II. The Rate of Exchange
//The rate of exchange is known to be the barometer for the international movement of money metals. If England has more payments to make to Germany than Germany to England, the price of marks, expressed in sterling, rises in London, and the price of sterling, expressed in marks, falls in Hamburg and Berlin. If this preponderance of England's payment obligations towards Germany is not balanced again, for instance, by a preponderance of purchases by Germany in England, the sterling price of bills of exchange in marks on Germany must rise to the point where it will pay to send metal (gold coin or bullion) from England to Germany in payment of obligations, instead of sending bills of exchange. This is the typical course of events.
If this export of precious metal assumes a larger scope and lasts for a longer period, then the English bank reserve is affected, and the English money market, particularly the Bank of England, must take protective measures. These consist mainly, as we have already seen, in raising the interest rate. When the drain of gold is considerable, the money market as a rule becomes tight, that is, the demand for loan capital in the form of money significantly exceeds the supply and the higher interest rate follows quite naturally from this; the discount rate fixed by the Bank of England corresponds to this situation and asserts itself on the market. However there are cases when the drain of bullion is due to other than ordinary combinations of business transactions (for instance, loans to foreign states, investment of capital in foreign countries, etc.), and the London money market as such does not justify an effective rise in the interest rate; the Bank of England must then first "make money scarce", as the phrase goes, through heavy loans in the "open market" and thus artificially create a situation which justifies, or renders necessary, a rise in the interest rate; such a manoeuvre becomes more difficult from year to year.— F.E.jj
How this raising of the interest rate affects the rates of exchange is shown by the following testimony before the Committee of the Lower House concerning bank legislation in 1857 (quoted as B. A. or B. C. 1857).
John Stuart Mill:
"2176. When there is a state of commercial difficulty there is always ... a considerable fall in the price of securities ... foreigners send over to buy railway shares in this country, or English holders of foreign railway shares sell their foreign railway shares abroad ... there is so much transfer of bullion prevented."—"2182. A large and rich class of bankers and dealers in securities, through whom the equalisation of the rate of interest and the equalisation of commercial PRESSURE" between different countries usually takes place ... are always on the look out to buy securities which are likely to rise.... The place for them to buy securities will be the country which is sending bullion away."—"2184. These investments of capital took place to a very considerable extent in 1847, to a sufficient extent to have relieved the drain considerably."
J. G. Hubbard, ex-Governor, and a Director of the Bank of England since 1838:
"2545. There are great quantities of European securities ... which have a European currency in all the different money markets, and those bonds, as soon as their value is ... reduced by 1 or 2 per cent in one market, are immediately purchased for transmission to those markets where their value is still unimpaired."—"2565. Are not foreign countries considerably in debt to the merchants of this country? — Very largely. "— "2566. Therefore, the cashment of those debts might be sufficient to account for a very large accumulation of capital in this country? — In 1847, the ultimate restoration of our position was effected by our striking off so many millions previously due by America, and so many millions due by Russia to this country."
//At the same time, England owed these same countries "so and so many millions" for grain and also did not fail to "draw a line" through the greater portion of these millions via the bankruptcy of the English debtors. See the report on Bank Acts, 1857, Chapter XXX, p. 31 a above.
"2572. In 1847, the exchange between this country and St. Petersburg was very high. When the Government Letter came out authorising the Bank to issue irrespec-tively of the limitation of £14,000,000" (above and beyond the gold reserve), "the stipu-lation was that the rate of discount should be 8%- At that moment, with the then rate of discount, it was a profitable operation to order gold to be shipped from St. Petersburg to London and on its arrival to lend it at 8% up to the maturity of the three months' bills drawn against the purchase of gold."—"2573. In all bullion operations there are many points to be taken into consideration; there is the rate of exchange and the rate of interest, which is available for the investment during the period of the maturity of the bill" (drawn against it).
Rate of Exchange with Asia
The following points are important because, on the one hand, they show how England recoups its losses, when its rate of exchange with Asia is unfavourable, at the expense of other countries, whose imports from Asia are paid through English middlemen. On the other hand, they are important because Mr. Wilson once again makes the foolish attempt here to identify the effect of the export of precious metal on the rates of exchange with the effect of the export of capital in general upon these rates; the export being in both cases not as a means of paying or buying, but for capital investment. In the first place, it goes without saying that whether so many millions of pounds sterling are sent to India in precious metal or iron rails, to be invested in railways there, these are merely two different forms of transferring the same amount of capital to another country; namely, a transfer which does not enter the calculation of ordinary mercantile business, and for which the exporting country expects no other return than the future annual revenue from the income of these railways. If this export is made in the form of precious metal, it will exert a direct influence upon the money market and with it upon the interest rate of the country exporting this precious metal; if not necessarily under all circumstances, then under the previously outlined conditions, since it is precious metal and as such is directly loanable money capital and the basis of the entire money system. Similarly, this export also directly affects the rate of exchange. Precious metal is exported only for the reason, and to the extent, that bills of exchange, say on India, which are offered in the London money market, do not suffice to make these extra remittances. In other words, there is a demand for Indian bills of exchange which exceeds their supply, and so the rates turn for a time against England, not because it is in debt to India, but because it has to send extraordinary sums to India. In the long run, such a shipment of precious metal to India must have the effect of increasing the Indian demand for English commodities, because it indirectly increases the consuming power of India for European goods. But if the capital is shipped in the form of rails, etc., it cannot have any influence on the rates of exchange, since India has no return payment to make for it. Precisely for this reason, it need not have any influence on the money market. Wilson seeks to establish the existence of such an influence by declaring that such an extra expenditure would bring about an additional demand for money accommodation and would thus influence the interest rate. This may be the case; but to maintain that it must take place under all circumstances is totally wrong. No matter where the rails are shipped and whether laid on English or Indian soil, they represent nothing but a definite expansion of English production in a particular sphere. To contend that an expansion of production, even within very broad limits, cannot take place without driving up the interest rate, is absurd. Money accommodation, i. e., the amount of business transacted which includes credit operations, may grow; but these credit operations can increase while the interest rate remains unchanged. This was actually the case during the railway ma-nia in England in the forties. The interest rate did not rise. And it is evident that, so far as actual capital is concerned, in this case commodities, the effect on the money market will be just the same, whether these commodities are destined for foreign countries or for domestic consumption. It could only make a difference when capital investments by England in foreign countries exerted a restraining influence upon its commercial exports, i.e., exports for which payment must be made, thus giving rise to a return flow, or to the extent that these capital investments are already general symptoms indicating the overexertion of credit and the initiation of swindling operations. In the following, Wilson puts the questions and Newmarch replies.
"1786. On a former day you stated, with reference to the demand for silver for the East, that you believed that the exchanges with India were in favour of this country, notwithstanding the large amount of bullion that is continually transmitted to the East; have you any ground for supposing the exchanges to be in favour of this country?— Yes, I have... I find that the real value of the exports from the United Kingdom to India in 1851 was £7,420,000; to that is to be added the amount of India House drafts, that is, the funds drawn from India by the East India Company for the purpose of their own expenditure. Those drafts in that year amounted to £3,200,000, making, therefore, the total export from the United Kingdom to India £10,620,000. In 1855 ... the actual value of the export of goods from the United Kingdom had risen to £10,350,000 and the India House drafts were £3,700,000, making, therefore, the total export from this country £14,050,000. Now as regards 1851, I believe there are no means of stating what was the real value of the import of goods from India to this country, but in 1854 and 1855 we have a statement of the real value; in 1855, the total real value of the imports of goods from India to this country was £12,670,000 and that sum, compared with the £14,050,000 I have mentioned, left a balance in favour of the United Kingdom, as regards the direct trade between the two countries, of £1,380,000." (1)
Thereupon Wilson remarks that the rates of exchange are also affected by indirect commerce. For instance, exports from India to Australia and North America are covered by drafts on London, and therefore affect the rate of exchange just as though the commodities had gone directly from India to England. Furthermore, when India and China are considered together, the balance is against England, since China has constantly to make heavy payments to India for opium, and England has to make payments to China, so that the sums go by this circuitous route to India (1787, 1788).
1791. Wilson now asks if the effect on the rates of exchange will not be the same whether capital
"went in the form of iron rails and locomotives, or whether it went in the form of coin".
Newmarch correctly answers:
The £12 million which have been sent during the last few years to India for railway construction served to purchase an annuity which India has to pay at regular intervals to England.
"But as far as regards the immediate operation on the bullion market, the investments of the £12 million would only be operative as far as bullion was required to be sent out for actual money disbursements." [1792]
1797. //Weguelin asks:// "If no return is made for this iron" (rails), "how can it be said to affect the exchanges? — I do not think that that part of the expenditure which is sent out in the form of commodities affects the computation of the exchange.... The computation of the exchange between two countries is affected, one might say, solely by the quantity of obligations or bills offering in one country, as compared with the quantity offering in the other country against it; that is the rationale of the exchange. Now, as regards the transmission of those £12,000,000, the money in the first place is subscribed in this country ... now, if the nature of the transaction was such that the whole ofthat £12,000,000 was required to be laid down in Calcutta, Bombay, and Madras in treasure ... a sudden demand would very violently operate upon the price of silver, and upon the exchange, just the same as if the India Company were to give notice tomorrow that their drafts were to be raised from £3,000,000 to £12,000,000. But half of those £12,000,000 is spent ... in buying commodities in this country ... iron rails and timber, and other materials ... it is an expenditure in this country of the capital of this country for a particular kind of commodity to be sent out to India, and there is an end of it."—"1798. //Weguelin:// But the production of those articles of iron and timber necessary for the railways produces a large consumption of foreign articles, which might affect the exchange? — Certainly."
Wilson now thinks that iron represents labour to a large extent, and that the wage paid for this labour largely represents imported goods (1799), and then questions further:
"1801. But speaking quite generally, it would have the effect of turning the exchanges against this country if you sent abroad the articles which were produced by the consumption of the imported articles without receiving any remittance for them either in the shape of produce or otherwise? — That principle is exactly what took place in this country during the time of the great railway expenditure" (1845). "For three or four or five years, you spent upon railways £30,000,000, nearly the whole of which went in the payment of wages. You sustained in three years a larger population employed in constructing railways, and locomotives, and carriages, and stations than you employed in the whole of the factory districts. The people ... spent those wages in buying tea and sugar and spirits and other foreign commodities; those commodities were imported; but it was a fact, that during the time this great expenditure was going on the foreign exchanges between this country and other countries were not materially de-ranged. There was no efflux of bullion, on the contrary, there was rather an influx."
1802. Wilson insists that with an equalised trade balance and par rates between England and India the extra shipment of iron and locomotives "would affect the exchanges with India". Newmarch cannot see it that way so long as the rails are sent out as capital investment and India has no payment to make for them in one form or another; he adds:
"I agree with the principle that no one country can have permanently against itself an adverse state of exchange with all the other countries, with which it deals; an adverse exchange with one country necessarily produces a favourable exchange with another."
Wilson retorts with this triviality:
"1803. But would not a transfer of capital be the same whether it was sent in one form or another? — As regards the obligation it would."—"1804. The effect therefore of making railways in India, whether you send bullion or whether you send materials, would be the same upon the capital market here in increasing the value of capital as if the whole was sent out in bullion?"
If iron prices did not rise, it was in any case proof that the "value" of "capital" contained in the rails had not been increased. What we are here concerned with is the value of money capital, i. e., the interest rate. Wilson would like to identify money capital with capital in general. The simple fact is essentially that 12 million were subscribed in England for Indian railways. This is a matter which has nothing directly to do with the rates of exchange, and the designation of the £12 million is also the same to the money market. If the money market is in good shape, it need not produce any effect at all on it, just as the English railway subscriptions in 1844 and 1845 left the money market unaffected. If the money market is already in somewhat difficult straits, the interest rate might indeed be affected by it, but certainly only in an upward direction, and this, according to Wilson's theory, would favourably affect the rates of exchange for England, that is, it would work against the tendency to export precious metal; if not to India, then to some other country. Mr. Wilson jumps from one thing to another. In Question 1802 it is the rates of exchange that are supposed to be affected, and in Question 1804 the "value of capital"— which are two very different things. The interest rate may affect the rates of exchange, and the rates of exchange may affect the interest rate, but the latter can be stable while the rates of exchange fluctuate, and the rates of exchange can be stable while the interest rate fluctuates. Wilson cannot get it through his head that the mere form in which capital is shipped abroad makes such a difference in the effect, i. e., that the difference in the form of capital is of such importance, and particularly its money form, which runs very much counter to the explanations of economists. Newmarch replies to Wilson one-sidedly in that he does not indicate that he has jumped so suddenly and without reason from rate of exchange to interest rate. Newmarch answers Question 1804 with uncertainty and equivoca-tion:
"No doubt, if there is a demand for £12,000,000 to be raised, it is immaterial, as regards the general rate of interest, whether that £12 million is required to be sent in bullion or in materials. I think, however"
//a fine transition, this "however", when he intends to say the exact opposite//
"it is not quite immaterial"
//it is immaterial, but, nevertheless, it is not immaterial//
"because in the one case the £6 million would be returned immediately; in the other case it would not be returned so rapidly. Therefore it would make some"
//what definiteness!//
"difference, whether the £6 million was expended in this country or sent wholly out of it."
What does he mean when he says six million would return immediately? In so far as the £ 6 million have been expended in England, they exist in rails, locomotives, etc., which are to be shipped to India, whence they do not return; their value returns very slowly through amortisation, whereas the six million in precious metal may perhaps return very quickly in kind. In so far as the six million have been expended in wages, they have been consumed; but the money used for payment circulates in the country the same as ever, or forms a reserve. The same holds true for the profits of rail producers and that portion of the six million which replaces their constant capital. Thus, this ambiguous statement about returns is used by Newmarch only to avoid saying directly: The money has remained in the country, and in so far as it serves as loanable money capital the difference for the money market (aside from the possibility that circulation could have absorbed more coin) is only that it is charged to the account of A instead of B. An investment of this kind, where capital is transferred to other countries in commodities, not in precious metal, can affect the rate of exchange (but not the rate of exchange with the country in which the exported capital is invested) only in so far as the production of these exported commodities requires an additional import of other foreign commodities. This production then cannot balance out the additional import. However, the same thing happens with every export on credit, no matter whether intended for capital investment or ordinary commercial purposes. Moreover, this additional import can also call forth by way of reaction an additional demand for English goods, for instance, on the part of the colonies or the United States.
Previously,(2) Newmarch stated that, owing to drafts of the East India Company, exports from England to India were larger than imports. Sir Charles Wood cross-examines him on this score. This preponderance of English exports to India over imports from India is actually brought about by imports from India for which England does not pay any equivalent. The drafts of the East India Company (now the East India government) resolve themselves into a tribute levied on India. For instance, in 1855, imports from India to England amounted to £12,670,000; English exports to India amounted to £10,350,000; balance in India's favour £2,250,000.
"If that was the whole state of the case, that £2,250,000 would have to be remitted in some form to India. But then come in the advertisements from the India House. The India House advertise to this effect that they are prepared to grant drafts on the various presidencies in India to the extent of £3,250,000."
//This amount was levied for the London expenses of the East India Company and for the dividends to be paid to stockholders.//
"And that not merely liquidates the £2,250,000 which arose out of the course of trade, but it presents £1,000,000 of surplus" (1917).
"1922. //Wood:// Then the effect of those India House drafts is not to increase the exports to India, but pro tanto to diminish them?"
//This should read: to reduce the necessity of covering the imports from India by exports to that country to the same amount.// Mr. Newmarch explains this by saying that the British import "good government" into India for these £3,700,000 (1925). Wood, as Minister for India, knows full well the kind of "good government" which the British import to India, and correctly replies with irony:
"1926. Then the export, which, you state, is caused by the East India drafts, is an export of good government, and not of produce."
Since England exports a good deal "in this way" for "good government" and as capital investment in foreign countries — thus obtaining imports which are completely independent of the ordinary run of business, tribute partly for exported "good government" and partly in the form of revenues from capital invested in the colonies or elsewhere, i.e., tribute for which it does not have to pay any equivalent— it is evident that the rates of exchange are not affected when England simply consumes this tribute without exporting anything in return. Hence, it is also evident that the rates of exchange are not affected when it reinvests this tribute, not in England, but productively or unproductively in foreign countries; for instance, when it sends munitions for it to the Crimea.(3) Moreover, to the extent that imports from abroad enter into the revenue of England — of course, they must be paid for in the form of tribute, for which no equivalent return is necessary, or by exchange for this unpaid tribute or in the ordinary course of commerce — England can either consume them or reinvest them as capital. In neither case are the rates of exchange affected, and this is overlooked by the sage Wilson. Whether a domestic or a foreign product constitutes a part of the revenue — whereby the latter case merely requires an exchange of domestic for foreign products — the consumption of this revenue, be it productive or unproductive, alters nothing in the rates of exchange, even though it may alter the scale of production. The following should be read with the foregoing in mind:
1934. Wood asks Newmarch how the shipment of war supplies to the Crimea would affect the rate of exchange with Turkey. Newmarch replies:
"I do not see that the mere transmission of warlike stores would necessarily affect the exchange, but certainly the transmission of treasure would affect the exchange."
In this case he thus distinguishes capital in the form of money from capita] in other forms. But now Wilson asks:
"1935. If you make an export of any article to a great extent, for which there is to be no corresponding import"
//Mr. Wilson forgets that there are very considerable imports into England for which corresponding exports have never taken place, except in the form of "good government" or of previously exported investment capital; in any case imports which do not enter into normal commercial movement. But these imports are again exchanged, for instance, for American products, and the circumstance that American goods are exported without corresponding imports does not alter the fact that the value of these imports can be consumed without an equivalent flow abroad; they have been received without reciprocal exports and can therefore be consumed without entering into the balance of trade//,
"you do not discharge the foreign debt you have created by your imports"
//but, if you have previously paid for these imports, for instance, by credit given abroad, then no debt is contracted thereby, and the question has nothing to do with the international balance; it resolves itself into productive and unproductive expenditures, no matter whether the products so consumed are domestic or foreign//,
"and therefore you must by that transaction affect the exchanges by not discharg-ing the foreign debt, by reason of your export having no corresponding imports? — That is true as regards countries generally."
This lecture by Wilson amounts to saying that every export with no corresponding import is simultaneously an import with no corresponding export, because foreign, i.e., imported, commodities enter into the production of the exported article. The assumption is that every export of this kind is based on, or creates, an unpaid import and thus presupposes a debt abroad. This is wrong, even when the following two circumstances are disregarded: 1) England receives certain imports free of charge for which it pays no equivalent, e. g., a portion of its Indian imports. It can exchange these for American imports and export the latter without importing in return; in any case, so far as the value is concerned, it has only exported something that has cost it nothing. 2) England may have paid for imports, for instance, American imports, which constitute additional capital; if it consumes these unproductively, for instance, as war materials, this does not constitute any debt towards America and does not affect the rate of exchange with America. Newmarch contradicts himself in Nos.
1934 and 1935, and Wood calls this to his attention in No. 1938:
"We seem, I think, to have exhausted the practical question, and to have now attained a very elevated region of metaphysical discussion."
//Wilson has still another version of his claim that the rate of exchange is affected by every transfer of capital from one country to another, no matter whether in the form of precious metal or commodities. Wilson knows, of course, that the rate of exchange is affected by the interest rate, particularly by the relation of the rates of interest prevailing in the two countries whose mutual rates of exchange are under discussion. If he can now demonstrate that surpluses of capital in general, i. e., in the first place, of commodities of all kinds including precious metal, have a hand in influencing the interest rate, then he is a step closer to his goal; a transfer of any considerable portion of this capital to some other country must then change the interest rate in both countries, with the change taking place in opposite directions. Thereby, in a secondary way, the rate of exchange between both countries is also altered.— F.E.jj
He then says in the Economist, 1847, page 574, which he edited at the time(4):
"No doubt, however, such abundance of capital as is indicated by large stocks of commodities of all kinds, including bullion, would necessarily lead, not only to low prices of commodities in general, but also to a lower rate of interest for the use of capital (1). If we have a stock of commodities on hand, which is sufficient to serve the country for two years to come, a command over those commodities would be obtained for a given period at a much lower rate than if the stocks were barely sufficient to last us two months (2). All loans of money, in whatever shape they are made, are simply a transfer of a command over commodities from one to another. Whenever, therefore, commodities are abundant, the interest of money must be low, and when they are scarce, the interest of money must be high (3). As commodities become abundant, the number of sellers, in proportion to the number of buyers, increases, and, in proportion as the quantity is more than is required for immediate consumption, so must a larger portion be kept for future use. Under these circumstances, the terms on which a holder becomes willing to sell for a future payment, or on credit, become lower than if he were certain that his whole stock would be required within a few weeks" (4).
In regard to statement (1), it is to be noted that a large influx in precious metal can take place simultaneously with a contraction in production, as is always the case in the period following a crisis. In the subsequent phase, precious metal may come in from countries which mainly produce precious metal; imports of other commodities are generally balanced by exports during this period. In these two phases, the interest rate is low and rises but slowly; we have already discussed the reason for this. This low interest rate could always be explained without recourse to the influence of any "large stocks of commodities of all kinds". And how is this influence to take place? The low price of cotton, for instance, renders possible the high profits of the spinners, etc. Now why is the interest rate low? Surely not because the profit, which may be made on borrowed capital, is high. But simply and solely because, under existing conditions, the demand for loan capital does not grow in proportion to this profit; in other words, because loan capital has a movement different from industrial capital. What the Economist wants to prove is exactly the reverse, namely, that the movements of loan capital are identical with those of industrial capital. In regard to statement (2), if we reduce the absurd assumption of stocks for two years in advance to the point where it begins to take on some meaning, it signifies that the commodity market is overstocked. This would cause a fall in prices. Less would have to be paid for a bale of cotton. This would by no means justify the conclusion that money for the purchase of a bale of cotton is more easily borrowed. This depends on the state of the money market. If money can be borrowed more easily, it is only because commercial credit is in a state requiring it to make less use than usual of bank credit. The commodities glut-ting the market are either means of subsistence or means of production. The low price of both increases the industrial capitalist's profit. Why should it depress the interest rate, unless it be through the antithesis, rather than the identity, between the abundance of industrial capital and the demand for money accommodation? Circumstances are such that the merchant and the industrial capitalist can more easily advance credit to one another; owing to this facilitation of commercial credit, both industrialist as well as merchant need less bank credit; hence the interest rate can be low. This low interest rate has nothing to do with the influx in precious metal, although both may run parallel to each other, and the same causes bringing about low prices of imported articles may also produce a surplus of imported precious metal. If the import market were really glutted, it would prove that a decrease in the demand for imported articles had taken place, and this would be inexplicable at low prices, unless it were attributed to a contraction of domestic industrial production; but this, again, would be inexplicable, so long as there is excessive importing at low prices. A mass of absurdities — in order to prove that a fall in prices = a fall in the interest rate. Both may simultaneously exist side by side. But if they do, it will be a reflection of the opposition in the directions of the movement of industrial and the movement of loanable money capital. It will not be a reflection of their identity.
In regard to statement (3), it is hard to understand even after this exposition why money interest should be low when commodities are available in abundance. If commodities are cheap, then I may need only £1,000 instead of the previous £2,000 to buy a definite quantity. But perhaps I nevertheless invest £2,000, and thus buy twice the quantity which I could have bought formerly. In this way, I expand my business by advancing the same capital, which I may have to borrow. I buy £2,000 worth of commodities, the same as before. My demand on the money market therefore remains the same, even though my demand on the commodity market rises with the fall in commodity prices. But if this demand for commodities should decrease, that is, if production should not expand with the fall in commodity prices, an event which would contradict all the laws of the Economist, then the demand for loanable money capital would decrease, although the profit would increase. But this increasing profit would create a demand for loan capital. Incidentally, a low level of commodity prices may be due to three causes. First, to lack of demand. In such a case, the interest rate is low because production is paralysed and not because commodities are cheap, for the low prices are but a reflection ofthat paralysis. Second, it may be due to supply exceeding demand. This may be the result of a glut on the market, etc., which leads to a crisis and may coincide with a high interest rate during the crisis itself; or, it may be the result of a fall in the value of commodities, so that the same demand can be satisfied at lower prices. Why should the interest rate fall in the last case? Because profits increase? If this were due to less money capital being required for obtaining the same productive or commodity capital, it would merely prove that profit and interest are inversely proportional to each other. In any case, the general statement of the Economist is false. Low money prices for commodities and a low interest rate do not necessarily go together. Otherwise, the interest rate would be lowest in the poorest countries, where money prices for produce are lowest, and highest in the richest countries, where money prices for agricultural products are highest. In general, the Economist admits: If the value of money falls, it exerts no influence on the interest rate. £100 bring £105 the same as ever. If the £100 are worth less, so are the £5 interest. This relation is not affected by the appreciation or depreciation of the original sum. Considered from the point of view of value, a definite quantity of commodities is equal to a definite sum of money. If this value increases, it is equal to a larger sum of money. The opposite is true when it falls. If the value is equal to 2,000, then 5% = 100; if it is equal to 1,000, then 5% = 50. But this does not alter the interest rate in any way. The rational part of this matter is merely that greater money accommodation is required when it takes £2,000 to sell the same quantity of commodities than when only £1,000 are required. But this merely shows that profit and interest are here inversely proportional to each other. For the lower the prices of the components of constant and variable capital, the higher the profit and the lower the interest. But the opposite can also be and is often the case. For instance, cotton may be cheap because no demand exists for yarn and fabrics; and cotton may be relatively expensive because a large profit in the cotton industry creates a great demand for it. On the other hand, the profits of industrialists may be high precisely because the price of cotton is low. Hubbard's table proves that the interest rate and the prices of commodities execute completely independent movements, whereas the movements of the interest rate adhere closely to those of the metal reserve and the rates of exchange." The Economist states:
"Whenever, therefore, commodities are abundant, the interest of money must be low."
Precisely the opposite obtains during crises. Commodities are super-abundant, inconvertible into money, and therefore the interest rate is high; in another phase of the cycle the demand for commodities is great and therefore quick returns are made, but at the same time, prices of commodities are rising and because of the quick returns the interest rate is low.
"When they //the commodities// are scarce, the interest of money must be high."
The opposite is again true in the slack period following a crisis. Commodities are scarce, absolutely speaking, not with reference to demand; and the interest rate is low.
In regard to statement (4), it is pretty evident that an owner of commodities, provided he can sell the latter at all, will get rid of them at a lower price when the market is glutted than he would when there is a prospect of the existing supply becoming rapidly exhausted. But why the interest rate should fall because of that is not so clear.
If the market is glutted with imported commodities, the interest rate may rise as a result of an increased demand on the part of the owners for loan capital, in order to avoid dumping their commodities on the market. The interest rate may fall, because the fluidity of commercial credit may keep the demand for bank credit relatively low.
The Economist(5) mentions the rapid effect on the rates of exchange in 1847 of the raising of the interest rate and other circumstances exerting pressure on the money market. But it should be borne in mind that the gold drain continued until the end of April in spite of the change in the rates of exchange; a turn did not take place here until early May.
On January 1, 1847, the metal reserve of the Bank was £15,066,691; the interest rate 3-^-%; three months' rates of exchange on Paris 25.75; on Hamburg 13.10; on Amsterdam 12.3-j-, On March 5, the metal reserve had fallen to £11,595,535; the discount had risen to 4%; the rate of exchange fell to 25.67 -£- on Paris; 13.9 ~ on Hamburg; and 12.2-^- on Amsterdam. The drain of gold continued.
See the following table:
Bullion Reserve of the Bank of England (£)
Money Market
Highest Three-Month Rates Bullion Reserve of the Bank of England (£)
Money Market
Paris Hamburg Amsterdam
March 20 April 3 April 10 April 17 April 24 May 1 May 8
11,231,630 10,246,410 9,867,053 9,329,941 9,213,890 9,337,716 9,588,759
Bank disc. 4%
5°/ Money very scarce . . . Bank disc. 5.5%
Increasing pressure . . . Highest pressure
25.6772 25.80 25.90 26.0272 26.05 26.15 26.2772
13,9[3]/« 13.10 13.1072 13.10[3]/« 13.12 13.12V« 13.1572
12.272 12.372 12.472 12.572 12.6 12.672 12.7V« In 1847, the total export of precious metal from England amounted to £8,602,597.
Of this to the United States . . £3,226,411 France £2,479,892 Hanse towns . . . £ 958,781 Holland £ 247,743
In spite of the change in the rates at the end of March, the drain of gold continued for another full month, probably to the United States.
"We thus see" //says the Economist, 1847, p. 954// "how rapid and striking was the effect of a rise in the rate of interest, and the pressure which ensued in correcting an adverse exchange, and in turning the tide of bullion back to this country. This effect was produced entirely independent of the balance of trade. A higher rate of interest caused a lower price of securities, both foreign and English, and induced large purchases to be made on foreign account, which increased the amount of bills to be drawn from this country, while, on the other hand, the high rate of interest and the difficulty of obtaining money was such that the demand of those bills fell off, while their amount increased.... For the same cause orders for imports were countermanded, and investments of English funds abroad were realised and brought home for employment here. Thus, for example, we read in the Rio de Janeiro Price Current of the 10th May, 'Exchange //on England// has experienced a further decline, principally caused by a pressure on the market for remittance of the proceeds of large sales of//Brazilian// government stock, on English account.'[3] Capital belonging to this country, which has been invested in public and other securities abroad, when the interest was very low here, was thus again brought back when the interest became high."
England's Balance of Trade
India alone has to pay 5 million in tribute for "good government", interest and dividends on British capital, etc., not counting the sums sent home annually by officials as savings from their salaries, or by English merchants as part of their profit to be invested in England. Every British colony continually has to make large remittances for the same reason. Most of the banks in Australia, the West Indies, and Canada, have been founded with English capital, and the dividends are payable in England. In the same way, England owns many foreign securities — European, North American and South American — on which it draws interest. In addition to this it has interests in foreign railways, canals, mines, etc., with corresponding dividends. Remittance on all these items is made almost exclusively in products over and above the amount of English exports. On the other hand, what is sent from England to owners of English securities abroad and for consumption by Englishmen abroad, is insignificant in comparison.
The question, so far as it concerns the balance of trade and the rates of exchange, is "at any particular moment one of time".
"Practically speaking ... England gives long credits upon her exports, while the imports are paid for in ready money. At particular moments this difference of practice has a considerable effect upon the exchanges. At a time when our exports are very considerably increasing, e.g., 1850, a continual increase of investment of British capital must be going on ... in this way remittances of 1850 may be made against goods exported in 1849. But if the exports of 1850 exceed those of 1849 by more than 6 million, the practical effect must be that more money is sent abroad, to this amount, than returned in the same year. And in this way an effect is produced on the rates of exchange and the rate of interest. When, on the contrary, our trade is depressed after a commercial crisis, and when our exports are much reduced, the remittances due for the past years of larger exports greatly exceed the value of our imports; the exchanges become correspondingly in our favour, capital rapidly accumulates at home, and the rate of interest becomes less." {Economist, January 11, 1851.(1))
The foreign rates of exchange can change:
1) In consequence of the immediate balance of payments, no matter what the cause — a purely mercantile one, or capital investment abroad, or government expenditures for wars, etc., in so far as cash payments thereby are made to foreign countries.
2) In consequence of money depreciation — whether metal or paper — in a particular country. This is purely nominal. I f £ l should represent only half as much money as formerly, it would naturally be counted as 12.5 francs instead of 25 francs.
3) When it is a matter of a rate of exchange between countries, of which one uses silver and the other gold as "money", the rate of exchange depends upon the relative fluctuations of the value of these two metals, since these necessarily alter the parity between them. This is illustrated by the rates of exchange in 1850; they were unfavourable to England, although that country's export rose enormously. Yet no drain of gold took place. This was a result of a momentary rise in the value of silver as against gold. (See Economist, November 30, 1850. b)
Parity for the rate of exchange of £1 is: Paris, 25 francs 20 cent.;
Hamburg, 13 marks banko 10.5 shillings; Amsterdam, 11 florins 97 cent. To the extent that the Paris rate of exchange exceeds 25.20 francs, it becomes more favourable to the English debtor of France, or the buyer of French commodities. In both cases he needs fewer pounds sterling in order to accomplish his purpose.— In remoter countries, where precious metal is not easily obtained when bills of exchange are scarce and insufficient for remittances to be made to England, the natural effect is to drive up the prices of such products as are generally shipped to England since a greater demand arises for them, in order to send them to England in place of bills of exchange; this is often the case in India.
An unfavourable rate of exchange, or even a drain of gold, can take place when there is a great abundance of money in England, the interest rate is low and the price for securities is high.
In the course of 1848 England received large quantities of silver from India, since good bills of exchange were rare and mediocre ones were not readily accepted in consequence of the crisis of 1847 and the general lack of credit in business with India. All this silver had barely arrived before it found its way to the continent, where the revolution led to the formation of many hoards. The bulk of the same silver made the trip back to India in 1850, since the rate of exchange now made this profitable.
The monetary system is essentially a Catholic institution, the credit system essentially Protestant. "THE SCOTCH HATE GOLD." In the form of paper the monetary existence of commodities is only a social one. It is Faith that brings salvation." Faith in money value as the immanent spirit of commodities, faith in the mode of production and its pre-destined order, faith in the individual agents of production as mere personifications of self-expanding capital. But the credit system does not emancipate itself from the basis of the monetary system any more than Protestantism has emancipated itself from the foundations of Catholicism.
Chapter XXXVI. Precapitalist Relationships
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 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 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 Alcalâ, Salamanca, Ingolstadt, Freiburg in Breisgau, Mayence, Cologne, Treves, one after another recognised 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 Traité de l'usure et des intérêts, by Bruyset-Ponthus, Lyons." (M. Augier, Le Crédit 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 pur-posely 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 precapitalist 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 Pol. Econ., 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.[57] 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 prerequisite 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.(1) 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 conditions of production, i.e., the field which he cultivates, the raw materials which he processes, etc. But under this system estrangement of the producer from the conditions 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 conditions of production, for they have already been separated.
Usury centralises 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 the conditions 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 slaveholder 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 precapitalist 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 organisation 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 the capitalist mode of 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 centralising 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. The interest rate 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 was still undeveloped. Therefore wide divergences in interest rates and in the concept of usury. In Charlemagne's time, it was considered usurious to charge 100%. In Lindau on Lake Constance, local burghers took 216-^ % in 1344. In Zurich, the City Council fixed the legal interest rate at 4 3 y %. In Italy, 40% had to be paid sometimes, although the usual rate from the 12th to the 14th century did not exceed 20%. Verona decreed that 12-^ % should be the legal rate. Frederick II fixed the rate at 10%, but only for Jews. He did not wish to speak for Christians. In Rhenish Germany, 10% was the usual rate as early as the 13th century (Hüllmann, 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 fulfils 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 of securing a hold on a part of the conditions 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 conditions 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 conditions 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 plebeians by compelling them to serve as soldiers and which prevented them from reproducing their conditions of labour, and therefore made paupers of them (and pauperisation, the crip-pling or loss of the conditions of reproduction is here the predominant form) — these same wars filled the store-rooms and coffers of the patricians with looted copper, the money ofthat 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 conditions 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 géné-raux, receveurs généraux. Then, there develops with commerce and the generalisation 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 capitalist 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 conditions 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-piété (1350 in Sarlins in Franche-Comté, later in Perugia and Savona in Italy, 1400 and 1479).[58] These are noteworthy mainly because they reveal the irony of history, which turns pious wishes into their very opposite during the process of realisation. According to a moderate estimate, the English working class pays 100% to the pawnshops, the modern successors of Monts-de-piété.21) 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.[22]'
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 based on it to emancipate themselves from the domination of outmoded usury and the monopolisation 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
[2] '> "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 a year, and yields each time about 33y 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, I, p. 114).
[22] Even in the titles of their works(2) 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.
themselves from the exactions of usurers,[23]' 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 cheques 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 fight against the monopoly of "private tailors". This same Josiah Child is simultaneously the father of English stock-jobbing. Thus, this
[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" (1. 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" (1. c , pp. 59, 60).
autocrat of the East India Company defends its monopoly in the name of free trade. Versus Thomas Manley (INTEREST OF MONEY MISTAKEN) [59] 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." {Traités sur le Commerce, etc., 1669, trad. Amsterdam et Berlin, 1754.) (3) "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" (1. 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" (1. 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.[60]
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" (J. Francis, 1. c , p. 73).(4)
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".
After many endeavours this BANK or CREDIT was established in De-vonshire 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 organised 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 phraseolo-gy, 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.
"[/n travailleur a besoin d'aides, de seconds, d'ouvriers; il les cherche intelligents, habiles, dévoués; il les met à l'oeuvre, et leurs travaux sont productifs."* (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 Nou-veau 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 Napo-leonic era. What a difference compared with the contemporaneous writings of Owen![24] 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 materialised in the Crédit mobilier, founded by an ex-follower of Saint-Simon, Emile Péreire.[61] 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 mobilier is already contained in the following passages from Doctrine de St. Simon. Exposition. Première année, 1828-29, 3me éd., 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).
(5) 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 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.
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 cancelled, by the opportunities offered in our disorganised 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 organisation and centralisation is concerned, is the most artificial and most developed product turned out by the capitalist mode of production, a fact already expressed in 1697 in Some Thoughts of the Interests of England. This accounts for the immense power of 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 the 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 realised 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 yet actively employed at the disposal of the industrial and commercial capitalists so that neither the lenders nor users of this capital are its 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 mirac-ulous 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,[25]'
25> Karl Marx, Misère de la Philosophie, Bruxelles et Paris, 1847. (6)—Karl Marx, Kritik der Polit. Oekonomie, S. 64.b was capable of dreaming up the monstrous crédit gratuit,[62] the ostensible realisation of the pious wish of the petty-bourgeois estate.
In Religion saint-simonienne. Economie 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 général 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 complete with one another just as their capitalist masters now do" (C. Pecqueur, Théorie nouvelle d'économie soc. et pol., Paris, 1842, p. 434).(7) 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 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," 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 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.
Interest in the Middle Ages
"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, The History and Princ. of Banking, pp. 164, 165).
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 Kauftiandel und Wucher vom Jahre 1524, Luther's Werke, Wittenberg, 1589, Teil 6.(1))
"Fifteen years ago I took pen in hand against usury, when it had spread so alarm-ingly that I could scarcely hope for any improvement. Since then it has become so ar-rogant 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?" (An die Pfarrherm 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 imitat-ed; 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, 1. 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:[64]
"The moneys employed at interest in this nation, are not near the tenth part; dis-posed 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 Tepper and other highly respected Warsaw bankers" (J. G. Busch, Theoretisch-praktische Darstellung der Handlung, etc., 3rd ed., Hamburg, 1808, Vol. II, pp. 232, 233).
Advantages Derived by the Church from the Prohibition of Interest
"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',[65] 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 af-fluent" (1. c , p. 55).
Endnotes
[57] Marx criticised Carey's unhistorical approach. Carey compared the rate of interest at the early stages of capitalism with the level of this interest under developed capitalism — in the economic manuscripts of 1857-58 and of 1861-63 (present edition, Vol. 29, p. 227 and Vol. 34, pp. 118-19 respectively) .—590
[58] Monts-de-piété or montes depièta — loan offices or pawnshops set up in Western Europe to counterbalance usury. In the fifteenth century the King of France Louis XI granted the Lombards the right to give loans on the security of property at a legalised rate of interest. Monts-de-piété, however, failed to protect poor people from usurers.—596
[2] As early as 1865, when working on the manuscript Marx planned to have Capital translated into English (see Marx's letter to Engels of July 31, 1865; present edition, Vol. 42, p. 173). Reporter Peter Fox, a member of the British labour movement, was to help him find a publisher. However, he died in 1869, and nothing was settled. The English translation of Volume I of Capital, edited by Engels, appeared after Marx's death, in January 1887 (ibid., Vol. 35). The translation was done by Samuel Moore and Edward Aveling between mid-1883 and March 1886; Eleanor Marx-Aveling assisted in preparing the translation for the press.— 5
[59] Marx is inaccurate here. Thomas Manley did not write the anonymous treatise Interest of Money Mistaken published in London in 1668. He was one of the authors of another treatise similar in content and published in 1669. The author of this particular treatise is not known.—598
[60] This refers to John Law, the Scottish economist and financier, who sought to implement in France his financial projects based on the erroneous idea that a state can increase the country's wealth by issuing banknotes without security. In 1716 Law founded a private bank that, in 1718, was turned into a state bank. In addition to implementing the unlimited emission of banknotes, Law withdrew metallic money from circulation and supported various speculative undertakings. The controversy aroused by Law's activities culminated, at the end of 1720, in the final collapse of the bank and "Law's system".—598
[24] See Ch. Babbage, Traité sur l'économie des machines et des manufactures, Paris, 1833, pp. 377-78. Cf. K.Marx, Economie Manuscript of 1861-63 (present edition, Vol. 33, p. 350) and Capital (ibid., Vol. 35, p. 394).—115
[61] The Crédit mobilier (Société générale du Crédit mobilier) — a big French joint-stock bank founded by the Péreire brothers in 1852. It was notorious for its speculation. The Crédit mobilier took an active part in building railways and setting up industrial enterprises. It went bankrupt in 1867.—600
[25] See H.C. Carey, Principles of Political Economy, Philadelphia, 1837. Cf. K.Marx, Outlines of the Critique of Political Economy (present edition, Vol. 29, p. 138).—115
[62] Proudhon expounded this theory in Gratuité du crédit. Discussion entre M. Fr. Bastiat et M. Proudhon, Paris, 1850. Cf. also present edition, Vol. 29, pp. 219-22.—603
[64] Marx examined Sir Dudley North's views in the Economic Manuscript of 1861-63 (present edition, Vol. 34, pp. 272-74).—606
[65] A reference to the mortmain — the right of the medieval feudal lord to inherit the property of the dead serf peasant. Since the property and the land of the dead peasant usually went to his heirs, the latter were obliged to pay a specially onerous fee for it to the lord.— 607
[3] Since the late 1860s Marx repeatedly asked his correspondents to send him materials on landed property in various countries (see present edition, Vol. 43, pp. 61 and 412). He also informed them that he intended to use this new material to supplement the section on ground rent. Having received numerous statistical reference books and other publications on landed property in Russia from Nikolai Danielson, in particular, and having made a thorough study of them, Marx wrote to his Russian correspondent on December 12, 1872: "In Volume II of Capital I shall, in the section on landed property, deal in great detail with the Russian form" (ibid., Vol. 44, p. 457). This passage, among other excerpts from Marx's letters to him, was quoted by Danielson in his letter to Engels of August 25 (September 6), 1885. He thought they could be used in the preface to Volume III of Capital. See also Engels' letter to Danielson of June 3, 1885 (ibid., Vol. 47, p. 294).—10
[22] High import duties on agricultural produce were imposed by the Corn Laws (first introduced in the fifteenth century) in the interests of the landowners in order to maintain high prices on the home market. See also Note 73.—109, 325
[23] The Ten Hours' Bill, passed by the British Parliament on June 8, 1847, applied only to adolescents and women and was ignored by many manufacturers. In February 1850 the Court of Chancery (one of Britain's high courts) acquitted a number of manufacturers accused of infringing the Ten Hours' Bill. This ruling caused protests from the workers. On August 5, 1850, Parliament passed a new Bill which stipulated a lO'/s-hour working day for women and adolescents and fixed the beginning and end of the working day. On more details on this Bill see present edition, Vol. 35, p. 297 and Vol. 10, pp. 271-76, 288-300.—109