- Created: Friday, 16 April 2010 16:12
- Written by David Yaffe
Fight Racism! Fight Imperialism! Nos 56-64 / 1986
These education articles were written in 1986 to help those wanting to understand the basic revolutionary ideas in Marx’s Capital. However, to understand the development of capitalism into imperialism we have to look at Lenin’s writings, and later material in Fight Racism! Fight Imperialism! See further reading in the RCG Education Programme.
If the capitalist system of production could ensure continual expansion and full employment, guaranteeing a reasonable standard of living for everyone, then the objective argument for communism would break down. It was Marx’s great contribution to the communist movement to demonstrate that capitalism could not achieve this. On the contrary it was precisely because the capitalist system could never satisfy the basic needs of the vast majority of humanity that it would be superseded by communism.
Marx’s Capital has as its ultimate aim ‘to lay bare the economic law of motion of modern society’, that is capitalist society, It examines a given and historically limited form of the social relations of production - investigates its beginning, development and inevitable decline. In this way, Marx demonstrates the necessity of the transformation of capitalist society into socialist society wholly from the economic laws of development of capitalist society.
The wealth of capitalist society presents itself as ‘an immense accumulation of commodities’. Marx therefore begins his analysis with an examination of the commodity.
What is a commodity? In the first instance it is something that satisfies a human want - it is an object of use or use-value. In the second instance it is something that can be exchanged for another thing, an exchange-value. Exchange value, at first sight, is a quantitative relation, the proportion in which values in use of one sort are exchanged for those of another sort. It is a relation which constantly changes with time and place. So what is it that is common to all these commodities and which allows them to be equated with each other in the process of exchange? Their common feature is that they are products of labour.
However in exchanging products we equate very different kinds of labour. So what is common to all commodities cannot be the concrete labour of producing one kind of commodity or another. What they have in common is that they are the product of abstract human labour -human labour in general
‘Along with the useful qualities of the products themselves, we put out of sight both the useful character of the various kinds of labour embodied in them, and the concrete forms of that labour; there is nothing left but what is common to them all; all are reduced to one and the same sort of labour, human labour in the abstract’ (CapitalVol 1, Chapter 1).
The substance common to all commodities is that they are values - the product of abstract human labour.
The magnitude of this value is measured by the quantity of the value-creating substance, the labour contained in the commodity: that is, by its duration, labour time. Now the total labour-power of society, which is contained in the sum total of the values of all commodities produced, is one homogenous mass of human labour power. Each particular commodity represents a certain share of the socially necessary Iabour-time. So the magnitude of the value of a commodity is measured by the Iabour-time socially necessary to produce it under normal conditions of production, with the average degree of skill and intensity prevalent at the time.
A commodity is both a use-value and value. In that is contained the seeds of a contradictory development. For an increase in the quantity of use-values is an increase in material wealth. Two coats will clothe two people, one coat only one person. Nevertheless an increased quantity of material wealth may correspond to a simultaneous fall in the magnitude of its value due to an increased productivity of labour. The antagonistic movement has its origins in the two-fold character of labour under the capitalist system of production.
Money is the root of all evil, according to a popular expression. And given the over-bearing influence of money in our lives it is not surprising that many utopian socialists have argued for the abolition of money or the abolition of banks as away of ridding us of the evils of the capitalist system. Yet others have argued that the capitalist system doesn't even need money any more and modern computer technology will do away with it. But capitalism without money is not possible and would be equivalent, as Marx once said, to having Catholicism without the Pope.
Marx began his analysis in Capital with the commodity and examined exchange-value, or the exchange relation of commodity to commodity, in order to get at the value that lies hidden behind it. He showed that the value of commodities has a purely social reality and that they acquire this reality in so far as they are expressions or embodiments of one identical social substance, that is, abstract human labour. Further, exchange-value is the only form in which the value of commodities can be expressed. The value of a commodity can only manifest itself in the social relation of commodity to commodity.
Marx then goes on to develop the expression of value implied in the value-relation of commodities in order to trace the genesis of the money form of value. The creation of money proceeds logically and historically from the contradiction between the particular nature of the commodity as a use-value and its general nature as exchange-value. Marx shows this through an examination of the relation between two commodities in what he calls the ‘accidental’ or ‘elementary’ form of value:
20 yards of linen = one coat.
This relates to an underdeveloped form of commodity production.
In the relation 20 yards of linen = one coat, the-value of the linen appears in relative form, and the coat acts as equivalent or appears in equivalent form. The value of the linen is expressed only relatively, that is, by the bodily form of the commodity coat, the value of the one (linen) by the use-value of the other, the coat. (In this relation which commodity appears in relative and which in equivalent form is purely accidental.) Marx then goes on to examine the equivalent form of value. He points to three ‘peculiarities’ of the equivalent form:
- the use value becomes the form of manifestation, the phenomenal form of its opposite, value;
- concrete labour becomes the form under which its opposite, general human labour, manifests itself;
- the labour of private individuals takes the form of its opposite, labour directly social in form.
With the further development of capitalism the accidental form leads to the total or expanded form of value. This is given by:
20 yards of linen = one coat or = 10lbs of tea or = 4lbs of coffee... or = etc, etc.
In this the accidental relation between two commodity owners disappears. Marx says: ‘It becomes plain that it is not the exchange of commodities which regulates the magnitude of their value, but, on the contrary, that it is the magnitude of their value which controls their exchange proportions’. However, this expanded form suffers from ‘defects’ in that it is still incomplete. The creation of every new commodity lengthens the chain and furnishes the material for a further expression of value.
This is overcome with its inversion, in the emergence of the ‘general’ form of value, that is:
one coat, 10lbs of tea, 40lbs of coffee...etc = 20yds of linen
and results from the ‘joint action of the whole world of commodities’. It paves the way for the emergence of the money form of value. This is identical with the general form except that gold replaces the linen of the above example:
20 yds of linen, 1 coat, 10lbs of tea, 40lbs of coffee etc…= 2 ounces of gold.
A single commodity has been excluded from the rest and is made to play the universal equivalent. It is an exclusion that has to have social validity. The particular commodity with whose bodily form the equivalent form is thus socially identified, now becomes the money commodity, and gold has historically played this role. ‘Money as a measure of value, is the phenomenal form that must of necessity be assumed by that measure of value, which is immanent in commodities, labour time.
3. Mystical veil of commodity production
A commodity at first sight appears to be a very trivial, easily understood thing. However on analysing it we find that there is much more to it than was at first thought. It turns out to be ‘a very strange thing abounding in metaphysical subtleties’ (Marx). What is it then that makes commodity production so mysterious?
Regarded as a use-value, the commodity has nothing mysterious about it. A table, for example, is the product of labour and Nature. It is a natural product modified by human labour to satisfy a human need.
The mystery of the commodity does not come from its use-value. Neither does it come from the nature of the determinants of its value. In the first place (regarding the qualitative aspect of its value), however different the useful kinds of human labour, it is clear that, as human labour, they are expenditures of human energy. In the second place (regarding the quantitative aspect of its value) there is clearly a difference between the character of being human labour and the quantity of that human labour. In all states of society the necessary labour-time it costs to produce the means of subsistence is of importance to humanity, even if not to the same degree at different stages of development. Finally that the commodity is a social product is easily understood. As soon as people start to work for each other in any way their labour assumes a social form.
So where does the mysterious character of the product of labour arise from as soon as it assumes the form of commodities. It arises from the commodity form itself - from the commodity being both a use-value and value. This is because:
- The equality of one kind of labour with another kind of labour is not expressed as such equality, but it is only expressed objectively by another kind of equality: the equality of different commodities in all being equally values (the value in linen being equal to the value in coats).
- The quantity of socially necessary labour-time in commodities is not expressed as such quantity, that is, in a direct comparison of time, but only as another quantity: indirectly as equal quantities of value.
- The mutual relations of the producers of commodities, within which the social characters of their labour manifests itself, are not expressed as such relations, but as relations between the products of labour.
The real mystery of commodity production lies in the fact that social relations between people are disguised. ‘The relations connecting the labour of one individual with the rest appear, not as direct social relations between individuals at work but as what they really are: material relations between persons and social relations between things’. Similarly the relations of the labour of individuals to the total labour of society are presented as something else; as the value relations of different commodities to a universal equivalent, namely money. And it is precisely this ultimate money-form of the world of commodities which actually conceals, instead of discloses the social character of private labour and the social relations of individual producers.
Marx calls all this the fetishism of commodities. To find an analogy with this we must go to the ‘mist-enveloped regions of the religious world’. In that world ‘the products of the human brain appear as independent beings endowed with life and entering into relation with one another and with the human race’. What is the product of the creative imagination of people, controls them and determines their life. So it is with the world of commodities. What people produce as a result of their social labour takes the form of objects which rule them, instead of being ruled by them.
This will be the case for as long as capitalism exists. It will disappear only in a socialist society when social production is carried out by freely associated individuals and ‘stands under their conscious and planned control’.
The circulation of commodities is the starting point of capital. The simple circulation of commodities begins with a sale C-M (a commodity is converted into money) and ends with a purchase M-C (money is used to buy another commodity). The social division of labour forces the commodity owner to convert commodities into money in order to convert them into commodities again. The whole process is represented by C-M-C. This is selling in order to buy. Use-values not wanted are exchanged for ones wanted. Money here serves as a medium of circulation. In this process money runs from hand to hand moving ever further away from its starting point but still always moving a commodity from one commodity owner to another.
The difference between money and money as capital is a difference in their form of circulation. Instead of C-M-C in which we begin and end with commodities we have a totally deferent form of circulation, M-C-M, or buying in order to sell. In this case the money always returns to the same hand in which it began. This money which circulates as M-C-M is potentially capital.
M-C-M, or buying in order to sell, would be absurd if the purpose was to exchange by these means an equal sum of money. The aim of this process is to withdraw more money from circulation than was put into it at the beginning.
‘The character and tendency of the process M-C-M, is therefore, not due to any qualitative difference between its extremes, both being money, but solely to their quantitative difference. More money is withdrawn from circulation at the finish than was thrown in at the start… The exact form of this process is therefore M-C-M1, where M1 = M+ÙM = original sum advanced, plus an increment. This increment or excess overthe original value I call “surplus value”. The value originally advanced, therefore, not only remains intact while in circulation, but adds to itself a surplus value or expands itself. It is this movement that converts it into capital.’
The simple circulation of commodities, selling in order to buy, is limited by the consumption that satisfies definite wants. Its goal is use-values. The circulation of money as capital, buying in order to sell, however. has no limits. Its goal is the expansion of value which can only take place by constantly renewing the process. As capital it can never stop for if it stops it is just a hoard (of money) not capital at all. The capitalist is the conscious representative of this process. The subjective aim is the expansion of value, the appropriation of ever more and more wealth in the abstract.
The creation of surplus-value and therefore the conversion of money into capital cannot be explained on the assumption that commodities are sold above or below their value. The sum of values in circulation cannot be increased by any change in their distribution. If £50 worth of corn is exchanged for £40 worth of wine we still have £90 circulating although one commodity owner loses and another gains. The conversion of money into capital has to be explained on the basis of laws that regulate the exchange of commodities in such a way that the starting point is the exchange of equivalents.
Just as surplus-value cannot arise in circulation, nor can it arise apart from circulation. So how do capitalists buy commodities at their value, sell them at their value, and at the end take out more from this process than they put in at the beginning? The answer lies in the first part of the circulation process M-C-M1, that is, in M-C. It is necessary to find within the sphere of circulation, on the market, a commodity whose use-value possesses the peculiar property of being a source of value, and whose actual consumption is therefore itself an embodiment of labour and hence a creation of value. Such a commodity does exist in the capacity to labour or labour power. Labour power is the aggregate of those mental and physical capabilities which every human being exercises in order to produce a use-value of any kind. It is through the buying and selling of labour power that money is transformed into capital.
5. Surplus value
How can the consumption of labour power create a value over and above its own value, that is, a surplus value? The crucial point here is that the value of labour power and the value which that labour power creates in the production process are entirely different magnitudes. What is vital to the capitalist is the specific use-value the commodity labour power possesses of being ‘a source not only of value but of more value than it has itself’. How does this come about?
Certain historical conditions are necessary for the appearance in the market of this peculiar commodity labour power. The first is that the person, whose bodily strength the labour power is, is ‘free’ in legal terms, to offer it for sale as a commodity. It must be sold for a definite period of time. For if it were sold once and for all, the person would be selling his/herself and would be converted from a ‘free’ person into a slave, from the owner of a commodity into a commodity. That is, the commodity labour power could not be sold over and over again in the market. The second condition is that the owner of labour power must not own any means of production such as raw materials, implements of labour etc nor be able to sell the products of his/her labour. The only commodity the labourer has to sell is the capacity to labour or labour power. The labourer has to work to live, to sell his/her labour power over and over again.
The value of labour power, as of any commodity, is the amount of socially necessary labour time for its reproduction. This will be equal to the value of the means of subsistence, food, clothes, housing etc necessary for the maintenance of the labourer in a normal working state. As this maintenance will vary with the social, climatic and other physical conditions of the country concerned, the value of labour power will contain an ‘historical and moral element'. In this it differs from any other commodity. Further the seller of labour power is mortal. So the upkeep of labour power includes its reproduction costs: the upkeep of the labourer’s family including the education and training of the labourer's children necessary to maintain an adequate future supply of workers. The value of labour power, therefore, varies with the value of the means of subsistence of the labourer.
The labour process under capitalist conditions of production has two distinguishing features. The first is that the labourer works under the control of the capitalist. The second is that the product of the labour process is the property of the capitalist. The capitalist supplies the means of production and puts the labourer to work. The labourer adds new value to the means of production by expending upon them a given amount of additional labour. The values of the means of production used up in the process are preserved and are transferred to the product produced during the labour process. By the very act of adding new value, the labourer preserves the value of the means of production.
Surplus value arises from the fact that the value which labour power creates in the labour process is greater than the value of the means of subsistence necessary to maintain the labourer. It is the difference between the value of labour power, representing that part of the working day in which the labourer produces the equivalent of his/her means of subsistence and the value created during the whole working day. If the working day is eight hours long and it takes the equivalent of five hours to produce the worker’s means of subsistence, the necessary labour time, then the surplus labour time would be three hours and it is this that is the source of surplus value, the source of capitalist profits. The ratio of surplus to necessary labour time is a measure of the exploitation of the working class.
Payment in the form of wages obscures the capitalist exploitation of the working class. In reality the labourer only receives payment for part of the working day, the paid labour time. The rest is unpaid. The wage form of the value of labour power actually hides this. The payment for labour power takes upon itself the false appearance of payment for labour. As Marx put it ‘the wage form ...extinguishes every trace of the division of the working day into necessary labour and surplus labour, into paid and unpaid labour. All labour appears as paid labour.’
6. The accumulation of capital
Surplus value is the difference between the value of labour power and the value which the labour power creates in the labour process. It is produced once the working day is longer than the necessary time to produce the equivalent of the worker's means of subsistence. Surplus value can, therefore, be increased by lengthening the working day. This is absolute surplus value.
If the length of the working day is fixed, then surplus value can be increased by reducing the labour time necessary to produce the worker's means of subsistence, that is, by a fall in the value of labour power. The worker gets the same means of subsistence as before, but now it is produced in less time. Surplus value produced as a result of a reduction in necessary labour time or by a fall in the value of labour power is called relative surplus value. Such a fall in the value of labour power is brought about by an increased productivity of labour in those industries which produce the worker's means of subsistence, or which provide the machinery and raw materials etc for such industries. Suppose the working day is eight hours divided equally between necessary and surplus labour time. If the productivity of labour now increases so that the equivalent of the worker's means of subsistence can be produced in three hours instead of four, the surplus labour time will be increased from four to five hours. The rate of exploitation, the ratio of surplus to necessary labour time, will have increased from 100 per cent to 167 per cent.
Capitalist production has as its aim and driving force the production of the greatest amount of surplus value. When capital accumulates it converts this surplus value into new capital. The accumulation of capital, therefore, not only maintains the existing capital but enlarges it. Accumulation of capital is both the reproduction and expansion of capital.
Continuous accumulation of capital would soon come up against the limits of the existing working population. The length of the normal working day has its physical and social limits. So under capitalist production a transition from the production of absolute surplus value (extension of the working day) to that of relative surplus value (decreasing the necessary part of the working day by an increase in the social productivity of labour) takes place. Together with this change, occurs, generally, an increase in the intensity of labour as the capitalist tries to obtain more value per unit of time (increased expenditure of labour in a given time) from the same worker, so increasing the surplus value produced in a working day. However, the increase of the intensity of labour also has physical and social limits so that the main method for increasing surplus value under developed capitalist conditions is through increasing the social productivity of labour, that is, through technical change.
In general, therefore, accumulation of capital ‘revolutionises out and out the technical processes of labour’.
Any change in technique involves a change in the composition of capital. This means a change in machinery or chemical process etc and/or a different organisation of work so as to get more out of labour. This leads to an increase in the mass of means of production (machinery, raw materials etc) per worker employed, or a rise in the technical composition of capital. Increases in productivity involving a rise in the technical composition of capital in turn lead to changes in the value composition of capital, that is, the ratio of constant capital, or value of the means of production, and variable capital, or value of labour power. Between the technical and value composition of capital there is a 'strict correlation'.
‘The value composition, in so far as it is determined by its technical composition and mirrors the changes of the latter (is called) the organic composition of capital'.
The organic composition of capital will rise although not as fast as the technical composition of capital due to the increasing productivity of labour.
‘As a result of this increasing productivity of labour however, a part of the existing constant capital is continually depreciated in value, for its value depends not on the labour time it costs originally but on the labour time with which it can be reproduced and this is continuously diminishing as the productivity of labour grows. Although, therefore, the value of the constant capital does not increase in proportion to its amount, it increases nevertheless because its amount increases even more rapidly than its value falls.’
In its relentless drive to increase surplus value, the accumulation of capital leads to a rising organic composition of capital. Constant capital continually grows in relation to variable capital.
The compulsion to increase the productivity of labour through an increase in the means of production per worker employed is expressed in reality through competition between capitalists and the need to reduce costs of production. The capitalist who is able to introduce a new technique first can derive extra surplus value (profits) until the new technique becomes more generally available. However, this is not its explanation, which Marx has deduced from the accumulation process of capital without reference to the competition between capitalists.
With the advance of accumulation and the rapid growth in the productivity of labour the proportion of constant to variable capital rapidly changes. If it was originally 1:1, it now became 2:1, 3:1, 4:1, 5:1, 7:1 etc so that as the capital increases, instead of 1/2 of its total value, only 1/3, 1/4, 1/5, 1/6, 1/8 etc is transformed into labour power and, on the other hand, 2/3, 3/4, 4/5, 5/6, 7/8 etc, into means of production. Since the demand for labour is not determined by the amount of total capital but by its variable constituent alone, that demand falls progressively with the increase of the total capital. It falls relatively to the magnitude of the total capital, and at an accelerated rate as this magnitude increases. Although there will also be an increase of variable capital, with the growth of the total capital, it will be at an ever-diminishing rate. An ever more rapid accumulation of capital is needed to absorb an additional number of workers, or given that the old capital is continually being replaced by more productive new capital, to keep even the same level of employment. In such a way the accumulation of capital constantly produces a relatively redundant population of workers, that is, a greater workforce than can be employed by it. Capitalism depends upon the constant transformation of a part of the working population 'into unemployed or half-employed hands'. Capital creates an industrial reserve army of labour.
'The greater the social wealth, the functioning capital, the extent and energy of its growth, and, therefore, also the absolute mass of the proletariat and the productiveness of its labour, the greater is the industrial reserve army. The same causes which develop the expansive power of capital develop also the labour power at its disposal.’
The same causes which expand capital create unemployment. That, says Marx, is the absolute general law of capital accumulation which, while modified in its working by many circumstances, expresses the overriding trend in the production of wealth under the capitalist system.
7. The tendency for the rate of profit to fall
So far we have examined the capitalist system through an analysis of what Marx called its 'invisible and unknown essence'. Surplus value and the rate of surplus value appear to us in the form of profit and the rate of profit. Surplus value and profit are actually the same thing and numerically equal. While the rate of profit, the ratio of surplus value produced to the total capital invested (s/c + v), differs numerically from the rate of surplus value, the ratio of surplus value to variable capital alone (s/v), nevertheless profit is a converted form of surplus value,
‘a form in which its origin and the secret of its existence are obscured and extinguished. In effect, profit is the form in which surplus value presents itself to view, and must be initially stripped by analysis to disclose the latter.’ (Capital Vol III)
Under capitalist conditions of production natural resources are only utilised, the social productivity of labour only developed, labour is only employed if it serves the expansion of capital, that is, returns the capital invested with a profit. A crisis of the capitalist system begins when the rate of profit on investment falls too low. Capitalists rapidly cut back their investments in industry, unemployment grows and living standards fall. The present crisis of world capitalism is essentially a crisis of profitability. The rate of profit for industrial and commercial companies (excluding North Sea oil) in Britain, for example, fell from over 13% in 1960 to a low point of just over 3% in 1981. The Thatcher government’s assault on the working class through massive unemployment and cutbacks in the growth of state spending has, however, started to reverse this fall, and profit rates have recently reached 8.5%, the highest since 1973 but still well below the 1960s level.
That there is an inherent tendency for the rate of profit to fall as capital accumulation takes place was regarded by Marx ‘as the most important law of modern political economy’. This tendency of the rate of profit to fall is an expression of the contradictory nature of the capital accumulation process.
The aim of the capitalist is to make the largest amount of profit possible with a given amount of wealth produced by the workers employed. To do this, and survive in the face of other competitors, the capitalist has to continually raise the productivity of labour through investment in labour-saving machinery. More and more capital has to be invested in machinery, raw materials etc relative to that paid out as wages for workers.
There will be a rise in the organic composition of capital (c/v). If the rate of exploitation, that is, the rate of surplus value (s/v), remained the same, there would be a fall in the rate of profit. This is because profits only arise from the exploitation of workers; for it is only the variable part of capital that yields surplus value (profits), while the rate of profit is measured on total investments, that is on both constant and variable capital.
The law, however, does not express itself in absolute form. Since the increase in the organic composition of capital represents an increase in the social productivity of labour, the rate of surplus value will not remain constant but will be increased because the value of the mass of products constituting the equivalent of the workers' means of subsistence, the necessary labour-time, is cheapened.
‘The tendency of the rate of profit to fall is bound up with a tendency of the rate of surplus value to rise, hence with a tendency of labour exploitation to rise . . .Both the rise in the rate of surplus value and the fall in the rate of profit are but specific forms through which growing productivity of labour is expressed under capitalism’. (Capital Vol III)
However, the tendency, inherent in the accumulation process, for the rate of surplus value to rise cannot prevent the fall in the rate of profit. With the rise of the organic composition of capital fewer workers are employed by a given amount of capital. And, as Marx argues, ‘the compensation of the reduction of labourers by means of an increase of exploitation has certain insurmountable limits’. Those limits are physical and social ones.
‘Two labourers, each working 12 hours daily, cannot produce the same mass of surplus value as 24 who work only 2 hours, even if they could live on air and hence did not have to work for themselves at all’ (Capital Vol III)
Although Marx has not said what the surplus labour time of the 24 labourers is, the point being made is clear. While the means of production per worker employed has no limits theoretically, the mass of surplus value produced by a worker has an impassable limit - namely the duration of the working day. Further, as capitalism develops it becomes increasingly more difficult to shorten the necessary labour time by an increase in productivity. The larger the surplus value produced, or the smaller the fractional part of the working day which expresses necessary labour, before the increase in productivity, the smaller is the increase in surplus value which capital obtains from a further increase in productivity. The tendency of the rate of profit to fall is an expression of the increasing difficulty in raising the rate of exploitation sufficiently in order to satisfy the self-expansion requirements of capital as capitalism progresses.
The accumulation of capital therefore involves a rise in the organic composition of capital, a rise in the productivity of labour and a relative decrease (an absolute increase) in the labour employed. These express themselves in a tendency of the rate of profit to fall, although the mass of profits or surplus value increases and the rate of exploitation increases. The rate of profit falls not because labour becomes less productive, but because it becomes more productive, not because the worker is less exploited but because the worker is more exploited. Nothing more clearly expresses the revolutionary implications of Marx's analysis of capitalism.
Besides the imminent tendency within the accumulation process to check the tendency of the rate of profit to fall by a rise in the rate of exploitation, there are a number of other counteracting tendencies which can apply temporarily. Marx lists the following:
- the increase in the rate of surplus value by lengthening the working day or the intensification of labour;
- the pushing down of wages below their value – an attack on the living standards of the working class;
- cheapening of the elements of constant capital;
- foreign trade.
Finally it should be said here that imperialism, through the export of capital to oppressed nations where the organic composition of capital is low and people are brutally exploited under the yoke of viciously repressive regimes, gives rise to massive super-profits, which can hold in check the fall in the rate of profit in the imperialist countries themselves.