Interest on Loan Capital

payment received by the creditor from the debtor for the use of money loaned. In precapitalist formations, when credit took the form of usury, the source of interest was the surplus and—to some extent—the necessary labor of small producers or slaves. Under capitalism, interest constitutes only a portion of the produced surplus value, or profit. The profit on capital is divided into the interest acquired by the lending capitalist and the entrepreneurial income acquired by the functioning capitalist.

On the surface, interest operates as the fruit of capital alone, and this conceals the capitalist exploitation. Interest assumes the form of the price of capital, like a commodity in the consumption of which the value and the use value are not only maintained but also increased; by contrast, the use value of other commodities is ultimately consumed.

Under socialism, interest is a portion of the profit of a socialist enterprise or a portion of the income of juristic or natural persons that is paid for the use of money in a loan, deposit, or other form. In establishing interest, the socialist state proceeds from the necessity of providing the fullest and most effective use of monetary resources and strengthening economic discipline and khozraschet (economic accounting). Interest is paid on bank loans by socialist enterprises and organizations and is figured for the deposits of enterprises, organizations, and the public in banks and savings banks.