The rate of interest

In the capitalist system of production, every sum of money is able to function as capital, that is, to produce a profit, so long as it is made available to productive capitalists. Under normal conditions, therefore, profit constitutes the upper limit of interest because the interest is a fraction of profit. A fall in the rate of profit would involve a decline in the rate of interest only if interest were a fixed part of profit; but this is not the case. At most, a decline in the rate of profit means that there has been a reduction in the theoretical maximum level of interest, namely the total profit. But there is another important factor which should not be overlooked. In a developed capitalist system, the rate of interest is fairly stable, while the rate of profit declines, and in consequence the share of interest in the total profit increases to some extent at the expense of entrepreneurial profit.