Introduction to Marx’s Capital

The following lectures were developed between 1991 and 2015 as part of the RCG educational programme.

They are based on a 10 lecture programme given by David (Reed) Yaffe in 1991 and include additional material on the accumulation of capital, the falling rate of profit and the theory of crisis.

Lectures 1-5

• Lecture 1: Introduction
• Lecture 2: The method of Marx’s critique of political economy
• Lecture 3: Value, money and mystical veil of commodity production
• Lecture 4: From the money to the capital form of value
• Lecture 5: The accumulation of capital
• Lecture 6: The tendency of the rate of profit to fall and the crisis theory

Lecture 1: Introduction

I have given lectures on the critique of political economy, on and off, over a period of 15 years. Looking over the notes to these lectures it can be seen how they had to change, develop and be adjusted in response to the changing political circumstances in Britain and internationally. They can, if we include this series of lectures, be divided up into three different political periods. Not only have the circumstances in each period changed, but also our own understanding of politics has continually developed and changed:

1. In the mid-1970s during the debate on Marx’s crisis theory as part of an attempt to understand the crisis hitting the major capitalists nations at the end of the post-war boom.

2. At the end of the 1970s and early 1980s at the time of the Eurocommunist/social democratic assault on the main tenets of Marxist-Leninism. The Reagan/Thatcher counterrevolution and growing crisis in socialist bloc.

3. Today with the collapse of the socialist bloc and the procla­mation of the victory of capitalism over socialism. ‘Less than 75 years after it officially began, the contest between capitalism and socialism is over: capitalism has won.’ (New Yorker 23 January 1989)

In the first period we were developing a Marxist understanding of the theory of crisis and defending it against the so-called ‘critical’ Marxists. We believed that a reformist political perspective arose from a failure to understand the laws of motion of the capitalist system. ‘The abandoning of the materialist basis leads inexorably from revolutionary socialism to reformism’ (Henryk Grossmann). The failure to grasp the real character of the relations of the capitalist system – the fact workers were ex­ploited – was rooted in the way the capitalist system appeared to workers and capitalists alike. For example the wage-form – the phenomenal form of payment for wages hides the reality of exploi­tation. Ideological expression in the slogan a ‘fair days’ pay for a fair days work’. Another example would be that wage rises were responsible for inflation or job losses. These appearances are not mere illusions but have a basis in the way things appear under the capitalist system. ‘If essence and appearance coincided there would be no need for science’ (Marx). Our task was to pro­vide the science and use it to destroy the illusions of the working class.

In this period we fought those who were questioning a Marxist understanding of the crisis under the banner of ‘critical Marx­ism’. These critics – we called them neo-Ricardians – attacked Marx’s theory of value, the concept of productive labour, and the theory of crisis particularly that based on the tendency of the rate of profit to fall. ‘Critical Marxism’ was a recurring feature historically, usually occurring at the end of the period of capitalist boom and not long before a new crisis was to break out. Eduard Bernstein said in Evolutionary Socialism (1899 – English edition 1909) ‘The further development and elaboration of the Marxist doctrine must begin with criticism of it.’ (p25) His criticisms were an attempt to remove the revolutionary content of Marxism and the ‘critical Marxists’ of the mid-1970s were doing the same thing.

It is important to understand that the critics of Marxism claimed to be criticising Marxism under the guise of further developing it. Steedman saw himself as removing ‘incoherencies’ in Marx to save wasting time so it was possible to get on with ‘worthwhile Marxist theoretical work.’ (CSE Bulletin Autumn 1973) What was important about these schools of thought is that in the period in which they were writing, when Marxism had significant or growing influence in the socialist movement, they were forced to oppose Marxism hypocritically. That is not to oppose the principles of Marxism openly but to pretend to accept them or parts of them while purging them of its revolutionary content. Lenin could say of such ‘Marxists’ in his own day: ‘the dialectics of history were such that the theoretical victory of Marxism compelled its enemies to disguise themselves as Marxists.’ (CW Vol 18 p584)

In the second period two new developments determined how we approached the critique of political economy. Firstly the critics of Marx now began to form a distinct political current – Eurocom­munism. Historical materialism, the necessity for socialism and the dictatorship of the proletariat came under attack. Secondly we developed our understanding of imperialism, and, most importantly, began to understand the materialist/class basis of reformism/opportunism and the split in the working class movement.

Again none of this criticism of Marxism/Leninism was historically new. Bernstein had, after all, rejected the ‘phrase’ dictatorship of the proletariat in 1899:

‘Is there any sense, for example, in maintaining the phrase of the “dictatorship of the proletariat” at a time when in all possible places representatives of social democracy have placed themselves practically in the arena of Parliamentary work, have declared for the proportional representation of the people, and for direct legislation – all of which is inconsistent with a dictatorship’ (op cit p146).

Bernstein and our modern day critics of Marx are determined to remove the revolutionary content from Marxism. Their criticisms are, however, not difficult to refute. But to understand their position requires a quite different approach. Plekhanov gets to the root of the matter when discussing Bernstein’s views:

‘Anyone who wishes to understand Herr Bernstein should try to understand, not so much his theoretical arguments, which contain nothing but ignorance and muddled thinking, as his practical aspirations, which account for all his mishaps in the realm of theory and his backsliding. ‘What a man is, such is his philosophy’, Fichte said with much justice.’ (‘Cant against Kant’ Plekha­nov Selected Works Vol II p365-6)

Plekhanov is showing us how to understand the theoretical positions of the ‘critical Marxists’ – a materialist approach. It is the class standpoint of the critics which forces them to revise Marx – not their revision of Marx which determines their politi­cal standpoint.

Today the rejection of Marxism/Leninism has gone much further and has been given, in the eyes of their proponents, total vindication by the collapse of the socialist bloc in Eastern Europe. Eurocommunism was very quickly overtaken by ‘new realism’ and a total rejection of all fundamental Marxist/Leninist princi­ples followed. In an interview in Marxism Today (January 1990 p41) Eric Hobsbawn soberly, and with some intellectual rigour, pre­sented his conversion to the anti-Marxist/Leninist bandwagon. It is worth making his points in some detail because they show us the issues we need to deal with in defending Marxism/Leninism.

On the capitalist system:

‘Insofar as we envisage a change in the nature of capitalism, it will not, within the foreseeable future, be through a basic catastrophic crisis of the capitalist system, out of which the only thing that can be saved is by revolutionary means.

 

‘…certainly from the 50s on it’s been quite clear that, for instance, the argument that capitalism is not viable economically disappeared. It’s more than viable.’

On the split in the working class movement:

‘…the split in the labour movement which was introduced after the 1917 revolution no longer has any justification…The case for the split between the communist and the social democratic movements I believe falls by the wayside.’

Martin Jacques, editor of Marxism Today, always more crude and provocative, summed up the position succinctly – ‘The international communist movement is now surely at an end’. Or, in the slightly more sober words of Eric Hobsbawn, ‘what we see is the end of an era dominated by the October Revolution’.

Essentially this is a rejection of all the fundamental positions of Marx and Engels not just of Lenin. It is further a rejection of the position that we are still living through the epoch of imperialism – a period of wars and revolutions. History has a habit of refuting such epochal statements soon after they are made. The first major product of the ‘new world order’ was the barbaric Gulf war. Kautsky had a similar comeuppance with the first imperialist war.

Faced with this onslaught against Marxism/Leninism we have to return to fundamentals, to restudy the basic positions of Marx­ism/Leninism. So this series of lectures more than the others will be concerned to re-establish these positions through a deeper study of the two most important texts of Marxism/Leninism – Marx’s Capital and Lenin’s Imperialism.

Before we begin to study the text of Marx’s Capital we need to say something of Marx/Engels overall view of the historical process – historical materialism.

‘Men make their own history, but they do not make it just as they please; they do not make it under circumstances chosen by them­selves, but under circumstances directly encountered, given and transmitted from the past.’ (Marx The Eighteenth Brumaire of Louis Bonaparte 1853)

The central determining factor in these circumstances for Marxists is the mode of production – the way in which human beings produce and reproduce the necessities for life. It is this which determines the general character of the social and political processes of life. Marx sums up the position in the famous pref­ace to the Contribution to the Critique of Political Economy 1859.

‘In the social production which men carry on they enter definite relations that are indispensable and independent of their will, these relations of productions correspond to a definite stage of development of their material powers of production. The sum total of these relations of production constitutes the economic structure of society – the real foundation, on which rise legal and political superstructures and to which correspond definite forms of social consciousness. The mode of production in material life determines the general character of the social, political and spiritual processes of life. It is not the consciousness of men that determines their existence, but, on the contrary, their social existence determines their consciousness. At a certain stage of their development, the material forces of production in society come into conflict with the existing relations of production, or – what is but a legal expression for the same thing – with the property relations within which they had been at work before. From forms of development of the forces of production these relations turn into their fetters. Then comes the period of social revolution.

 

‘No social order ever disappears before all the productive forces, for which there is room in it have developed; and new higher relations of production never appear before the material condi­tions of their existence have matured in the womb of the old society. Therefore, mankind always takes up only such problems as it can solve; since, looking at the matter more closely, we will always find that the problem itself arises only when the material conditions necessary for its solution already exist or are at least in the process of formation…

 

‘The bourgeois relations of production are the last antagonistic form of the social process of production – antagonistic not in the sense of individual antagonism, but of one arising from conditions surrounding the life of individuals in society; at the same time the productive forces developing in the womb of bour­geois society create material conditions for the solution of that antagonism.’

The class which would resolve that last antagonism was the working class – a class Marx argued in the Communist Manifesto which is the builder of socialist society. The revolutions of 1848 confirmed this position of Marx showing that only the working class was a reliable revolutionary force.

In 1852 in a letter to J Weydemeyer Marx sets out his broad historical view – written before he started to work on Capital. Marx states that no credit is due to him for discovering the existence of classes in modern society or the struggle between such classes.

‘Long before me bourgeois historians had described the historical development of this class struggle and bourgeois economists the economic anatomy of classes. What I did that was new was to prove: (1) that the ‘existence of classes’ is only bound up with particular historic phases in the development of production (2) that the class struggle necessarily leads to the ‘dictatorship of the proletariat’ (3) that this dictatorship itself only consti­tutes the transition to the abolition of all classes and to a classless society.’

So that when Lenin wrote some 50 years later in What is to be done?:

‘The fundamental economic interests of the proletariat can be satisfied only by a political revolution that will replace the dictatorship of the bourgeoisie by the dictatorship of the prole­tariat’.

He was merely following in the generally accepted tradition of Marx and Engels.

What has Marx said so far in the passages quoted above?

The economic structure of society is the real foundation on which politics and political struggle arise – it follows also that the economic standpoint adopted in relation to society inevitably expresses and reflects the economic interests of classes in society. In that context Marxist writings on the economic structure of capitalism and imperialism are part of the class struggle:

• they express the fundamental interests of the proletariat;
• they lay bare the economic law of motion of capitalist society; 
• they are a weapon in the hands of the class which will destroy capitalist society – the working class. So Engels could say that ‘Modern Socialism is nothing but the reflex, in thought, of this [class] conflict in fact; its ideal reflection in the minds, first, of the class directly suffering under it, the working class. (Socialism: Utopian and Scientific p97, 1877).

Why then are we socialists? Why is socialism/communism progres­sive? Because capitalism is a fetter on the productive forces.

Engels:

‘In every crisis, society is suffocated beneath the weight of its own productive forces and products, which it cannot use, and stands helpless, face to face with the absurd contradiction that the producers have nothing to consume, because consumers are wanting. The expansive force of the means of production bursts the bonds that the capitalist mode of production had imposed upon them. Their deliverance from these bonds is the one precondition for an unbroken constantly accelerated development of the productive forces, and therewith for a practically unlimited increase of production itself. Nor is this all. The socialised appropria­tion of the means of production does away, not only with the present artificial restrictions upon production, but also with the positive waste and devastation of productive forces and products that are at the present time the inevitable concomitants of production, and that they reach their height in the crises. Further, it sets free for the community at large a mass of the means of production and of products, by doing away with the senseless extravagance of the ruling classes of today and their political representatives. The possibility of securing for every member of society, by means of socialised production, an exist­ence not only fully sufficient materially, and becoming day by day more full, but an existence guaranteeing to all the free development and exercise of their physical and mental faculties – this possibility is now for the first time here, but it is here.’ (op cit p127-8)

Lecture 2: The method of Marx’s critique of political economy

Marx’s great contribution in applying historical materialism to the capitalist mode of production was to show the necessity of the dictatorship of the proletariat – the inevitability that capitalism will be replaced by socialism – a higher social system. Hence the importance of the collapse of the socialist bloc as a significant problem facing communists, an issue to which we will eventually have to return.

What Marx showed was that:

1. Socialism was possible – preconditions for socialism were present.
2. Socialism was necessary – the working class and other op­pressed masses faced with a threat to its fundamental interests with the growing crisis of the capitalist system would be forced to overthrow it.

Rosa Luxemburg wrote:

‘If the capitalist mode of production can ensure boundless expansion of the productive forces, of economic progress, it is invincible indeed. The most objective argument in support of socialist theory breaks down; socialist political action and the ideologi­cal import of the proletarian class struggle cease to reflect economic events, and socialism no longer appears an historical necessity.’ (The Accumulation of Capital p325)

The significance of Hobsbawn’s statement cited earlier should now be clear:

• if possible and necessary – why has the socialist revolution not occurred in one of the most developed capitalist nations? In any of the major imperialist nations which existed in Lenin’s time?
• this is the context in which Lenin’s Imperialism is crucial. The split in the working class and the rise of opportunism. Or is our concept of the epoch incorrect? Has capitalism not outlived its historical mission? Questions which we need to address.

So let us move on to examine Marx’s Capital and Lenin’s Imperial­ism and how their writers actually saw their contributions serv­ing the working class movement.

Both Marx’s Capital and Lenin’s Imperialism are critiques of political economy in two senses of the word.

First Marx’s Capital :

1. A critique of political economy as the theoretical understand­ing which bourgeois society in its period of rise has of itself and found its most adequate political expression.

Adam Smith and unproductive labour – nb Thatcher and the tradi­tions of dead generations weighing like a nightmare on the brain of the living. Ricardo and the Corn Laws and landlord class. Malthus and unproductive consumers – profits arise from selling commodities above their value.

– but most importantly the petty bourgeois criticism of capital­ism – Proudhon with his schemes for abolishing money. Capital was a political intervention to arm the working class against oppor­tunist currents of this kind.

2. Critical representation of the capitalist mode of production – a criticism of the real, economic conditions as they necessarily arise from capitalist forms of production and distribution.

– the inherent contradictions within the system

– the inevitability of crises etc…

Second Lenin’s Imperialism:

1. Imperialism is capitalism in decay. Lenin’s critique is against those who see imperialism not as the inevitable decline of a system but as a wrong, misguided policy of a section of the ruling class – military cliques etc criticism of the liberal Hobson and the renegade Kautsky.

2. Lenin shows how imperialism leads to a division of the world between oppressed and oppressor nations and how the battle to redivide the world and control weaker capitalist nations inevita­bly leads to war…

– how imperialism divides the working class and necessarily provides apologists for imperialism in the working class move­ment.

Both Marx’s Capital and Lenin’s Imperialism are attempts to defend the scientific proletarian standpoint against bourgeois and petty bourgeois critiques of capitalism and imperialism.

– to establish the materialist foundation of the revolutionary working class standpoint.

Our task in the longer term sense is to do the same in the con­text of today’s serious defeats for proletarian socialism. To do this we must first understand the nature of the capitalist system, its laws of motion and development. That is why we need to restudy the basic principles of Marx’s Capital.

In the preface to the first German edition of Capital, Marx tells us that every beginning is difficult and that holds in all sciences. ‘To understand the first chapter, especially the sec­tion that contains the analysis of commodities, will therefore, present the greatest difficulty.’ (p7 Capital Vol 1 Moscow 1961). This is indeed the case. Many have failed to understand the theory of value in Marx’s Capital and most of the critics of Marx have never really made the effort. This is not surprising.

In 1915 Lenin wrote:

‘It is impossible to understand Marx’s Capital, and especially its first chapter, without having thoroughly studied and under­stood the whole of Hegel’s Logic. Consequently half a century later none of the Marxists understood Marx.’ (Philosophical Notebooks CW Vol 38 p180)

Today this is almost certainly not necessary, and with the publi­cation of the Grundrisse and the writings of Rosdolsky, Ruben and others many of the errors of earlier commentators on Capital, can be avoided. Nevertheless some understanding of Marx’s dialectical method is necessary.

In a letter to Engels (14 January 1858) talking about the progress of his work on political economy Marx wrote: ‘In the method of treatment the fact that by mere accident I again glanced through Hegel’s Logic has been of great service to me.’ Further in the afterword to the second German edition of Capital, while saying that his dialectic method ‘is not only different from Hegelian but its direct opposite’ (p19), Marx openly avowed himself ‘the pupil of that mighty thinker’ (p20). And as if to prove the point he admits in the chapter on value, here and there, to coquetting with the modes of expression peculiar to Hegel.’ The dialectic suffers from mystification in Hegel’s hands; ‘with him it is standing on its head. It must be turned right side up again, if you would discover the rational kernel within the mystical shell.’

In fact many of the decisive categories in Capital arise directly out of Hegel’s Logic – essence and appearance, quantity and quality, mediated and immediate etc.

Note: for Hegel the real world is only the external phenomenal form of ‘the Idea’ – the process of thinking which Hegel transforms into an independent subject. For Marx, on the contrary, the ideal is nothing else than the material world reflected by the human mind, and translated into forms of thought.

In these lectures I intend to show what Marx’s dialectical method consists of through an exposition of Capital. But a few general points are in order.

First the method of inquiry and that of presentation are very different. Inquiry follows the actual course of bourgeois history. Presentation takes a quite different process of development. Marx begins Capital with an analysis of the simplest social form in which the product of labour presents itself in capitalist society, the commodity. He proceeds from ‘immediate being’ (commodities or more precisely the exchange of commodities) moves to mediating ‘essence’ (value – expenditure of human labour) to the forms of value, exchange value, money, capital etc. That is we move from the abstract to the concrete. We start from simple (abstract) conceptions such as labour, need, value, exchange-value and end with the state, international exchange and the world market etc.

‘The concrete is concrete, because it is a combination of many determinations and therefore a unity of diverse elements, in our thought, it therefore appears as a process of synthesis, as a result, and not as the starting point, although it is the real starting point and, therefore, also the starting point of observation and conception…the abstract definitions lead to the concrete subject in the course of reasoning…While the method of advancing from the abstract to the concrete is but the way of thinking by which the concrete is grasped and reproduced in our mind as concrete…’ (A Contribution to the Critique of Politi­cal Economy Chicago 1904, Introduction p294 and Grundrisse Penguin 1973 p101)

This method is essential if we are to not, like vulgar economy, to remain trapped in what Marx called the ‘estranged outward appearance of things’. If essence and outward appearance of things coincided there would be no need for science.

There are two senses in which the word ‘appearance’ can be used:

1. those appearances and forms of manifestation in which social relations present themselves and which are not mystificatory or false as such, in as much as they do correspond to an objective reality. These become mystified only when regarded as a product of nature or of the subjective intentions of human beings.
2. those appearances, of forms of manifestation which are simply false, corresponding to no objective reality. (Most of vulgar economy would come into this category while the difficulties and failure of Classical Political Economy would, in general, be due to the difficulties involved with the former.)

In this context it is important to understand the levels of abstraction in the different volumes of Capital. In Volume I we are dealing with the immediate process of production as such – the production of value and surplus value and the accumulation of capital in this context. Volume II moves on to the circulation of total capital – capital’s existence as fixed and circulating capital. In both Volume I and II we are dealing with ‘capital in general’. It is only in Volume III that Marx begins to examine the concrete forms which grow out of the movements of capital as a whole… in competition and in the consciousness of the agents of production themselves. The first paragraph of Volume III makes this clear:

‘In the first volume we analysed the phenomena presented by the process of capitalist production, considered by itself as a mere productive process without regard to any secondary influences of conditions outside it. But this process of production, in the strict meaning of the term, does not exhaust the life circle of capital. It is supplemented in the actual world by the process of circulation, which was the object of our analysis in the second volume. We found in the course of this last-named analysis, especially in part III, in which we studied the intervention of the process of circulation in the process of social reproduction, that the capitalist process of social reproduction, considered as a whole, is a combination of the processes of production and circulation. It cannot be the object of this third volume to indulge in general reflections relative to this combination. We are rather interest­ed in locating the concrete forms growing out of the movements of capitalist production as a whole and setting them forth. In actual reality the capitals move and meet in such concrete forms that the form of the capital in the process of production and that of capital in the process of circulation impress one only as special forms of those concrete forms. The conformations of the capitals evolved in this third volume approach step by step that form which they assume on the surface of society, in their mutual interactions, in competition, and in the ordinary consciousness of the agents of production themselves.’ (Charles H Kerr ed 1909 Capital Volume III p37-8 and Moscow 1962 Capital Volume III p25 – from both translations)

We can now move on to deal with Volume I of Capital.

Lecture 3: Value, money and mystical veil of commodity production

What we have learned so far:

The economic structure of society is the real foundation on which politics and political struggle arise – it follows also that the economic standpoint adopted in relation to society inevitably expresses and reflects the economic interests of classes in society. In that context Marxist writings on the economic structure of capitalism and imperialism are part of the class struggle:

• they express the fundamental interests of the proletariat
• they lay bare the economic law of motion of capitalist society 
• they are a weapon in the hands of the class which will destroy capitalist society – the working class. So Engels could say that ‘Modern Socialism is nothing but the reflex, in thought, of this [class] conflict in fact; its ideal reflection in the minds, first, of the class directly suffering under it, the working class. (Socialism: Utopian and Scientific p97, 1877).

Why then are we socialists? Why is socialism/communism progres­sive? Because capitalism is a fetter on the productive forces. That is what we have to show. (Lecture 1)

First we need to understand Marx’s method in Capital.

For Marx the method of inquiry and that of presentation are very different. Inquiry follows the actual course of bourgeois history. Presentation takes a quite different process of development. Marx begins Capital with an analysis of the simplest social form in which the product of labour presents itself in capitalist society, the commodity. He proceeds from ‘immediate being’ (commodities or more precisely the exchange of commodities) moves to mediating ‘essence’ (value – expenditure of human labour) to the forms of value, exchange value, money, capital etc. That is we move from the abstract to the concrete. We start from simple (abstract) conceptions such as labour, need, value, exchange-value and end with the state, international exchange and the world market etc.

‘The concrete is concrete, because it is a combination of many determinations and therefore a unity of diverse elements, in our thought, it therefore appears as a process of synthesis, as a result, and not as the starting point, although it is the real starting point and, therefore, also the starting point of observation and conception…the abstract definitions lead to the concrete subject in the course of reasoning…While the method of advancing from the abstract to the concrete is but the way of thinking by which the concrete is grasped and reproduced in our mind as concrete…’ (A Contribution to the Critique of Politi­cal Economy Chicago 1904 Introduction p294 and Grundrisse Penguin 1973 p101)

This method is essential if we are to not, like vulgar economy, to remain trapped in what Marx called the ‘estranged outward appearance of things’. If essence and outward appearance of things coincided there would be no need for science. (Lecture 2)

So let us move on to Marx’s understanding of value.

Marx begins Capital with the statement:

‘The wealth of those societies in which the capitalist mode of production prevails, presents itself as “an immense accumulation of commodities,” its unit being a single commodity. Our investi­gation must therefore begin with the analysis of a 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. The nature of those wants – whether they spring from stomach or fancy makes no difference. In the second instance it is something that can be exchanged for another thing, an exchange-value. In capitalist society, use-values are the material depositories of exchange-value.

A given commodity, eg a quarter of wheat is exchanged for x blacking, y silk or z gold &c – in short, for other commodities in the most different proportions. Instead of one exchange-value, the wheat has a great many. Therefore, first: valid exchange-values express something equal; secondly, exchange-value, generally, is only the mode of expression, the phenomenal form of something contained in it, yet distinguishable from it.

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 human 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’ (Capital Vol 1, Chapter 1).

The substance common to all commodities is that they are values – the product of abstract human labour. Hence a commodity is both a use-value and a value, and exchange-value is the only form in which the values of commodities can manifest themselves or be expressed.

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 labour-time. So the magnitude of the value of a commodity is measured by the labour-time socially necessary to produce it under normal conditions of production, with the average degree of skill and intensity prevalent at the time.

Before we move on two points should be made here. So far as labour is the creator of use-value it is a necessary condition, independent of all forms of society, for the existence of the human race. Labour is not the only source of material wealth, that is of use-values but so is nature which sup­plies the material substratum on which labour is expended. Skilled labour counts only as multiplied simple labour – a given quantity of skilled labour being equal to a multiple of simple labour – a quantitative difference not a difference in kind. Experience shows, says Marx, that this reduction of skilled labour to multi­ples of unskilled or simple labour is constantly being made. In the analysis from now on we shall assume, for simplicity’s sake, that every kind of labour is unskilled, simple labour.

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.

Productivity refers only to labour of some useful concrete form. The more productive the more products, that is, use-values, will be produced. On the other hand no change in this productiveness affects the labour represented by value. Abstract labour is an abstraction from precisely the useful qualities of that labour and therefore its productiveness. So however much the productive power of labour varies, the same labour exercised over equal periods of time always yields equal amounts of value. But it will yield, during equal periods of time, different quantities of use-values. This antagonistic and contradictory movement is the result of the commodity being both a use-value and value, being the product of concrete and abstract labour. It is an expression of the antagonistic and contradictory character of the capitalist mode of production. It will reappear in different forms as we move from the commodity to money and capital.

The origin of money

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 a way of ridding us of the evils of the capitalist system. Yet others have argued that the capitalist system doesn’t even need money anymore 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.)

It is not possible to express the value of the linen in linen. 20 yards of linen = 20 yards of linen is no expression of value. The relative form of value presupposes the presence of some other commodity under the form of an equivalent. On the other hand the commodity which serves as equivalent cannot at the same time assume a relative form. We can reverse the equation to 1 coat = 20 yards of linen and then the value of the coat is expressed in relative form and the linen acts as equivalent. But a single commodity cannot assume, in the same expression of value, both forms. The very polarity of these forms makes them mutually exclusive.

Marx then goes on to examine the equivalent form of value. He points to three ‘peculiarities’ of the equivalent form:

1. the use value becomes the form of manifestation, the phenomenal form of its opposite, value;

2. concrete labour becomes the form under which its opposite, general human labour, manifests itself;

3. 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 the expanded form of value the linen now stands in a social relation no longer with only one other kind of commodity but with the whole world of commodities. ‘As a commodity it is a citizen of the world.’ (p63) The accidental relation between two individu­al commodity owners disappears. It becomes clear 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.’ (p63) 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.

Gold could become money, for expressing the value of commodities, only because it was itself previously one of those commodities. The elementary expression of the relative value of a single commodity, such as linen, in terms of the money commodity, gold, is the price-form of that commodity. The price-form of linen is 20 yards of linen = 2 ounces of gold or, if two ounces of gold when coined are £2, 20 yards of linen = £2.

In this analysis so far Marx has shown how the simple commodity-form of value is the germ of the money-form.

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:

1. 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).

2. 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.

3. 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’.

Lecture 4: From the money to the capital form of value

Let me summarise where we have got so far in understanding the laws of motion of capitalist society. We have demonstrated how the historical development of money arises out of the nature of the commodity itself. The commodity is the simplest social form in which the product of labour presents itself in capitalist society. The commodity appears both as a use-value and an exchange-value. But further analysis reveals that it is both a use-value and a value, that is, the product of individual concrete labour and general abstract labour. This contradictory nature of the commodity develops into the duplication of the commodity into ordinary commodities and the money commodity.

Before the setting aside of a particular commodity as the universal equivalent, as money, a commodity would express the value of other commodities, whilst other commodities in turn expressed its value. The contradiction here was that individual commodity producers entered into direct social relations through the exchange of the products of their private individual labour. With the growth of commodity production this contradiction between the private and the social character of labour finds its spontaneous resolution in the setting aside of part of society’s labour force in order to produce the money commodity – the universal commodity – a commodity which is the embodiment of directly social labour. This has to have social validity. Various concrete labours have historically assumed this role but it has ultimately devolved upon the gold producer. The reason is that gold is a fitting materialisation of that which is common to all commodities – homogeneous abstract human labour. It is homogeneous, easily divisible and can easily be reunited. A small quantity embodies a large amount of socially necessary labour time.

We now have, on the one hand, ordinary commodities in which the social character of labour exists only latently, and on the other hand, the money commodity which serves as the direct embodiment of social labour, and therefore can both express and realise the value of all other commodities. Individual commodity producers relate to one another not directly through the products of their individual private labour, but indirectly through the money commodity. This is a necessary development arising with the emergence of commodity production and enables the further development of such production. The inner contradiction of the commodity is resolved, only to be recreated at a higher level. The special commodity, the money commodity, gold, is the product of social labour and therefore has a value. The magnitude of its value, as with all other commodities, is the time socially necessary to produce a given quantity of it. The magnitude of the values of commodities with which it is exchanged comes then to be expressed in a quantity of this money commodity – that is, their values are expressed in the weight of a certain quantity of gold.

The money name of the quantity of gold which expresses the exchange value of that commodity for which it is exchanged, is the price of that commodity. The money commodity cannot have a price itself since this would make necessary the existence of a second commodity to serve as money – a double measure of values.

Price is the phenomenal form of a social relation expressing the commensurability of commodities founded on their common nature as the products of abstract human labour. However, commodities exchange for money only after they have been ideally transformed into prices. In the establishing of the price of commodities the quantity of the really available money is of no consequence. Commodities are first transformed into money ideally before exchange takes place. Marx says that the price or money form of commodities, like the form of value generally, is quite distinct from the commodity’s bodily form. It is therefore a purely mental or ideal form. Although invisible the value of iron, linen and corn has actual existence in these articles: it is ideally made perceptible by their equality with gold, ‘a relation that, so to say, exists only in their heads. Their owner must, therefore, lend them his tongue, or hang a ticket on them, before their prices can be communicated to the outside world.’ (Capital Vol 1 p95) As the expression of the value of commodi­ties in gold is merely an ideal act, we can use for this purpose imaginary or ideal money. It does not require the least bit of real gold to estimate the value of goods in that metal. So when money serves as a measure of value it is employed only as imaginary or ideal money. However price (which is the quantity of money thus expressing a value) depends on the kind of metal that is money.

When the values of commodities are habitually expressed in quan­tities of gold it becomes necessary to have a standard of price – a fixed quantity of gold as a unit measure. Such a standard of price is adopted from the pre-existing standard of weight. Hence the pound weight as a standard of price subsequently developed into the pound sterling.

As a measure of value and a standard of price money has two entirely different functions to perform. As a measure of value it is the socially recognised incarnation of human labour; as a standard of price it is a fixed weight of the metal. As a measure of value it serves to convert the values of commodities into prices, into imaginary quantities of gold; as a standard of price it measures those quantities of gold.

In the end standards of money are regulated by legal statute. A given weight of one of the precious metals, an ounce of gold, becomes officially divided into aliquot parts, with legally bestowed names, such as dollar, pound etc. These serve as units of money, and are subdivided into other aliquot parts with legal names eg pence etc. But both before and after these divisions are made a definite weight of metal is the standard of metallic money.

To summarise, the magnitude of a commodity’s value is the portion of the total labour time of society necessarily embodied in it. When the magnitude of value is converted into price the above necessary relation takes the form of a more or less accidental exchange-ratio between a single commodity and another, the money commodi­ty. This may really represent the value, or, on the other hand, may represent the greater or lesser quantity of money (gold deviating from that value) for which it can be sold under the given circumstances. The possibility, therefore, of a quantitative incongruity between price and the magnitude of value, ie that the price may diverge from the magnitude of value, is inher­ent in the price-form itself. This is not a defect, but, on the contrary, the price-form is admirably suited for a mode of production whose laws only assert themselves as blindly operating averages of continual irregularities.

The money name can be ‘detached’ from its social base. Because of the price-form, a price may exist where there is no value. Objects which are in themselves not commodities, such as conscience, honour etc can be offered for sale by their holders, thus acquiring, through their price, the form of commodities. The price in such a case is imaginary.

Money or the circulation of commodities

The development of the money form of value does not abolish the contradictions inherent in commodity exchange – between use-value and value. Rather it creates a form in which they can exist side by side. This is the way real contradictions are resolved.

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:

Commodity – Money – Commodity or 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. In order for the commodity to be converted into money it has to satisfy a number of conditions. It must prove to be social labour by being a use-value for some buyer. It must not be a superfluous article over and above the needs of society. It must not contain more labour time than is socially necessary. It must not be superseded by some new product etc.

So that while commodities are in love with money, as Marx says, ‘the course of true love never did run smooth’. The quantitative division of labour is brought about in exactly the same spontaneous and accidental manner as its qualitative division. And the owners of commodities find out that the social division of labour which turns them into independent private producers, also makes the social process of production and the relations of the individual producers independent of their will; that the independence from each other has as its counterpart and supplement a system of general and mutual dependence.

Because every sale is a purchase and every purchase a sale it does not follow that the circulation of commodities implies an equilibrium of sales and purchases. No one is forced to immediately make a purchase because they have just made a sale. Money is a commodity which remains in a form capable of circulating, whether it appears on the market at an earlier or later date. If the interval in time between the two complementary phases of the complete metamorphosis C-M, M-C becomes too great, if the split between the sale and purchase becomes too pronounced with one commodity remaining too long in its money form, the intimate connection between them, their oneness, asserts itself by producing a crisis. But this crisis is only a mere possibili­ty. The conversion of this possibility into a reality is a result of a long series of relations which, from the standpoint of simple circulation, do not yet exist.

The same pieces of money can serve a number of transactions. In the wheat-linen-bible-brandy exchanges, £2 can be used four times to cover the £8 that represents the sum of the prices of the four commodities. Hence the circulating medium, at any time, equals the sum of the realised prices divided by the number of moves of coins of the same name. Dividing the total number of moves of such coins by the number of such coins functioning gives the average velocity of the currency. The circulation can only absorb that amount of gold which, if multiplied by the average velocity, will equal the sum of all the prices to be realised.

The quantity of money in circulation at any time will depend on the level of prices, the quantity of commodities circulating, the average velocity of money-currency.

The transformation of money into capital

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 different 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-M^l, where M^l = M+ΔM = original sum advanced, plus an increment. This increment or excess over the 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 capitalist is the personification of capital.

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-M^l, 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.

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.’

Lecture 5: The accumulation of capital

So far we have we have shown that 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.

The surplus-value generated in the process of production by C, the capital advanced; or the self-expansion of the capital C (Verwertung) presents itself to us first as the amount by which the value of the product exceeds the value of its constituent parts.

The capital C is made up of two components; the sum of money c laid out in the means of production and the sum of money v ex­pended on labour power. C = c + v, the sum of the constant and variable capital leads after production to (c + v) + s, where s is the surplus-value.

Marx makes the point that the proportion of the constant capital which consists of the instruments of labour transfers to the product only a fraction of its value, while the remainder resides in those instruments. Since this remainder plays no part in the formation of value, we can, at present leave it to one side. If we include it, then its value would be transferred to the product. However the amount of new value added to the product and the amount of surplus value produced remains unchanged. So throughout Capital Volume I Marx assumes, unless the context dictates otherwise, that by the constant capital advanced for the production of value we actually always mean the value of the means of production consumed in the course of production.

This being the case if C becomes C’ after the process of produc­tion then C’ = (c + v) + s. The new value added will be v + s, as the value of constant capital is transferred to and merely reappears in the product.

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 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. The ratio of surplus to necessary labour time is a measure of the exploitation of the working class.

Skilled and unskilled labour

Marx goes on to show that it makes no difference to the fact of the creation of surplus value whether the labour employed by the capitalist be skilled or unskilled labour. Skilled labour will produce more labour than unskilled labour in a given time.

‘All labour of a higher or more complicated character than average labour is expenditure of labour-power of a more costly kind, labour power whose production has cost more time and labour, and which therefore has a higher value than unskilled or simple la­bour-power. This power being of a higher value its consumption is labour of a higher class, labour that creates in equal time pro­portionally higher value than unskilled labour does.'(Capital I p197)

And just as with unskilled labour it will produce surplus-value by the extension of the labour time past the point when the worker has replaced the value of his/her own labour power. As skilled labour can be reduced to average social labour eg one day of skilled labour to say six days of unskilled labour we can simplify our analysis by assuming throughout that the labour employed by the capitalist is unskilled average labour.

Relative 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’.

Productive and unproductive labour

Before we go on to deal with the accumulation of capital something needs to be said about productive and unproductive labour. This distinction is central to Marx’s work although one that is nearly always rejected by critics of Marx.

A productive worker is one who produces surplus value for the capitalist and so works for the self-expansion of capital. The particular characteristics of the labour are irrelevant. The use-value produced ‘may be of the most futile kind’. It is a definition derived not from the content or result of that labour but its social form. This also applies in the case of ‘immaterial production’ – no tangible commodity eg entertainment etc., but also teachers, nurses, doctors as well as artists if they are employed by capital. Transportation in so far as it alters the use-value of the product – in a place where it can be consumed – is productive labour. As we shall see in the next lecture the particular concrete character of the labour does have economic significance as in the case of luxury production, owing to the role it plays in the reproduction process of capital. But this is of no significance in defining productive labour itself. The labour power of the productive worker is consumed in the production of value and surplus value – its use value for capital is its capacity to produce surplus value. Real variable capital (v) is the labour power of the productive worker in action.

Productive labour of a special kind – repair, health and education acts directly on machines in the process of production and on the workers themselves. Some of this work is done ‘gratis’ – machines are repaired as part of the job and domestic labour is carried out with no payment by women in the home. But where capital is employed to hire such workers value and surplus value is produced and added to the value of the product. However capitalists will not for long purchase labour power impregnated with surplus value and that is why the state invariably takes over the ‘maintenance’ and ‘training’ of workers – hospitals and schools – to make sure the expenditure of the workers is kept to a minimum. These points help to explain recent developments in Britain and the growing inequality in education provision.

Unproductive labour is labour that does not produce value and surplus value. It is labour exchanged with revenue – wages or profits. Marx following Adam smith would have had domestic and personal servants in mind and other services of this kind. Today a great deal of this labour would be employed by the state – in public and local government, the ideological professions, the repressive apparatus and health and welfare if the labour of the medical and teaching professions is not spent on productive workers.

Finally we come to unproductive labour exchanged against capital – this is labour engaged in the realisation rather than production of surplus value. That is labour employed by capital in the circulation process. This labour merely converts value from its commodity form to money form. It is the cost of realising existing values and creates neither value nor surplus value. It involves accounting, banking, marketing and advertising. The costs occurred by commercial and banking capital attract surplus-value produced by productive capital. Today such costs on one estimate represent around 75% of the price of a product in the major imperialist countries.

The rising organic composition of capital

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.

Lecture 6: The tendency of the rate of profit to fall and the crisis theory

In lecture 5 we showed that capital’s relentless drive to increase surplus value and expand leads to a rising organic composition of capital. Constant capital continually grows in relation to variable capital. As a result the same causes which expand capital create unemployment – an industrial reserve army of labour. 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.

This law is the general expression of the contradictory nature of capitalist production, of the increase in the social productivity of labour under the domination of capital. The size of the reserve army is relative to the rate of capital accumulation. During periods of stagnation and average prosperity it weighs down on the working population and during periods of rapid expansion, being a reservoir of labour power, holds back the ‘pretensions’ of the labour force (Capital Vol 1 p639).

The process of capitalist production, of accumulation and the increase of the social productivity of labour has so far been examined through an analysis of its ‘invisible and unknown essence’. The appearance of surplus-value and rate of surplus-value ‘on the surface of the phenomenon’ in the form of profit and the rate of profit is the next step in the analysis.

‘Although the rate of profit thus differs numerically from the rate of surplus-value, while surplus-value and profit are actually the same thing and numerically equal, profit is nevertheless 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 3 p47].

The general law of capitalist accumulation from the standpoint of capital (and the capitalist) represents itself ‘on the surface of the phenomenon’ as a tendency of the rate of profit to fall. This is not a mechanical or algebraic relation but the expression of the contradictory nature of the accumulation process from the standpoint of capital.

The development of the social productivity of labour under capitalism, leads to a decrease of the exchange-value of commodities relative to their use-value, (they are produced with less expenditure of labour-time) together with an increase of the mass of use-values. The accompanying rise in the organic composition of capital (c/v) means that the mass of the means of production grows faster than the mass of labour employed the from material side, and from the value side, constant capital grows faster than variable capital. However, due to the increasing productivity of labour the value-composition rises slower than the technical-composition. If the rate of exploitation (s/v), the proportion between surplus and necessary labour-time remained the same, the rise in the organic composition of capital would lead to a falling rate of profit since it is only the – variable part of capital that yields surplus-value, while the rate of profit is measured on total investments, that is, constant and variable capital. This inherent tendency for the rate of profit to fall is called by Marx:

‘…the most important law of modern political economy and the most essential one for understanding the most complicated relationships. It is the most important law from an historical standpoint’ (Grundrisse p634).

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 p234)

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 p242)

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 (Marx gives arithmetical examples in the Grundisse p239-247). 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 capital accumulates.

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 counteracting tendencies which can apply temporarily. Marx lists the following: the increase in the rate of surplus value by lengthening the working day, or intensification of labour; the pushing down of wages below their value – an attack on the living standards of the working class; cheapening the elements of constant capital; and foreign trade. To this we can add the export of capital to less developed nations where the organic composition of capital is low and wages are low and profits are therefore much higher. (A jump cannot be made from this position to seeing imperialism as a countertendency to the rate of profit to fall. The theory of imperialism has to start from the development of monopoly capitalism.)

Before we move on to discuss the capitalist crisis we need to say something about luxury goods and the rate of profit. Luxury goods are not part of the means of subsistence of the working class nor do they contribute directly or indirectly to the production of those means of subsistence. So increases of productivity in the luxury industries cannot lead to the production of relative surplus value – that is cannot affect the rate of profit in so far as it is determined by the rate of surplus value. A rise in the organic composition of capital in the luxury sector will only accelerate the tendency of the rate of profit to fall as it cannot counter that rise with an increase in the rate of exploitation. This counters all those theories of armaments spending as the driving force behind the post-war boom.

Finally, we need to understand the role played by commercial and banking capital. The employment of workers in these sectors increases the expenses of productive capital and therefore the mass of capital advanced without directly increasing surplus value. If the extra costs of such capital are c then the rate of profit will be reduced from s/C to s/C + c.

The capitalist crisis

Capitalism is always driven to a higher and higher productivity of social labour in order to produce sufficient surplus value for the continuous reproduction and expansion of the growing capital. But the process is a contradictory one.

‘The contradiction…. consists in this that the capitalist mode of production has a tendency to develop the productive forces absolutely, regardless of value and of the surplus value contained in it and regardless of the social conditions under which capitalist production takes place; while it has as its aim the preservation of the value of the existing capital and its self-expansion to the highest limit (that is an ever accelerated growth of this value) (Capital Vol III p244).’

When the expansion of production outruns profitability, when existing conditions of exploitation preclude a further profitable expansion of capital, or what amounts to the same thing, an increase of accumulation does not increase the mass of surplus value or profits, an absolute over-accumulation of capital has occurred and the accumulation process comes to a halt. The interruption of the accumulation process or its stagnation constitutes the capitalist crisis. It represents an overproduction of capital with respect to the degree of exploitation. From the point of view of profitability at this stage, existing capital is at the same time too small and too large. It is too large in relation to the existing surplus value and not large enough to overcome the lack of surplus value. Capital has only been overproduced in relation to profitability.

Although any actual crisis has to be explained out of the real movement of capitalist production, credit and competition, it is the general tendencies of the accumulation process itself and the long run tendency of the rate of profit to fall that constitute the basis of that explanation.

Competition, capital and crisis

In order to indicate why the crises take the form of ‘periodically reoccurring explosions’ with each cycle tending to be more severe than the last, we need to discuss the role of the crisis in restoring the conditions for a new profitable expansion. It is here that competition becomes a decisive factor in the whole discussion.

With a relatively declining mass of surplus value in relation to the growing mass of constant capital, competition for this declining mass becomes a vital element in the accumulation process. Competition is the result of the struggle for profits and extra profits accompanying the rise in the productivity of labour. For those first introducing new methods of production can sell their cheaper produced commodities above their price of production, and under their social value (above their individual value). Competition is the force that equilibrates different production prices to a new social value. Competition forces the laws of capital on to individual capitals.

‘…a fall in the rate of profit connected with accumulation necessarily calls forth the competitive struggle. Compensation of a fall in the rate of profit by a rise in the mass of profits applies only to the total social capital and to the big, firmly placed capitalists. The new additional capital operating independently does not enjoy any such compensating conditions. It must still win them and so it is that a fall in the rate of profit calls forth the competitive struggle amongst capitalists, not vice versa.’

Competition comes into its own in the crisis situation. The crisis while representing an end to the accumulation process, is nevertheless the precondition for its continuation on a higher level – with more concentrated and developed capital. The crisis is both the disease and cure. In the crisis profitability of capitalist production is restored, in principle, in a number of ways.

1. Assuming no physical destruction of capital takes place as a result of abandonment or war – the same quantity of use values, of means of production, represent a smaller exchange value than before the crisis through the devaluation of capital due to bankruptcies and stronger capital buying up the weaker. However productivity based on use-values remains the same, and the rate of profit increases with the same mass of surplus value relating to a smaller total capital.

2. Only more productive capitals survive with the concentration and restructuring of capital through competition – overall a higher social productivity with larger markets. (This is important in understanding the development of monopoly capitalism and imperialism)

3. Unemployment and the growing competition for work allow wages to be pushed below their value.

4. New technology and ‘rationalisations’ in methods and techniques of work increase the productivity and intensity of labour.

The crisis is a political as well as an economic question as the processes necessary to bring about a restructuring of capital to a greater profitability exacerbate the class struggle…etc Nothing is clearer in the crisis than the wasteful and destructive side of capitalism. In the crisis the struggle between capital and labour, the class struggle in the wider sense, becomes a struggle about the system itself. The outcome of the struggle cannot be predicted in advance, and in this sense ‘no crisis is the final crisis’ for capitalism.

Some characteristics of the present period

The drive to push forward the further profitable expansion of capital since the crisis began in the mid-1970s has been the dominant characteristic of the last 40 years. The problem is insufficient surplus value for the amount of capital invested – and the enormous weight of unproductive labour in the imperialist economies. Here the importance of the new middle class is a constant consideration in maintaining capitalist stability and determines the form of the battle to sustain an adequate rate of profit. Some factors are easily understood on the basis of this position.

1. Massive increase of women in the production force. Two hands needed to work to produce the means of subsistence for the worker. Women’s wages are lower than men’s.

2. Increase in the intensity of work and the length of the working day. Simple reduction of wages below the value of labour power.

3. Restructuring of production – just-in-time methods. ‘Outsourcing’ and ‘downsizing’ including core workforces.

4. Production shifted to low wage, less developed nations.

5. Intensification of inter-imperialist rivalries through a new re-division of the world

6. Enormous growth of speculation – derivatives etc.

All indicate a looming crisis on a much greater scale than in 1929 as all the possible frontiers of the world have now been crossed and are subject to intense capitalist exploitation.