Another Perspective on the Debate
over Interest Theory
[Reprinted from Land and Freedom,
I have found the articles and letters on interest in your last two
issues very interesting, but suspect that their conflicting statements
must be most confusing to many.
This confusion is a result of the mistaken practice of first defining
terms and then checking the facts of life by this arbitrary measure
instead of first checking the facts of life and determining the truth
and then defining terms in accordance with the truth. The critics of
Christopher Columbus made that mistake and ruled out his proposal
because it did not check with their preconceived and mistaken
definitions. The economists, so-called, to whom Raymond McNally refers
on page 79 have made this mistake. In their definitions they limit
interest to the return that is in excess of replacement value. This
view contradicts the excellent statement by McNally that interest is
the return on capital, which he defines as wealth devoted to obtaining
more wealth. It is noticeable that McNally says "obtaining,"
instead of "producing."
This distinction is important because it makes for certainty and
universality; there can be no "ifs" in science. The question
whether a certain dollar is interest must not depend upon the
contingencies of the market and the other uncertain factors that
determine whether or not a venture is profitable. Nor may a fact in
science rest upon the fact that any group of men agree that it is a
fact; the agreement of the authorities mentioned by McNally has no
weight in science, for scientific facts are not determined by ballot.
McNally appears to be guilty of self-contradiction in saying on page
82, or appearing to say, that interest exists only in cases in which
the capital is borrowed; and he contributes further to confusion and
uncertainty by injecting into the discussion the matter of absolute
and relative returns. Here he overlooks the fact that the interest
question is merely a phase of the problem of ownership; a man's title
to his product is in no way affected by the fact that his product has
become capital. This is the assumption that led Karl Marx so far
This confusion is compounded by the letters in these issues in which
the writers comment on McNally's article. Here, too, some of these
take it for granted that interests exists only in cases of borrowed
capital. The letter of Henry P. Sage is faulty in this respect. C. H.
Kendal's letter, excellent in some respects, is open to criticism; for
he says on page 96 that "under equitable conditions"
interest is inevitable. One might as well say that, in a just world,
the law of gravity will always be operative. What has equity to do
with the fact which Kendal himself states so well; namely, that wealth
is produced by the application of labor to land, or by labor assisted
by the tool capital. The question whether the claim of the owner of
the capital is recognized, and the problem of evaluating that claim do
raise a question in equity; but that is another matter, and it lies
outside the science of economics. The interest is there, regardless of
equities; and regardless of the question whether the operator is
making money, or being useful to the community.
In his letter, page 133, Kendal makes a similar mistake in limiting
labor to human effort directed to production. No physicist would think
of limiting the term "force" to manifestations of nature
having certain preconceived effects. Force is force, anywhere, always,
under all conditions, regardless of purpose or effect. So labor is
labor, regardless of circumstances. There are no "ifs" in
science; and no contingencies.
*Alan C. Thompson. 88 Page:. Paper. Price, $1.00. The Green way
Press, Ltd., Toronto, Ont., Can.