Bank Credit Versus Solidarity
For better or worse I have no academic training in economics (only history and physics as an undergraduate, and biostatistics as a graduate student.) To my way of thinking, the language of economics masks much of the specifically capitalist nature of society with words and phrases that are so abstract that reality gets lost in the shuffle. By "reality" I mean material reality and social reality. Material reality is made out of matter. By "social reality" I mean things like trust, or mistrust between people, or services provided by some people for others, or the motivations of people. Symbols of real things, in contrast, are not the same as the things they symbolize. Money and bank ledgers and "credit" are symbols of real things, but we often forget that and treat the symbols as if they were the reality.
Let's look at the reality behind the phrase, "The bank extended credit to me by loaning me $1000 of capital." We all know what this means in the familiar language of economics. I get $1000 with which to buy things or services from other people who in turn can use that money to buy things or services from others ad infinitum (i.e. the money "flows") and after, say, one year, I need to give the banker $1000 plus some interest, which I hope to be able to do by using that $1000 to produce something (or provide some service) that I can sell for substantially more than $1000 plus interest ("profit").
What this phrase means, in reality, is that somebody (the "banker") has sufficient social power, and uses it, to tell other people to admit me into a social relationship with them in which they will give me what I ask them for (within limits symbolized by "$1000") and they will in turn be given an equivalent amount from other people when they ask for it, and so forth forever. The $1000, as a bank ledger or some paper, and the "flow of money" that occurs when people do this giving and receiving, is just an abstract symbol for this real social relationship of giving and receiving material stuff or human services. Also I have to give the banker, after a certain time, more material wealth than all that I received from the other people (the "principle") if I pay in kind, or I must give the banker promises (i.e. pieces of paper with portraits of dead presidents) from the other people to give the banker more material wealth than they collectively gave to me.
Now let's ask why people do what they do in this scenario, but without obscuring the social reality with economic language like "credit" etc. The banker does it a) because in return for simply writing a larger number in a bank ledger and waiting one year he gets a lot of material wealth and b) because unlike other people he has the social power to do it. I do it because I want people to give me things I need to live decently (food etc.) in exchange for my producing something that some of them think is useful or valuable. But why do the other people do it? Why do they give me stuff? They do it because they trust me and the other people to share things with each other: Sam gives me something knowing that Mary will later give him something and I will later give Sally something who in turn will give Mary something, and so on. When lots of people have lots of this trust then a complex, efficient and very productive economy will exist. When the number of people having this mutual trust is less, or when the level of trust is less, then the economy is less complex and efficient and less productive. At one extreme, everybody shares the way a family does among family members. At the other extreme nobody trusts anybody except for strict barter exchanges. In between these extreme cases is a money-based economy in which people only trust others to the extent that they have symbolic money to pay for material things or services.
Bankers get rich by having a monopoly of violence at their command (i.e. a state--police, courts, the military etc.) to prevent trust among people (i.e. solidarity) from developing to the point where money would be irrelevant because the economy would be a moneyless "gift" economy (i.e. like a big family.) People want and need some kind of an economy and therefore they want and need some degree of trust. In a capitalist society trust is only allowed to manifest as trust in money because solidarity is actively discouraged or even outlawed by the state. Thus sympathy strikes are illegal and corporations are not legally allowed to have solidarity goals, only "fiduciary responsibility" to their shareholders. Our society is arranged by those at the top in such a way that we are forced to compete for success in school or to get a job or keep it, and to always "look out for Number One."
Bankers, with the backing of the state, control and use money to collect interest, thereby forcing people either to be a capitalist making a profit (by paying wages less than the value added by labor to the product) or a worker selling his or her labor to a capitalist (or to the state).
The Communist Manifesto is wrong. It says we need to centralize credit in the hands of the state. No we don't. Credit is money that must be paid back with interest, and we neither need it nor want it, period. And we certainly don't need it to be held by a monopoly. Bankers need credit/money, not ordinary people. What we need is solidarity and trust among people. The capitalist state's main function is to destroy solidarity. We need to abolish the capitalist state and create a state (i.e. something with a monopoly of violence) whose purpose will be to prevent enemies of solidarity from attacking solidarity. Then trust can develop and people can share with each other to make a complex, efficient and productive economy without money or credit or bankers collecting interest. Even as a transitional stage, there is no need for money or credit to be monopolized anywhere. People or various organizations can give out IOUs (like the State of California was going to do when it didn't think it had enough to pay state income tax refunds earlier this year).
I know, some will warn that this is what happens when people don't study economics in college. :)