Mises Daily Articles
Is Interest Exploitation?
[Recent Literature on Interest (1903)]
During this entire period the exploitation theory has occupied much space in literary discussions. These have been especially excited and animated on account of a peculiar personal turn that they have taken and sometimes also on account of a kind of dramatic tension. Of all socialistic writers Karl Marx — not perhaps without an unjust depreciation of others, and especially of Rodbertus, whose scientific rank was high — had gained the greatest influence over his partisans. His work represented, so to speak, the official doctrine of contemporary socialism. It therefore occupied the center of attack and defense. The polemical literature of the time became a literature on Marx. The circumstances also were of unusual interest. Marx had died before he had brought his work on capital to an end. The unfinished parts were found in manuscript among his belongings in an almost complete form. These were expected to furnish the explanation of a problem that had been the chief cause of the attack against the exploitation theory and that, according to the expectations of both the contending parties, would furnish the deciding test of the tenableness or untenableness of the Marxian system, the problem, namely, of harmonizing and connecting the rate of profits, which experience shows tends toward equality in all forms of investment, with the law of value and the theory of exploitation that Marx had developed in his first volume.1
The publication of the third volume, in which this theme was treated, was delayed until 1894, 11 years after the death of Marx. The interest in the question regarding what Marx himself might have had to say on this most delicate point of his theory showed itself in a sort of prophetic literature that had for its object the development of Marx's probable opinion on the subject of the average rate of profit from the premises given in his first volume. This prophetic literature fills the decade from 1885–1894, and presents a stately array of more or less extensive publications.2 The second act and at the same time the climax of the dramatic development was reached in 1894 by Engels's publication of the posthumous third volume. And then follows as a third act an exceedingly animated literary discussion on the critical estimate of this third volume, its relation to the point of departure taken by Marx in the systematic development of his theories, and the future prospects of Marxism, a discussion that is not likely soon to reach a conclusion.3
I can content myself here with a mere registration of these events, because in an earlier part of this work I have described their scientific content and subjected them to a critical analysis. Nor have I withheld my opinion that the great test has been decidedly against Marx and his theories of value and surplus value, and that for these the beginning of the end seems to be at hand.
But the period under discussion presents us with another very peculiar theoretical development that must be mentioned in this connection, and which I have called in another place the vulgär-ökonomischen branch of the socialistic theory of exploitation.4 This peculiar phenomenon may be described as follows: Various eminent theorists of a nonsocialistic tendency, who do not even recognize the theoretical value-premises of the socialistic exploitation theory, have yet adopted a general view of interest that in its essence is identical with the exploitation theory and differs from it only in its more moderate, more reserved, or less consistent form.
The most characteristic expressions of this kind come from Dietzel and Lexis. Dietzel confesses it to be his opinion that in its essence the exploitation theory is undeniable, and maintains that he is obliged to accept the view that the interest phenomenon is a historical product that is rooted in the commercial law of the present time, and that it is one of those kinds of income that in a form of society like the present are justly blamed as necessarily opposed to the maxim suum cuique.5 Lexis expresses the opinion that the normal profit on capital is connected with the relations of power brought about by the possession or nonpossession of capital. The source of the slave-holder's profits is unmistakable, and the same may be said of the profits of the "sweater." In the normal relation of the employer to the workman there exists no exploitation of this kind, but an economic dependence of the workman that undoubtedly influences the division of the product of labor. The share of the workman in the yield of production is conditioned by the circumstance, unfavorable to him, that he cannot utilize his working power independently, but is compelled to sell it, resigning his claim to the product for a more or less adequate means of subsistence.6On another occasion Lexis still more clearly explains this opinion of his on the origin of interest by saying that the capitalistic seller, the producer of raw material, the manufacturer, the wholesale dealer, the retailer, make profits in their business by selling at a higher price than they buy, thereby raising the cost price of their goods by a certain percent. The laborer alone is unable to get a similar advance of price. On account of his unfavorable situation with reference to the capitalist he is compelled to sell his labor at the price that it costs himself, namely, the necessary means of subsistence. Thus, even if capitalists by buying goods at a higher price lose again a part of what they win as sellers, these advanced prices retain their full significance for the wage-earner who buys, and effects the transfer of part of the value of the total product to the capitalist class.7
In all these statements the idea is unmistakably expressed that profits — and not merely some excessive portion acquired under especially burdensome circumstances, but ordinary, normal profits as such — arise from the pressure the possessing classes exert on the nonpossessing by availing themselves of the stronger position that they hold in the struggle for price, an idea that is essentially the same as that which forms the essence of the socialistic theory of exploitation.
In order to characterize these statements, attention should be called to two circumstances that may bear some relation to each other. The first is that up to the present time they have been presented as occasional statements only, and have been made on occasions that prompted the authors to a confession of their own opinions on the interest problem, but did not force them to a systematic defense and explanation of their views, namely, on the occasion of a critical review of other people's theories (Marx's and my own). The second circumstance is that these statements have presented themselves hitherto only as simple expressions of opinion, as confessions of faith of the authors, for which a connected, theoretically tenable foundation has neither been given nor attempted. Dietzel does not add a word in support of his statements, and the brief remarks8 with which Lexis accompanies the expression of his opinion are so vague and leave the problem so plainly unexplained that the author himself will hardly claim that they contain, even in general outlines, a really adequate explanation.
In view of the fact that the theoretical grounds on which the views of the exploitation theorists are usually based, namely, the socialistic theories of value and surplus value, are not laid down by these authors as a basis for their allied theory of interest, and in view of the fact that until now no other tenable foundation has been laid for it, as a historian of doctrines I have merely to register the fact that these opinions exist, and that for the present, at least, they exist merely as unproved nontheoretical statements. We must wait to see whether an earnest attempt will be made to elevate these confessions of faith to real theories based on some kind of a foundation, or whether they will die out as mere expressions of feeling to which the tendency of the time inclines without any attempt to bring them into connection with tenable scientific premises.9
- 1. See "Geschichte und Kritik der Capital zins-Theorien," 2d ed., Section XII, p. 530 sq.
- 2. I have given a compilation of these on another occasion (in an essay "Zum Abschluss des Marx'schen Systems," in the "Festgaben für Carl Knies," 1896, p. 6). It comprises: Lexis, Jahrbücher für Nationalökonomie, 1885, ν.F., Vol. XI, pp. 452–465; Schmidt, "Die Durchschnittsprofitrate auf Grund des Marx'schen Wertgesetzes," Stuttgart, 1889; an examination of this latter paper by myself in the Tübinger Zeitschrift f d. ges. Staatstv., 1890, p. 590 sq., and by Loria in the Jahrbücher für Nationalökonomie, N.F., Vol. XX (1890), p. 272 sq.; Stiebeling, "Das Wertgesetz und die Profitrate," New York, 1890; Wolf, "Das Räthsel der Durchschnittsprofitrate bei Marx," Jahrbücher für Nationalökonomie, III F., Vol. 2 (1891), p. 352 sq.; again Schmidt, Nene Zeit, 1892–1893, Nos. 4 and 5; Lande, ibid., Nos. 19 and 20; Firenjan, "Kritik der Marx'schen Werttheorie," Jahrbücher für Nationalökonomie, III F., Vol. 3 (1892), p. 793 sq.; finally, Lafargue, Soldi, Coletti, and Graziadei, in the Critica Sociale, from July to November, 1894. Of the other literature of this period on Marx, we may refer to Georg Adler, "Die Grundlagen der Karl Marx'schen Kritik der bestehenden Volkswirtschaft," Tübingen, 1887.
- 3. Of the writings on this subject that have hitherto appeared may be mentioned: numerous essays in the Neue Zeit, especially by Engels (XIV Jahrgang, .Vol. ι, Nos. ι and 2), Bernstein, and Kautsky; then Loria, "L'opera posthuma di Carlo Marx" (Nuova Antologia, February, 1895); Sombart, "Zur Kritik des Ökonomischen Systems, von K. Marx" (Archivfür soc. Gesetzgebung und Statistik, Vol. VII, Pt. 4); the above-mentioned essay by myself, "Zum Abschluss des Marx'schen Systems," 1896; Komorzynsky, "Der dritte Band von Carl Marx, 'das Kapital,'" in the Zeitschr. für Volkswirtschaft, Socialpoli-tik und Verwaltung, Bd. VI, p. 242 sq.; Wenkstern, "Marx," Leipzig, 1896; Diehl, "Ueber das Verhältnis von Wert und Preis im Ökonomischen System von Carl Marx" (in the "Festschrift zur Feier des 25 jährigen Bestehens des staatsw. Seminars in Halle," Jena, 1898); Labriola, "La teoria del valore di Carl Marx," Milan, 1899; Graziadei, "La produzione capitalistica," Turin, 1899; Bernstein, "Die Voraussetzungen des Socialismus und die Aufgaben der Socialdemokratie," Stuttgart, 1899; Masaryk, "Die philosophischen und sociologischen Grundlagen des Marxismus," Vienna, 1899; Weisengrün, "Das Ende des Marxismus," Leipzig, 1899.
- 4. "Einige strittige Fragen der Capitalstheorie," Vienna, 1900, p. III. (Also printed in Vol. VIII of the Zeitschrift für Volkswirtschaft, Socialpolitik und Verwaltung.)
- 5. Göttinger Gelehrte Anzeigen, No. 23, 1891, pp. 935, 943.
- 6. Schmoller's Jahrbuch Vol. XIX, p. 335 sq.
- 7. Conrad's Jahrbücher, N.F., Vol. XI (1885), p. 453
- 8. Namely, that, even under the full pressure of competition, — which is the condition necessary to the levelling of profits to the normal rate, — capitalistic sellers are yet able permanently to maintain a surplus of value above prime costs, and that this is the peculiar fact that requires an explanation such as will be compatible with the laws of value and price, or such as may be plausibly deduced from them. Yet there is nothing in what Lexis says to suggest the existence of these facts. Consult the exhaustive treatment of this subject in my above-mentioned essay, "Einige strittige Fragen der Capitalstheorie," Vienna, 1900, p. 110 sq.
- 9. Namely, that, even under the full pressure of competition, — which is the condition necessary to the levelling of profits to the normal rate, — capitalistic sellers are yet able permanently to maintain a surplus of value above prime costs, and that this is the peculiar fact that requires an explanation such as will be compatible with the laws of value and price, or such as may be plausibly deduced from them. Yet there is nothing in what Lexis says to suggest the existence of these facts. Consult the exhaustive treatment of this subject in my above-mentioned essay, "Einige strittige Fragen der Capitalstheorie," Vienna, 1900, p. 110 sq.