Page:The Economic Journal Volume 1.djvu/705

THE NEW THEORY OF INTEREST 688 our hand now' is not the same thing--not the same value as ?100 in our hand five years hence. The agio on present goods is interest. In other words, interest is a complementary part of the price: a part equivalent of the principal lent. The second case of interest is that in which it appears as part of the 'profit' on undertaking. A capitalist employer buys uses of land, raw materials, machinery, power, and labour. He sets these to co-operate in the making of a product. Now a product is nothing else than the changed shape of all the productive goods required to make it, and we should naturally expect that the price obtained would exactly cover and reimburse the value of all these consumed goods. But after all ordinary costs are accounted for, the price obtained, in normal economic circum- stances, shows a surplus of value. The explanation of this sur- plus is that, while productire goods are physically and materially present, they are economically future: they are products in the making. The wants to which they can minister, and from which alone they can get their value, are future wants; such goods are, therefore, really future goods. The undertaker intentionally turns his wealth from consumption goods into productive goods: that is to say, he exchanges his parent wealth for raw materials, workshops and machinery, and for labour: during the productive process these ripen in his hand into present goods, with the full value of present goods. The price he receives recoups all his expenditure plus interest; interest, as before, being the difference in value between the formerly future and the now present goods. If we inquire what is the capitalist's motive for engaging in undertaking, we should theoretically find ample explanation of it in the two facts: (1) that the capitalist cannot keep his wealth unless he gets labour, not only to guard it from natural destruc- tive influences, but to keep it reproducing itself by vegetative, mechanical, and chemical processes; and (2) that, if production stopped, interest--of course along with rent and wage--would cease to be a regular source of income. But this is not the con- scious motive. Employers go into business, neither to conserve their wealth, nor to increase it by simple interest on capital. Men go into employing exactly as they do into day-labouring to make a living. It is an amiable fiction that the wage of the em- ployer is a wage of superintendence. If, in any large industrial concern, the partners take a salary, it is seldom more than ?300 a year--that is to say, a sum which would never tempt a rich man to undergo the work and worries of undertaking. The truth is that the capitalist employer speculates on his profit; this is his