Another Perspective on the Debate
over Interest Theory

L.D. Beckwith

[Reprinted from Land and Freedom, November-December 1937]

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 astray.

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.