So much for the teaching of ecclesiastical and ethical authorities. What are the objective reasons in favour of the capitalist's claim to interest? In this chapter we consider only the intrinsic reasons, those arising wholly out of the relations between the interest-receiver and the interest-payer. Before taking up the subject it may be well to point out the source from which interest comes, the class in the community that pays the interest to the capitalist. From the language sometimes used by Socialists it might be inferred that interest is taken from the labourer, and that if it were abolished he would be the chief if not the only beneficiary. This is incorrect. At any given time interest on producing capital is paid by the consumer. Those who purchase the products of industry must give prices sufficiently high to provide interest in addition to the other expenses of production. Were interest abolished and the present system of private capital continued, the gain would be mainly reaped by the consumer in the form of lower prices; for the various capitalist directors of industry would bring about this result through their competitive efforts to increase sales. Only those labourers who were sufficiently organised and sufficiently alert to make effective demands for higher wages before the movement toward lower prices had got well under way, would obtain any direct benefit from the change. The great majority of labourers would gain far more as consumers than as wage earners. Speaking generally, then, we may say that the capitalist's gain is the consumer's loss, and the question of the justice of interest is a question between the capitalist and the consumer.
The intrinsic or individual grounds upon which the capitalist's claim to interest has been defended are mainly three: productivity, service, and abstinence. They will be considered in this order.
The Claims of Productivity
It is sometimes asserted that the capitalist has as good a right to interest as the farmer has to the offspring of his animals. Both are the products of the owner's property. In two respects, however, the comparison is inadequate and misleading. Since the owner of a female animal contributes labour or money or both toward her care during the period of gestation, his claim to the offspring is based in part upon these grounds, and only in part upon the title of interest. In the second place, the offspring is the definite and easily distinguishable product of its parent. But the sixty dollars derived as interest from the ownership of ten shares of railway stock, cannot be identified as the exact product of one thousand dollars of railway property. No man can tell whether this amount of capital has contributed more or less than sixty dollars of value to the joint product, i.e., railway services. The same is true of any other share or piece of concrete capital. All that we know is that the interest, be it five, six, seven, or some other per cent., describes the share of the product which goes to the owner of capital in the present conditions of industry. It is the conventional not the actual and physical product of capital.
Another faulty analogy is that drawn between the productivity of capital and the productivity of labour. Following the terminology of the economists, most persons think of land, labour, and capital as productive in the same sense. Hence the productivity of capital is easily assumed to have the same moral value as the productive action of human beings; and the right of the capitalist to a part of the product is put on the same moral basis as the right of the labourer. Yet the differences between the two kinds of productivity, and between the two moral claims to the product are more important than their resemblances.
In the first place, there is an essential physical difference. As an instrument of production, labour is active, capital is passive. As regards its worth or dignity, labour is the expenditure of human energy, the output of a person, while capital is a material thing, standing apart from a personality, and possessing no human quality or human worth. These significant intrinsic or physical differences forbid any immediate inference that the moral claims of the owners of capital and labour are equally valid. We should logically expect to find that their moral claims are unequal.
This expectation is realised when we examine the bearing of the two kinds of productivity upon human welfare. In the exercise of productive effort the average labourer undergoes a sacrifice. He is engaged in a process that is ordinarily irksome. To require from him this toilsome expenditure of energy without compensation, would make him a mere instrument of his fellows. It would subordinate him and his comfort to the aggrandisement of beings who are not his superiors but his moral equals. For he is a person; they are no more than persons. On the other hand, the capitalist as such, as the recipient of interest, performs no labour, painful or otherwise. Not the capitalist, but capital participates in the productive process. Even though the capitalist should receive no interest, the productive functioning of capital would not subordinate him to his fellows in the way that wageless labour would subordinate the labourer.
The precise and fundamental reason for according to the labourer his product is that this is the only rational rule of distribution. When a man makes a useful thing out of materials that are his, he has a strict right to the product simply because there is no other reasonable method of distributing the goods and opportunities of the earth. If another individual, or society, were permitted to take this product, industry would be discouraged, idleness fostered, and reasonable life and self development rendered impossible. Direful consequences of this magnitude would not follow the abolition of interest.
Perhaps the most important difference between the moral claims of capitalist and labourer is the fact that for the latter labour is the sole means of livelihood. Unless he is compensated for his product he will perish. But the capitalist has in addition to the interest that he receives the ability to work. Were interest abolished he would still be in as good a position as the labourer. The product of the labourer means to him the necessaries of life; the product of the capitalist means to him goods in excess of a mere livelihood. Consequently their claims to the product are greatly unequal in vital importance and moral value.
The foregoing considerations show that even the claim of the labourer to his product is not based upon merely intrinsic grounds. It does not spring entirely from the mere fact that he has produced the product, from the mere relation between producer and thing produced. If this is true of labour-productivity we should expect to find it even more evident with regard to the productivity of capital; for the latter is passive instead of active, non rational instead of human.