The Natural Economic Order/Part V/Chapter 4

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A commodity is bought with money and sold again to the consumer loaded with interest. When the commodity has been sold. money is again free for a new foray.[1] This is the true meaning of Marx's formula Money — Wares — Surplus Money.

Basic interest thus exacted by money from the wares is not booty snatched on one occasion only, it is a perpetually flowing fountain and the experience of thousands of years permits us to estimate it on the average at 4% to 5% annually of the money sum involved. The interest that the merchant exacts directly from the wares as they pass through his hands is the true and full basic interest. What the merchant delivers to his capitalist is basic interest less the cost of collections[2]; just as the tolls which the toll-collector delivers to the State are not the full toll-money.

But if someone with his money-capital buys bricks, lime, wheelbarrows, not in order to sell them again but to build a tenement house, he voluntarily puts an end to the periodic return of the money; he gives up the perpetually-flowing fountain of interest. He has then a house but no money, no source of interest. Obviously he will give up such a valuable possession only on condition that the house brings him in the interest which, experience shows, the money necessary for its construction can always exact in commerce. If money in the course of a year can exact 5% interest from the wares, the house must be able to exact the same tribute from its tenants, the ship from its freight, the factory from wages;[3] otherwise money simply remains in the market with the wares, and the house is not built.

Money therefore lays down this obvious condition for the construction of a house, or factory, or ship, that the house must be able to exact from its tenants, or the factory from its workmen, or the ship from its freight, the same interest that money itself can at any time exact from the wares. No interest means no money for houses, factories, ships. And without money how could anyone collect and put together the thousand different articles necessary for the construction of a ship, a factory, a house ? Without money it is inconceivable that a house or ship or factory could ever be constructed, so the foundation capital of every capitalistic undertaking consists of a sum of money. For the millions of factories, ships, rented houses, it may be said, "In the beginning was the money."

But if no money is given for the construction of houses unless they can exact the same interest that money itself exacts from the wares, building is suspended and the consequent scarcity of houses raises rent; just as the scarcity of factories reduces wages.

Houses, ships and factories, in short all so-called real capital, must therefore necessarily yield interest equal to the tribute which money can impose as basic interest upon the exchange of wares.

Houses, factories, machinery are capital. They do not, like the wares, collect interest as bank-messengers in order to hand it over to the possessors of money, they collect it for the owner of the house or factory. This power does not, however, lie in the characteristics of such things, but in the fact that money here, precisely as with the wares, prepares the market conditions necessary for the collection of interest. The ratio of houses to tenants, of ships to freights, of workmen to factories is regularly, artificially and inevitably so constituted by the present form of money that demand (tenants and workers) is always faced with an insufficient supply.

The traditional form of money (medium of exchange) provided by the State protects all existing houses from the interest-reducing competition of new houses. Money takes jealous care that its creatures shall not degenerate; it is given only for the construction of as many houses as can be built without causing the yield of interest to fall below basic interest. This fact is confirmed by thousands of years of experience.

So-called real capital is therefore anything rather than "real". Money alone is true real capital, basic capital. All other capital objects are completely dependent upon the characteristics of the existing form of money; they are its creatures; they receive the title of nobility, the title of capital, from money. Deprive money of the privilege of forbidding the workers to build new houses, tear down the barrier raised by money between the workers and real capital, and the supply of such things will increase until they lose the characteristics of capital.

The statement sounds monstrous, and one must be very sure of one's reasoning to make it, that the houses, factories, ships, railways, theatres and power-stations, in short, the whole dark and mighty ocean that one can overlook, say, from the Kreuzberg in Berlin, is capital, and must necessarily be capital, only because money is capital. Is it possible that this mighty ocean of capital, at least 100 times as great as money-capital, yields interest only because money yields interest ? The statement sounds improbable.

But the apparent improbability at once decreases if we reflect upon the antiquity of money, upon the fact that for three or four thousand years money has by artificial means regularly and automatically restricted the construction of houses, so that demand has always exceeded supply, and houses, for this reason, have remained capital.

And the improbability disappears if we recall to mind the economic glacial period (as we have named the Middle Ages) and the thousand economic crises caused, since then, by money. Real capital worth billions of dollars would have been constructed but for forced unemployment; it is the absence of this real capital, due to money, that permits the existing real capital to exact interest.

The scarcity of houses, ships, factories, revealed by the fact that these things yield interest, is the result of a cause which has been uninterruptedly at work for thousands of years.

If during the years of crisis 1873 — 1878, the starving and unemployed masses had been allowed to build houses and machinery, would not house-rent have been forced down by this addition to supply ? And those were but five years! Nor must it be forgotten that the other causes of economic crises, unconnected with interest (as described in the third part of this book: "Money as it is") act in the same direction, that is, restrict or prevent exchange.

Clearly, therefore, so-called real capital produces interest because it can be created only by spending a sum of money, and because this money is capital. So-called real capital has not, like money, the power of extorting interest. Real capital, just as the wares merely makes use of a state of the market forcibly established for its own ends by money, namely an artificial limitation of the production of real capital with the aim of keeping the supply of it constantly below the demand.

By forced unemployment our traditional form of money, stamped and managed by the State, inevitably creates the homeless and destitute mass of workers, the proletariat, essential for the continuance of the capitalistic character of houses, ships, and factories.

Money is indispensable for the formation of this real capital, and without interest there is no money. But real capital cannot exist without a proletariat.[4] Consequently the indispensability of money must produce the proletariat necessary for interest upon real capital and for the circulation of money.

Money creates a proletariat, not because the burden of interest deprives the masses of their property, but because it forcibly prevents the masses from constructing property for themselves.

To account for the existence of the proletariat we need not have recourse to the facile expedient of the alleged historical explanation; for the proletariat is a regular concomitant of the traditional form of money. Without a proletariat; no interest upon real capital; without interest: no circulation of money; without the circulation of money: no exchange of commodities - the result of which is impoverishment.

In former times, no doubt, the sword was a powerful factor in the production of a proletariat. The throne (legislation) and altar also helped. Even in our time attempts are still made to put land-rents under the protection of the law; wheat-duties are devised to deprive the people of the weapons they have forged against rent, namely ships, railways and agricultural machinery. A right to exact rent is set up against the right to work and the right to eat. But even without this aid, capital would not have been the poorer by a single proletarian. A few more economic crises, a few more thousand superfluous workers, would have been effective substitutes for legislation and the sword. Even without the sword and legislation money-capital has sufficient intrinsic power to create the proletariat necessary for real capital. With the impetus of a natural agent money creates a proletariat. Metal money and a proletariat are inseparable.

So-called real capital consists, no doubt, of very real and indispensable objects, but as capital these objects are anything rather than real. The interest at present produced by them is the creature of basic capital, of money.


  1. According to this, the consumer must always spend more money than as producer he receives. The difference, consisting of basic interest, the producer obtains by producing and selling more commodities than he buys. The surplus so delivered by the producers is bought by the money-capitalists for their personal use with the money which they receive as interest. It is the same with the cost of commerce paid by the consumer.
  2. We shall see later that the cost of collection is not inconsiderable. The chief item is the devastation caused in economic life by commercial crises.
  3. I use this expression unwillingly, as it is ambiguous. It is better to speak of the price which the employer pays the workmen for their produce, since it is for this, the completed, tangible achievement, not for the activity of the workman that the employer pays.
  4. Proletariat: workmen deprived of their own means of production.