Raising interest rates . . . can be carried more or less to extremes by mistake, based upon false theories of money and enforced on the nation by the interest of money lenders . . . The basis, however, is given with the basis of the mode of production itself. A depreciation of credit money would unsettle all existing relations. Therefore the value of commodities is sacrificed for the purpose of safeguarding the fantastic and independent existence of this value in money . . . For a few million in money, many millions in commodities must be sacrificed. This is inevitable under capitalist production and constitutes one of its beauties.67
The suffering of many hundreds of millions as a result of the Volcker interest rate hike was a price worth paying to restore a relatively stable measure of value as far as US capitalism in its entirely was concerned-and helped cement its control elsewhere in the world. The "coup" by Volcker (and the turn to monetarism under Thatcher in Britain) consisted of turning away from one policy that was supposed to help restore the profitability of productive industry-expanding the money supply so as to allow prices and profits to rise-to another policy, that of encouraging interest rates to rise so as to squeeze out unprofitable firms and to put pressure on workers through unemployment to accept lower pay. Capital-and not just financial capital-was recognising that the Keynesian orthodoxies of the long boom could not cope with the new phase in which capital (including, not least, industrial capital) found itself.
When this manoeuvre produced only minimal results and it became clear that the high interest rates were beginning seriously to hurt US industry, Volcker cut them-not only under pressure from industrialists, but also from sections of finance.68 The trend of real long term interest rates for the next quarter century was down, not up, although they remained above the level of the long boom until the year 2000, after which they fell to around 1 percent in 2003.
The whole claim that there are two distinct sections of capitalfinance capital and industrial capital-is open to challenge. Many important financial institutions not only lend money, but also borrow it, since they are involved in "intermediation" between lenders and borrowers. What matters for them is not the absolute level of interest rates but the gaps that open up between different rates, particularly between long-term and short-term rates. And industrial concerns lend as well as borrow. Typically they accumulate surpluses between bouts of new investment, which they lend out in return for interest (see Chapter Three). They also advance credit to the wholesalers who take their produce off their hands. In short, industrial capital takes on some of the attributes of finance capital. As Makato Itoh and Costas Lapavitsas point out, "Revenue in the form of interest tends also to accrue to industrial and commercial capitalists, and cannot be the exclusive foundation for a social group".69 Thomas Sablowski-who accepts part of the "shareholder value" position-makes the point:
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