A Policy of No Interest? The Permanent Zero Interest Rate and the Evils of Capitalism

In 1937 Joan Robinson proposed that ‘when capitalism is rightly understood, the rate of interest will be set at zero and the major evils of capitalism will disappear’. A permanent zero rate would abolish risk-free profit except in limited cases, leaving nearly all output to be claimed by labour as wages. It would allow capital to be allocated on the basis of prospective social benefit rather than short-term profitability and a collateral basis that favours the wealthy. It would remove some of the economic pressure to use resources unsustainably. So why retain a positive risk-free interest rate? I argue that the few available philosophical arguments for positive interest rates are all unsatisfactory.