Capital Vol. III Part V
Division of Profit into Interest and Profit of Enterprise. Interest-Bearing Capital
Interest-bearing capital, or, as we may call it in its antiquated form, usurer's capital, belongs together with its twin brother, merchant's capital, to the antediluvian forms of capital, which long precede the capitalist mode of production and are to be found in the most diverse economic formations of society.
The existence of usurer's capital merely requires that at least a portion of products should be transformed into commodities, and that money should have developed in its various functions along with trade in commodities.
The development of usurer's capital is bound up with the development of merchant's capital and especially that of money-dealing capital. In ancient Rome, beginning with the last years of the Republic, when manufacturing stood far below its average level of development in the ancient world, merchant's capital, money-dealing capital, and usurer's capital developed to their highest point within the ancient form.
We have seen (English edition: Vol. I, pp. 130-34. — Ed.) that hoarding necessarily appears along with money. But the professional hoarder does not become important until he is 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 expend it. Hence in earlier forms of society the money-lender stands in the same relation to him as to the modern capitalist. This specific relation was also experienced by the Catholic universities.
"The universities of Alcalá, Salamanca, Ingolstadt, Freiburg in Breisgau, Mayence, Cologne, Trèves, 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 to the Traitè de l'usure et des intérêts, by Bruyset-Ponthus, Lyons." (M. Augier, Le Crèdit public, etc., Paris, 1842, p. 206.)
In all the 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 therefore is a means of appropriating the labour of others through the purchase of slaves, land, etc., money can be expanded as capital, i.e., bear interest, for the very reason that it can be so invested.
The characteristic forms, however, in which usurer's capital exists in periods antedating capitalist production are of two kinds. I purposely say 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 members of the upper classes, particularly landowners; secondly, usury by lending money to small producers who possess their own conditions of labour — this includes the artisan, but mainly the peasant, since particularly under pre-capitalist conditions, in so far as they permit of small independent individual producers, the peasant class necessarily constitutes the overwhelming majority of them.
Both the ruin of rich landowners through usury and the impoverishment of the small producers lead to the formation and concentration of large amounts of money-capital. But to what extent this process does away with the old mode of production, as happened in modern Europe, and whether it puts the capitalist mode of production in its stead, depends entirely upon the stage of historical development and the attendant circumstances.
Usurer's capital as the characteristic form of interest-bearing capital corresponds to the predominance of small-scale production of the self-employed peasant and small master craftsman. When the labourer is confronted by the conditions of labour and by the product of labour in the shape of capital, as under the developed capitalist mode of production, he has no occasion to borrow any money as a producer. When he does any money borrowing, he does so, for instance, at the pawnshop to secure personal necessities. But wherever the labourer is the owner, whether actual or nominal, of his conditions of labour and his product, he stands as a producer in relation to the money-lender's capital, which confronts him as usurer's capital. Newman expresses the matter insipidly when he says 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. (F. W. Newman, Lectures on Political Economy, London, 1851, p. 44.) He overlooks the fact that a difference between two modes of social production and their corresponding social orders lies at the heart of the matter and that the situation cannot be explained by the distinction between rich and poor. Moreover, the usury which sucks dry the small producer goes hand in hand with the usury which sucks dry the rich owner of a large estate. As soon as the usury of the Roman patricians had completely ruined the Roman plebeians, the small peasants, this form of exploitation came to an end and a pure slave economy replaced the small-peasant economy.
In the form of interest, the entire surplus above the barest means of subsistence (the amount that later becomes wages of the producers) can be consumed by usury (this later assumes the form of profit and ground-rent), and hence it is highly absurd to compare the level of this interest, which assimilates all the surplus-value excepting the share claimed by the state, with the level of the modern interest rate, where interest constitutes at least normally only a part of the surplus-value. Such a comparison overlooks that the wage-worker produces and gives to the capitalist who employs him, profit, interest and ground-rent, i.e., the entire surplus-value. Carey makes this absurd comparison in order to show how advantageous the development of capital, and the fall in the interest rate that accompanies it, are for the labourer. Furthermore, while the usurer, not content with squeezing the surplus-labour out of his victim, gradually acquires possession even of his very conditions of labour, land, house, etc., and is continually engaged in thus expropriating him, it is again forgotten that, on the other hand, this complete expropriation of the labourer from his conditions of labour is not a result which the capitalist mode of production seeks to achieve, but rather the established condition for its point of departure. The wage-slave, just like the real slave, cannot become a creditor's slave due to his position — at least in his capacity as producer; the wage-slave, it is true, can become a creditor's slave in his capacity as consumer. Usurer's capital in the form whereby it indeed appropriates all of the surplus-labour of the direct producers, without altering the mode of production; whereby the ownership or possession by the producers of the conditions of labour and small-scale production corresponding to this — is its essential prerequisite; whereby, in other words, capital does not directly subordinate labour to itself, and does not, therefore, confront it as industrial capital — this usurer's capital impoverishes the mode of production, paralyses the productive forces instead of developing them, and at the same time perpetuates the miserable conditions in which the social productivity of labour is not developed at the expense of labour itself, as in the capitalist mode of production.
Usury thus exerts, on the one hand, an undermining and destructive influence on ancient and feudal wealth and ancient and feudal property. On the other hand, it undermines and ruins small-peasant and small-burgher production, in short, all forms in which the producer still appears as the owner of his means of production. Under the developed capitalist mode of production, the labourer is not the owner of the means of production, i.e., the field which he cultivates, the raw materials which he processes, etc. But under this system separation of the producer from the means of production reflects an actual revolution in the mode of production itself. The isolated labourers are brought together in large workshops for the purpose of carrying out separate but interconnected activities; the tool becomes a machine. The mode of production itself no longer permits the dispersion of the instruments of production associated with small property; nor does it permit the isolation of the labourer himself. Under the capitalist mode of production usury can no longer separate the producer from his means of production, for they have already been separated.
Usury centralizes money wealth where the means of production are dispersed. It does not alter the mode of production, but attaches itself firmly to it like a parasite and makes it wretched. It sucks out its blood, enervates it and compels reproduction to proceed under ever more pitiable conditions. Hence the popular hatred against usurers, which was most pronounced in the ancient world where ownership of means of production by the producer himself was at the same time the basis for political status, the independence of the citizen.
To the extent that slavery prevails, or in so far as 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 still remains the same; it only becomes harder on the labourer. The indebted slave holder or feudal lord becomes more oppressive because he is himself more oppressed. Or he finally makes way for the usurer, who becomes a landed proprietor or a slave-holder himself, like the knights in ancient Rome. The place of the old exploiter, whose exploitation was more or less patriarchal because it was largely a means of political power, is taken by a hard, money mad parvenu. But the mode of production itself is not altered thereby.
Usury has a revolutionary effect in all pre-capitalist modes of production only in so far as it destroys and dissolves those forms of property on whose solid foundation and continual reproduction in the same form the political organization is based. Under Asian forms, usury can continue a long time, without producing anything more than economic decay and political corruption. Only where and when the other prerequisites of capitalist production are present does usury become one of the means assisting in establishment of the new mode of production by ruining the feudal lord and small-scale producer, on the one hand, and centralizing the conditions of labour into capital, on the other.
In the Middle Ages no country had a general rate of interest. The Church forbade, from the outset, all lending at interest. Laws and courts offered little protection for loans. Interest was so much the higher in individual cases. The limited circulation of money, the need to make most payments in cash, compelled people to borrow money, and all the more so when the exchange business has still undeveloped. Therefore large divergences both in interest rates and the conceptions of usury. In the time of Charlemagne it was considered usurious to charge 100%. In Lindau on Lake Constance, some local burghers took 216⅔% in 1348. In Zurich, the City Council decreed that 43⅓% should be the legal interest rate. In Italy 40% had to be paid sometimes, although the usual rate from the 12th to the 14th century did not exceed 20%. Verona ordered that 12½% be the legal rate. Emperor Friedrich II fixed the rate at 10%, but only for Jews. He did not deign to speak for Christians. In the German Rhine provinces, 10% was the rule as early as the 13th century. (Hullmann, Geschichte des Städtewesens, II, S. 55-57.)
Usurer's capital employs the method of exploitation characteristic of capital yet without the latter's mode of production. This condition also repeats itself within bourgeois economy, in backward branches of industry or in those branches which resist the transition to the modern mode of production. For instance, if we wish to compare the English interest rate with the Indian, we should not take the interest rate of the Bank of England, but rather, e.g., that charged by lenders of small machinery to small producers in domestic industry.
Usury, in contradistinction to consuming wealth, is historically important, inasmuch as it is in 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 intensively and extensively exchange-value has taken hold of production, the more does money appear as actual wealth as such, as wealth in general — in contrast to its limited representation in use-values. This is the basis of hoarding. Aside from money as world-money and as hoard, it is, in particular, the form of means of payment whereby it appears as the absolute form of commodities. And it is especially its function as a means of payment which develops interest and thereby money-capital. What squandering and corrupting wealth desires 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 for making payments. (The transformation of services and taxes in kind to landlords and the state into money-rent and money-taxes plays a great role here.) In either case, money is needed as such. On the other hand, it is in usury that hoarding first becomes reality and that the hoarder fulfills his dream. What is sought from the owner of a hoard is not capital, but money as such; but by means of interest he transforms this hoard of money into capital, that is, into a means of appropriating surplus labour in part or in its entirety, and similarly securing a hold on a part of the means of production themselves, even though they may nominally remain the property of others. Usury lives in the pores of production, as it were, just as the gods of Epicurus lived in the space between worlds. Money is so much harder to obtain, the less the commodity-form constitutes the general form of products. Hence the usurer knows no other barrier but the capacity of those who need money to pay or to resist. In small-peasant and small-burgher production money serves as a means of purchase, mainly, whenever the means of production of the labourer (who is still predominantly their owner under these modes of production) are lost to him either by accident or through extraordinary upheavals, or at least are not replaced in the normal course of reproduction. Means of subsistence and raw materials constitute an essential part of these requirements of production. If these become more expensive, it may make it impossible to replace them out of the returns for the product, just as ordinary crop failures may prevent the peasant from replacing his seed in kind. The same wars through which the Roman patricians ruined the plebe jails by compelling them to serve as soldiers and which prevented them from reproducing their conditions of labour, and therefore made paupers of them (and pauperization, the crippling or loss of the prerequisites of reproduction is here the predominant form) these same wars filled the store-rooms and coffers of the patricians with looted copper, the money of that time. Instead of directly giving plebeians the necessary commodities, i.e., grain, horses, and cattle, they loaned them this copper for which they had no use themselves, and took advantage of this situation to exact enormous usurious interest, thereby turning the plebeians into their debtor slaves. During the reign of Charlemagne, the Frankish peasants were likewise ruined by wars, so that they faced no choice but to become serfs instead of debtors. In the Roman Empire, as is known, extreme hunger frequently resulted in the sale of children and also in free men selling themselves as slaves to the rich. So much for general turning-points. In individual cases the maintenance or loss of the means of production on the part of small producers depends on a thousand contingencies, and every one of these contingencies or losses signifies impoverishment and becomes a crevice into which a parasitic usurer may creep. The mere death of his cow may render the small peasant incapable of renewing his reproduction on its former scale. He then falls into the clutches of the usurer, and once in the usurer's power he can never extricate himself.
The really important and characteristic 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 on a certain date, carries with it the need to secure money for such a purpose. Hence from the days of ancient Rome to those of modern times, wholesale usury relies upon tax-collectors, fermiers gènèraux, receveurs gènèraux. Then, there develops with commerce and the generalization of commodity- production the separation, in time, of purchase and payment. The money has to be paid on a definite date. How this can lead to circumstances in which the money-capitalist and usurer, even nowadays, merge into one is shown by modern money crises. This same usury, however, becomes one of the principal means of further developing the necessity for money as a means of payment — by driving the producer ever more deeply into debt and destroying his usual means of payment, since the burden of interest alone makes his normal reproduction impossible. At this point, usury sprouts up out of money as a means of payment and extends this function of money as its very own domain.
The credit system develops as a reaction against usury. But this should not be misunderstood, nor by any means interpreted in the manner of the ancient writers, the church fathers, Luther or the early 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 only continue to exist, but is even freed, among nations with a developed capitalist production, from the fetters imposed upon it by all previous legislation. Interest-bearing capital retains the form of usurer's capital in relation to persons or classes, or in circumstances where borrowing does not, nor can, take place in the sense corresponding to the capitalist mode of production; where borrowing takes place as a result of individual need, as at the pawnshop; where money is borrowed by wealthy spendthrifts for the purpose of squandering; or where the producer is a non-capitalist producer, such as a small farmer or craftsman, who is thus still, as the immediate producer, the owner of his own means of production; finally where the capitalist producer himself operates on such a small scale that he resembles those self-employed producers.
What distinguishes interest-bearing capital — in so far as it is an essential element of the capitalist mode of production — from usurer's capital is by no means the nature or character of this capital itself. It is merely the altered conditions under which it operates, and consequently also the totally transformed character of the borrower who confronts the money-lender. Even when a man without fortune receives credit in his capacity of industrialist or merchant, it occurs with the expectation that he will function as capitalist and appropriate unpaid labour with the borrowed capital. He receives credit in his capacity of potential capitalist. The circumstance that a man without fortune but possessing energy, solidity, ability and business acumen may become a capitalist in this manner — and the commercial value of each individual is pretty accurately estimated under the capitalist mode of production — is greatly admired by apologists of the capitalist system. 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 reinforces the supremacy of capital itself, expands its base and enables it to recruit ever new forces for itself out of the substratum of society. In a similar way, the circumstance that the Catholic Church in the Middle Ages formed its hierarchy out of the best brains in the land, regardless of their estate, birth or fortune, was one of the principal means of consolidating ecclesiastical rule and suppressing the laity. The more a ruling class is able to assimilate the foremost minds of a ruled class, the more stable and dangerous becomes its rule.
The initiators of the modern credit system take as their point of departure not an anathema against interest-bearing capital in general, but on the contrary, its explicit recognition.
We are not referring here to such reactions against usury which attempted to protect the poor against it, like the Monts-de-piètè (1350 in Sarlins in Franche-Comté, later in Perugia and Savona in Italy, 1400 and 1479). These are noteworthy mainly because they reveal the irony of history, which turns pious wishes into their very opposite during the process of realization. According to a moderate estimate, the English working-class pays 100% to the pawnshops, the modern successors of Monts-de-piètè  We are also not referring to the credit fantasies of such men as 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 farmers' bank using paper money based on real estate. 
The credit associations established in the 12th and 14th centuries in Venice and Genoa arose from the need for marine commerce and the wholesale trade associated with it to emancipate themselves from the domination of outmoded usury and the monopolization of the money business. While the actual banks founded in those city-republics assumed simultaneously the shape of public credit institutions from which the state received loans on future tax revenues, it should not be forgotten that the merchants founding those associations were themselves prominent citizens of those states and as much interested in emancipating their government as they were in emancipating themselves from the exactions of usurers,  and at the same time in getting tighter and more secure control over the state. Hence, when the Bank of England was to be established, the Tories also protested:
"Banks are republican institutions. Flourishing banks existed in Venice, Genoa, Amsterdam, and Hamburg. But who ever heard of a Bank of France or Spain?"
The Bank of Amsterdam, in 1609, was not epoch-making 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 the acceptors. But in Holland commercial credit and dealing in money developed hand in hand with commerce and manufacture, and interest-bearing capital was subordinated to industrial and commercial capital by the course of development itself. This could already be seen in the low interest rate. Holland, however, was considered in the 17th century the model of economic development, as England is now. The monopoly of old-style usury, based on poverty, collapsed in that country of its own weight.
During the entire 18th century there is the cry, with Holland referred to as an example, for a compulsory reduction of the rate of interest (and legislation acts accordingly), in order to subordinate interest-bearing capital to commercial and industrial capital, instead of the reverse. The main spokesman for this movement is Sir Josiah Child, the father of ordinary English private banking. He declaims against the monopoly of usurers in much the same way as the wholesale clothing manufacturers, Moses & Son, do when leading the light against the monopoly of "private tailors." This same Josiah Child is simultaneously the father of English stock-jobbing. Thus, this autocrat of the East India Company defends its monopoly in the name of free trade. Versus Thomas Manley (Interest of Money Mistaken — Thomas Manley was not the author of this book. It was published anonymously in London in 1668. — Ed.) he says:
"As the champion of the timid and trembling band of usurers he erects his main 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." (Traitès sur le Commerce, etc., 1669, trad. Amsterdam et 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. 155). "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 battle against usury, this demand for the subordination of interest-bearing capital to 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 idle money reserves and throwing them on the money market, and on the other hand limits the monopoly of the precious metal itself by creating credit-money.
The same opposition to usury, the demand for the emancipation of commerce, industry and the state from usury, which are observed here in the case of Child, will be found in all writings on banking in England during the last third of the 17th and the early 18th centuries. We also find colossal illusions about the miraculous effects of credit, abolition of the monopoly of precious metal, its displacement by paper, etc. The Scotsman William Paterson, 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 pawnbrokers set up 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 foreign feuds; its notes were only accepted far below their nominal value ... the goldsmiths" (in whose hands the trade in precious metals served as a basis of a primitive banking business) "were jealous of the Bank, because their business was diminished, their discounts were lowered, their transactions with the government had passed to their opponents." (3. Francis, l. c., p. 73.)
Even before the establishment of the Bank of England a plan was proposed in 1683 for a National Bank of Credit, which had for its purpose, among others,
"that tradesmen, when they have a considerable quantity of goods, may, by the help of this bank, deposit their goods, by raising a credit on their own dead stock, employ their servants, and increase their trade, till they get a good market instead of selling them at a loss" [J. Francis, l. c., pp. 39-40].
After many endeavors this Bank of Credit was established in Devonshire House on Bishopsgate Street. It made loans to industrialists and merchants on the security of deposited goods to the amount of three-quarters of their value, in the form of bills of exchange. In order to make these bills of exchange capable of circulating, a number of people in each branch of business were organized into a society, from which every possessor of such bills would be able to obtain goods with the same facility as if he were to offer them cash payment. This bank's business did not flourish. Its machinery was too complicated, and the risk too great in case of a commodity depreciation.
If we go by the actual content of those records which accompany and theoretically promote the formation of the modern credit system in England, we shall not find anything in them but — as one of its conditions — the demand for a subordination of interest-bearing capital and of loanable means of production in general to the capitalist mode of production. On the other hand, if we simply cling to the phraseology, we shall be frequently surprised by the agreement — including the mode of expression with the illusions of the followers of Saint-Simon about banking and credit.
Just as in the writings of the physiocrats the cultivateur does not stand for the actual tiller of the soil, but for the big farmer, so the travailleur with Saint-Simon, and continuing on through his disciples, does not stand for the labourer, but for the industrial and commercial capitalist.
"Un travailleur a besoin d'aides, de seconds, d'ouvriers; il les cherche intelligents, habiles, dèvouès: il les met a l'oeuvre, et leurs travaux sont productifs." ( [Enfantin] A travailleur (worker) needs helpers, supporters, labourers; he looks for such as are intelligent, able, devoted; he puts them to work, and their labour is productive." (Religion saint-simonienne, Economie politique et Politique, Paris, 1831, p. 104.).
In fact, one should bear in mind that only in his last work, Le Nouveau Christianisme, Saint-Simon speaks directly for the working-class and declares their emancipation to be the goal of his efforts. All his former writings are, indeed, mere encomiums of modern bourgeois society in contrast to the feudal order, or of industrialists and bankers in contrast to marshals and juristic law-manufacturers of the Napoleonic era. What a difference compared with the contemporaneous writings of Owen!  For the followers of Saint-Simon, the industrial capitalist likewise remains the travailleur par excellence, as the above-quoted passage indicates. After reading their writings critically, one will not be surprised that their credit and bank fantasies materialized in the credit mobilier, founded by an ex-follower of Saint-Simon, Emile Péreire. This form, incidentally, could become dominant only in a country like France, where neither the credit system nor large-scale industry had reached the modern level of development. This was not at all possible in England and America. The embryo of Crédit mobilizer is already contained in the following passages from Doctrine de Saint-Simon. Exposition. Premiere annèe, 1828-29, 3me ed., Paris, 1831. It is understandable that bankers can lend money more cheaply than the capitalists and private usurers. These bankers are, therefore,
"able to supply tools to the industrialists far more cheaply, that is, at lower interest, than the real estate owners and capitalists, 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 accrue from the mediation of bankers between the idle rich and the travailleurs is often counterbalanced, or even canceled, by the opportunities offered in our disorganized society to egoism, which may manifest itself in various forms of fraud and charlatanism. The bankers often worm their way between the travailleurs and idle rich for the purpose of exploiting both to the detriment of society."
Travailleur here means capitaliste industriel. Incidentally, it is wrong to regard the means at the command of the modern banking system merely as the means of idle people. In the first place, it is the portion of capital which industrialists and merchants temporarily hold in the form of idle money, as a money reserve or as capital to be invested. Hence it is idle capital, but not capital of the idle. In the second place, it is the portion of all revenue and savings in general which is to be temporarily or permanently accumulated. Both are essential to the nature of the banking system.
But it should always be borne in mind that, in the first place, money — in the form of precious metal — remains the foundation from which the credit system, by its very nature, can never detach itself. Secondly, that the credit system presupposes the monopoly of social means of production by private persons (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, a driving force in its development to its highest and ultimate form.
The banking system, so far as its formal organization and centralization 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 an institution such as the Bank of England over commerce and industry, although their actual movements remain completely beyond its province and it is passive toward them. The banking system possesses indeed the form of universal book-keeping and distribution of means of production on a social scale, but solely the form. We have seen that the average profit of the individual capitalist, or of every individual capital, is determined not by the surplus-labour appropriated at first hand by each capital, but by the quantity of total surplus-labour appropriated by the total capital, from which each individual capital receives its dividend only proportional to its aliquot part of the total capital. This social character of capital is first promoted and wholly realized through the full development of the credit and banking system. On the other hand this goes farther. It places all the available and even potential capital of society that is not already actively employed at the disposal of the industrial and commercial capitalists so that neither the lenders nor users of this capital are its real owners or producers. It thus does away with the private character of capital and thus contains in itself, but only in itself, the abolition of capital itself. By means of the banking system the distribution of capital as a special business, 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 potent means of driving capitalist production beyond its own limits, and one of the most effective vehicles of crises and swindle.
The banking system shows, furthermore, by substituting various forms of circulating credit in place of money, that money is in reality nothing but a particular expression of the social character of labour and its products, which, however, as antithetical to the basis of private production, must always appear in the last analysis as a thing, a special commodity, alongside 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 mode of production of associated labour; 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, in the socialist sense, 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 cease being transformed into capital (which also includes the abolition of private property in land), credit as such no longer has any meaning. This, incidentally, was even understood by the followers of Saint-Simon. On the other hand, as long as the capitalist mode of production continues to exist, interest-bearing capital, as one of its forms, also continues to exist and constitutes in fact the basis of its credit system. Only that sensational writer, Proudhon, who wanted to perpetuate commodity-production and abolish money,  was capable of dreaming up the monstrous crèdit gratuit, the ostensible realization of the pious wish of the petty-bourgeois estate.
In Religion saint-simonienne, èconomie politique 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 will to employ them, and where other industrious people have no instruments of labour, 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 follow the movement initiated by transactions taking place outside of their domain, but not themselves to provide an impulse to this movement; in other words, the banks perform the role of capitalists in relation to the travailleurs, whom they loan money."
The notion that the banks themselves should take over the management and distinguish themselves
"through the number and usefulness of their managed establishments and of promoted works" (p. 101)
contains the Crédit mobilier in embryo. In the same way, Charles Pecqueur demands that the banks (which the followers of Saint-Simon call a Système general des banques) "should rule production." Pecqueur is essentially a follower of Saint-Simon, but much more radical. He wants
"the credit institution ... to control the entire movement of national production." — "Try to create a national credit institution, which shall advance the wherewithal to needy people of talent and merit, without, however, forcibly tying these borrowers together through close solidarity in production and consumption, but on the contrary enabling them to determine their own exchange and production. In this way, you will only accomplish what the private banks already accomplish now, that is, anarchy, disproportion between production and consumption, the sudden ruin of one person, and the sudden enrichment of another; so that your institution will never get any farther than producing a certain amount of benefits for one person, corresponding to an equivalent amount of misfortune to be endured by another ... and you will have only provided the wage-labourers assisted by you with the means to compete with one another just as their capitalist masters now do." (Ch. Pecqueur, Thèorie Nouvelle èconomie sociale et Politique, Paris, 1842, p. 434.)
We have seen that merchant's capital and interest-bearing capital are the oldest forms of capital. But it is in the nature of things that interest-bearing capital assumes in popular conception the form of capital par excellence. In merchant's capital there takes place the work of the middleman, no matter whether considered as cheating, labour, or anything else. But in the case of interest-bearing capital the self-reproducing character of capital, the self-expanding value, the production of surplus value, appears purely as an occult property. This accounts for the fact that even some political economists, particularly in countries where industrial capital is not yet fully developed, as in France, cling to interest-bearing capital as the fundamental form of capital and regard ground-rent, for example, merely as a modified form of it, since the loan-form also predominates here. In this way, the internal organisation 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, means of production in kind, such as machines and business offices, can also be loaned instead of money. But they then represent a definite sum of money, and the fact that in addition to interest a part is paid for wear and tear is due to their use-value, i.e., the specific natural form of these elements of capital. The decisive factor here is again whether they are loaned to direct producers, which would presuppose the non-existence of the capitalist mode of production-at least in the sphere in which this occurs — or whether they are loaned to industrial capitalists, which is precisely the assumption based upon the capitalist mode of production. It is still more irrelevant and meaningless to drag the lending of houses, etc., for individual use into this discussion. That the working-class is also swindled in this form, and to an enormous extent, is self evident; but this is also done by the retail dealer, who sells means of subsistence to the worker. This is secondary exploitation, which runs parallel to the primary exploitation taking place in the production process itself. The distinction between selling and loaning is quite immaterial in this case and merely formal, and, as already indicated, (Present edition: pp. 345-50. — Ed.) cannot appear as essential to anyone, unless he be wholly unfamiliar with the actual nature of the problem.
Usury, like commerce, exploits a given mode of production. It does not create it, but is related to it outwardly. Usury tries to maintain it directly, so as to exploit it ever anew; it is conservative and makes this mode of production only more pitiable. The less elements of production enter into the production process as commodities, and emerge from it as commodities, the more does their origination from money appear as a separate act. The more insignificant the role played by circulation in the social reproduction, the more usury flourishes.
That money wealth develops as a special kind of wealth, means in respect to usurer's capital that it possesses all its claims in the form of money claims. It develops that much more in a given country, the more the main body of production is limited to natural services, etc., that is, to use-values.
Usury is a powerful lever in developing the preconditions for industrial capital in so far as it plays the following double role, first, building up, in general, an independent money wealth alongside that of the merchant, and, secondly, appropriating the conditions of labour, that is, ruining the owners of the old conditions of labour.
"In the Middle Ages the population was purely agricultural. Under such a government as was the feudal system there can be but little traffic, and hence but little profit. Hence the laws against usury were justified in the Middle Ages. Besides, in an agricultural country a person seldom wants to borrow money except he be reduced to poverty or distress.... In the reign of Henry VIII, interest was limited to 10 per cent. James I reduced it to 8 per cent ... Charles II reduced it to 6 per cent; in the reign of Queen Anne, it was reduced to 5 per cent.... In those times, the lenders ... had, in fact, though not a legal, yet an actual monopoly, and hence it was necessary that they, like other monopolists, should be placed under restraint. In our times, it is the rate of profit which regulates the rate of interest. In those times, it was the rate of interest which regulated the rate of profit. If the money-lender charged a high rate of interest to the merchant, the merchant must have charged a higher rate of profit on his goods. Hence, a large sum of money would be taken from the pockets of the purchasers to be put into the pockets of the money-lenders." (Gilbart, History and Principles of Banking, pp. 163, 164, 165.)
"I have been told that 10 gulden are now taken annually at every Leipzig Fair, (The author has in mind the loan of 100 gulden with interest payable in three installments at the Leipzig Fair, held three times annually: Easter and St. Michael's Day) that is, 30 on each hundred, some add the Neuenburg Fair, thus making 40 per hundred; whether that is so, I don't know. For shame! What will be the infernal outcome of this? ... Whoever now has 100 florins at Leipzig 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 nobleman 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 big merchants must possess, he takes 40,000 annually, which means devouring one affluent prince each year. If one has 1,000,000 florins, he takes 400,000 annually, which means devouring one mighty king every year. And he does not risk either his person or his wares, does not work, sits near his fire-place and roasts apples; so might a lowly robber sit at home and devour a whole world in ten years." (Quoted from Bücher vom Kaufhandel und Wucher vom Jahre 1524, Luther's Werke, Wittenberg, 1589, Teil 6, S. 312.)
"Fifteen years ago I took pen in hand against usury when it had spread so alarmingly that I could scarcely hope for any improvement. Since then it has become so arrogant that it deigns not to be classed as vice, sin, or shame, but achieves praise as pure virtue and honour, as though it were performing a great favour and Christian service for the people. What will help deliver us now that shame has turned into honour and vice into virtue?" (Martin Luther, An die Pfarherrn wider den Wucher zu predigen, Wittenberg, 1540.)
"Jews, Lombards, usurers and extortioners were our first bankers, our primitive traffickers in money, their character little short of infamous... They were joined by London goldsmiths. As a body ... our primitive bankers ... were a very bad set, they were gripping usurers, iron-hearted extortioners." (D. Hardcastle, Banks and Bankers, 2nd ed., London, 1843, pp. 19, 20.)
"The example shown by Venice" (in establishing a bank) "was thus quickly imitated; all sea-coast towns, and in general all towns which had earned fame through their independence and commerce, founded their first banks. The return voyage of their ships, which often was of long duration, inevitably led to the custom of lending on credit. This was further intensified by the discovery of America and the ensuing trade with that continent." (This is the main point.) "The chartering of ships made large loans necessary-a procedure already obtaining in ancient Athens and Greece. In 1308, the Hanse town of Bruges possessed an insurance company. (M. Augier, l. c., pp. 202, 203.)
To what extent the granting of loans to landowners, and thus to the pleasure-seeking wealthy in general, still prevailed in the last third of the 17th century, even in England, before the development of modern credit, may be seen, among others, in the works of Sir Dudley North. He was not only one of the first English merchants, but also one of the most prominent theoretical economists of his time:
"The moneys employed at interest in this nation, are not near the tenth part, disposed to trading people, wherewith to manage their trades; but are for the most part lent for the supplying of luxury, and to support the expense of persons, who though great owners of lands, yet spend faster than their lands bring in; and being loath to sell, choose rather to mortgage their estates." (Discourses upon Trade, London, 1691, pp.6-7.)
Poland in the 18th century:
"Warsaw carried on a large bustling business in bills of exchange which, however, had as its principal basis and aim the usury of its bankers. In order to secure money, which they could lend to spendthrift gentry at 8% and more, they sought and obtained abroad open exchange credit, that is, credit that had no commodity trade as its basis, but which the foreign drawee continued to accept as long as the returns from these manipulations did not fail to come in. However, they paid heavily for this through bankruptcies of men like Tapper and other highly respected Warsaw bankers." (J. G. Büsch, Theoretisch-praktische Darstellung der Handlung, etc., 3rd ed., Hamburg, 1808, Vol. II, pp. 232, 233.)
"Taking interest had been interdicted by the Church. But selling property for the purpose of finding succour in distress had not been forbidden. It had not even been prohibited to transfer property to the money-lender as security for a certain term, until a debtor repaid his loan, leaving the money-lender free to enjoy the usufruct of the property as a reward for his abstinence from his money.... The Church itself, and its associated communes and pia corpora, derived much profit from this practice, particularly during the crusades. This brought a very large portion of national wealth into 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 churches and cloisters would never have become so affluent" (l. c., p. 55).
21. "It is by frequent fluctuations within the month, and by pawning one article to relieve another, where a small sum is obtained, that the premium for money becomes so excessive. There are about 240 licensed pawnbrokers in the metropolis, and nearly 1,450 in the country. The capital employed is supposed somewhat to exceed a million pounds sterling; and this capital is turned round thrice in the course of the year, and yields each time about 33½ per cent on an average; according to which calculation, the inferior orders of society in England pay about one million a year for the use of a temporary loan, exclusive of what they lose by goods being forfeited." (J. D. Tuckett, A History of the Past and Present State of the Labouring Population, London, 1846, 1, p. 114.)
22. Even in the titles of their works they state as their principal purpose "the general good of the landed men, the great increase of the value of land, the exemption of the nobility, gentry, etc., from taxes, enlarging their yearly estates, etc." Only the usurers would stand 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.
23. "The rich goldsmith" (the precursor of the banker), "for example, made Charles II of England pay twenty and thirty per cent for accommodation. A business so profitable, induced the goldsmith 'more and more to become lender to the King, to anticipate all the revenue, to take every grant of Parliament into pawn as soon as it was given; also to outvie each other in buying and taking to pawn bills, orders, and tallies, so that, in effect, all the revenue 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, on the security of parliamentary grants" (l. c., pp. 59, 60).
24. Marx would surely have modified this passage considerably, had he reworked his manuscript. It was inspired by the role of the ex-followers of Saint-Simon under France's Second Empire where just at the time that Marx wrote the above, the world redeeming credit fantasies of this school through the irony of history were being realised in the form of a tremendous swindle on a scale never seen before. Later Marx spoke only with admiration of the genius and encyclopaedic mind of Saint Simon. When in his earlier works the latter ignores the antithesis between the bourgeoisie and the proletariat which was just then coming into existence in France when he includes among the travailleurs that part of the bourgeoisie which was active in production, this corresponds to Fourier's conception of attempting to reconcile capital and labour and is explained by the economic and political situation of France in those days. The fact that Owen was more far sighted in this respect is due to his different environment, for he lived in a period of industrial revolution and of acutely sharpening class antagonisms. — F. E.
25. Karl Marx, Misère de la Philosophie, Bruxelles et Paris, 1847. — Karl Marx, Zur Kritik der politischen Oekonomie, S. 64.