Chapter XLVI: Section CLXXXIX

INTEREST-POLICY.--LEGITIMATENESS OF INTEREST.

The legitimateness of interest is based on two unquestionable grounds: on the real productiveness of capital, and on the real abstinence from enjoyment of it by one's self.[189-1] Let us suppose a nation of fishermen with no private ownership in land and no capital, living naked in caverns, on sea-fish which the ebb of the ocean has left in the puddles along the shore, and which are caught only with the hand.[189-2] All workmen here may be equal, and each catch and consume three fish a day. Let us again suppose that some clever savage reduces his consumption to two fish a day, for one hundred days, and uses the stock of one hundred fish collected in this way to enable him to devote all his strength and labor, during fifty days, to the construction of a boat and a net. With the aid of this capital he, from the first, catches thirty per day. What now will his fellow tribesmen, who are not capable of such intelligent and systematic self control to do as he has done, do? What will they offer him for the use of his capital? In discussing this question both parties will very certainly consider not only the fifty days' labor spent in the construction of the boat, etc., but also the one hundred and fifty days during which its maker had to abstain from his full ration of food. If the borrower, of the thirty fish which may be caught daily with the aid of his capital, gives twenty-seven away, his condition is at least no worse than it was at first. On the other hand, the lender, if compensated only for the wear and tear of his capital, would reap no profit whatever from his loan. The interest to be paid will be fixed somewhere between these two extremes by the relation between demand and supply. A loan which pays no interest is a donated use of capital. (_Knies._)[189-3] Interest may be called the reward of abstinence (_Senior_), in the same way as wages is called the reward of industry.[189-4] With the abolition of interest, exchange would be limited to the mere present, without any mediation between the past and the future. A great number of services would bring no equivalent in return, and, therefore, as a rule, never be performed. Most of the charges commonly made in our day against the "tyranny of capital" are, at bottom, only a complaint that capital is not inexhaustible; and even those workmen who are obliged to pay most to capital would be much worse off without it.

[Footnote 189-1: The Greeks very appropriately call interest
tokos, i. e., that which is born. In the loaning of capital
productively invested, the creditor, in the interest
received, consumes the real produce of his property. If the
debtor has consumed the property unproductively, the
creditor indeed lives on the debtor's other returns or
supplies; which, however, without his intervention would
probably have been consumed by their owner.]

[Footnote 189-2: We here, for the time being, make
abstraction of all entangling surrounding circumstances.
However, _Diodor._, III, 15 ff., and _Strabo_, XVI, 773,
describe a very similar condition of things among the
Ichthyographs; also _Hildebrand_, Reise, um die Erde, III,
2, in China. In the Sudan, whole generations fetch water
every day from a distant town, instead of working for a few
weeks to dig a deep well nearer home. (_Barth_, Afr. Reise,
III, 297.)]

[Footnote 189-3: The most recent relapse into the old error
of the unproductiveness of capital, viz.: that of _Karl
Marx_ (Das Kapital; Kritik der polit. Oekonomie, I, 167) is a
turning round and round of the author in the vicious circle
of his demonstration. If the value of every commodity
depends simply on the labor necessary to bring it into
existence, or on the time of labor required to produce it,
it is self-evident that the value of the capital consumed
for the purpose of its production, can at most be only
preserved in the new product, and that all the additional
value (_Mehrwerth_) of the latter should be ascribed to
labor. (172, and passim.) Hence, strictly speaking, the
capitalist who advances capital to workmen, is still bound
in duty to be grateful to the latter when the value of his
advance is preserved to him undiminished, (§ 173) and all
interest levied by him should be considered as a payment
towards the extinguishment of the capital [debt] itself.
(556.) Relying on such theories, many socialists admit
private property and even the right of inheritance to means
of enjoyment and use capital (_Gebrauchskapitalien_)
provided only that land and productive capital should pass
over into the "collective property" of society, with
compensation, however, to their former owners. Considering
the short duration of most goods used in enjoyment or
consumed, the evil consequences of a community of goods
mentioned in § 81, could not be avoided to any extent by
this means.

How entirely fallacious the above assumption is, is seen
most strikingly in the case of such goods as cigars, wine,
cheese, etc., which, without the least addition of labor, by
merely postponing the consumption of them, obtain a much
larger value both in exchange and in use. Or, how would it
be possible, for instance, to reduce the value of a
hundred-year-old tree, over and above the cost of planting
it, to labor alone? Similarly, the fact that on a Chilian
_hacienda_, 25 per cent. of the cattle can be slaughtered
and no diminution of the herd take place. (_Wappäus_, M. und
S. Amerika, 784.) _Strassburger_ rightly inquires: if all
the profit of capital is based on a cheating of workmen by
capitalists, who is cheated in the case in which a
manufacturer without workmen earns more with an increased
capital than before with a small capital? (_Hildebrand's_
Jahrb., I, 103.)]

[Footnote 189-4: In a time full of nabobism and pauperism,
when some can, without the least abstinence, make immense
savings, and others none at all even with the greatest
abstinence, we may comprehend where the socialists find food
for their derision of the expression, "reward of
abstinence."]