[5.] North [Money as Capital. The Growth of Trade as the Cause of the Fall in the Rate of Interest]
North's work, Discourses on Trade (1691), like Locke's work, is directly based on the work of Petty.
“The work is mainly concerned with commercial capital, and so it is not relevant here, though it shows masterly skill in the field with which it deals.” (p 368)
From around 1641, the price of wheat fell, and brought with it a fall in rents. Between 1641 and 1649 the average price of wheat was just over £5 per quarter (12.7 kilograms = 1 quarter, so £0.39 per kg.) In the second half of the 17th century, the price fell to £2.10 per quarter (£0.17 per kg) and in the first half of the 18th century to £1.80 per quarter (£0.14 per kg.).
During this period, the landlords continually complained about falling rents. The landlords, noting the effect of the rate of interest on the price of land, sought to bring about a fall in interest rates, so as to increase the price of land. This may also have been, in part, driven by the fact that these landlords, reluctant to modify their extravagant lifestyles, in response to reduced revenues, found themselves getting increasingly into hock to the usurers.
“Although the industrial capitalist class played a considerable part in the compulsory reduction of the rate of interest (from the time of Culpeper and Sir Josiah Child), the real protagonist of this measure was the landed interest. The “value of land” and the “raising of it” were proclaimed to be in the national interest. (Just as on the other hand from about 1760 the rise in rents, in the value of land and in the price of corn and provisions, and the complaints of the manufacturers on this score, form the basis of the economic investigations on this subject).” (p 368)
It was the landed aristocracy, during this period, that had overwhelming political power, and were able to use it, to bring in legislation to limit usury. The landlords also complained about the improvements that capitalist farmers were introducing. By raising productivity, on the less fertile soil, and by making possible the working of previously unworkable land, output was raised, which caused a fall in agricultural prices, and rents on the more fertile soils. Marx discusses this in his analysis of rent in Capital III.
Although industrial capital had an incentive to see lower interest rates, because interest is a deduction from profit, the ideological representatives of capital, such as Petty and Locke and North, opposed any legislation to limit interest rates. In part, this is because it was possible to tie the usurious interest to rent as both deriving from an exploitation of labour (at a time when the division between labour and capital was not so stark), because it weakened the landlords, and also because usury acted, at the time, as a means of primary capital accumulation.
“This is the first form in which capital starts its revolt against landed property, as in fact usury was one of the principal agents in the accumulation of capital—i.e., through its co-proprietorship in the landlord’s revenues. But industrial and commercial capital go more or less hand in hand with the landlords against this outmoded form of capital.” (p 367)
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