Reading guide to: Marx, K (1989) [1861 - 63] 'Revenue and Its Sources', in Karl Marx Frederick Engels Collected Works, Volume 32, Lawrence and Wishart: London.


This is a fairly short section in a series of economic notebooks written by Marx between 1861 and 1863. The main theme of these notebooks is to examine the origins and nature of surplus value, and, in the process, to thoroughly criticise the conceptions of the origins of economic growth (surplus value) in a range of other bourgeois economists. In many ways, the best of Marx's argument is to be found in his critique of Ricardo on the origin of rent, also in this volume, but here, I am summarising Marx's critique of a slightly easier set of targets -- the more popular or vulgar conceptions that surround the origins of interest as a particular form of payment.

Interest, of course, looks as if it is a simple reward for lending money, for taking a risk, or for being prudent enough to have accumulated some money, and these ideas are still around today. Also still around is a particular form of moral condemnation of this way of earning money -- living off interest is still seen as a rather parasitical way to make a living. I have also met people who take the opposite view, seeing the interest that they receive from their savings as somehow a 'purer' way to make money, not involved in any grubby production process that harms the environment or exploits people. Marx's analysis is pretty thought-provoking for both groups.

On a more technical level, this piece is interesting in that it uses classic Marxist terms such as fetishism, or the difference between surface/phenomenal and deep forms. These terms were made controversial by an Althusserian critique in the 1960s and 1970s, since they clearly seem to belong to an earlier philosophical tradition. Briefly, Althusserians were much more concerned to to pin down the moment at which Marx started using his own, more scientific, terms, and suggest that we diminish the importance of work which uses the earlier ones. Apart from anything else, they are philosophically flawed in that they seem to want to explain social reality in terms of a correct perception, an adjustment in consciousness, seeing beneath the surface, or overcoming fetishism by an act of thought alone. It follows that only gifted individuals can produce this breakthrough in consciousness, which elevates the individual Karl Marx to the status of some kind of prophet. Althusserians prefer other sections in Marx where he seems to be developing new concepts which will generate scientific knowledge in a more rigorous and coherent manner, and as a result of a definite form of production, which people can learn to use and develop collectively in the future. This is a large debate, and there are hints of it in the file on value. For now, readers must decide for themselves on the power of this particular approach to explain economic riddles like the origin of interest.

Revenue and its sources reveal the 'most fetishistic expression of the relations of capitalist production. It is their form of existence as it appears on the surface, divorced from the hidden connections and the intermediate connecting links' (449). The same error appears when people think of land as the source of rent, capital as the source of profit, and labour as the source of wages. This distorted view is also found in economic theories. The more vulgar economists simply take over 'the standpoint of the ruling section, i.e. the capitalists, and their treatment is therefore [only] not naive and objective [that is too concerned with immediate objects] but apologetic' (450). Marx exempts economists such as Smith and Ricardo from this charge of vulgarity [but not from the charges of naivety and objectivity?]. Although the categories of land, capital and labour also need analysis, the source of interest offers the greatest form of mystification. This is so for a number of reasons:

(1) Interest-bearing capital 'is the perfect fetish' (451), since it represents capital in a 'finished form', one which includes the results of both production process and the circulation process. As a result, it seems to yield 'a definite profit in a definite period of time' (451). Thus while 'Memories of the past still remain in capital and profit' interest-bearing capital seems more autonomous, and becomes 'the consummate automatic fetish, the self-valorising value, the money-making money, and in this form it no longer bears any trace of its origin' (451) (original emphasis). As some kind of pure form, interest-bearing capital becomes the main way in which capital itself is imagined.

(2) Capitalist production enables value to be expressed in money, which in turn enables further surplus value to be extracted. In this way, money can be sold as capital. [Indeed, the crucial role of money in the reproduction and valorisation of capital is shown in the famous formula M-C-M, , money-capital-money. On page 450, Marx tells us that the misunderstanding of interest seems to offer a shorter circuit, where M-M. However, this is only a 'meaningless résumé ' of the original process]. Since the use of this money enables someone else to appropriate surplus value, it means that the lender is entitled to receive part of the surplus value in return. Marx refers to the right to 'intercept' a portion of surplus value [and this is a political and legal right, not at all a natural one]. Indeed, the act of lending, just like the act of investing capital in production, means that the value of the original sum is retained, but in the case of money, the actual ownership of money is retained as well. In effect, money is 'rented out as a value creating thing' (452), not actually sold as would be the case with a normal commodity. None of this is obvious on the surface, since 'the thing [either money or normal commodities] now appears as capital and capital appears as a mere thing; the whole result of the capitalist production and circulation process appears as a property inherent in a thing' (452).

(3) Despite the careful separation of money lent and interest paid, we are still talking about capital as a whole. It is simply that the different portions of capital are referred to either as principal or as yield. It is 'superficial' to want to criticise the practice of paying interest while preserving the production of normal commodities, since both are consequences of capitalist production. This criticism may be associated with contemporary [non-marxist] socialism, but it appeared first in the 17th century 'when the industrial capitalist had to assert himself against the old fashioned usurer' (453). Nevertheless, interest-bearing capital appears to be particularly important [politically and socially?], 'a Moloch demanding the whole world as a sacrifice belonging to it of right' (453).

(4) What actually happens is that the industrial capitalist who borrows money is able to reproduce it, by converting into labour, then converting the finished commodity after labour has added value into money, or reconverting money to commodities [in other words, generating surplus value in the industrial process]. When money is lent to industrial capitalists, a mere juridical convention means that such transfers are expressed as lending. What people do with money that is lent to them has always been considered to be their business, since the days of usury. Industrial capitalists specifically use money to generate more exchange value via capitalist reproduction. It just so happens that this whole process is mystified, and money that is lent appears to be self- valorising. This makes money look quite different from any other commodity, which [apart from labour that is] does not increase in value on being exchanged. This different appearance in turn appears in the unusual arrangements for lending money, with the rights of the lender guaranteed by law. There is thus a difference between the surface forms of money here, between the legal and economic functions of money [Marx actually insists that it is the capitalist that 'exists in a dual form -- juridically and economically' (454)]. It just so happens that money is lent instead of being sold outright, but 'What is sold is, in fact, its use value, whose function in this case is to produce exchange value, to yield profit, to produce more value than it itself contains' (455) (original emphasis). [This is an interesting sentence, since conventional marxism has always argued that it is only labour that has a use value that works so as to produce more value than it contains itself. Is this a revision, allowing for the development of finance capitalism? Or is it just that money can only take on this otherwise unique function when it is lent to industrial capitalists?]. It appears, however as if money remains the same, being lent as money and then returning as money.

(5) This extra value can return in different forms -- as a loan plus interest, as an annuity based on the value of machinery or buildings, or as profit. Profit itself is 'already obscured and mystified', however: (a) It is mystified in the formal accounting processes that see profit as an average return of the whole capital advanced [whereas surplus value is produced only by labour, and not the other 'factors of production', such as raw materials or machinery]. (b) The market establishes a 'general rate of profit' regardless of the actual rates of profit in different sectors, although individual enterprises will produce quite different rates of surplus value, and the actual processes involved may vary in time as well, as we shall see.

(6) Interest depends on the category of profit, 'of which it is merely a part placed in a special category or division. It is therefore much more difficult to recognise surplus value in interest...' (456). Take as an example, the time-span needed to return the capital and pay interest. This appears to depend on the personal agreement between lenders and borrowers, although these agreements are actually underpinned by more general forces affecting real returns 'But this is not evident in the transaction itself' (456).

(7) There is no obvious antagonism or contradiction [which might have prompted further reflection and inquiry?] between lenders and borrowers of capital, unlike the case where capital confronts the worker as 'non-property and consequently... someone else's property' (456). Here, the process of transforming labour into capital is clear, and [politically] contradictory. But this is not the case when money is turned into capital on being lent. The lender himself does not confront the labourer in the same way either. Nor is there any argument over use-value, since the sole use-value of money is to be a universal commodity. Moreover, the lenders do not sell to borrowers but transfer ownership only for a limited period of time. Anticipating its return, lenders can already see their money as capital, without having to understand the processes at work.: indeed, the mere ownership of money is itself regarded as capital because of its potential, even though this potential cannot be put to work until the money has actually been lent to industrial capitalists. In this way, money lenders are indeed capitalists, even though they are not directly involved in capitalist production themselves [so moralistic people who put their money in banks and live off the interest are still capitalists, and have not escaped the system]. It is just that interest conventionally gets attached to the surplus apparently produced by capital as such, and is given a special name of 'revenue', but this is as misleading as the category of profit discussed above. However, this misleading appearance is a 'godsend' to vulgar economists who want to see capital as 'an independent source of value, a source which creates value' (458). Industrial capitalists appear to be actually taking part in production, while money lenders appear to be inactive, but there is no real difference.

(8) Just as with profit, interest can of course be paid back in any conventional period of time, even though the process to realise it may vary considerably. There is a general rate of interest just like a general rate of profit, although this properly can be explained only by reference to the dynamics of credit. Although the rate of interest may vary daily, it is still the same for every sum of money lent, even though different enterprises produce very different amounts of real profit. The rate of interest is even more of a 'generality' than that of profit, and it appears as 'the fact which the industrial capitalist even regards as a precondition and an item of a calculation in his operations' (459). This generality can also affect the lender, who bases his rate of interest on it, despite minor fluctuations according to the creditworthiness of the borrower. The rate of interest is a very flexible indicator of the amount of capital available on the money market. It takes this flexible and general form because, unlike the rate of profit, it is not based on the prices of different commodities, which can take time to become apparent. The commodity in question here has just the one form, money, and only one set of buyers and sellers, capitalists and money lenders. The specificity, and thus complexity, of commodity exchange is removed. There is also a tendency for money lending to become concentrated away from individuals and towards a few central banks: it is not surprising that it looks as if the capitalist class borrows from loan capital 'en masse, the loan capital of society, concentrated in a few reservoirs' (461). For all these reasons, the rate of interest looks particularly 'fixed, given; just as money despite the changes in its value has the same value for all commodities' (461). What we see here is the most developed stage, whereby capital becomes 'a commodity, whose quality of self valorisation has a fixed price' (462).

(9) 'Thus capital acquires its pure fetish form in interest-bearing capital, and indeed in its direct form of interest bearing money capital' (462). It takes the form of money, 'in which all its determining features are obliterated and its real elements invisible; in this form it represents merely independent exchange value, value which has become independent' [of any particular commodity form] (462). The surplus value produced 'seems to accrue to capital as such, consequently to the mere owner of money capital, i.e. of capital separated from its process' (462).Money appears to generate money, which obliterates the real process, and also conceals 'the particular forms of the productive capitals themselves' (462). Instead, it looks as if interest just appears as a definite rate connected to the amount of money: this is a 'quite irrational form, the incomprehensible, mystified form' (463) of the real relation 'M- C- M, of which M-M* was only the result' [M* here stands for the increased value of M after production and circulation etc] (463). This appears as the basic form to vulgar economics and 'superficial critics', however: the form happens to conceal both the real origins of value and the contradictions inherent in it, especially the contradiction to labour, while vulgar socialist critics take this to be the most irrational and outdated form and thus the one most in need of reform. However, the struggle against interest is just the struggle of industrial capitalists against old-fashioned usurers, taking interest bearing capital to still be the same as it once was, a primitive form of capital preceding industrial capitalism. Marx points out that 'The bourgeoisie did not hesitate to accept State aid' (463) in their struggle to subordinate this primitive form! [and he refers to State violence in the form of the compulsory reduction of interest rates]. In fact, it makes no difference how profit is to be divided between various kinds of capitalists, since capitalist production remains the same. Thus socialist attacks on interest still remain 'completely within the bounds of the bourgeois horizon', (464) and serve only to develop bourgeois credit [a note here singles out the unfortunate Proudhon's work proposing 'free credit' as an example of such socialism]. Industrial capital offers the real basic form of capital, 'and all other forms are only derived from it or secondary' (464). This basic form subjugates all other historically existing forms, such as usury, just as it transformed the whole notion of pre-capitalist commodity exchange or money circulation. This is usually done through the credit system (rather than State violence), which replaced old fashioned usury.

(10) Finally, as further examples of this process of subjugation, merchants began no longer to buy commodities to deal in [after borrowing money], but bought wage labour to produce commodities, and this transformed the older form of commercial capital to a form of industrial capital. Similarly, producers themselves bought materials instead of employing merchants as middlemen, an example of the full entry of industrial production into purchasing. The merchants and merchant capital now act only as an intermediary in circulation. Trade has been thoroughly taken over by commodity circulation, although, ironically, trading helped the development of the commodity form in the first place. However, industrial capital takes over, and trade becomes merely its servant. Production proceeds according to the 'amount of capital available and the level of productive power of labour' (466), rather than the customs and practices of trade (once tied to actual use value). This over-production in turn floods existing markets and produces a drive to expand markets, initially by force as in colonialism, and later with the development of 'the whole market of the world' (467). [How's that for an early analysis of globalisation]