Part Five — The Division of Profit into Interest and Profit of Enterprise. Interest-Bearing Capital Chapters 21–36. Interest-bearing capital and the M–M′ fetish, the division of profit into interest and profit of enterprise, credit, fictitious capital, and pre-capitalist usury.

This is the longest and most difficult Part of Volume III — the one Engels assembled, with acknowledged struggle, from Marx's most disordered and unfinished manuscripts. Its subject is the second great differentiation of capital: the splitting of profit into interest and profit of enterprise, and the emergence of interest-bearing capital as a form of its own. Here the descent into the fetishized surface reaches its lowest point. Money is lent as capital and returns as money plus interest, M–M′, and in this form capital appears to breed money out of itself as a pear tree bears pears, with no visible trace of production, labour, or surplus-value. Interest-bearing capital is, for Marx, the most externalized and fetish-like form of the capital relation, the form in which the social relation of exploitation is most completely obliterated and capital appears as a self-moving thing. Chapters 21 to 23 develop interest-bearing capital and the merely quantitative, competition-fixed division of the average profit into interest (which appears to accrue to capital as property) and profit of enterprise (which appears as the wage of the active capitalist's labour). Chapter 24 draws out the fetish in its purest expression. Chapters 25 through 35 — the credit chapters, the most fragmentary in all of Marx — analyse credit, banking, fictitious capital, the money market, and the confrontation of money capital with real capital, material that would become the starting point for all later Marxist work on finance and crisis. Chapter 36 returns historically to usurer's capital, the antediluvian form of interest-bearing capital. The brief holds the load-bearing formulations of the fetish and of fictitious capital, reconstructs the credit material at the level of its essential concepts given its unfinished state, and keeps the finance-and-crisis reception in view.

Interest-bearing capital arises when money itself becomes a commodity of a special kind: the owner of money lends it to a functioning capitalist, who uses it as capital to produce the average profit, and returns it with a portion of that profit as interest. Money thus acquires, on top of its ordinary use-value, the "additional use-value" of functioning as capital — of producing a profit. The lender parts with the money and receives it back augmented; the circuit M–M′ is complete, apparently without any intervening production. Marx stresses that capital here becomes a commodity that is sold, uniquely, without changing owners in the way ordinary commodities do — it is alienated as a loan and returns to its owner.

The profit the borrowing capitalist produces then splits in two. The part he pays to the lender is interest; the part he keeps is profit of enterprise. Marx's decisive point is that this division is purely quantitative and has no basis in the production of value: interest and profit of enterprise are not two different sources of income but two shares of the one surplus-value, and where the line between them falls is settled only by the competition between lenders and borrowers — by supply and demand for loanable money capital, with no "natural" rate to anchor it. Yet the division, once made, generates a powerful mystification. Interest comes to appear as the yield of capital-as-property, of mere ownership, accruing to the sleeping owner; profit of enterprise comes to appear as the reward of the active capitalist's own labour of superintendence, a kind of wage. The single relation of exploitation is thus refracted into two apparently independent and even opposed incomes — the passive owner's interest and the active manager's "wages" — and the surplus labour that is the source of both drops entirely out of view.

This chapter is where the fetishism that began in Volume I with the commodity reaches its consummation. In interest-bearing capital, the form M–M′ appears without any mediating content — money that makes money, value that grows of itself, the social relation of production wholly effaced into a property of a thing.

Capital appears as a mysterious and self-creating source of interest, of its own increase. The thing (money, commodity, value) is now already capital simply as a thing; the result of the overall reproduction process appears as a property devolving on a thing in itself.

Marx, Capital III, page 515.

In M–M′ we have the irrational form of capital, the misrepresentation and objectification of the relations of production, in its highest power.

Marx, Capital III, page 515.

Marx's word for it is that in interest-bearing capital the fetish is complete: capital appears as an automatic self-valorizing thing, money that lays golden eggs by its mere existence, and the whole apparatus of production and exploitation that actually generates the return has vanished from the form. Where the commodity-fetish (Volume I) presented a social relation as a property of things, interest-bearing capital presents the whole circuit of self-valorizing value as a property of a thing, achieved without process. It is, Marx says, the form in which vulgar economics finds its ready-made material, since here the surface offers a "capital" that yields income with no visible connection to labour at all — the perfect ground for the trinity formula of Part Seven, in which capital-interest takes its place beside land-rent and labour-wages as an apparently self-evident source of revenue.

The credit chapters are the great unfinished heart of the volume — Engels warned that here more than anywhere he worked from fragments, notes, and undigested excerpts — but their essential concepts are clear and enormously consequential. Credit-money grows out of money's function as means of payment (Volume I): the bill of exchange, the promise to pay, circulates in place of money and becomes the basis of commercial credit; banking credit then concentrates the idle money of all classes into loanable capital and advances it to production. Credit accelerates the turnover of capital, equalizes the rate of profit, economizes on money, and enables accumulation to leap beyond the limits of any individual capital — and by the same means it drives the contradictions of the system to their extreme, becoming the principal lever of overproduction and speculation, and the mechanism through which local disturbances become general crises.

The chapter's most fertile concept is fictitious capital. Titles to future income — government bonds, shares, mortgages — are bought and sold as though they were themselves capital, at prices got by capitalizing the expected income at the going rate of interest. But this "capital" is fictitious: the money once lent to the state has been spent, the real capital of a company exists in its plant and goods, and the paper claims are only duplicate, tradeable titles to streams of revenue.

The formation of fictitious capital is known as capitalization. Any regular periodic income can be capitalized by reckoning it up, on the basis of the average rate of interest, as the sum that a capital lent out at this interest rate would yield.

Marx, Capital III, page 597.

Because the market value of these paper titles moves with the rate of interest and with speculative expectation, quite independently of the real capital or income they nominally represent, a whole sphere of accumulation opens up — the money market, the stock exchange — that appears wholly autonomous from production, doubling and redoubling claims on a surplus-value that has yet to be produced. Marx analyses the confrontation of this money capital with real capital across several chapters (the "money capital and real capital" chapters), the drain and reflux of the reserve, the role of the Bank of England, and his running polemic against the Currency School and the Bank Act of 1844. The material is unfinished and often merely documentary, but its concepts — credit as the lever of accumulation and of crisis, fictitious capital, the autonomization of the financial sphere — are the direct ancestors of the entire Marxist theory of finance capital and financial crisis, from Hilferding onward. The brief fixes these load-bearing concepts and leaves the reconstruction of the documentary detail for the read-through.

As with commerce, the Part closes historically. Usurer's capital is the antediluvian form of interest-bearing capital, existing wherever money exists, and it operates through the two classic channels: lending to the extravagant great (the spendthrift landowner, the prince) and lending to the small producer (the peasant, the artisan) who owns his conditions of labour. In pre-capitalist conditions usury is purely destructive and conservative at once: it ruins and expropriates the producers without transforming the mode of production, sucking the wealth out of the old society while leaving its productive basis unchanged, and so it is hated by all the old ruling classes even as they depend on it. Marx's dialectical point is that usury, like merchant's capital, plays a historically dissolving role — it helps to concentrate money-wealth and to ruin the old forms of property — but it cannot by itself create the capitalist mode of production; that required the divorce of the producer from the means of production analysed in Volume I's account of primitive accumulation. Only once the capitalist mode is established does interest-bearing capital lose its independent, destructive character and become a subordinate moment of the credit system, serving industrial and commercial capital instead of preying on pre-capitalist producers. The chapter thus completes the volume's recurring lesson: the fetishized surface forms — commercial profit, interest — have ancient pedigrees, but their meaning is wholly transformed once they are subsumed under the capitalist production of surplus-value, and to read the modern forms through their ancient appearances, as vulgar economics does, is to mistake the surface for the substance.