Modern Protests Against Interest

Modern Protests Against Interest

These views have on the whole discussed interest as an eco­nomic fact of our present society and have sought to explain it in terms of economic processes. Another body of theory, harking back to the medieval period, attempted to deal with interest as an ethical problem. Using the statements of Smith and Ricardo —which give labor the entire credit for the creation of value—as a starting point, Socialist writers beginning with Sismondi claimed that interest was an unjust charge on the rightful earnings of labor. Sismondi believed that payment for capital was justified since capital was stored-up labor and consequently required re­muneration. Whether the payment was equal to a replacement cost of the capital in terms of its labor cost of production, Sis­mondi did not say. This might easily be inferred. Marx and other Socialists contended that it was the stored-up labor in capital goods which was productive and consequently should be paid for only as its labor cost of production, not as capital or as waiting time. It was the superior bargaining position of the capitalist which allowed him to secure an interest that was fundamentally unjustified, and the institution of private property which gave him claim to it.