William J. Blake: An American Looks at Karl Marx
In the next section, on interest and rent, we are considering not the division of surplus-value beween two sections of the capitalist class, one the producer of value, or rather the employer of the producers of value, and the merchant class occupied with circulation, but rather with the two types of payment made by the capitalists of either species, producers and circulators, to a group of money-lenders and landlords.
The money-lender assists them in their operations, but neither adds to value nor makes use-value available, nor does he add to the entire social capital although he appears to be the source of all capital, especially in the most highly developed forms of capitalism.
As to the landlord (not the seller of the occupancy of houses but the collector of tribute for the use of the earth), he is an altogether different category, for he has no more relation to production than a highwayman has to savings. Even the state, for its taxes, is, as we shall see later, of service to certain economic groups and renders some smaller service even to the poor. But it would be impossible to figure the economic equivalent of ground-rent.
In discussing interest, we shall take it up in its restricted form for the time being. The immense superstructure of credit and of financing, that is, finance-imperialism, of the domination of industrial capital, or rather the interpenetration of industrial capital by finance capital, these are properly part of a treatment of the present-day forms of capitalism; forms that, though suspected and prophesied by Marx, did not come into being until after his death. The term interest here is used as in most textbooks on political economy. It is restricted to the money earned by money on loan, or by money invested for a long term, but with no direct participation in industry or commerce.
Interest has been historically one of the thorniest subjects of economic theory. The Fathers of the Church denounced it, and Luther stormed as much at money-lending as at the abuses of indulgences. It was so dreaded that the name of usurer became one of the horror words of literature. It never conjures up the idea of a decent human being, even in reactionary minds.
But in the seventeenth century it was tolerated, in the eighteenth even exalted, and is now perfectly domiciled. Few bankers think of themselves now as anything but the motors of economic activity, the beneficent spreaders of savings, the one group of capitalists whose eyes, not myopically fixed on one industry, embrace the earth and the heavens and who because of this universal vision scatter credit right and left where it should fall.
Only when there is a fearful crisis do they invoke and admit the existence of forces beyond their control.1 Those who read the dithyrambs of Walter Bagehot in Lombard Street can appreciate the unction of money.2
Now what do the bankers really do? Money does not create more money. If it did it would not be invested or loaned; dollar bills would wait nine months and bring forth after their kind and gold pieces would ooze out dollar coins from the edges of double-eagles.
No, money is loaned to producers and circulators of commodities, or (but this follows in a later chapter) to speculators who guess at what are likely to be the values created through production and manifested through circulation.
The capitalists pay out a part of their profit for the loan of capital, for money is capital. It does not matter whether a producer or a merchant does this; he is parting with some of the surplus-value created by labor for the accommodation of a loan.
Why does the capitalist borrow? Because he can make more profit for himself by so doing. For example, with $100,000 he can employ 100 workers and produce $20,000 in net profits. But if he borrows $100,000 more from the bankers then he can employ, say, 200 men (this is not always strictly in proportion; it will do only as an example of the principle), and make $40,000. He pays the banker, say, 6 per cent for the loan, that is, he pays him $6,000 a year. He gives the banker, in security therefor, a pledge or, in other words, a conditional sale, of his factory, raw materials, etc. The banker takes a very slight risk, as he has security (at least in theory) far beyond the amount of his loan. The capitalist then makes $40,000 less $6,000 on his own capital, or 34 instead of 20 per cent.
So long as he can do this there is a brisk demand for money. But the capitalist class as a whole cannot do this since it is clear that all capitalists cannot use more money than there is the possibility of utilizing in extracting surplus-value from employed labor. Certain capitalists utilize this and others do not. As a class, they can live only on so much surplus labor, but bank loans help to decide which of them will get more of his share of the social total.
Interest Must Be Less than Profit
Interest arises out of the possibility of profit, and except at crazy and short-lived moments, it cannot rise higher than the rate of profit, or, rather, the rate of anticipated profit. True, in speculation, this can be exceeded. Over-ripe and overextended gentlemen who hope that they can outguess the stock exchange and their hosts, the welcoming brokers, get into trouble when the values run the other way. They will pay insane rates of interest, merely to survive. But that is in the nature of ransom, not of economic interest. Ninety-nine days out of a hundred interest is far below the average rate of profit, and on only one day in a thousand is it seriously above. Production of commodities is capitalism, whatever its froth may think, and profits on commodities must exceed the rate of interest, otherwise the capitalists would not be able to use money-loans.
Loan Capital Receives Less than Average Rate of Profit
Why does loan capital, then, accept a rate of interest below the average rate of profit? Would not the banker follow the economic law that if the average rate of profit is higher in industry he would shut his bank and go into fabricating lipsticks or suspenders?
First, let us recall that, unlike the merchant, the banker is outside of the production-circulation process. He neither completes nor adds to social capital as a whole.
He channels money but does not augment it. To participate in the equalization of profits, one must be in the realm where profits are produced. The banker must choose to stand inside of the production of surplus-value or outside of it. He chooses to stand outside.
But that does not affect his psychology. Economically he cannot participate in surplus-value, except to be paid out of it, but why does he not abandon standing outside of it to get inside? Because he participates in the average rate of profit, or rather obtains it by another route. Most money is loaned by bankers. The individual usurer or money-lender preys on salaried people without security. Or he is a pawnbroker or a discounter of installment paper. These “industrial loan” people charge more than the average rate of profit, because their operations are petty and economically are not loaned against realization by surplus-value. But today all commercial and industrial loans above peanuts are made by bankers or giant investment corporations.3
Bankers Participate in Average Rate of Profit
A banker loans out deposits, which he owes to his depositors. Banking is one of the few businesses in which a man is permitted to alienate property he owes to others, obviously because there would be no motive in his owing it at all unless he proposed to lend it out. Hence his average rate of interest on what he owes will be less than the average rate of profit, but not on what he has. A banker has $1,000,000 capital, $10,000,000 deposits. He lends out the deposits at 4 per cent, say. He receives $400,000. He pays his depositors 1 per cent, say. His money costs him $150,000. His expenses are $50,000. He makes $200,000 as the difference, or 20 per cent on his capital. Thus he obtains the average rate of industrial profit, although his interest must always be less than that average rate. (We disregard his profits in selling securities; that will be given in the section on finance-capital. We also disregard the “cheap money” devices of magicians like the English Chancellor of the Exchequer, Neville Chamberlain, in which the alterations of production are sought to be stimulated from the area of loan capital.)
Since interest is a part of profit, and does not rise above it, neither can it fall to zero, for there would be no motive then in lending money. At times of either stagnant trade or, as is now the fashion, of artificially cheap money, short-term funds amply secured by salable securities, are loaned at less than 1 per cent per annum.
The Tendency of Interest Rates to Fall
But even at these times commercial capital is rarely obtainable for less than 3 per cent, usually it is 4 per cent even when money is cheap. One great historic tendency must be noted. Since the tendency of the rate of profit is to fall, the tendency of interest, which cannot exceed it, is to fall also, and it is notorious that the more highly developed a capitalism, the cheaper is money, the lower the rate of interest. The average rate of government interest was 8 per cent in 1690, 5 per cent in 1810, and is now slumping to 3 per cent or less wherever currency is reasonably stable and industrial development high.
The lender of money is wholly divorced from production. He sees money become more money and he never sees the intervention of labor at all. The investor, who is (whatever the alleged form of his partnership) really a lender at long-term, is in the same position. Both invest X funds and receive X’ funds. This tinctures their thinking. They nearly always believe that the secret of cycles of business is to be sought in finance. An interesting example is the financier and head of an insurance company, Mr. J. M. Keynes, whose theories converge on finance and to whom all production is a function of available money. The Marxian analysis opposes this derivative point of view.
It must not be forgotten that the great mass of deposits of commercial banks (and even private banks) are those of the commercial and industrial capitalists who borrow from these banks. Hence there is non clear-cut opposition between the money-lenders and the borrowers as is often pretended. Business may be subject to an “autocracy of credit” but it gives the autocrats their weapons.
The Position of the Rentier
It may be asked: True, the banker makes the average rate of profit on his loans, since that rate is computed on his capital, but how about the ordinary saver in a savings bank or purchaser of government bonds? They certainly make less than the average rate of profit; they receive only, say, 4 per cent, when the average rate is 10 per cent. But their capital is generally too small to be used in extracting surplus-value: they could use it only in a business where their own labor would be primary, or that of their family. We have seen the minimum number of persons that must be employed to allow for surplus-value for the capitalists’ excess consumption, for the conservation of capital, and for its increase. It can rarely be less than eight employees. Short of this, money cannot command the full rate of surplus-value and the expansion of capital to produce more surplus-value.
The little people, as the French call them, must lend their money cheaply to the big people who, with the tendential fall in the rate of interest, are always giving the little people less for the use of their savings, except in panics and inflations, when they take the savings away from them altogether.4
By rent is meant the annual price paid for the use of the land, whether as unimproved agricultural land or (which is infinitely greater in price) the sites or building lots in cities. It also includes the use of forests, mines, etc., but these have to be separately considered, as there is a question of wastage of resources here. But for our purposes rent is the payment for that use of land which arises outside of any improvements in it, whether of fertility of buildings.
As we shall see, rent need not be paid; it may inhere to the landlord who uses his own soil or site. In order to isolate rent from other economic payments, we shall assume that one person pays it and the other receives it, and secondly that in farming one person owns land and the other works for him. This is not essential to the problems raised; it is merely a pedagogic aid.
Differential Rent
Lands are unequal in fertility. Let us say that $20.00 is invested in an acre of very fertile soil, and then in three other soils of gradually diminishing fertility. The number of farmers is equal, as is the time they work. The yield of wheat per acre will be 40, 30, 20, and 10 bushels on the respective parcels, say. The farmers will sell their wheat in the hope of realizing the average rate of profit. The price of production of the first lot of 40 bushels is $20.00 plus 20 per cent, if that is the average rate of profit, and also it is the price of the 30, 20, and 10 bushels. The price of production per bushel in the first lot is 60 cents, of the second 80 cents, of the third $1.20, of the fourth $2.40 (this last is an impossibly high price for wheat, but the scale is taken to make the problem easy for comparative magnitudes). What will be the selling price (not the price of production) of the wheat per bushel?
It might be thought that it would be determined as in industry. If relative surplus-value is improved in any one industry, the producer who has the advantage obtains a higher surplus-value, for the time being, but that attracts new capital which brings down the differential advantage. But that is not so in agriculture, for here the soil is fixed in area; one is better than the other but new soil cannot be created, and the full dosage of capital has been put into each acre to begin with.
The price of the wheat is determined by what can be raised on the worst soil, that is, the worst soil amenable to cultivation within the limits of effective demand. There the wheat costs $2.40 and still finds a market. Hence on the worst soil the farmer receives $2.40 ✕ 10, or $24.00; on the next best, $2.40 (the price of wheat on the worst soil) ✕ 20, or $48.00; on the next $2.40 ✕ 30 or $72.00, and then the very best, $2.40 ✕ 40, or $96.00. The net profit above the $20.00 invested per acre is $4.00 on the worst soil, $28.00 on the second best, $52.00 on the third, and $76.00 on the fourth. Whether the landlord tills the land and gets it himself or whether the tenant tills it, this differential does not go to the labor on the farm, but to the landlord. That is differential rent.
Rent Is an Extra Surplus-Value
Rent is not like interest. That was paid out of profits. Rent is paid out of the surplus-value arising from the labor of the farmer. It is an extra surplus-value resulting from the differing results of equal labor.
If the price of wheat, though, falls and the most that wheat will realize is $2.00, then the poorest soil is not worth cultivating and differential rent falls all along the line. For then the $1.20 producer becomes the poorest land from which differential rent can be reckoned.
Urban Ground-Rent
This type of differential rent is most common in agriculture. But in actual money it is far exceeded by the differential rent of position, that is, the rent of building lots. There is nothing either more beautiful or exquisite or fertile in a lot 100 ✕ 100 at the corner of Broadway and Wall Street, New York, or Madison and State Streets in Chicago, than there is in the same lot at the corner of Main and any other street in Hohokus, New Jersey.
But the ability to sell goods at Broadway and Wall Street, or to be near where money is made, makes the same naked plot worth millions in one place and hundreds in Hohokus, and worth dimes in a remote village in Arizona, and nothing at all in the sagebrush desert. In terms of value5 all the farm land in the United States counts for little indeed compared to the rental value of city land. In New York City acres that yield more than a million a year in differential land rent are common. It would take 200,000 acres of good Ohio farming land to equal that in net rental value per annum. The worst soil or the worst location, from which all others are reckoned, may yield a small rent, but that is absolute rent, not differential.
Absolute Rent
Land is limited in quantity. In any given area, any economic area, it is completely limited even in availability. Its ownership, not being subject to more production, is an economic monopoly. Capitalists as well as workers, in so far as they pay land rent, are tributary to a monopoly.
For the worker it is a means of reducing the articles of consumption, of diminishing his means of subsistence.
For the capitalist, the payment of such rent must be made in any case, and it is an absolute rent he must pay, as well as a differential rent. He pays for the monopoly of the soil, even of the least available soil.
Nor does he escape the payment of rent by buying land. The price of land is the capitalized rent. That means that if land yields $6,000 a year, and is taxed $1,000, the net annual rent is $5,000, and if the prevailing rate of interest is 5 per cent, the land is worth $5,000 ✕ 20, or $100,000. The capitalist who buys land for his factory is paying the rent for twenty years in advance. After that he really becomes a landlord himself. But, as he has lost the use of that money for twenty years, it really works out that he has paid rent in perpetuity by the amount of the capitalized annual rent. Now comes the question, why will the capitalist pay the absolute rent? Why should he pay high rent and thus diminish the average rate of profit when he can invest in an industry where rent is a very minor factor and make that average rate? Yet capitalists pay fabulous rents for mines, fine farms, etc. Do they reduce the rate of profit by that payment or not?
Low Organic Composition of Farming
Now absolute rent, we have pointed out, is a form of rent, and rent is an extra surplus-value. Take farming, for that is how most land is used (a great deal is unused). Agriculture has a very low organic composition. The constant capital is small indeed compared to the labor put into farming. It is beginning to increase with the purchase of tractors, etc., and to that extent is diminishing absolute rent, since the land needs to employ more capital per acre. But up to the present time land has been far more a matter of new value added by labor with each crop or through dairying than it has been of transferring the means of production into the crop. It does not follow the same law of profits as industry. Let us take a concrete example.
A factory has invested in it $100,000, of which $75,000 is constant, $25,000 is variable, capital. If the surplus-value rate is 100 per cent, profit rate is 25 per cent.
A farm has rarely so high a proportion of constant capital. Say the investment of $100,000 is $50,000 constant, $50,000 variable. The rate of surplus-value is 100 per cent. Now let us eliminate landlordism, and what do we have? Total industrial and farming capital, that is, total social capital, $200,000; total surplus in both activities $75,000. That is, a rate of profit of 37½ per cent on the average. But this is not the case. The average rate in industry was $25,000 on $100,000, or 25 per cent. The capitalist in agriculture does not do better than in industry despite the fact that the rate of surplus-value is higher, because his variable capital is a higher proportion in agriculture than in industry. He must accept 25 per cent rate of profit in agriculture instead of the 50 per cent he has made, because the monopoly of land enables the landlord to collect the differential between the rate of profit in industry and that in agriculture. In other words:
The absolute rent of land is the surplus of profit in agriculture above the average rate of profit for industry.
It follows that if there were no monopoly of land, the profits of capital engaged in agriculture would be higher than they are today and thus there is a great deal of sympathy for schemes of land nationalization (though with compensation) among the liberal bourgeoisie. Even among the classical economists such as John Stuart Mill, this hostility to landlordism has been manifested.
Absolute and Differential Rent Distinguished
From the theory of differential rent and absolute rent, Marx is able to explain critically the price of land. Land has no value, since no labor is incorporated into it. But it has a price. The capitalization of the rent is composed of differential rent, whereby the landlord capitalizes an excess surplus-value, and the absolute rent, whereby he takes the surplus profit in agriculture over the average profit in industry, when such a difference exists.
Capitalization of Rent
What follows from this? One, that as the rate of interest falls, the price of land rises for the same rent. If rent is $5,000 a year, and money is worth 5 per cent, land sells for $100,000. But if the standard rate of money falls to 3 per cent, land that brings $5,000 a year will compete with government bonds that produce the same, and such bonds will cost $166,666.
Landlords know too that the rate of interest has had a tendency to fall, and those who sold their land only at the prevailing rate of interest were not the gainers thereby. Hence, as the rate of profit has a tendency to fall, and so the rate of interest to fall, the price of land has a tendency to rise beyond the rent basis for such a rise. But the rent too has a tendency to rise with gains in population and industry.
The greater need for money to buy land is a grievous burden on the capitalists who, in so far as they are not landlords, resent this division of surplus-value with a wholly “non-productive” class.
That accounts for the popularity among the smaller capitalists of theories, such as that of Henry George, that the rent of land tends to absorb all profit and to pauperize the laborer and despoil the capitalist.
According to this hypothesis the rent of land is the sole beneficiary of progress. It records all social gains, since it is a monopoly and it appropriates them. From this, the single-taxers, as the followers of Henry George are called, have evolved the quaint and plausible hypothesis that were this rent of land made common property the capitalist and the worker, having lost their common vampire, would both flourish and there need be no conflict between them.
Organic Composition Increasing in Agriculture
Before examining some aspects of this theory (it would take too long to uncover its extremely tenuous though humane reasoning), we must note that there are two factors operating in the other direction in respect of rent. The first is the gain of heavy investment in agriculture. As machines are used more and more, the organic composition of agriculture is beginning to approach more nearly to that of industry. If this tendency is not checked, and it seems rather to be gaining, absolute agricultural rent may end of itself. For if there is no greater profit in agriculture than in industry, due to a different organic composition, then the landlord will be reduced to differential rent.
Effect on Absolute Rent
It may seem surprising to those who think of the rich lands of Illinois and the sparse lands of South Carolina, to know that the difference of fertility in land, near to the same markets, with similar transport and labor charges, is not as large as people think. The proportion of absolute to differential rent is very high. Hence we may see absolute rent (and that means most rent) imperiled in agriculture, and to that extent, the higher price of land, due to lower interest, counteracted.
Also, in cities the tax on land is rising with greater civic needs. Hence, since rent of land is always net of taxes (taxes on land cannot be shifted, for land already charges a monopoly rent; taxes can only serve as a deduction), wherever taxes are increased, the net rent that can be capitalized is diminished.
But so far the advancing rent of land, coupled with lower rates of interest, have more than outweighed these two restraining factors.
As to the single-tax argument, it is enough to point out that the rent of land, whether differential or absolute, is derived in the long run from the hours of labor given gratis to the capitalist and it is no alleviation to the worker that this differential would go into one pocket, the capitalist’s, instead of to the landlord as well.
The other argument, that labor would receive the wages it could get working for itself on the best free land, and that that land, once rent were socialized, would be the corner of Forty-second Street and Fifth Avenue, New York, is negated by the existence of rent at all. So long as rent has to be paid—and under capitalism differential rent must be paid for the advantages of location, whether it is in the coffers of the community or of the landlord—it is effectively the same situation as far as the worker is concerned. He works without capital for a capitalist who pays differential and some absolute rent. His condition is unchanged.
But the taxation of land-values (as they are mistakenly termed) would reduce the burden of agricultural investment. Any cheapening of land helps the investment and mobility of agricultural capital. Marx holds that the laws of capitalist development, while they are deflected and varied in agriculture, are basically similar, in their general outline, to those for industry.
The Law of Concentration in Agriculture
The question basically relates to the “decisive branches of agriculture.” By these Marx means the production of grain (wheat, rye, barley, corn), of the fodder crops (hay and other grasses as well as feeder corn), of cotton and tobacco and coffee and rice and bananas—in short, of nine-tenths of the crops of the earth—in money-values. Whether cocoa or rubber, technical crops for raw materials, or food, or clothing, or mass pasturage of sheep and cattle, or mass dairying, or giant fruit farming, or wine-grapes, all these he holds subject to the great tendencies of industry. On the other hand, truck farming, where crops of large value are produced in small space by intense and unremitting labor, may not exhibit these tendencies, but then neither does fine bookbinding, nor etching.
This contention of Marx is the one most bitterly attacked by the Socialist revisionists, especially their agricultural expert, David. The analyses of Lenin will be referred to later on the Marxist side.6
The Marxians contend, for example, that out of five million farms in a highly developed agricultural and industrial economy like Germany, 3.5 millions are below ten acres and the majority of these farm owners have to do other work for a living. Farming is thus a help, but not an exclusive occupation, to several millions.
Among the remaining farms, those above 100 hectares (200 acres, roughly), to the last one, practically, employ ten laborers on hire, the same as with any other proletariat. So the large farms are capitalistic, the small farms not altogether farms. Between these two there is a large middle group, but it is being reduced.
The opponents of the Marxian hypothesis now contest such figures, not so much as they did formerly, as economic ones, but as minimizing the survival socially of large bodies of peasants, who feel that they are independent enterprisers and who are hostile to socialism. But this aspect takes us outside the limits of this book on Marxian economic theory.
Only in countries where farming is obviously capitalistic—like England, where two thousand lords and “gentlemen” own most of the soil—is the Marxian hypothesis practically uncontested.
In England, too, the traditional ceremonial aspects about land transfer were so burdensome that a general clamor changed them slightly several years ago and focused attention on the concentration of ownership. As the greatest historian of land tenure wittily observed, “There are some vestiges of reason in the English Land Law, but accidents will happen in the best regulated of museums.”7
American Farming Concentration
In the United States farms of more than 1,000 acres, although 1 per cent of all farms in number, contain 25 per cent of total farm area. Tenant farmers are over 40 per cent of all farmers, and the mortgages on a great many farms of medium size act as a rent burden, in effect, against the working farmer.
How many farms in the United States are paying enterprises, between twenty acres and two hundred acres, free of too burdensome debt, and employing only a few or no workers apart from the owner’s family itself? This is the American farm of tradition. A great many, say the anti-Marxians; a constantly shrinking number and of lessening importance in production, say the Marxians. The output per man increased 50 per cent in twenty-five years; that points to a change in organic composition against the small farm. This is the Marxian explanation of the mechanism by which this process is accelerated:
The Marxians point out that the formally independent farmer is often working for usurers, mortgage companies, feed companies, tractor companies, etc., and that when his accounts are squared his means of subsistence, at least for millions of farmers, are comparable to those of the wage-worker. For the Southern states, this is undoubtedly true; it is still contested as exaggerated for the older Middle West and the more prosperous farming sections of the Middle Atlantic states. For the Marxists, the small farmer produces hours of labor gratis for others; he is a donor of surplus labor-time like the worker.
Marx pointed out that land nationalization would technically assist the capitalist farmers and the capitalists generally. Private property in land was a feudal survival that hampered their development. But socially they cannot permit this, as an annihilation of tens of billions in “values” would be a precedent they dare not establish, even for their own good.8
NOTES ON AGRICULTURE:
(a) Collateral aspects of agricultural theory are legion. A subtle point of the Marxists is that the small holding, by reason of not sufficing to nourish a family, increases the supply of cheap labor in the rural districts to the big farmers, and thus hastens the concentration of agriculture. What appears in statistics as “ownership” is a weapon of pauperization. Its legal character, property, is the reverse of its economic character, a lever of low wages.
(b) The Marxians, too, argue that the principal reason why the tempo of agriculture has been slower than that of industry, as to concentration, is not at all in the mechanical differences involved. The small properties, tenancy, peonage, mortgage debt, etc., under the guise of title deeds, etc., are a barrier to technique in the way that the rules of the guilds (so long as they could be sustained) prevented the development of the industrial system. Legal rather than mechanical factors have been important. Centralization, however, by assisting mechanization, must reach a point where the industrial costs are so lowered that the technical development will no longer be at an even tempo, but will take a leap, and agriculture be mechanized with incredible rapidity.
(c) It is stated by Corey (Crisis of the Middle Class) that farmers whose holdings are insufficient for a living are, with tenants, 4,300,000 (and farm laborers are 2,600,000), whereas rich and successful farmers (without reference to their debts) appear to be about 1,900,000. Clearly concentration is taking place. But the percentage of survivors is still higher than in manufactures.
(d) The decisive criteria for capitalism in agriculture would be the capital investment used in farming, the employment of machinery, either per acre or per man, depending on which was the significant, and the number of wageworkers employed. As to the latter, the evidence is all in favor of the Marxians; there is a considerable rural proletariat even in the United States. Nor is it possible to deny that the “hobo” or occasional labor, used for harvesting, etc., is a departure from the tradition of independent farming, and assumes an unattached proletariat. Lenin pointed out that between 1900 and 1910 in the United States the number of rural wage earners increased by 27 per cent while that of farmers increased by only 5 per cent. There must have been a considerable transfer of independent farmers into field workers, paid by wages.
(e) The cost per unit of the great money crops is considerably less on farms where there is a large capital investment than it is on those that rely on manual crops (except in truck farming). Hence, the mechanism of prices that effected concentration in industry is beginning to operate in agriculture. This was not necessarily so a hundred years ago, when no matter how intensive a capital investment on the Atlantic seaboard, the opening up of free black-loam soil in the Mississippi Valley made the little man often as cheap a producer as the patroon in New York State. As land becomes more settled, the influence of capital on costs grows proportionately.
(f) The Marxians need to prove concentration of ownership, increase of tenancy, increase of debt, number of farmers requiring industrial means of employment for a subsidiary living, reduced costs due to capital investment in agriculture, increase of wage-labor. On the whole, statistical demonstrations point to the tendencies being pretty much their way, but the question of the speed of this development and the importance of traditional factors in limiting the speed of application of capital invesment (as against industry that was relatively freer), remain the moot question, socially rather than economically.
1. The writer has been in international banking from 1910 to 1937, with few intervals. [Author.]
2. The best history of theories of interest, despite bias and inaccuracies, is still the learned Capital and Interest of Böhm-Bawerk (London, 1889).
3. This treatment of loan capital does not cover savings banks, or building-and-loan associations, or life insurance companies, especially the so-called “mutual” companies. Nor does it cover the auxiliary functions of banking. The reason is that this book covers only Marxist economic theory, and these types of institutions are covered, as to functions, in many admirable manuals of economics. Some Marxian aspects, though, are interesting.
Savings banks invest in four things—the right to collect rent, taxes, railway fares or charges, and public utility rates. That is, they lend on mortgages, government and state and municipal bonds, railroad bonds, and public utility bonds. The life insurance companies do likewise. They come as near as possible to the pure rate of money-loans, irrespective of short-term factors. In exchange, they have the right to demand short-term delays in payment. These banks and insurance companies are not directly interested in an increase in the rate of surplus-value, for they hold no properties that depend on variations in that rate. They are tied up merely with the basic phenomenon of profit, not with its dynamics. The industrial insurance companies, though, by their excessive policy charges, are a burden on wages.
Building-and-loan associations are different in function and are hard to describe because they vary so much in legal shape from state to state and country to country. But they have some curious consequences for workers. One is, for example, a reduction in the wages of labor.
In England there has recently been a “build your own home” campaign, far wider in scope than in America. The worker has paid about $3,500 on the average for lath-and-plaster Tudor shacks, built in ribbon series. Every week he pays, say, one pound ($5) for principal and interest. This goes on for 25 years, to include interest “rates” and charges. If he pays rent he pays 12s. 6d. a week, that is, about $3. For years he pays $2 a week to the building-and-loan society more than he would have paid for rent, but he is becoming an “owner.” Actually he is losing $2 a week to acquire a property that will be junked in 25 years under a slum clearance act and wholly depreciated. In the meantime this wretch is financing “recovery.” This shameful business has reached billions of dollars. Engels’s Housing Question should be read for a philosophical study of such illusions. The British have discovered that you can pay “good” wages if you take it all back.
4. This does not pretend to be an exhaustive account of the theory of the rate of interest. Heroic efforts have been made to relate its fluctuations to a theory, notably by Prof. Irving Fisher of Yale. Marxist science has, for its purposes, not stressed this study, which is merely peripheral.
5. Used popularly. Land has no value.
6. The debate on agriculture led to the first expansions of Marxist doctrine by Lenin.
7. F. W. Maitland, whose historic works are gold mines of economic fact as exhibited by law.
8. They do this only when it is the life of their system that is at stake. The necessary imperialism of the slave system as against their own, allowed them to see four billion dollars in slaves wiped out, to end the costly rivalry.