The socialists contend that the whole of the value of the product is due to the labor expended in producing it. They assert that the reason that capitalists are able to collect interest for the use of their capital is that capitalists are in possession of the material means of production without which production cannot go forward. From this point of vantage they are able to dictate terms to the laborers. Unless the laborers sell them the results of their labor on terms that permit the capitalists to reap interest they will not let production proceed. In other words, according to this view the capitalists are in the position of a highwayman who permits his victims to depart with their lives, provided that they deliver up a large part of their possessions.

There is a great deal of merit in the contention of the socialists that economic production can be ultimately traced back to labor. But they fail to understand the meaning of interest when they ascribe it to the exploitation of labor. Capitalistic processes as we have already seen are roundabout processes. They are spread out over a long period of time. The labor which was performed two years ago in the creation of intermediate products appears to-day in the form of the product ready for consumption; but the laborer who performed the work two years ago did not wait until to-day for his pay. If he had done so, he would have received all of the value which finally came from his labor of two years ago. He preferred, however, to receive his pay two years ago when the labor was performed and the product of his labor was not yet ready for consumption, and he cannot reasonably complain if he received at that time not what the product of his labor would be worth to-day when it is ready for consumption, but what the product of his labor was worth at that time. The capitalist who has made it possible for him to receive pay for his labor before his labor is converted into finished product ready for consumption has performed a service for him which should relieve him from being stigmatized as merely an exploiter of labor.