Chapter X. Interest under Socialism

CHAPTER X

INTEREST UNDER SOCIALISM

LET us imagine the Socialist state perfectly realised; all private property in land and capital abolished; all instruments of production vested in the hands of the community; all citizens working as labourers in the service of the commonweal; and the national product distributed to all according to work done. How is it now with the action of those causes which produced interest under the individualist economy?

First of all, it must be made clear that the causes are still there. There is always a natural difference of value between present and future goods; and since under Socialism time does not stand still, future goods gradually become present ones, and bring a surplus value with them. The difference of value between present goods and future, I say, is always there. For its peculiar causes continue to exist;—the difference between the circumstances of provision in present and future, the partial underestimate of the future which is characteristic of man the uncertainty and shortness of life. In the Socialist state no one will be allowed to be an undertaker on his own account, and, of course, the consideration of the greater technical productiveness of present goods employed as productive instruments ceases to be a motive for individuals: all the more strongly does this motive obtain as regards the great economic common-wealth which now conducts and guides the total national production.

Thus, even for the Socialist state, it is absolutely inconceivable that economic subjects, whether as individuals or as the powerful economic commonweal, should, in their economic judgment and their economic practice, treat present and future goods as on the same footing. How, for instance, could it he all the same to the Socialist worker whether he received his hard-earned wage by instalments of £1 a week, or in £5 2 at the end of a year, or in the shape, perhaps, of £52 five or ten or fifty years later? Or how is it conceivable that, under Socialism, a young oak sapling which will be an oak tree, with the value of an oak tree, in two hundred years, can be made equal in value to an oak full-grown now? The central authority directing the national production must base its entire arrangements and dispositions on a calculation of present and future goods having different values, if its dispositions are not to be quite inept and monstrous. If it do not put a less value on future goods it must find that a process which promises a greater number of products in the far future is more remunerative than a process which yields a small number in the present or near future, and it must, accordingly, always turn its productive powers to remote productive ends, however remote they are, as being, technically, the most fruitful. The natural consequence would be very much as we have already pictured it¹—misery and want in the present: and those in charge of the national economy would have no more pressing duty than to overturn this inept disposition, give the less amount of present goods the preference over the greater amount of future ones, and so prove that the difference in value between present goods and future is an elementary economic phenomenon independent of any human arrangements.

If it is now clear that, even in the Socialist state, present goods will, universally, be valued more highly, it goes without saying that, if there is an exchange between the two, it cannot be effected at par. Exactly as under the present economic organisation, present goods, as more valuable, will claim and will receive an agio. The emergence of this agio—and with it the emergence of interest in its most legitimate form—could only be repressed if every opportunity for it were repressed; in other words, if the exchange or barter of present goods for future were removed out of the world altogether.

Now, of course, this would be attempted to a considerable extent in the Socialist state. All private ownership in the means of production being banished, all production on private account would be banished also, and all opportunity of buying the future commodities, Labour, Uses of Land, and Capital, would be taken away from private individuals. Since, then, in any case the loan at interest would also be forbidden, the two chief springs, from which interest flows to private persons in the present day, would be happily stopped up. But certain opportunities would still remain open if exchange transactions between individuals were not entirely forbidden. Suppose, for instance, that free exchange were allowed in durable goods, agio and interest would immediately slip in, as it were, by a back door. Say that a good lasts one hundred years, and that its (present) year’s service is worth £100, £10,000 must be the price of the good if the hundredth year’s service—rendered perhaps to some grandchild or great-grandchild—is to be paid full £100. No man would be willing to pay this price. But the moment that the purchase price is calculated at less than £10,000, the owner receives, in course of time, an income greater than the purchase price, and harvests the excess as true interest.

But much more important than any such sporadic obtaining of interest by private individuals is the fact that, in the Socialist state, the commonwealth itself, as against the citizens, would make use of the principle of interest which to-day it reviles as “exploitation “and deduction from the product of labour. The Socialist state, as possessing all means of production, gets all the citizens to work in its factories, and pays them a wage. It conducts, therefore, on the largest scale the buying—forbidden to private individuals—of the future good Labour. Now, on technical grounds, various portions of the labour it buys it necessarily sets to work simultaneously towards various productive ends widely removed in point of time. One group of labourers, for instance, it sets to baking; another it sets to sink mining shafts, which, perhaps, assist in turning out consumption goods only twenty years later; another it sets to replant a forest. The labour directed to distant ends, for reasons with which we are now familiar, obtains a greater technical product, and that product when ripe will possess also a greater value. While, for instance, the product that a baker turns out in a day is worth, perhaps, 4s., a labourer engaged in of labour and the receiving of the mature product, and, with it, the difference in value between labour and future product, is at its maximum: in the most unambiguous way, because here no additional labour of any sort is necessary, and, consequently, the calculation of the final product produced by a definite expenditure of labour is quite simple. But it surely needs no further demonstration that exactly the same relations occur, in more or less weakened degree, in the case of all labour which is directed to more remote goals of production. They are all technically more productive than those which yield their results on the moment. Their abundant future product, too, must always have a greater future value, because it could not, economically, have been produced at all if already its present value, reduced by perspective, were not equal to the otherwise normal value of a similar amount of labour.¹ Since, finally, the wage for similar and similarly valuable labour cannot be assessed at different levels according as the Socialist state directs its labour to a near or a remote goal of production, the wage of those labourers who are put to more remote tasks must, necessarily, be measured under the full value of their future product,² and this secures that, to a greater or less extent, there appears a surplus gain for the community which is the owner of the present goods.³

Nor does it require any demonstration that the phenomenon of interest must emerge to a still greater degree if the Socialist society be organised, not as one united community, but as a system of independent economic groups.¹ For in this case, at every exchange between mature and immature commodities, each group would appropriate surplus value, not only as against its own workers employed to remote productive ends, but, in a much greater degree, as against the other groups, and would divide out this surplus value to the shareholders of the wealth belonging to the group, as dividend.

Thus we come to a very remarkable and noteworthy result. Interest, which to-day the Socialists abuse as a gain got by exploitation, a robbery from the products of labour, would not disappear even in the Socialist state, but would remain, in promise and potency, as between the community organised under Socialism and its labourers, and must so remain. The new organisation of society may make some change in the persons who receive it, and in the shares into which it is divided, by altering the relations of ownership; but the fact that the owners of present commodities, in exchanging them for future commodities, obtain an agio, it neither will nor can alter. And here, again, it is shown that interest is not an accidental “historico-legal” category, which makes its appearance only in our individualist and capitalist society, and will vanish with it; but an economic category, which Springs from elementary economic causes, and therefore, without distinction of social organisation and legislation, makes its appearance wherever there is an exchange between present and future goods. Indeed, even the lonely economy of a Crusoe would not be without the basis of the interest phenomenon, the increasing value of goods and services preparing for the service of the future; only, of course, that, in the absence of exchange transactions, there would be wanting the chief occasion to put exact figures on the value of goods, and therewith almost the only opportunity of calling attention and giving fixity to the phenomenon.

¹ See above, p. 335.

¹ See above, p. 310.

² The levelling up of wages—that is, up to the value of the future product of the most remuneratively employed labour—is, of course, impossible, because the national product would not suffice for that.

³ I may remark in passing that the same position holds in the case of land rent. It is obvious that, even in the Socialist state, a labourer working on a peculiarly fruitful piece of land, e.g. in a Rüdesheim vineyard, will produce a greater or more valuable product than one who puts forth the same exertion and skill on a common piece of land or vineyard. But it is as evident that it would be insufferable “protection” to allow the former labourers their entire greater product as wage. To avoid injustice the wage here must be levelled down; that is to say, of the product of the more fruitful lands, the “land rent “must be first of all retained for the common purse, to be divided afterwards to all the citizens in their capacity as joint owners of the national land. Land rent, therefore, even in the Socialist state, would exist, would come into operation as against the labourers cultivating superior land, and would only be divided according to another plan than now, on account of the equal share of all in the nationalised land.

¹ On these forms of organisation see Anton Menger, Das Hecht auf den willen Arbeitsertrag, Stuttgart, 1888, pp. 104, 112.