Marx’s Observations on the Classical Theory of Interest

Abstract

In the classical theory of interest, as enunciated by David Ricardo, interest is determined by the rate of profit. Marx was critical of this view, starting with an idea that usury is a feature of pre-industrial or mercantile capitalism, and proceeding to the view that the development of money markets concentrates monetary resources and tends to reduce the money rate of interest. It is not the current money rate of interest that is determined by the rate of profit, but some average or long-term rate that is implicit, rather than emerging as a real economic variable. The chapter concludes by showing that in a pure capitalist economy, interest is a pure transfer between capitalists of their existing monetary resources, rather than requiring a current surplus of production over costs. In this way, the rate of interest ceases to be dependent on the rate of profit.