2. The interest.

We have so far only considered the movements of loaned capital between its owner and the industrial capitalist. Now we must inquire into interest.

The lender expends his money as capital; the amount of value, which he relinquishes to another, is capital, and consequently returns to him. But the mere return of it would not be the reflux of the loaned sum of value as capital, but merely the return of a loaned sum of value. To return as capital, the advanced sum of value must not only be preserved in the movement but must also expand, must increase in value, i.e., must return with a surplus-value, as M + DM, the latter being interest or a portion of the average profit, which does not remain in the hands of the operating capitalist, but falls to the share of the money-capitalist.

What does the money-capitalist give to the borrower, the industrial capitalist? What does he really turn over to him? It is only this act of handing over money which changes lending money into alienation of money as capital, i.e., alienation of capital as a commodity.

What, now, is the use-value which the money-capitalist gives up for the period of the loan and relinquishes to the productive capitalist — the borrower? It is the use-value which the money acquires by being capable of becoming capital, of performing the functions of capital, and creating a definite surplus-value, the average profit (whatever is above or below it appears here as a mere accident) during its process, besides preserving its original magnitude of value. In the case of the other commodities the use-value is ultimately consumed. Their substance disappears, and with it their value. In contrast, the commodity-capital is peculiar in that its value and use-value not only remain intact but also increase, through consumption of its use-value.

It is this use-value of money as capital — this faculty of producing an average profit — which the money-capitalist relinquishes to the industrial capitalist for the period, during which he places the loaned capital at the latter's disposal.

The use-value of the loaned money lies in its being able to serve as capital and, as such, to produce the average profit under average conditions.

What, now, does the industrial capitalist pay, and what is, therefore, the price of the loaned capital?

What the buyer of an ordinary commodity buys is its use-value; what he pays for is its value. What the borrower of money buys is likewise its use-value as capital; but what does he pay for? Surely not its price, or value, as in the case of ordinary commodities.

The sum of value, i.e., the money, is given away without an equivalent, and is returned after a certain period. The lender always remains the owner of the same value, even after it passes from his hands into those of the borrower. In an ordinary exchange of commodities money always comes from the buyer's side; but in a loan it comes from the side of the seller. He is the one who gives away money for a certain period, and the buyer of capital is the one who receives it as a commodity. But this is only possible as long as the money acts as capital and is therefore advanced. The borrower borrows money as capital, as a value producing more value. But at the moment when it is advanced it is still only potential capital, like any other capital at its starting-point, the moment it is advanced. It is only through its employment that it expands its value and realizes itself as capital. However, it has to be returned by the borrower as realized capital, hence as value plus surplus-value (interest). And the latter can only be a portion of the realized profit. Only a portion, not all of it. For the use-value of the loaned capital to the borrower consists in producing profit for him. Otherwise there would not have been any alienation of use-value on the lender's part. On the other hand, not all the profit can fall to the borrower's share. Otherwise he would pay nothing for the alienated use-value, and would return the advanced money to the lender as ordinary money, not as capital, as realised capital, for it is realized capital only as M + DM.

The entire transaction, as assumed, takes place between two kinds of capitalists — the money-capitalist and the industrial or merchant capitalist.

Lending and borrowing, instead of selling and buying, is a distinction which here springs from the specific nature of the commodity-capital. Similarly, the fact that it is interest, not the price of the commodity, which is paid here. If we want to call interest the price of money-capital, then it is an irrational form of price quite at variance with the conception of the price of commodities. The price is here reduced to its purely abstract and meaningless form, signifying that it is a certain sum of money paid for something serving in one way or another as a use-value; whereas the conception of price really signifies the value of some use-value expressed in money.

Interest, signifying the price of capital, is from the outset quite an irrational expression. The commodity in question has a double value, first a value, and then a price different from this value, while price represents the expression of value in money. Money-capital is nothing but a sum of money, or the value of a certain quantity of commodities fixed in a sum of money. If a commodity is loaned out as capital, it is only a disguised form of a sum of money.

Capital manifests itself as capital through self-expansion. The degree of its self-expansion expresses the quantitative degree in which it realizes itself as capital. The surplus-value or profit produced by it — its rate or magnitude — is measurable only by comparison with the value of the advanced capital. The greater or lesser self-expansion of interest-bearing capital is, therefore, likewise only measurable by comparing the amount of interest, its share in the total profits, with the value of the advanced capital. If, therefore, price expresses the value of the commodity, then interest expresses the self-expansion of money-capital and thus appears as the price paid for it to the lender.