1. Commerce and Credit

In countries where the capitalist system of production prevails the masses of the people are forced down to the condition of proletarians; that is to say, of workers who are divorced from their instruments of production so that they can produce nothing by their own efforts, and, therefore, are compelled to sell the only commodity they possess – their labor-power. To this class, also, belong the majority of the farmers, small producers and traders; the little property they still possess today is but a thin veil, calculated rather to conceal than to prevent their dependence and exploitation.

Over against this class we find a small group of property holders – capitalists and landlords – who alone possess the most important means of production and the most important sources of livelihood, the exclusive ownership of which invests them with the power to subjugate the class of propertyless and to exploit them.

While the majority of the people sink ever deeper in want and misery, this small group of capitalists and landlords, together with their parasites, appropriate all the tremendous advantages that have been wrung from nature, especially through the progress made by the natural sciences and their practical application.

There are three sorts of capital: merchant’s capital, interest-bearing capital and industrial capital. The last of these is the youngest; perhaps it is not as many hundred years old as the other two are thousands. But the youngest of these brothers has grown faster, much faster, than either of his seniors; he has become a giant who has enslaved and forced them into his service.

In its classic form small production was not dependent on commerce. The farmer and the mechanic could acquire the means of production, in so far as they needed any, direct from the producer; furthermore, they could sell their product directly to the consumer. Commerce, at that stage of economic development, catered chiefly to luxury; it was not then a matter of necessity. either for the promotion of production or for the support of society.

Capitalist production, however, is from the very start dependent upon commerce; and vice versa, from a certain stage on, commerce needs capitalist production for its further development. The further the capitalist system of production extends, and the more dominant it becomes, the more requisite is the development of commerce to the whole industrial life. Commerce today no longer caters simply to superfluity and luxury. The whole system of production, yes, even the sustenance of the people, in a capitalist country depends now upon the free and unrestricted action of commerce. This is one of the reasons why war is more devastating than ever; it interrupts commerce, and that has become equivalent to a stoppage of production, to a suspension of economic life, and to an industrial ruin that spreads beyond the field of battle and is not less mischievous than the devastation that takes place there.

As important as the development of commerce is that of interest to the capitalist system of production. In the days of the small producer the money-lender was simply a parasite, who profited by the distress or improvidence of others. The money which he lent to others was, as a rule, put to unproductive uses. If, for instance, a nobleman borrowed money, he did so to spend it in pleasure; if a farmer or mechanic borrowed money, it was mainly to pay his taxes or the cost of lawsuits. In those days lending at interest was considered immoral and was everywhere condemned.

Under the capitalist system of production this has all changed. Money is now a means whereby to establish a capitalist industry, to buy and to exploit labor-power. When today a capitalist raises money in order to establish a factory, or to enlarge one already in existence it does not follow – provided, of course, that his undertaking prosper – that his previous income will be reduced by the interest on the loan. The loan, on the contrary, helps him to exploit labor-power, consequently, to increase his income by an amount larger than the interest he will have to pay. Therefore, under the capitalist system of production, lending has lost its original character. Its role as a means for the exploitation of distress or improvidence is pushed to the rear by a new one, that of “fructifying” the capitalist system of production, that is to say, of enabling it to develop faster than it otherwise would by the mere hoarding of capital in the vaults of industrial capitalists. The horror once entertained for a lender has come to an end; he now becomes a spotless character and receives a new and euphonious name, creditor.

Simultaneously with this metamorphosis, the principal current of interest-bearing capital underwent a change. The money which the lenders heaped up in their vaults flowed formerly out of those reservoirs, through a thousand channels, into the hands of the non-capitalists. Today, on the contrary, the vaults of the lenders, the institutions of credit, have become the reservoirs into which there flow, through a thousand channels, money from non-capitalists, and out of which this money is then conveyed to the capitalist. Credit is today, just as it was formerly, a means whereby to render non-capitalists – whether property holders or propertyless – subject to the payment of interest; today, however, it has, further, become a powerful instrument wherewith to convert into capital the property in the hands of the various classes of non-capitalists, from the large estates of endowed institutions and aristocrats down to the pennies saved by servant girls and day laborers. In other words, it has become an instrument for the displacing of the old propertied classes and the intensified exploitation of the wage-earners. People praise the present institutions of credit, savings banks, etc., thinking that they turn the small savings of working-men, servant girls and farmers into capital and these unfortunates themselves into “capitalists.” Nevertheless, the only object in collecting the money of non-capitalists is to place at the disposal of capitalists an increased quantity of capital and thus to accelerate the development of the capitalist system of production. What this means to wage-earners, small farmers and mechanics we have already seen.

At the same time that the present institutions of credit are converting the whole property of non-capitalists into capital and placing it at the disposal of the capitalist class, they see to it that the capital of the capitalist class itself is better utilized than before. They become the reservoirs of all the money which the individual capitalist may, from time to time, have no occasion to use, and they make these sums, which otherwise would have lain “dead,” accessible to such other capitalists as may stand in need of them. Furthermore, they make it possible to convert merchandise into money before it is sold, and thereby diminish the quantity of capital formerly needed in a given business undertaking.

Through all these means the quantity and power of the capital at the disposal of the capitalist class is enormously increased. Hence it is that credit has now become one of the most powerful levers of the capitalist system of production. Next to the great development of machinery and the creation of the reserve army of unemployed labor, credit is the principal cause of the rapid development of the present system.

Credit is, however, much more sensitive than commerce to any disturbance. Every shock it receives is felt throughout the economic organization.

Many political economists have looked upon credit as a means whereby people without any, or with little, property could be turned into capitalists. But, as its name indicates, credit rests upon the confidence of him who gives, in him who takes, credit. The more the latter possesses, the grater is the security that he offers, and the greater is the security that he enjoys. Consequently, credit is only a means whereby more money may be furnished to the capitalists than they possess, thereby to increase their preponderance and to draw sharper the social antagonisms, instead of to weaken or remove them.

To sum up, credit is not only a means whereby to develop the capitalist system of production more rapidly, and to enable it to turn to use every favorable opportunity; it is also a means whereby to promote the downfall of small production; and, lastly, it is a means to render modern industry more and more complicated and liable to disturbance, to carry the feeling of uncertainty into the ranks of the capitalists themselves and to make the ground upon which they move ever more uncertain.