Marx’s Capital and Capitalism Today: Part 1


by Robert Griffiths

The first volume of Capital by Karl Marx was published in 1867, in German as Das Kapital. It was the fruit of ten years’ study, analysis and composition in the wake of the first real international crisis of capitalism.

This work began in earnest with his Economic Manuscripts of 1857-58i. In essence, these represent the first draft of Volume I of Capital.

Portions of the Economic Manuscripts relating to the dual character and values of commodities, labour and money were then restructured and published in 1859 as ‘part 1’ of A Contribution to the Critique of Political Economy (ACCPE)ii. The title was to become the sub-title of Capital proper. In a famous preface to the 1859 text, Marx summarised his theory of historical materialism, with its revolutionary conclusion that within each mode of production (slavery, feudalism, capitalism), society’s productive forces develop to the point where the existing relations between the exploiting and exploited classes act as an absolute barrier to their further development and so have to be ruptured: “Then begins an era of social revolution.”iii

Although ACCPE launched a fierce assault on classical bourgeois political economy’s understanding of value, labour and money, it met initially with silence in Germany. But German-speaking workers there and in emigré communities in France, England and the USA awoke to the significance of its contents, not least its exposition of the Theory of Labour Exploitation.

Family illness, an upsurge in working class and national-democratic movements in Germany, Italy and Poland, and the American Civil War, interrupted Marx’s efforts to complete the second part of ACCPE. What he produced in the end was the Economic Manuscript of 1861-63iv, in effect a second draft of Volume I of Capital. Additional notebooks and the Economic Manuscript of 1863-65 followed, on which Marx worked intermittently until his death in 1883. Other commitments – not least his leading role in the International Workingmen’s Association (the ‘First International’, the IWA) from 1864 until 1873 – meant that it was only in 1885 and 1894 that much of this material was published, as Volumes II and III respectively of Capital, prepared and edited by Engels. A hitherto unpublished section of the 1861-63 Manuscript, ‘Theories of Surplus Value’, was later produced by Karl Kautsky, although a complete and accurate translation into English did not follow until 1963-71.

The first draft of Capital

In August 1857, US investors had begun to lose confidence in insurance companies, banks and railroad stocks after an economic boom based on the expansion of international trade, gold discoveries and credit-fuelled investment and speculation. The panic provoked a financial crash with banking and insurance failures and cutbacks in production. Extensive US commercial and financial links spread the impact to parts of western Europe, the Far East, Australia and Latin America. In Britain, financial institutions involved in the extensive trade with the US collapsed, contributing to an economic stagnation that lasted until late in 1858.v

While politicians, economists and commentators in Britain pinned blame for this first major international crisis on over-speculation, unsound credit, inadequate gold supply, the Crimean War or on some permutation of them, Marx located its root in capitalism’s cyclical character. In a series of articles for the New York Daily Tribune,vi he argued that, as the economy grows and accelerates, investment and production increase along with profit, credit and speculation. Inevitably, a point is reached where there is an ‘over-production’ of commodities, not all of which can then be sold at a profit. It is in these conditions that investors, speculators and stock markets become nervous and more sensitive to signs of slowdown and failure. Production declines, investment is cut back, workers are laid off, prices and profits fall, stocks and shares go down, companies fail and the economy as a whole spirals into recession. Recovery will then occur as it becomes profitable once more to produce commodities with lower-cost premises, plant, machinery, supplies, labour and credit. The pace quickens, breaks into a boom and so the cycle proceeds.

While other factors – economic, political, legal – can hasten, postpone, aggravate or prolong capitalism’s periodic crises, Marx suggested that their underlying and primary cause is to be found in the sphere of production. This remained the case, even though dramatic commercial and financial events had occupied the newspaper headlines, parliamentary speeches and the official reports in 1857-58.vii Varying the amount of money in circulation beforehand, or curbing speculation on the stock exchange, might have affected the contours of the crisis in some way, but they would not have prevented it from breaking out sooner or later.

Marx’s intention with his Economic Manuscripts of 1857-58 was to help workers understand the laws and tendencies of the economic and political system in which they worked and lived, so that they would see why it would have to be overthrown and replaced by communism. Six of the seven notebooks comprise a chapter on ‘Capital’, where he traced the development of trade, money and commodities. Capitalism is defined as a mode of production in which, firstly, the production of commodities – of goods and services for sale in a market – has become predominant. Indeed, as he was to put later in Volume I proper of Capital, in terms of its material wealth capitalist society presents itself as “an immense accumulation of commodities”.viii

Secondly, the means of production (land, premises, plant and machinery, raw materials and other inputs, etc) are largely in private ownership. Thirdly, labour power – the worker’s capacity to work – has also become a universal commodity. In fact, without the purchase and application of labour power, the means of production could not be set in motion and applied.

Commodities, value and exploitation

In the 1857-58 Manuscripts, Marx transformed the Labour Theory of Value advanced by Adam Smith and David Ricardo – with all their confusions around wealth and value – into his own Theory of Labour Exploitation (or Theory of Surplus Value). In particular, he explained how workers are robbed of much of the value they produce, amending and refining the main propositions in a series of newspaper articles that had been published together in 1849 under the title Wage Labour and Capital.

Every commodity must have a ”use value’, so that a consumer wishes to buy it. But that cannot determine its price, nor does it explain why very different types of commodity in size, weight, composition etc, can be measured against one another through their price (or ‘exchange value’) on the market. The one characteristic all commodities have in common, to which they can all be reduced and by which, therefore, their value can be measured, is the labour time that goes into every aspect of their production. The past labour time embodied in the means of production used up in producing the commodity, together with the present or living labour time turning those means into the finished product, is the starting point for determining a commodity’s exchange value. It is why there is almost always a proportionality within limits between the prices of vastly different commodities. Obviously, market prices can be driven above or below a commodity’s exchange value due to factors of supply and demand, monopoly power, state regulation etc, but these are fluctuations around that value and are rarely completely divorced from it.

When the average worker sells her or his labour time to the capitalist employer, what is its exchange value? Like any other commodity, it is the average amount of society’s labour time necessary to produce that commodity, to produce the means of consumption (accommodation, food, clothing, leisure etc) that enable the worker and any dependants to live, work and rear the next generation of workers. Therefore, the worker’s wage broadly reflects the value of her or his labour power.

But labour power has the capacity to produce more value in a day or a week than it needs to consume. As well as producing value equivalent to the value of the wage used to buy one day’s worth of means of consumption, which might take five hours of labour time, the worker then goes on working for another, say, three hours. This produces three hours of ‘surplus value’ in labour time for the capitalist employer, for which the worker is unpaid. But like the value of the five hours’ paid labour time and of the past labour time embodied in the means of production used up in producing the commodity, the value of this surplus labour time will be transferred into the total value of the end commodity and reflected in its selling price. The employer has not paid the worker in full for his or her eight hours of labour, with a wage worth eight hours of means of consumption. Instead, the employer has paid the worker in full for her or his capacity to work, ie her or his labour power, which can be set to work on the means of production for eight hours a day. Of course, the wage is presented as full payment for the hours worked (or commodities produced in the case of piece-work), thereby concealing the unpaid surplus labour performed and the surplus value it has created.

Here is the great secret discovered by Marx and which had escaped earlier political economists, whose labour theories of value held that workers were fairly rewarded for the wealth they create while also producing the compensation that was fairly due to the owners of the two other factors of production, namely, land (in the form of rent) and capital (in the form of profit).

When the commodity is sold, the capitalist gets back the money laid out on the means of production, including depreciation (c for constant capital whose value is transferred unchanged into the final product) and on living labour power in the form of wages (denoted as v for variable capital because this is the money which makes possible the variation – the increase – in value and thus money returned in revenue). When it is realised in money terms, the surplus value (s) in the commodity created by unpaid, surplus labour time constitutes the gross operating profit and includes the amount necessary for the capitalists to purchase their own means of consumption.

Here is the ‘use value’ of labour power as far as the capitalist is concerned: it produces surplus value, which from the standpoint of the capitalist is the only reason for producing anything. Under capitalism, commodities are not produced in order to make people happy, or to meet some pressing social need. As Marx put it in his Economic Manuscript of 1861-63: “The direct purpose of capitalist production is not the production of commodities, but of surplus value or profit.”ix Left to its own devices, capitalism would not produce anything that does not do so.

Recent calculations indicate that the rate of exploitation or surplus value (the proportion s/v) in Britain has ranged from 42% to 63% between 1986 and 2009.x In other words, the average production worker performs somewhere between three and a half to five hours unpaid labour in an 8-hour day, not counting breaks. Michael Roberts estimates that exploitation rates varied from 42% to 68% in the US economy between 1945 and 2014.xi

Because a commodity’s surplus value does not manifest itself as extra money until the point of sale, the illusion is created that profit originates in the sphere of circulation – and then only in its final stage – rather than production.

Out of the surplus value, or gross operating profit, other sections of the capitalist class may draw rent for land and interest on loan capital from the commodity-producing capitalist, both of which are also forms of the surplus value extracted from workers. Rent and interest are also collected directly from workers by other capitalists, of course, and after the deduction of costs are also classed as ‘profit’ in the everyday use of the term. Nonetheless, Marx made the important point that, however defined, the source of capitalist profit in general is not to be found in the spheres of circulation and finance as such, but in the sphere of the commodity production by living labour power.

Furthermore, while constant capital c replenishes the means of production at their previous level, a portion of the surplus value s is used to expand investment, production and therefore profit in a process of expanded reproduction. In this way, capital accumulates to exercise what Marx called its “great civilising influence” by developing society’s productive forces on a colossal scale.xii

In presenting this theory of labour exploitation, Marx also laid bare the motivation for employers to maintain or even extend the working day or week. It would enable them to increase the absolute amount of unpaid labour time (ie surplus value) extracted from the workers’ labour power. Hence the capitalist resistance to trade union demands for the 8-hour day, the 5-day week and more holidays.

Guided and enthused by Marx, the IWA in 1866 took up the demand for the 8-hour day; and in 1889 the Second International made it the first theme for International Workers’ Day demonstrations on May 1. Enacted first in Soviet Russia four days after the Great October Socialist Revolution in 1917, the 8-hour day was soon won by workers in France and Portugal, and by railway workers in Britain, after a nine-day strike in 1919.

Nevertheless, the struggle over the duration of working time has continued ever since. In 1989-90, the Confederation of Shipbuilding and Engineering Unions in Britain launched a rolling programme of subsidised, selective strikes to compel employers to reduce the standard working week from 39 hours to 35; many opted to settle at 36-38 hours. In France, the Socialist-Communist coalition government legislated in 2000 for a universal 35-hour week. Today, most countries have national laws limiting the obligatory working week to 40-48 hours, but some have higher limits (Kenya) or none at all (Nigeria, India, Pakistan, Jamaica, Grenada) although in some of the latter there are limits agreed through collective bargaining with trade unions (Germany, Australia, Denmark) or within an international legislative framework such as the EU Working Time Directive. But weak enforcement, exempted occupations and ‘voluntary’ overtime mean that the struggle proposed by Marx and the IWA continues and, as in France currently, employers and their hired politicians still strive to change the law to allow longer working time.

There are other ways in which employers seek to maximise surplus value. For example, working-class consumption can be cut in real terms, hence in part the struggle over wages and payment systems. But this can only be taken so far before it adversely affects the worker’s capacity to work, produce value and rear the next generation of labour power.

Surplus value can also be increased relatively, by reducing the value of labour power (v), so that less of the worker’s labour time is required to earn the wage needed to purchase life’s necessities. This is made possible by increasing productivity, especially in those branches producing consumer goods most required by the working class. Hence the struggle over the intensity of work and control of the work process. But higher productivity will only lower the average labour time necessary to produce the essentials of life for the average worker if it can be achieved in all the relevant branches of production.

Another possibility is to import cheaper consumer goods or their raw materials from outside. This option is, of course, limited by problems of availability and the willingness of importers to sell their commodities at significantly below the prevailing market price.

More recently, we have seen the spread of various forms of contracted labour in the guise of ‘self-employment’ in some of the developed capitalist economies, not least in Britain. The genuinely self-employed worker sells his or her commodity to the customer at more or less its value, in other words at a price that very roughly reflects the past and living labour time that has gone into its production (although the means of production have usually been secured at ‘trade’ discount below their value). There is no unpaid surplus labour time as such, because the self-employed worker is being paid for every hour worked. But the contractor of so-called ‘self-employed’ labour pays only for the hire of the labour power, often maximising the surplus value from it by not paying for holiday time, sickness, maternity or paternity leave etc.

Such social and welfare benefits are part of what today – together with public services such as health, education etc – is regarded as the ‘social wage’. Workers and capitalists fund it through taxation and state insurance rather than by payment at the point of delivery. It is in the interests of the working class to maximise the funding contribution from the capitalist class and enhance the ‘social wage’ in both quality and quantity; the capitalists seek to minimise their financial contribution while ensuring that those services essential to the functioning of capitalism and its workforce are maintained, preferably on a basis that also allows profits to be made. This struggle over the formation and composition of the social wage is today a prominent feature of the economic and political class struggle in capitalist society.

“Estrangement” or alienation

In Volume I of Capital, Marx provided a detailed historical and contemporary account of the class struggle in England, Scotland and Wales over surplus value. Battles were fought over the length of the working day, night work, work systems and female and child labour throughout the period from England’s 14th Century Labour Statutes to Britain’s 19th Century Factory Acts. In particular, his accounts of the rise and impact of machinery and the factory system draw from a host of sources relating to England, Scotland, Wales and continental Europe. Referring to the machine as the “material embodiment of capital”, he returned to an earlier theme about the dehumanising effect (“estrangement”) of mechanisation and automation on the labour process, on the machine operative and on those handicraft workers who lose their livelihoods as their skills are rendered redundant.xiii

In the 1857-58 Economic Manuscripts, he had argued that the development of society’s productive forces had enshrined (“reified”) past labour in the huge machinery that dominates living labour – indeed, to the point that it appears (at least to the capitalist) that the machine is independent of the worker. Society’s labour has set up an “enormous objectified power” which it sees as an alienated force over and against itself, and which belongs to capital.xiv That machinery should appear so to the capitalist and the worker is an historical necessity as part of capitalist development. Yet this is merely one aspect of capitalism’s appropriation of living labour, in effect “alienating” it from itself, objectifying it whether in the form of machinery or as the commodities produced by living labour and then removed from it.

Technology and the division (specialisation) of labour have further transformed the labour process and workplaces in the course of the 20th Century, particularly in the advanced capitalist economies. Many workers still feel alienated from their work, the workplace and its modern machinery. Numerous studies published by bodies ranging from the Trades Union Congress (TUC) in Britain to the International Labour Organisation (ILO) in Geneva describe and explain how the introduction of the most modern technology – computerisation, automation etc – and the pressures of globalised competition have greatly increased workplace stress.xv

As Marx had put it in his Economic and Philosophic Manuscripts of 1844:

“Labour is external to the worker ... in his work, therefore, he does not affirm himself but denies himself, does not feel content but unhappy, does not develop freely his physical and mental energy but mortifies his body and ruins his mind. The worker therefore only feels himself outside his work, and in his work feels outside himself. He feels at home when he is not working, and when he is working he does not feel at home. His labour is therefore not voluntary, but coerced; it is forced labour. It is therefore not the satisfaction of a need; it is merely a means to satisfy needs external to it. Its alien character emerges clearly in the fact that as soon as no physical or other compulsion exists, labour is shunned like the plague.”xvi

Cyclical crises

The 1857-58 Manuscripts elaborate Marx’s theory of economic crisis. A portion of surplus value is reinvested as wage-capital (approximating to v), exploits labour and emerges afresh as expanded value (s) seeking further profitable investment. This process of expanded reproduction accelerates into a boom.

But capitalism’s recurring problem is that, while the capitalist class constantly seeks to maximise profit, not least by exerting downward pressure on wages, this accumulation of capital outstrips the capacity of the working class to buy all that its labour power produces at a profitable price for the capitalists. Capital is accumulating which cannot find a profitable outlet and so engages in ever more speculative ventures. More is being produced than can be sold at a profit. The result is that products go unsold or have to be offloaded at a loss. Companies cut back their production and investment plans. Some go out of business. Workers are laid off, reducing purchasing power in the economy still further. Production and investment go into a downward spiral. Economic slow-down turns into recession and, in the most severe cases, slump. Only when labour power and the means of production are cheap enough to return a profit does production and then investment begin to recover as the cycle begins once more.

As Marx summarised this cycle in Volume I of Capital itself:

“The enormous power, inherent in the factory system, of expanding by jumps, and the dependence of that system on the markets of the world, necessarily beget feverish production, followed by overfilling of the markets, whereupon contraction of the markets brings on crippling of production. The life of modern industry becomes a series of periods of moderate activity, prosperity, overproduction, crisis and stagnation.”xvii

This is the cyclical character of capitalism’s crises of generalised overproduction, which the orthodox economists in Marx’s day made “childish” attempts to deny.xviii Since then, cyclical crises have been a recurring feature of established, developed capitalist economies. Britain, for instance, has experienced the depressions of 1919-21 and 1930-31 and the recessions of 1952, 1958, 1974-75, 1980-81, 1991 and 2008-09, when aggregate GDP actually fell. In the US, by far the world's biggest economy throughout the post-war period, GDP dropped in 1954, 1958, 1974-5, 1982, 1991 and 2008-9. Most Western European economies, including Germany and France, shared the recessions of the mid-1970s, early 1990s and 2008-9, less so in the early 1980s, and the growing international synchronisation of the most advanced capitalist economies is clear.xix

While these crises all had their own particular characteristics, they also exhibited the common features of overaccumulation and overproduction to a greater or lesser degree. In addition, especially during the post-war expansion between 1945 and 1973, there were cyclical slowdowns in economic growth that did not dip into recession and an absolute decline in national economic output.

Of course, capitalism’s tame economists deny that these crises arise as the result of contradictions within the capitalist mode of production related to overaccumulation and overproduction. They prefer to identify ‘business cycles’ that merely describe a crisis. Explanations are rare and very unconvincing, usually attributing turbulence to insufficient demand or, for various reasons, insufficient supply. Capitalism’s apologists also tend to exaggerate the uncommon features of each crisis (such as world oil price rises in 1973-4) in order to separate them from one another and from capitalism’s own contradictions.

Within the Marxist tradition in the 20th Century, Dutch economists Jacob van Gelderen and Salomon de Wolff and, later, Soviet economist Nikolai Kondratiev claimed to detect long waves of economic growth and slowdown in the course of capitalist development internationally. These cover periods of 45-60 years at a time, encompass overproduction cycles and are linked by most Marxist proponents of the theory to technological innovations such as the steam engine, iron smelting and the railways, engineering, motor vehicles and oil and, most recently, information technology. Non-Marxist ‘long wave’ theories emphasise the role of demographic change, land speculation or levels of credit and debt.

Capital accumulation and the “reserve army”

Part VII of Capital Volume I contained much new and ground-breaking material on “The Accumulation of Capital”. A portion of surplus value is converted into capital for expansion, divided between extra investment in both labour power (v) and in means of production (c). But the onward march of technology, mechanisation and labour productivity means that the amount of c in the economy as a whole grows faster than the amount of v. Even though extra labour will be employed actually producing the means of production (machines, tools, energy etc), this will be counteracted by the spread of labour-saving technology. Furthermore and in any event, there will usually be limits on the speed and extent to which the labour force can expand through procreation or immigration.

One effect of the accumulation of capital, Marx noted, is that the amount of capital owned by the individual capitalist or association of capitalists grows in a process he calls concentration. But the intensified competition for surplus value also gives rise to a process of centralisation: the “expropriation of capitalist by capitalist” and the “transformation of many small into few large capitals”.xx

Volume II of Capital highlighted the importance of the timescale in which a given portion of capital circulates and expands. The faster the turnover, the quicker the accumulation and the bigger the mass of profit over a particular period of time. The credit system, which develops along with capitalism generally, accelerates both production and consumption as well as facilitating the concentration of capital.

The increased demand for labour power that accompanies capital accumulation, as both c and v grow in absolute terms, compounds the displacement of labour in particular industries (employment in agriculture and textiles were early casualties of technological advance). As a consequence, where sections of a multiplying population are relatively surplus to requirements, a more or less permanent “disposable industrial reserve army”xxi of labour is formed, which can be recruited for work during a boom and quickly expelled during recession and slump. Moreover, its very existence is essential to capital accumulation, because it exerts pressure on employed workers to submit to greater exploitation – through productivity measures or wage restraint – for fear of losing their job to reservists waiting in the wings.

During the long economic expansion from the end of the Second World War until 1970, Britain’s unemployment rate did not fall below the ‘full employment’ rate of 3% as defined by William Beveridge. Post-war Labour and Tory governments pursued the objective of “full and stable employment” first set out in the Economic Policy White Paper published in May 1944. Governments in the USA, Australia and elsewhere quickly followed suit. Since 1980, the unemployment rate in the G7 group of leading capitalist countries has not fallen more than fractionally below 5%. In fact, it has undergone four dramatic cycles over that time, reaching peaks of 8.5%. Historically, after the freak period brought on by world war and the destruction of value on an epic scale, capitalism has returned to normal – complete with its reserve army of labour, its migrant worker battalions and its temporary, casual, flexible and zero-hours contracts.

“Primitive Accumulation”

The final Part VIII of Capital Volume I constitutes the most searing indictment of the methods by which capitalism established itself. Outlining the “So-Called Primitive Accumulation” of capital, Marx recounted in fine detail the depredations inflicted on the agricultural populations of England, Wales and Scotland from the late 15th Century onwards, ruthlessly sweeping away small peasant producers and culminating in the Highland Clearances (the later depopulation of Ireland is covered at the end of Part VII). They were separated from the means of production (land, small-scale machinery and tools) and turned into urban or rural labourers now ‘free’ to sell their labour power, as some landowners and emergent capitalist farmers stole common land and turned to large-scale mechanised commodity production. Obversely, the primitive accumulation of capital also produced and necessitated a primitive accumulation of labour power.

Several chapters detail the harsh and cruel legislation enacted against those who had been expropriated – liberated from their previous livelihoods – whipping and mutilating them for vagrancy and vagabondage, press-ganging the unemployed and destitute into military service, extending the working day, limiting wages, outlawing strikes and workers’ combinations. Marx drew parallels with similar measures in France and Germany.

In Chapter XXX on the ‘Genesis of the Industrial Capitalist’, he laid bare the brutal means by which money was accumulated for use as industrial capital (as c and v). The dissolution of feudalism, with its expropriation and clearance of the rural population, made possible the transformation of money made from trade and credit. Marx summarised the other main sources thus:

“The discovery of gold and silver in America, the extirpation, enslavement and entombment in mines of the aboriginal population, the beginning of the conquest and looting of the East Indies, the turning of Africa into a warren for the commercial hunting of blackskins, signalised the rosy dawn of the era of capitalist production. These idyllic proceedings are the chief momenta of primitive accumulation. On their heels treads the commercial war of the European nations, with the globe for a theatre. It begins with the revolt of the Netherlands from Spain, assumes giant dimension in England’s Anti-Jacobin Warxxii, and is still going on in the opium wars against China &c.”xxiii

Chapter XXX of Volume I goes on to highlight the role of state power in organising colonial trade monopolies, the National Debt, taxation and trade protectionism to accelerate the transformation of the feudal mode of production into the capitalist mode in Spain, Portugal, Holland, France and – from the late 17th Century – England. He reserved special scorn for the way in which Christian colonists, with the backing of governments and parliaments in the ‘mother country’, enslaved or massacred native peoples from Indonesia and Africa to the West Indies, Mexico and the United States. Due prominence is given to the role of the nexus linking the slave trade, shipping, colonial plantation, the cotton industry and child labour in the take-off of British capitalism: “the veiled slavery of the wage workers in Europe needed, for its pedestal, slavery pure and simple in the new world.”xxiv

While primitive accumulation had been more or less completed in western Europe, capitalism still had to expropriate the many independent producers in Europe’s colonial settlements. Otherwise, there could be no supply of labour for commodity production there, no development of labour’s enormous productive power on the basis of large-scale machinery, cooperation and division of tasks. In the USA and Canada, for instance, this failure to divorce colonists from the means of production – especially the land – had retarded the development of industry and its necessary separation from agriculture. In the American case, mass immigration, civil war and with it the raising of a National Debt and taxes, together with the huge allocation of public land to mining, railway construction etc, spurred the rapid development of capitalist production. A similar path had also been taken in Australia.

Unsurprisingly, much of this account of primitive accumulation differs radically from those in numerous history and economics text books over the past 150 years and even today. Many pro-capitalist historians and economists simply equate the onset of capitalism with the expansion of domestic and international trade and then industrialisation. The initial finance is attributed to thrift, royal patronage, family collectivism, merchant profit, commercial credit and overseas discoveries, allowing barely a minor role to the slave trade and slavery.

In reality, according to Marx, the capitalist mode of production transforms the mass of the population into wage labourers and their means of production into capital which comes into the world “dripping from head to foot, from every pore, with blood and dirt.”xxv

Historical parallels can be misleading, if not wholly misconceived and erroneous. Yet they can be detected in the huge shifts in population from the countryside to industrial areas, towns and cities that have taken place in many parts of the Third World, as part of a process of primitive accumulation. In some countries, notable India, this has been driven by landowning and industrial capitalist interests and facilitated by legislation. But in the biggest example of all, China, parallels have been contradicted because the process has been centrally planned by a socialist state in order to develop what the Chinese Communist Party calls the “primary stage” of socialism. Unlike early industrial capitalism in Britain and elsewhere, China is implementing policies to provide social protection for urban workers and to stimulate economic development in rural areas.

Concentration, centralisation, globalisation

In Chapter XXXII of Volume I, Marx indicated how capitalism’s primitive accumulation necessarily dissolves private, self-earned property in the means of production based on the labour of its owner. This is the case whether that property is the land of the peasant or the tool of the artisan. Such a pattern of small-scale production, which had survived ancient slave-society and feudalism, was incompatible with capitalism’s concentration of the means of production to create a vast socially integrated mode of production based on cooperation, a division of labour and control and application of the forces of nature.

In “annihilating” – Marx’s term – the old order, capitalism transformed the scattered and individualised means of production of the many into the huge property of the few. As the smallholders and artisans are expropriated and turned into propertyless labourers (“proletarians”) to be employed and exploited, so in turn are many small capitalists driven out by bigger ones: “one capitalist kills many.”xxvi This centralisation is an essential feature of a system that expands to create a world market which entangles all peoples in its net.

The 20th Century witnessed an enormous acceleration in these processes of concentration and centralisation and the extension of a capitalist world market.

Marx laid bare the forces and tendencies that shaped modern capitalism. But he could not have anticipated the precise forms, relations and mechanisms that would characterise such development. Only after his death did Karl Kautsky and V I Lenin propose the theory that capitalism had entered a qualitatively new stage, namely, “imperialism”. Economically, in the biggest and most advanced capitalist societies (Britain, France, the USA and Germany), free competition had turned into its opposite, namely monopoly. Through growth, merger and takeover, accelerated by periodic crises, a small number of companies had come to monopolise most sectors of the economy.

In his classic work, Imperialism: the Highest Stage of Capitalism (1916), Lenin identified the other defining economic features of capitalism in its imperialist stage:xxvii banking capital fusing with industrial capital to create finance capital controlled by a financial oligarchy; the export of capital – as distinct from goods – assuming exceptional significance; the formation of “international monopolist capitalist associations” sharing the world between them; and the biggest capitalist powers dividing up the world between each other. In these conditions, monopolies in the imperialist heartlands could export surplus capital to reap super-profits from the super-exploitation of non-unionised, cheap and ‘flexible’ labour to obtain raw materials in the colonies and semi-colonies.

This last feature would not have been unknown to Marx, even though it did not achieve such prominence until after his death. In Volume III of Capital, he noted that “if capital is sent abroad, this is not done because it absolutely could not be applied at home, but because it can be employed at a higher rate of profit in a foreign country.”xxviii

By 2011, of the world's biggest 175 economic entities by Gross Domestic Product (in the case of countries) or revenue (for companies), the top 25 are countries led by the US, China, Germany, Japan, France, Italy and Britain; but monopoly corporations make up most of the others and almost two-thirds of the total.xxix Most of the names will be familiar: Walmart, Royal Dutch Shell, Exxon Mobil, BP, General Electric, Volkswagen, Glencore, Total, Apple, Samsung, Berkshire Hathaway .... Each of the first three has a turnover bigger than the GDP of 110 of the world’s countries – more than half. The scale of Royal Dutch Shell’s operations is twice that of Portugal’s entire economy. Oil and other energy corporations comprise the biggest group, with vehicles, electronics and IT, banking and retail corporations following closely behind. Thanks to China (Sinopec, PetroChina), a growing number of the top corporations are state-owned, notably in energy, banking and construction.

These transnational corporations (TNCs) straddle the international economy, carrying out their operations in more than one country. They have helped to form and intensify a world market in which the processes of production, trade and commerce are increasingly integrated internationally. At the same time, it should be emphasised that all but a handful of TNCs have a home country whose national state power is usually exercised in their interests. In 2016, most of the biggest 100 were based in the USA (55), with others in China (11), Britain (7), Germany (5), France (4) and Japan (4). In terms of market capitalisation (ie aggregate share value), several of them are bigger now than the biggest of them seven years previously, having recovered from the general collapse in capital values in 2008-09. Sectors with the most companies in the top 100 are consumer goods (19), finance (18), health and pharmaceuticals (17), technology (12) and consumer and retail services (11), followed by oil and gas, telecommunications and industrial production.xxx

In the domestic economies of the main capitalist countries, monopoly domination is almost total. In Britain, for example, the biggest five companies in each industry in 2004 accounted for more than 50% of the output in coal, oil and gas extraction, sugar, confectionery, drinks, tobacco, oil refining, nuclear power, chemicals, pharmaceuticals, cement, iron and steel, armaments, energy production and distribution, postal services, telecommunications, banking and most other financial services.xxxi As for concentration, in terms of market capitalisation at constant prices, the top 15 companies in 2006 were more than three times bigger than those in 1992. The same trends of centralisation and concentration occur in the USA, largely unhindered by the existence – as in Britain – of anti-monopoly legislation.xxxii

In Britain as elsewhere, these capitalist monopolies set the norms as far as prices, pay and technological development are concerned. In turn, they are now integrated into a financial oligarchy centred upon the City of London’s financial institutions and markets. This finance capital exerts a decisive influence over the economy as a whole through interlocking shares and directorships and through its role in determining interest and currency rates, commodity prices and the availability of credit and investment. Of the top 15 FTSE companies in 1992, none was a bank, ten were manufacturers and three were oil and gas producers; in 1992, the respective figures were six, five and three.xxxiii

Lenin also set out how, politically, imperialism meant a growth in the political power of the state in the core metropolitan countries and its merger with the economic power of the giant corporations, syndicates, trusts and cartels to constitute “state-monopoly capitalism”. The role of the capitalist class as a progressive, democratising force in history had come to an end, as Marx had recognised in his own lifetime. It also meant the domination of other, less developed countries and their human and natural resources by the imperialist countries, whether through direct colonial rule or indirect, semi-colonial pressure. Either way, it was domination based ultimately on the threat or use of military force. For Lenin, the struggle between the imperialist powers to redivide the world in favour of their own monopolies had culminated in the 1914-18 Great War. Marx might not have predicted this imperialist world war – although Engels did with astonishing prescience in 1887,xxxiv as he was editing Volume III of Capital – but Marx would not have been too surprised by its occurrence.

Expropriating the expropriators?

Above all, Marx was sure that capitalism with its innate tendencies of concentration and centralisation cannot expand indefinitely while escaping its own growing contradictions. Towards the end of Volume I, he concluded:

“Along with the constantly diminishing number of the magnates of capital, who usurp and monopolise all advantages of this process of transformation, grows the mass of misery, oppression, slavery, degradation, exploitation; but with this too grows the revolt of the working class, a class always increasing in numbers, and disciplined, united, organised by the very mechanism of the process of capitalist production itself. The monopoly of capital becomes a fetter upon the mode of production, which has sprung up and flourished along with, and under it. Centralisation of the means of production and socialisation of labour at last reach a point where they become incompatible with their capitalist integument. Thus integument is burst asunder. The knell of capitalist private property sounds. The expropriators are expropriated.”xxxv

This is a highly significant passage, because it demonstrates beyond doubt that it is not the injustices of exploitation, nor the tendency of the rate of profit to fall, nor cyclical crises, that create the conditions for the overthrow of capitalism by the working class. These all contribute to that outcome, because they strengthen the case for its replacement and create the force that will make it happen. But it is the barrier imposed by monopoly ownership of capital and the means of production on further development of society’s productive forces to meet humanity’s needs and desires that will compel the working class to break with capitalist exploitation.

This ‘immiseration thesis’ has been challenged by capitalism’s proponents and disowned by some of capitalism's opponents. They have argued as a matter of fact that “the mass of misery, oppression, slavery, degradation, exploitation” has not grown with the development of capitalism, but has actually decreased in the course of the 20th and 21st centuries.

In purely numerical terms, there are certainly more people exploited and oppressed today than in Marx’s time, if only because the world’s population is now six times bigger (7.5bn) than it was in 1850 (1.2bn). In a world that produces enough food for everyone, 795m people suffer chronic undernourishment, although the number has fallen rapidly over recent decades.xxxvi Furthermore, there are still 705m people living in extreme poverty (with incomes below $1.9 per day), although this is fewer than when Capital was first published (about 1.2bn) and again the figure has declined significantly since 1990.xxxvii In terms of health and life expectancy, global inequality grew substantially between 1800 and 1950 but has reduced since then at higher levels in all countries. Even so, child mortality rates in low-income countries are ten times higher than in high income ones.xxxviii Enormous inequalities in healthcare and education provision between countries and between classes persists. In Britain, income inequality by any measure fell gradually from the late 1860s until the late 1970s, since when it has been climbing back towards pre-World War One levels.xxxix

In fact, Utsa Patnaik has argued that Marx was correct if we look at capitalist accumulation on a global scale. Western capitalism arose on the basis of modern slavery and reduced its own reserve army of labour by outmigration to lands seized from indigenous peoples, and by creating a bloated reserve army in subjugated colonies. Third World countries seeking to industrialise today do not have these options; and there is clear evidence of growing undernutrition and poverty in the Global South.xl

On the negative side of capitalism’s balance sheet must also be entered its responsibility for two world wars and countless colonial and other conflicts, together with imperialist exploitation and debt bondage in the Third World, widescale environmental despoliation, global warming and extreme weather conditions and the forced migrations of many millions of people fleeing the consequences of capitalism’s impact on their societies of origin.

It should also be taken into account that many of the improvements secured in people's living standards, nutrition, health, education and life chances have come about through action and policies that have challenged capitalist interests. This was true in the case of welfare and other reforms in developed countries and in the transformation of society in the Soviet Union, eastern Europe, and in China where Communist Party rule has lifted more than 600m people out of extreme poverty in just 20 years: a feat “unequalled in history”, according to the World Bank.xli

What of “the revolt of the working class, a class always increasing in numbers, and disciplined, united, organised by the very mechanism of the process of capitalist production itself”? The world’s labour force numbers 3.4bn today, compared with no more than 300m in the mid-19th Century. Of these, more than 400m are organised in trade unions affiliated to the International Federation of Trade Unions, the World Federation of Trade Unions or the All-China Federation of Trade Unions. Despite ebbs and flows in militancy, they display no significant loss of capacity and willingness to revolt against essential aspects of capitalism.

Then there is the question of whether capitalism’s relations of production, notably monopoly capitalist ownership of the means of production, distribution and exchange, are substantially holding back the further development of society’s productive forces. This point has not been reached, however enthusiastically some anti-capitalists proclaim otherwise. Yet it cannot be denied, even by pro-capitalists, that we are approaching the point at which capitalism’s increasingly parasitic, anarchic, authoritarian, militaristic, anti-social, anti-environmental character means that it is incapable of solving humanity's most acute problems.

Reactions to Capital Volume I

In his introduction to the Economic Manuscripts of 1857-58, Marx set out his view of what should constitute “political economy” as a field of study, research and analysis. It should encompass all the relations in society between the different classes of people engaged in economic activity, including how and why those relations change in the transition from one mode of production to another. Because each mode of production and its class relations provide the basis for a social, political, legal and cultural superstructure of relations, ideas and institutions, these also comprise political economy. However much they concentrated their work on some of these elements rather than on others, this approach had been broadly accepted by Marx’s predecessors, from the French physiocrats to such classical capitalist economists as Smith and Ricardo, as well as by contemporaries such as John Stuart Mill.

In respect of Marx, this approach explains why Capital, like his earlier economic work, featured scathing and relentless attacks on every aspect of a system which condemned men, women and children to industrial slavery, debilitating poverty, virulent disease and – in most cases – an early death. Putting false modesty aside, he himself declared that Capital would be “without question the most terrible MISSILE that has yet been hurled at the heads of the bourgeoisie (landowners included).”xlii

Whether the content or its complexity was responsible, publication of Das Kapital in September 1867 met initially with a wall of silence. Frederick Engels wrote reviews to break through it. Friends secured the appearance of translated extracts in English and French journals. Then a Russian translation was produced before a second German edition came out in 1871, after all one thousand copies of the first edition had been sold. Marx edited a French translation and significantly altered the contents. Further editions would appear in English and other languages. The counter-attacks from bourgeois economists eventually arrived, too.

It may also be significant that, after the publication of Capital, the case was argued by William Stanley Jevons, Alfred Marshall and other neoclassicists for replacing the term, concept and practice of ‘political economy’ with that of ‘economics’. The latter would deal with the economy as a mathematically informed and logical science, analysing production in terms of laws of supply, demand and utility. In other words, the economy should be studied with the politics of class relations (not least political power) left out.

The battle of ideas

The ideological struggle over political economy has, of course, continued since Marx’s day. However, in recent decades the perceived failure of socialism and Marxism in the Soviet Union and eastern Europe, together with the triumph of neoliberalism, has had a profound impact in one arena where the battle has often been fiercest, namely, in the universities, not least in Britain. Economics departments have been turned into ‘business schools’ and, in many of them, curriculae have narrowed to the point where the only theory being studied is neoliberalism and its classical antecedents. Marxist and Keynesian political economy – previously taught alongside classical and neoclassical theories – has been ruthlessly excluded.

Yet the neoliberal orthodoxy was tarnished by the 2007-8 financial crash and subsequent economic recession. The high priests of monetarism, free markets, deregulation and privatisation neither foresaw the calamity whose size was precipitated, at least to some degree, by their creed. Nor could they propose any remedy, other than a retreat into an even more fundamentalist laissez-faire cul-de-sac that would have consigned whole economies to ruin. Economics students wondered why their studies were largely restricted to such dogma.

Notably, some of those at the University of Manchester formed a Post-Crash Economics Society in 2010, which is now part of a Rethinking Economics movement with groups in the USA, Germany, France, Brazil, India, Italy, Turkey and China.xliii

After I had taken part in a debate at the Manchester Union in October 2013, on the motion ‘Has Capitalism Failed?’, students informed me that little had changed in their courses. Following a debate on the same motion at the University of Bath in March 2015, one of the organisers wrote to tell me: “A lot of the economists in the audience felt that you transcended their previous knowledge on economics (it is a very narrowly taught subject at university). I think they really valued seeing economics from a fresh perspective.”

When I studied Economics and Administration at the same institution in 1970-4, the curriculum featured Marxist political economy and Soviet economic policy as well as the full range of pro-capitalist theories from Smith and Ricardo to Alfred Marshall, Keynes and Joan Robinson. Now, for the time being, it seems that neoliberalism exercises its intellectual dictatorship there as elsewhere.

This is all the more reason for communists, socialists, the left and the labour movement to mount a fight-back in the battle of ideas in political economy. But this should not be confined to universities. In the trade unions and political parties of the left, inspired by Capital, Marxist political economy at both the theoretical and policy levels now needs to be studied and formulated on a higher level than it is today.

Part Two of this article will deal with the following topics: ‘unproductive’ labour; crises of disproportion; the ‘price of production’; the tendency of the rate of profit to fall; ‘fictitious’ capital; theoretical controversies; ‘underconsumption’ and Keynesianism; monetarism and neoliberalism; ‘financialisation’ and the 2007-8 crash; the communist mode of production.

Notes and References in Magazine