Inter-est versus Interest
“Ora et labora” – pray
and work. Hegel translated this early Benedictine injunction as “pray and
imprecate” because under certain historical social conditions work and labour
are equal to a curse, to toil, thus inducing our imprecations and profanities.
But labour as toil is not a fate. In the worldview of Classical Political
Economy, labour is not only the essential expression of human living activity,
of creativity and fulfilment: labour is also the source of all produced wealth,
and therefore of economic exchange value. Even for the Protestant Work Ethic, although
labour is still the divine punishment for the original sin and the expulsion of
Adam and Eve from the Garden of Eden, labour is the source of all wealth and
the road to salvation. Hegel’s philosophy, and Marx’s critique of it, are in
one sense the apotheosis of the Christian-bourgeois exaltation of “labour”. (On
the concept of “Christian-bourgeois society”, see K. Lowith, From Hegel to Nietzsche.)
It is with Schopenhauer that the Central European bourgeoisie
begins to demolish this late-mediaeval and early-bourgeois glorification of
labour as a relic of European aristocratic Absolutism. Schopenhauer is the true
riposte of the new European industrial bourgeoisie to the traditions of
mediaeval Catholicism. Ricardo and Marx could still be seen as the last of the
Schoolmen (cf. R.H. Tawney, Religion and
the Rise of Capitalism). But it is Schopenhauer who heralds the rise of
Neoclassical economic theory, especially with the more explicitly philosophical
elaborations of economic theory in Karl Menger and the Austrian School.
The original sin of bourgeois
politico-economic ideology is already contained in its founding document – in
its “Bible”, as it were – that is, in Adam Smith’s Wealth of Nations. Smith’s proton
pseudon (first mistake) comes as early as Chapter Two of that work
dedicated to “The Division of Labor”. For here Smith fails to perceive that
there is no “division of labor”, as
if “labor” existed independently of human co-existence, but rather there is a
“division of social labor”, because
all “labor” must necessarily entail the existence of human interdependence. Smith’s appalling fallacy in that chapter
is to attribute the “division of labor” to the “natural tendency” of human
beings “to truck, barter and exchange”. In reality, instead, it is the
institution of market exchange that is made possible by the division of social
labor together with the institution of private property. What is “natural”
– indeed utterly essential for human
being – is the total dependence of individual human beings on social labor.
Exchange arises only once private property is added epiphenomenally and
arbitrarily on the division of social labor. Thus, whereas social labor is the
ineluctable aspect of human being, Smith surreptitiously and mistakenly assumes
that human beings can exist and produce in isolation or independently of one another!
Smith is still the economic equivalent of Kant’s philosophy of the
Enlightenment (cf. the latter’s “What Is Enlightenment?”), whereas Ricardo and
Marx develop a theory of value strictly aligned with Hegel’s Phenomenology of Spirit. (On this
complex theoretical link see M. Tronti, Operai
e Capitale, section on “Ricardo e Hegel”.)
(To clarify, Adam Smith treats
“labour” as a commodity whose price is determined by “the market”, and then
contradicts himself by arguing that “labour” is the source of value and the
determinant of market prices. Here value and labour remain in an antinomical
relation of passivity and activity, respectively, as in Kant’s critical
idealist opposition of Reason and Object [see G. Lukacs on “The Antinomies of
Bourgeois Thought”]. Ricardo, instead, sees that “labour” cannot be a commodity
like all others, and thereby overcomes the opposition of value and labour. But
then, like Hegel, he is unable to distinguish between concrete labour as the basis of all human expression and communion
and abstract labour as the specific
historical expression of capitalist command over human living activity, and
therefore as the source of “market” value and indeed of “surplus value”. Hegel
and Ricardo do not see that “concrete labour” is the use value upon which the capitalist constructs the exploitative
institution of quantifiable “abstract labour” and therefore of all exchange values.)
Adam Smith’s fallacious conception of
“labor” as individual exertion rather than as social construction of reality,
as the necessary extrinsication of human being, and his replacement of it with
a mistaken notion of social labor – what he calls “specialization” - as a
by-product of exchange between isolated individuals with private property
rights over the products to be exchanged – this “original sin” of Smith’s
politico-economic theory opened the door to Neoclassical economic theory. In
the Neoclassical vision of economic theory, capital replaces labor as the
source of human wealth: capital is seen as merely a “technical-neutral”
instrument of production which allows human beings to provide for their
“infinite wants” through their labor. Human beings therefore do not “create”
wealth through their labor: labor is not and cannot be “the source and
substance of wealth” as it was for Classical Political Economy. Wealth is not a
human construct, a common pursuit or “inter-est” (from the Latin, inter homines esse, to be common to
humans). Rather, wealth is seen only as a “satis-faction” or satiation of
“indefinite wants” – that is to say, of wants that are simply inexhaustible and
unfulfillable – and therefore as the unavoidable product of inevitable conflict
between human beings. Consequently, for Neoclassical economic theory, wealth is
not a common human goal or inter-est, but rather always as a subjective notion
defined by an individual’s ability to exclude others from its enjoyment!
In the economical world man finds
himself a being of infinite want, confronted with a universe full of potential
wealth but with no tools except hands and brains to give him possession of it. Incapable
of creating anything, he yet finds himself endowed with a power of
moving things, which, as he masters the secrets of nature's working, gradually
enables him to imprison, impress, or suspend the action of her powers, and so
make her his servant In various concrete ways he adapts or rearranges
nature—never, of course, changing her laws or acting contrary to them, but
varying the causal connection of natural processes in such a way that, to a
large extent, he remakes the natural world to suit his purposes. Thus, between man and his natural environment
there gradually grows up a third term, a
machinery for the fuller satisfaction of man's life, and to this, in
general terms, we give the name Capital.
Far from the Classical view of wealth
as a common human pursuit created by humans through their labor, in this
Neoclassical vision of economics, human beings do not transform nature so as to
humanize their world: No. Quite to the contrary, individual human beings are unfillable and non-communicating wells
of “wants” or avidity that can only be limited or constrained by the equally
“infinite wants” of other human beings. In the Neoclassical vision, the instrument
of production is not a necessary tool employed by humans, indistinguishable from and truly
an extension of their bodies (cf. Hannah Arendt, The Human Condition) to fulfil their constructive common social
needs and projects. Instead, tools as capital are seen as an extraneous
possession, a “third term” intervening between nature and labor, and that is
the fruit of the renunciation by some
humans of instant gratification so that other, less ascetic humans can gratify
their wants instantly. Capital is, as it were, the by-product of this struggle
between the “infinite wants” of selfish human beings and “nature”, so that in
the end those who can master their wants and delay their satisfaction earn the benefit or “interest” from their
renunciation of immediate gratification at
the expense of the “future” gratification of those who find this immediate
gratification irresistible – the workers.
In the Classical version, of course,
capital is not an instrument at all because the tools of production are an
ineluctable “means” in the process of production – not a “third term”!! There
is no “natural” antagonism between “infinite want” on the part of selfish human
beings and “provision” on the part of “nature”! If anything, in the Classical version
of economic theory, human beings co-operate with “nature” through the division
of social labour. This inseparable link between labor and tools is disturbed
and upset by capital, which, far from being “an instrument of production”, is
viewed by Classical Political Economy as a social relation whereby the
capitalists extract “surplus value” from the labor of workers precisely by
separating workers violently from their means of production. Capital is
therefore a “detraction” or “subtraction” from the wealth that ought to belong
to workers because all value is “created” through the labor of workers. In this
view, capital is not a “tool” that intervenes between labor and nature: it is
instead a social relation of production that violates the intrinsic connection
between labor and instrument.
Where the Neoclassics see value as a “natural”
struggle between equal and self-interested individuals, the Classics see value instead
as a product of political violence by one class against another over the
distribution of the fruits of social labour, - not, again, as the inevitable
by-product of human competition with nature and with one another! The
Neoclassics see value as inevitable: the Classics see value as an accident of
history. Right throughout, therefore, the bourgeois Neoclassical theory sees
human beings in a deadly combat against “nature”, where “nature” includes other
selfish individuals. The result of this infinite struggle between selfish
individuals is the assignment of “price or exchange value” to present goods in
relation to their future discounted utility.
Thus value has no absolute level;
it is neither intrinsic nor relative to any personal or material average: it is
always found in the relation of these two determinants of Want and Provision.
Price, or Exchange Value, again, is a superstructure on this subjective value,
determined by the competition of buyers and sellers with each other and among
themselves.
Value and Interest
Uber Wert, Kapital und Rente…. brought time, in some aspects at least, into the previously
timeless theory of value and income distribution. When Wicksell began to work on the explanation of what determines
the general level of money prices and of how the changes of this level come
about, he did not turn his back on the theory of the ‘real’ economic forces and
start afresh, but on the contrary the theory of the ‘real’ interest rate, which
he had developed in Uber Wert, Kapital
und Rente on Bohm-Bawerkian foundations, became a central and essential
element. (Schackle, Foreword to K. Wicksell, Value, Capital and Rent, p.7).
But what is “interest”? How is it possible? Interest is the rate
of increase of capital over a determinate period of time. Because capital “yields”
interest, it is empirically evident that capital
is the true source of value – market value – because it introduces a temporal component to the calculation of
value. The very notion of “capital” implies that human productive activity can
and indeed must (!) give rise to the phenomenon of “interest” – that is to say,
to the otherwise inexplicable periodic increase of the value of capital. If all
market exchanges took place simultaneously, without a temporal component, the
value of goods exchanged would never change and all exchange would cease
together with the market. It is capital that allows the projection of market
exchange into the future by making “interest” possible.
The most obvious fact here is that the payment of interest has
some very definite connection with the time when payment is made. This suggests
the general question: What is the place and influence of time on the value of
goods. And the answer is: It is an empirical fact of undoubted
universality that present goods are valued more highly than future goods of
like kind and amount. (Transltr’s Preface to K. Wicksell, Interest and Prices.)
By contrast, labour, far from having
utility, has dis-utility because its only aim is the immediate gratification of
infinite wants. Here, then, is the Arbeit
(labour) conceptualized by Schopenhauer: the telos of labour is purely
negative; labor does not create wealth, it merely transforms nature to maintain
itself in existence: labor is mere survival, sheer struggle for present
immediate consumption. For Neoclassical
economic theory, the real source of value, and therefore of wealth, is the renunciation of labor, and therefore of
immediate consumption, on the part of the capitalist who transforms immediate
consumption into “capital” or tools that make “future consumption” less
labour-intensive, and therefore makes labour more “productive”.
If, then, interest is so purely a natural
phenomenon, why has it met with so much covert dislike, and so much
scientific opposition? There are at least three reasons. First, the element on
which all interest is based, namely time, has come to be a peculiarly important
xviii TRANSLA TOR'S PREFACE
factor in modern production. All
things come to him who waits, and, in economic life, this describes the
capitalist. But this fact involves that the labouring classes who cannot wait,
and cannot compete with the productiveness of lengthy processes, are put in a
position of peculiar dependence: hence the possibility of exploitation
of wage, of usurious rates of interest, of unjust rents. Second, from a moral
point of view, there is much that is objectionable in the fact that interest
allows certain classes to live without working and to make this possibility
hereditary in their families. Third, in this income there is no ratio between
gain and desert. Those who have little must accept Savings Bank interest for
their hard-earned shillings; those who have much have all the chances of bonds,
mortgages, joint-stock investments and the like. All the same, so long as men
do put a different valuation on present and future goods, interest cannot be
prevented. Even a Socialist state could not prevent it: if by forcible means it
were stopped between individuals, it would still obtain between commune and
labourer. The state in this case would replace the capitalist, and "
exploit" the worker in the same way— although, it may be hoped, with a
clearer view to the wellbeing of the exploited—but no organisation could make
interest into wage.