it was never better defended than it was by a champion of slavery in the United States, a certain lawyer O'Connor, at a meeting held in ISTew York, on December 19th, 1859, under the slogan of 'Mustice for the South." " ISTow, Gentlemen," he said amid great applause, " nature itself has assigned this condition of servitude to the negro. He has the strength and is fit to work; 454 Capitalist Production.
but nature, which gave him this strength, denied him both the intelligence to rule and the will to work. (Applause.) Both are denied to him! And the same nature, which denied him the will to work, gave him a master, wdio should enforce this will, and make a useful servant of him in a climate, to which he is well adapted, for his own benefit and that of the master who rules him. I assert that it is no injustice to leave the negro in the position, into which nature placed him; to put a master over him; and he is not robbed of any right, if he is compelled to labor in return for this, and to supply a just compensation for his master in return for the labor and the talents devoted to ruling him and to making him useful to himself and to society."
]Srow, the wage-laborer, like the slave, must have a master, wdio shall put him to work and rule him. And assmning this relation of master and servant to exist, it is quite proper to compel the wage-laborer to produce his own wages and also the wages of superintendence, a compensation for the labor of ruling and superintending him, " a just compensation for his master in return for the labor and talents devoted to ruling him and to making him useful to himself and to society." The labor of superintendence and management arising out of the antagonistic character and rule of capital over labor, which all modes of production based on class antagonisms have in common wdth the capitalist mode, is directly and inseparably connected, also under the capitalist system, with those productive functions, which all combined social labor assigns to individuals as their special tasks. The wages of an epitropos, or regisseur, as he used to be called in feudal France, are entirely differentiated from the profit and assumes the form of wages for skilled hj^bor, wdienever the business is operated on a sufficiently large scale to warrant paying such a manager, although our industrial capitalists do not " attend to affairs of state or study philosophy " for all that.
That not the industrial capitalists, but the industrial managers are " the soul of our industrial system," has already A Interest and Profit. 455 been remarked by Mr. Ure.^*^ So far as the commercial part of the business is concerned, we have said as much as was necessary in the preceding j)art of this volume.
The capitalist mode of production itself has brought matters to such a point, that the labor of superintendence, entirely separated from the ownership of capital, walks the streets. It is, therefore, no longer necessary for the capitalist to perform the labor of superintendence himself. A director of an orchestra need not be the owner of tlie instruments of its members, nor is it a part of his function as a director, that he should have anything to do with the wages of the other musicians. The co-operative factories furnish the proof, that the capitalist has become just as superfluous as a functionary in production as he himself, in his highest developed form, finds the great real estate owner superfluous. To the extent that the labor of the capitalist is not the purely capitalistic one arising from the process of production and ceasing with capital itself, to the extent that it is not limited to the function of exploiting the labor of others, to the extent that it rather arises from the social form of the labor-process as a combination and co-operation of many for the purpose of bringing about a common result, to that extent it is just as independent of capital as that form itself, as soon as it has burst its capitalistic shell. To say that this labor as a capitalistic one, as a function of the capitalist is necessary, amounts merely to saying that the vulgar economist cannot conceive of the forms developed in the womb of capitalist production separated and freed from their antagonistic capitalist character. Compared to the money-capitalist the industrial capitalist is a laborer, but a laboring capitalist, an exploiter of the labor of others. The wages which he claims and pockets for this labor amount exactly to the appropriated quantity of another's labor and depend directly upon the rate of exploitation of this labor, so far as he takes the trouble to assume the necessary burdens of exploitation. They do not depend ■'^ A. Ure, Philosofhy of Manufactures, French translation, 1836, I, p. 68, where this Pindarus of the manufacturers at the same time testifies that most of the manufacturers have not the slightest understanding of the mechanism, which they set in motion.
456 Capitalist Production.
upon the degree of his exertions in carrying on this exploita-^ tion. He can easily shift this burden to the shoulders of a superintendent for moderate pay. After every crisis one may see plenty of ex-manufacturers in the English factory districts, who for low wages superintend their own former factories as managers of the new owners, who are frequently their creditors.''^^ The wages of superintendence, both for the commercial and the industrial manager, appear completely separated from the profits of enterprise in the co-operative factories of the laborers as well as in capitalistic stock companies. The separation of the wages of superintendence from the profits of enterprise, Avhich is at other times accidental, is here constant. In the co-operative factory the antagonistic character of the labor of superintendence disappears, since the manager is paid by the laborers instead of representing capital again-t them. Stock companies in general, developed with the credit system, have a tendency to separate this labor of management as a function more and more from the ownership of capital, whether it be self-owned or borrowed. In the same way the development of bourgeois society separates the functions of judges and administrators from feudal property, whose prerogatives they were in feudal times. Since the mere owner of capital, the money-capitalist, has to face the investing capitalist, while money-capital itself assumes a social character with the advance of credit, being concentrated in banks and loaned by them instead of by its original owners, and since, on the other hand, the mere manager, who has no title whatever to the capital, whether by borrowing or otherwise, performs all real functions pertaining to the investing capitalist as such, only the functipnary remains and the capitalist disappears from the process of production as a superfluous person.
From the public accounts of the co-operative factories in '''' In one case known to me, after the crisis of 1868, a bankrupt manufacturer became the paid wage-laborer of his own former employes. This factory was operated after the bankruptcy of its owner by a laborers' co-operative, and its former owner was employed as manager. — F. E.
Interest and Profit. 457 England "'^ it is manifest, that the profit, after the deduction of the wages of the superintendent, which form a part of the invested capital the same as the wages of the other laborers, was higher than the average profit, although they paid occasionally a much higher interest than the private factories. The cause of the greater profit was in all these cases a greater economy in the use of constant capital. What interests us particularly here is the fact that here the average profit (= interest + profit of enterprise) presents itself actually and palpably as a magnitude, which is wholly separated from the wages of superintendence. Since the profit was here higher than the average profit, the profit of enterprise was also higher than the current one.
The same fact is revealed by some capitalist stock companies, such as joint stock banks. The London and Westminster Bank paid in 1863 annual dividends of 30%, the Union Bank of London and others 15%. Aside from the salary of the director, the interest paid for deposits is here deducted from the gross profit. The high profit is explained in this case by the small proportion of the paid-up capital to the deposits. For instance, in the case of the London and Westminster Bank, it was in 1863: Paid-up Capital 1,000,-000 pounds sterling; deposits 14,540,275 pounds sterling. In that of the Union Bank of London, 1863: Paid-up capital 600,000 pounds sterling; deposits 12,384,173 pounds sterling.
The confounding of the profit of enterprise with the w^ages of superintendence or management was due originally to the antagonistic form assumed toward interest by the surplus over the interest. It was further promoted by the apologetic intention to represent profit, not as a surplus-value derived from unpaid labor, but as wages of the capitalist himself for labor performed by him. This was met on the part of the socialists by the demand, that profit should actually be reduced to what it pretended to be theoretically, namely mere wages of superintendence. And this demand was all the more disagreeable to the apologists of the capitalists, as these wages '* The accounts qvioted here go no farther than 1864, since the above was written 458 Capitalist Production.
of superintendence, like all other wages, found on one hand their level and fixed market-price to the extent that a numerous class of industrial and commercial superintendents was formed/^ while on the other hand these wages fell;, like all wages for skilled lahor, with the general development, which reduces the cost of production of specifically trained labor- jj power.^*^ With the development of co-operation on the part! of the laborers, of stock enterprises on the part of the bourgeoisie, even the last pretext for the confusion in matters of profit of enterprise and wages of management was removed, and profit aj^peared also in practice what it was undeniably in theory, mere surplus-value, a value for which no equiva-, lent was paid, realised unpaid labor. It was then seen that the investing capitalist really exploits labor, and that the fruit of his exploitation, when he worked witli a borrowed capital, was divided into interest and profit of enterprise, a surplus of profit over interest.
On the basis of capitalist production, a new swindle develops in stock enterprises with the wages of management. It consists in placing above the actual director a board of managers or directors, for whom superintendence and management serve in reality only as a pretext for plundering stockholders and amassing wealth. Very interesting details concerning this are found in '' The City or the Physiology of London Business; ivilh Sketches on 'Change, and the Coffee Houses, London. 1845." Here is a sample: "What bankers and merchants gain by being on the boards of eight or nine different companies, may be seen from the following illustration: The private account of Mr. Timothy Abraham Curtis, handed in by the court of bankruptcy on his failure, " " Masters are laborers as well as their journeymen. In this character their interest is precisely the same as of their men. But they are also either capitalists, or the agents of capitalists, and in this respect their interest is decidedly opposed to the interest of the workmen." (P. 27.) " The wide spread of education among the journeymen mechanics of this country diminishes daily the value of the labor and skill of almost all masters and employers by increasing the number of persons who possess their peculiar knowledge." (P. 30, Hodgskin, Labor defended against the Claims of Capital, etc., London, 1825.)
^ " The general relaxation of conventional barriers, the increased facilities of education tend to bring down the wages of skilled labor instead of raising those of the unskilled." (J. St. Mill, Principles of Political Economy, 2nd ed., London, Interest and Profit. 459 showed an income of 8,900 pounds sterling per year under the head of directorships. Since Mr. Curtis had been a director of the Bank of England and of the East Indian Company, every stock company was happy to secure him as a director." (P. 82.) — The remuneration of the directors of such companies for each weekly meeting is at least one guinea. The proceedings of the court of bankruptcy show, that these wages of superintendence are as a rule inversely proportioned to the actual superintenderce performed by these nominal directors.
CHAPTEK XXIV.
EXTEENALISATION OF THE RELATIONS OF CAPITAL IN THE FORM OF INTEREST-BEARING CAPITAL.
In the interest-bearing capital, the relations of capital assume their most externalised and most fetish-like form. We have here M — M' money creating more money, self -expending value, without the process intermediate between these two extremes. In the merchants' capital, M — C — M', there is at least the general form of the capitalistic process, although it clings to the sphere of circulation, so that profit appears merely as profit from selling; but it is at least seen to be the product of a social relation^ not the product of a mere tiling. The form of merchants' capital presents at least the aspect of a process, of a unity of antagonistic phases, of a movement divided into two transactions, namely into the purchase and sale of commodities. This is obliterated in M — M', the form of interest-bearing capital. For instance, if 1,000 pounds sterling are loaned by some capitalist, when the rate of interest is 5%, then the value of 1,000 pounds sterling as a capital for one year is C -(- Ci', C standing for the capital and i' for the rate of interest. In the present case this would mean 5%, or Yf"oOi"To ' ^^^ 1,000 -f- 1,000 times T^ ^1,050 pounds sterling. The value of 1,000 pounds sterling as capital is 1,050 pounds sterling, that is, capital is not a simple magnitude. It is a relation of mag- 460 Capitalist Production.
nitudes, a relation of principal sum, as a given value, to itself as a self-expanding value, as a principal sum having produced a surplus-value. And we have seen that capital assumes this form of a directly self-expanding value for all investing capitalists, whether thej work with their own or with a borrowed capital.
M — M'. We have here the original starting point of capital, we have money in the fonnula M — C — M' reduced to its two extremes M — M', in which M' stands for M -}- increment of M, money creating more money. It is the primal and general formula of capital concentrated into a meaningless summary. It is caj^ital perfected, a unity of the process of production and process of circulation, yielding a certain surplus-value in a certain period of time. In tlie form of interest-bearing capital this appears spontaneously without any intervention of the processes of production and circulation. Capital appears as a mysterious and self-creating source cf interest, a thing increasing itself. The Thing (money, commodity, value) is now capital even as a mere thing, and capital appears as a mere thing. The result of the entire process of reproduction appears as a faculty iidierent in the thing itself. It depends on the owner of the money, which represents the universal exchange-form of commodities, whether he wants to spend it as money or loan it as capital. In the interest-bearing capital, therefore, this automatic fetish is elaborated in its pure state, it is self-expanding value, money generating money, and in this form it does not carry any more scars of its origin. The social relation is perfected into the relation of a thing, of money, to itself. Instead of the actual transformation of money into capital, only an empty form meets us here. As in the case of labor-power, so here in the case of interest-bearing capital the use-value of money becomes that of creating value, and at that a greater value than it contains itself. Money as such is potentially selfexpanding value and is loaned as such, and loaning is the form of sale for this peculiar commodity. It becomes a faculty of money to generate value and yield interest, just as it is a faculty of a pear tree to bear pears. And the money li Relations of Capital. 461 lender sells his money as such an interest-bearing thing. But that is not all. The actually invested capital, as we have seen, presents itself in such a light, that it seems to yield the interest, not as a capital performing its function, but as a capital in itself, as money-capital.
And still something else becomes perverted. While interest is only a portion of the profit, that is, of surplus-value, which the investing capitalist squeezes out of the laborer, it looks now on the contrary as though the interest were the typical fruit of capital, the primal thing, and profit, in the shape of profit of enterprise, a mere accessory and by-product of the process of reproduction. Thus the fetish form of capital and the conception of a fetish capital are perfect. In M — M' we have the void form of capital, the perversion and individualisation of the relations of production in their highest degree. The interest-bearing form is the simple form of capital, in which it is assumed to be antecedent to its own process of rej^roduction. It is the faculty of money, or of a commodity, to expand its own value independently of reproduction, a mystification of capital in its most flagrant form.
For vulgar political economy, which desires to represent capital as a spontaneous source of value and its creation, this mystic form is, of course, a great boon. It is a form, in which the source of profit is no longer discernible, and in which the result of the capitalist process of production receives an independent existence apart from this process.
It is not until capital becomes money-capital, that it can assume the foi*m of a commodity, whose self -expanding faculty has a definite price, which is quoted in the current rate of interest.
As an interest-bearing capital, in its direct form of interestbearing money-capital (the other forms of interest-bearing capital, which do not concern us here, are derived from this one and require its existence), capital assumes its pure fetish form, M — M' as a subject and a saleable thing. In the first place, its continual existence as money gives to it a form, in which all its functions are obliterated and its real elements 462 Capitalist Production.
invisible. For money is precisely that form, in which the distinctions of commodities as use-values are concealed, and with them the distinctions of the industrial capital consisting of these commodities and their conditions of production. It is that form, in which value, in tlie present case capital, exists as an independent exchange-value. In the process of reproduction of capital, the money-form is but a transient one, a mere passing link. But on the money-market, capital always exists in this form. In the second place, the surplusvalue produced by it, which has here again the form of money, appears as inherent in it. Like the growing of trees, so the breeding of money appears as an innate quality of capital in the form of money-capital.
In the interest-bearing capital, the movement of capital is contracted. The intervening process is omitted. In this way a capital of 1,000 appears with the fixed faculty of being of itself 1,100 and converting itself after a certain period into 1,100, just as wine in a cellar improves its use-value after a certain period. Capital is then a thing, which is of itself capital. The money is then pregnant. As soon as it has been loaned, or invested in the process of reproduction (when it yields interest to its owner separate from profit of enterprise for his function as investing capitalist), the interest accumulates, whether it be awake or asleep, at home or abroad, day or night. In the interest-bearing money capital, then, the fervent wish of the hoarding miser is fulfilled (and all capital is money-capital, so far as the expression of its value is concerned, or is considered as the expression of money-capital).
It is this inherent dwelling of interest in money-capital as a thing (and this is the aspect here assumed by the production of surplus-value by capital), which engages Luther's attention so much in his naive thundering against usury. After demonstrating, that interest may be demanded, when failure to pay back a loan to a lender, who has to meet a certain payment himself, caused a loss to him, or when he might have made a profit on a bargain, for instance in buying a garden, but lost it for the reason that the borrower failed to return Relafio)is of Capital. 463 the loan on time, Luther continues: " Now that I have loaned you 100 guilders, you make good my double loss due to the fact that I could not pay on one side and not buy on the other, so that I had to lose on both sides, and this is called double interest, for loss sustained and gain stopped. Having heard that John lost on his loan of 100 guilders and demands just damages, they rush in and charge double interest on every 100 guilders, which interest was only charged for the loss due to nonpayment and to inability to make a profit on a bargain, just as though every 100 guilders could naturally groiu double interest, so that whenever they have 100 guilders, they loan them out and charge for two losses, which they have not at all sustained...Therefore you are a usurer, who takes damages out of his neighbor's money for an imaginary loss that you did not sustain at all, and which you can neither prove nor calculate. This sort of loss is called by the jurists not true, hut fantastical interest. It is a loss of which each dreams for himself...It will not do to say that you might incur a loss, because I might not have been able to pay or buy. That would be making something out of a thing that is not so, a thing that is uncertain into a thing that is absolutely sure. Such usury would eat up the world in a few years...If the lender accidentally incurs a loss, without his fault, he may demand damages for it, but it is different in trade and just the reverse.
There they scheme to profit at the expense of their needy neighbors, how to amass wealth and get rich, to be lazy and idle and live in luxury on the labor of others, without any care, danger and loss. To sit behind the stove and let my 100 guilders gather wealth for me in the country and yet keep them in my pocket, because they are only loaned, without any danger or risk, my friend, who would not like to do that! " (Martin Luther, An die Pfarherrn wider den Wncher zu predigen, etc., Wittenberg, 1540.)
The idea of capital as a self-reproducing and thereby selfexpanding value, lasting and growing eternally by virtue of its inherent power — by virtue of the hidden faculties of the scholastics — has led to the fabulous fancies of Dr. Price, 464 Capitalist Production.
Avliich far outdo the fantasies of the alchemists; fancies, in which Pitt seriously believed and which he used as pillars of his financial administration in his laws concerning the sinking fund.
" Money bearing compound interest grows at first slowly; but since the rate of increase is constantly accelerated, it becomes so fast after a while as to defy all imagination. A penny, loaned at the birth of our Savior at compound interest at 5%, would already have grown into a larger amount than would be contained in 150 million globes, all of solid gold. But loaned at simple interest, it would have grown only to 7 sh. 44 d. in the same time. Hitherto our government has preferred to improve its finances in the latter instead of in the former way." ^^ He flies still higher in his " Ohservaiions on Reversionary Payments, etc., London, 1782." There we read: " 1 sh. invested at the birth of our Savior " (presumably in the Temple of Jerusalem) "at 6% compound interest would have grown to a larger amount than the entire solar system could contain, if it were transformed into a globe of the diameter of the orbit of Saturn." " A state need never to be in difficulties on this account; for Avith the smallest savings it can pay the largest debt in as short a time as its interests may *^ Richard Price, An Appeal to the Public on the subject of the National Debt, 2nd ed., London, 1772. He cracks the naive joke: " A man must borrow money at simple interest, in order to increase it at compound interest." (R. Hamilton, An Inquiry into the Rise and Progress of the National Debt of Great Britain, 2nd ed., Edinburgh, 1814.) According to this, borrowing would be the safest means for private people to gather wealth. But if I borrow 100 pounds sterling at 5% annual interest, I have to pay 5 pounds at the end of the year, and even if the loan lasts for 100 million years, I have meanwhile only 100 pounds to loan every year and 5 pounds to pay every year. I can never manage by this process to loan 105 pounds sterling when borrowing 100 pounds sterling.
And how am I going to pay the 5 pounds? By new loans, or, if it is the state, by new taxes. Now, if the industrial capitalist borrows money, and his profit amounts to 15%, he may pay 5% interest, spend 5% for his private expenses (although his appetite grows with his income), and capitalise 5%. In this case, 15% are the premise on which 5% interest may be paid continually. If this process continues, the rate of profit, for the reasons indicated in former chapters, will fall from 15% to, say, 10%. But Price forgets wholly that the interest of 5% presupposes a rate of profit of 15%, and assumes it to continue with the accumulation of capital. He does not take note of the process of accumulation at all, but thinks only of the loaning of money and its return with compound interest. How that is accomplished is immaterial to him, since for him it is the innate faculty of interest-bearing capital.
Relations of Capital. 465 demand." (P. 13G.) What a pretty theoretical introduction to the national debt of England!
Price was simply dazzled by the enormousness of the figures arising from geometrical progression. Since he regarded capital, without taking note of the conditions of reproduction and labor, as a self-regulating automaton, as a mere number increasing itself (just as Malthus did with men in their geometrical progression), he could imagine that he had found the law of its growth in the formula s = c(l -f- i)^, in which s stands for the sum of capital plus compound interest, c for the advanced capital, i for the rate of interest expressed in aliquot parts of 100, and n for the number of years in which this process takes place.