they are sold again and a portion of the money-capital of the public appropriated through them. That portion, which is not sold yields a higher interest, because it was bought below price.
But the money-capitalists convert all profits made by them and reconverted into capital first into loanable money-capital. An accumulation of such money-capital, as distin- Money-Capital and Actual Capital. 591 guished from the actual accumulation that is it3 mother, takes place, obviously, even if we consider only the moneycapitalists, bankers, etc., by themselves, that is, an accumulation of this particular class of capitalists. And it must grow with every expansion of the credit system such as goes with the expansion of the process of reproduction.
If the rate of interest is low, then the depreciation of the money-capital falls principally upon the depositors, not upon the banks. Before the development of stock banks threefourths of all deposits rested in the English banks without returning any interest. If interest is now paid on them, it amounts to at least 1% less than the current rate of interest.
As for the money accumulation of the other classes of capitalists, we leave aside that portion of it, which is invested in interest-bearing papers and accumulates in this form. We consider merely that portion, which is thrown upon the market as loanable money-capital.
In the first place, we have here that portion of the profit, which is not spent as revenue, but intended for accumulation, yet at the same time not immediately of any use for the industrial capitalists in their own business. This profit exists originally in the form of commodity-capital, a part of whose value it constitutes, and is realised with it in money. Now, if it is not reconverted into the productive elements of commodity-capital (we leave out of consideration for the present the merchant, whom we shall have to discuss separately), then it must remain for a while in the form of money. This mass increases with the mass of capital itself, even when the rate of profit declines. That portion, which is to be spent as revenue, is gradually consumed, but forms in the meantime a loan capital of the banker in the form of a deposit. Thus even the gro\vth of that portion of profit, which is spent as revenue, expresses itself in a gradual and continually repeated accumulation of loan capital. The same is true of that other portion, which is intended for accumulation. With the development of the credit system, then, and its organisation, even the increase of revenue, that is, of the consumption of the industrial and commercial capitalists, expresses 592 Capitalist Production.
itself as an accumulation of loan capital. And this holds good of all revenues which are consumed gradually, in other words, of gi'ound rent, wages in their higher form, incomes of unproductive classes, etc. All of them assume for a certain time the form of a money revenue and are, therefore, convertible into deposits and thus into loan capital. All revenue, whether it be intended for consumption or accumulation, so long as it exists in some form of money, is a part of the value of commodity-capital transformed into money, and is, for this reason, an expression and result of the actual accumulation, but not the productive capital itself. When a spinner has exchanged his yarn for cotton, while he has exchanged that portion, which forms his revenue, for money, then the real existence of his industrial capital is the yarn, which has passed into the hands of the weaver or, perhaps, of some private consumer, and this yarn is the existence of both the capital-value and surplus-value contained in it, Avhether it be intended for reproduction or consumption. The magnitude of the surplus-value transformed into money depends upon the magnitude of the surplus-value contained in the yarn. But as soon as it has been transformed into money, this money is but the existence of the value of this surplusvalue. And as such it becomes an element of loan capital.
,To this end nothing more is required than that it should be transformed into a deposit, if it has not been loaned out by its owner. But in order to be reconverted into productive capital, it must have reached a certain minimum limit.
Money-Capital and Actual Capital. 593 CHAPTER XXXII.
MONEY-CAPITAL AND ACTUAL CAPITAL. III.
(Concluded.)
The mass of the money thus reconverted into capital is a result of the voluminous process of reproduction, but considered by itself, as loanable money-capital, it is not itself a mass of reproductive capital.
The most important point of our presentation so far is, that the expansion of that part of the revenue which is intended for consumption (leaving out of consideration the laborer, because his revenue is equal to the variable capital) represents itself in the first instance as an accumulation of money-capital. The accumulation of money-capital, therefore, presents a factor, which is essentially different from the actual accumulation of industrial capital; for that portion of the annual product, which is intended for consumption, does not become capital in any way. One portion of it replaces capital, namely the constant capital of the producers of means of consumption, but to the extent that it is actually converted into capital, it exists in the natural form of the revenue of the producers of this constant capital. The same money, which represents the revenue and serves merely for the promotion of consumption, is regularly transformed into loanable money-capital, for a certain time. So far as this money represents wages, it is at the same time the money-form of the variable capital; and so far as it replaces the constant capital of the producers of means of consumption, it is the money-form temporarily assumed by their constant capital and serves for the purchase of the natural elements of the constant capital to be replaced by them. Xeither in the one nor in the other form does it express in itself any accumulation, although its mass increases with the volume of the proe- 2L 594 Capitalist Production.
ess of reproduction. But it performs temporarily the function of loanable money, of money-capital. In this respect the accumulation of money-capital must reflect a gTeater accumulation of capital than is actually existing, owing to the fact that the extension of individual consumption, being promoted by money, appears as an accumulation of money-capital, whereby it furnishes the money-form for the actual accumulation of money opening new investments of capital.
The accumulation of money, then, expresses in part nothing else but the fact that all money, into which the industrial capital is transformed in the course of its cycle, assumes the form, not of money advanced by the reproductive capitalists, but of money harrowed by them; so that indeed the advance of money necessary in the process of reproduction appears as an advance of borrowed money. On the basis of commercial credit one capitalist loans indeed to another the money required for the process of reproduction. But this assumes now the form of a transaction, in which the banker, who receives the money as a loan from one portion of the reproductive capitalists, lends it to another portion of these reproductive capitalists, so that the banker appears in the role of a dispenser of blessings; at the same time the disposition of this capital drifts wholly into the hands of the banker in his capacity as a middleman.
A few special forms of accumulation of money-capital still remain to be mentioned. Capital is released, for instance, by a fall in the price of the elements of production, raw materials, etc. If the industrial capitalist cannot expand his process of reproduction immediately, then a portion of his money-capital is expelled from the cycle as superfluous and converted into loanable money-capital. In the second place, capital in the form of money is released especially by the merchant, w^henever any interruption of his business takes place. If the merchant has disposed of a series of transactions and cannot begin a new series on account of such interruptions until later, then his realised money represents for him but a hoard, superfluous capital. But at the same time it represents directly an accumulation of loanable money- Money-Capital and Actual Capital. 595 capital. In the first case, the accumulation of money-capital expresses a repetition of the process of reproduction under more favorable conditions, an actual release of a portion of formerly tied up capital, in other words, an opportunity for exjjanding the process of reproduction with the same amount of money. But in the other case it expresses merely an interruption in the flow of transactions. However, in both cases it is converted into loanable money-capital, represents its accumulation, influences equally the money-market and the rate of interest, although it expresses a promotion of the accumulation in the actual process in one case and its obstruction in the other. Finally an accumulation of moneycapital is brought about by that section of people, who have made their little pile and have withdrawn from reproduction. In proportion as more profits are made in the course of the industrial cycle, their number increases. In their case the accumulation of loanable money-capital expresses on the one hand an actual accumulation (considering its relative volume), and on the other hand the extent of the transformation of industrial capitalists into mere money-capitalists.
As for the other portion of profit, which is not intended to be consumed as revenue, it is converted into money-capital only when it is not immediately able to find a place for investment in the expansion of the productive sphere in which it has been made. This may be due to two causes. Either the sphere of production may be saturated with capital. Or it may be because accumulation must first have reached a certain volume, before it can serve as capital, according to the proportions of the investment of new capital required in this particular sphere. Hence it is converted for a while into loanable money-capital and serves in the expansion of production in other spheres. Assuming all other circumstances to remain unaltered, the mass of profits required for reconversion into capital will depend on the mass of profits made and thus on the extension of the process of reproduction itself. But if this new accumulation meets with difficulties in its employment, through a lack of spheres for investment, due to the overcrowding of the lines of production and an oversupply 296 Capitalist Production.
of loan capital, then such a plethora of loanable money-capital proves merely that capitalist production has its limits. The subsequent swindle with credit proves, that no positive obstacle stands in the way of the employment of this superfluous capital. The obstacle is merely one immanent in its laws of self-expansion, namely the limits in which capital can expand itself as such. A plethora of money-capital does not necessarily indicate an overproduction, nor even a lack of spheres of investment for capital.
The accumulation of loan-capital consists simply in the fact that money is precipitated as loanable money. This process is very different from an actual transformation into capital; it is merely the accumulation of money in a form, in wdiich it may be invested as capital. But this accumulation may, as we have shown, indicate facts, which are greatly different from actual accumulation. So long as actual accumulation is continually expanding, this extended accumulation of money-capital may be partly its result, partly the result of circumstances, which accompany it but are quite different from it, partly also the result of impediments to actual accumulation. Since accumulation of loan-capital is swelled by such circumstances, which are independent of actual accumulation but nevertheless accompany it, there must be a plethora of money-capital in definite phases of the cycle for this reason alone, if for no other, and this plethora must develop with the organisation of credit. And simultaneously with it must also develop the necessity of driving the process of production beyond its capitalistic limits, by overproduction, excessive commerce, extreme credit. And this must take place in forms that call forth a reaction.
So far as accumulation of money-capital from ground rent, wages, etc., is concerned, it is superfluous to discuss that here. Only one thing must be mentioned, namely that the business of actual saving and abstinence (by people forming hoards), to the extent that it furnishes elements of accumulation, is left in the division of labor, which comes with the progress of capitalist production, to those who receive the smallest share of such elements, and who frequently enough lose even their I Money-Capital and Actual Capital. 597 savings, as do the laborers when banks fail. On the one hand the capital of the industrial capitalist is not " saved " by himself, but he has command of the savings of others in proportion to the magnitude of his capital; on the other hand the money-capitalist makes of the savings of others his own capital, and of the credit, which the reproductive capitalists give to one another, and which the public gives to them, a source for enriching himself. The last illusion of the capitalist system, to the effect that capital is the fruit of ones own labor and saving, is thereby destroyed. Not only does profit consist of the appropriation of other people's labor, but the capital, with which this labor of others is set in motion and exploited, consists of other people's property, which the money-capitalist places at the disposal of the industrial capitalist, at the same time exploiting the latter in his turn.
A few remarks remain to be made about credit-capital.
How often the same piece of money may figure as a loan capital, depends, as we have previously indicated.
1) On the question, how often it realises the values of commodities by sale or purchase, thereby transferring capital, and furthermore on the question, how often it realises revenue. How often it gets into other hands as a realised value, either of capital or of revenue, depends, therefore, obviously, upon the volume and mass of the actual transactions; 2) On the economy of payments and on the development and organisation of the credit-system; 3) On the concatenation and velocity of action of the credits, so that a deposit set down at one point starts off immediately as a loan at another.
Even assuming that the form, in which loan capital exists, is merely that of actual money, of gold or silver, of that commodity whose substance serves as a measure of value, a large portion of this money-capital is necessarily purely fictitious, that is, a title to some value just as the tokens of value. So far as money functions in the cycle of capital, it forms indeed for the moment a money-capital; but it does not convert itself into loanable money-capital; it is rather exchanged for the elements of productive capital, or paid out as a medium of 59^ Capitalist Production.
circulation in the realisation of revenue, and cannot, therefore, convert itself into loan capital for its owner. But so far as it is converted into loan capital, and the same money repeatedly represents loan capital, it is evident that it exists only at one point in the form of metallic money; at all other points it exists only in the form of titles on capital. The accumulation of these titles, according to our analysis, arises from the actual accumulation, that is, from the transformation of the values of commodity-capital, etc., into money; but nevertheless the accumulation of these titles as such differs from the actual accumulation, from which it arises, and from the future accumulation (the new process of production), which is promoted by the loaning of this money.
In the first instance loan capital exists always in the form of money,^°i later as a title on money, since the money, in which it originally existed, is now held in the hand of the borrower as actual money. For the lender it has been transformed into a title on money, a title of ownership. The same mass of actual money may, therefore, represent very different masses of money-capital. Mere money, whether it represent ^'i B. A. 1857. Testimony of Twells, banker. 4516. " As a banker, do you deal in capital or in money? "—" We deal in money."— 4517. "How are the deposits paid into your bank?"— "In money."— 4518. "How are they paid out? "— " In money."— " Might it be said, then, that they are anything else but money?"— Overstone (see chapter XXVI) 'tangles himself up continually between "capital" and " money." Value of money signifies with him also interest, in so far as it is determined by the mass of money; value of capital is supposed to be interest, so far as it is determined by the demand for productive capital and the profit made by It. He says, 4140. " The use of the term capital is very dangerous." — 4148.
" The gold exports from England are a reduction of the quantity of money in the country, and this must naturally cause an increased demand in the money-market in general" [but not in the capital-market, according to this] — 4112. "In proportion as money leaves the country its quantity in the country is diminished. This diminution of the quantity remaining in the country creates an increased value of this money " [this signifies originally in his theory an increase in the value of money as money through a contraction of the currency, as compared to the values of commodities; in other words, an increase in the value of money is the same as a fall in the value of commodities. But since meanwhile even he has been convinced beyond peradventure, that the mass of the circulating money does not determine prices, it is now the contraction of money as a medium of circulation, which is supposed to raise its value as interest bearing capital, and thus the rate of interest]. " And this increased value of the still remaining money checks the export and continues, until it has brought back as much money as is necessary to restore the equilibrium."— A continuation of Overstone's contradictions follows later.
Money-Capital and Actual Capital. 599 realised capital en* realised revenue, liecomes a loan capital through the simple act of loaning, by its conversion into a deposit, if we look upon the general form under a developed credit system. The deposit is a morey-capital for the depositor. But in the hands of the banker it may be only a potential money-capital, which lies fallow in his strongbox instead of tliat of its owner. ^"^^ With the growth of material wealth gi'ows the class of money-capitalists; on one side the number and the wealth of retiring capitalists living on their incomes increases; on the other hand the development of the credit system is promoted, and with it the number of bankers, money lenders, financiers, etc.
With the development of the available money-capital grows also the mass of interest-bearing papers, government bonds, stocks, etc., as we have shown previously. At the same time grows also the demand for available money-capital, since the ^°-At this point the confusion starts in to the effect that both of these things are " money," namely the deposit as a claim to a payment from the banker, and the deposited money in the hands of the banker. Banker Twells, before the Committee on Bank Acts of 1857, takes the following example: " I start in business with 10,000 pounds sterling. With 5000 pounds sterling I buy commodities and place them in my stock. The other 5000 pounds sterling I deposit with some banker, in order to draw upon them as I need them.
But 1 still consider the total as my capital, although 5000 pounds sterling exist in the form of a deposit or money." (4528) — This gives rise to the following nice debate. — 4531. " Well, you have given your 5000 pounds sterling in bank notes to somebody else " — " Yes, Sir." — 4532. " Then he has 5000 pounds sterling in deposits?" — "Yes, Sir." — 4533. "And you have 5000 pounds sterling in deposits?"- — "Quite right." — 4534. "He has 5000 pounds sterling in money, and you have 5000 pounds sterling in money?" — "Yes, Sir." — 4535. "But it is ultimately nothing but money? " — " No, Sir." This confusion is due, partly to the circumstance, that A, who has deposited 5000 pounds sterling, can draw on them and dispose of them as though he still had them. To that extent they serve him as a potential capital. In all cases, in which he draws on them, he destroys his deposit to that extent. If he draws out real money, and his own money has already been loaned to some one else, he is not paid with his own money, but with that of some other depositor. If he pays a debt to B with a check on his banker, and if banker of A has also a check on the banker of B, so that the two bankers merely e.xchange checks, then the money deposited by A has performed the function of money twice; first, in the hands of him who received the money deposited by A; secondly, in the hands of A himself. In this second function it is a balancing of claims of indebtedness (the claim of A on his banker, and the claim of this banker on the banker of B) without the intervention of money. Here the deposit acts twice as money, namely on..e as real money, and then as a claim on money. Mere titles to money may take the place of money only by a balancing of claims of indebtedness.
6oo Capitalist Production.
jobbers, who speculate iu these securities, plaj a prominent role on the money-market. If all the purchases and sales of these papers were only an expression of actual investments of capital, it would be correct to say, that they can have no influence on the demand for loan capital, since, when A sells his paper, he draws exactly as much money as B puts into the paper. But even if the paper itself exists, though not the capital (at least not as money-capital) originally represented by it, it always creates to that extent a demand for such money-capital. But at any rate it is then money-capital, which was previously at the disposal of B and is not at the command of A.
B. A. 1857. 'No. 4886. " Is it in your opinion a correct statement of the causes determining the rate of discount, when I say that it is regulated by the quantity of capital existing on the market, which is available for the discounting of commercial bills, as distingiiished from other kinds of securities? " [Chapman]: *' No, I hold that the rate of interest is affected by all convertible securities of current character; it would be wrong to limit the question simply to the discounting of bills; for when there is a strong demand for money on consols [deposited] or even treasury notes, as was strongly the case of late, and at a much higher than the commercial rate of interest, it would be absurd to say that our commercial world is not influenced by it; it is very essentially touched by it." — 4890. "When good and current securities, such as bankers accept, are on the market, and the owners take up money on them, it has surely an effect on the commercial world; for instance, I cannot expect that a man should give me his money at 5% on a commercial bill, when he can lend this money out at the same time at 6% on consols, etc.; it affects us in the same way; nobody can expect of me that I should discount his bills at 5-|%, when I can lend my money out at 6%." — 4892. "Of people, who buy securities as fixed investments of capital for 2,000, or 5,000, or 10,000 pounds sterling, we do not speak as though they had any essential influence upon the money-market. When you ask me for the rate of interest on [a deposit of] consols, I speak Money-Capital and Actual Capital. 6oi of people, who transact business to the amount of hundreds of thousands, of so-called jobbers, who underwrite large amounts of public loans, or buy them on the market, and who must hold these papers until they can get rid of them at a profit; these people must take up money for this purpose."
With the development of the credit system great concentrated money-markets are created, such as London, which are at the same time the main seats of trade in such securities. The bankers place the money-capital of the public in masses at the disposal of this unsavory crowd of dealers, and thus this breed of gamblers multiplies. " Money is generally cheaper at the stock exchange than anywhere else," says the incumbent of the Governor's chair of the Bank of England in 1848 before the secret Committee of Lords, C. D. 1848, In the discussion of the interest-bearing capital we have already shown, that the average interest for a long period of years, other circumstances remaining the same, is determined by the average rate of profit; this does not mean profits of enterprise, which are themselves nothing but profit minus interest.
It has also been mentioned, and will be further analysed in another place, that the variations of commercial interest, that is, of interest calculated by the money lenders for discounts and loans within the commercial world, meet in the course of the industrial cycle a phase, in which the rate of interest exceeds its minimum and reaches its average level, which it exceeds later, and that this movement is a result of a rise in profits.
However, two things must be noted here.
First: When the rate of interest stays up for a long time (we are speaking here of the rate of interest of a certain country, for instance England, where the average rate of interest is a fact for a certain long time, and presents itself also in the interest paid on loans for a long period, called private interest), it is an evident proof of the fact, that the rate of profit is high during this period, but it does not prove necessarily, that the rate of profits of enterprise is high. This last distinction 6o2 Capitalist Production.
is more or less removed for capitalists, who operate mainly with their own capital; they realise the high rate of profit, since they pay their owti interest. The possibility of a high rate of interest of long duration is present when the rate "of profit is high; this does not refer, however, to the phase of the actual stringency. But it is possible, that this high rate of profit may leave but a low rate of profit of enterprise, after the high rate of interest has been deducted. The rate of profit of enterprise may shrink, while the high rate of profit continues. This is possible, because the enterprises must be continued after they have once been started. During this phase operations are carried on to a large extent with a pure credit capital (capital of other people); and the high rate of profit may be speculative, prospective, in some places. A high rate of interest may be paid with a high rate of profit, while profit of enterprise is declining. It may be paid (and this is done in part during times of speculation), not out of the profit, but out of the borrowed capital of another, and this may continue for a long time.
Secondly: The expression, that the demand for moneycapital, and with it the rate of interest, grows, while the rate of profit is high, is not the same as that which is to the effect that the demand for industrial capital grows and with it the rate of interest is high.