II. Capital and Capitalism
Capital in Pre-capitalist
Society
Between primitive society
founded on a natural economy in which production is limited to
use values destined for self-consumption by their producers, and
capitalist society, there stretches a long period in human
history, embracing essentially all human civilizations, which
came to a halt before reaching the frontiers of capitalism.
Marxism defines them as societies in which small-scale commodity
production prevailed. A society of this kind is already familiar
with the production of commodities, of goods designed for
exchange on the market and not for direct consumption by the
producers, but such commodity production has not yet become
generalized, as is the case in capitalist society.
In a society founded on
small-scale commodity production, two kinds of economic
operations are carried out. The peasants and artisans who bring
their products to market wish to sell goods whose use value they
themselves cannot use in order to obtain money, means of
exchange, for the acquisition of other goods, whose use value is
either necessary to them or deemed more important than the use
value of the goods they own.
The peasant brings wheat to the
marketplace which he sells for money; with this money he buys,
let us say, cloth. The artisan brings his cloth to the market,
which he sells for money; with this money he buys, let us say,
wheat.
What we have here, then, is the
operation: selling in order to buy.
Commodity–Money–Commodity, C–M–C which has this
essential character: the value of the two extremes in this
formula is, by definition, exactly the same.
But within small-scale
commodity production there appears, alongside the artisan and
small peasant, another personage, who executes a different kind
of economic operation. Instead of selling in order to buy,
he buys in order to sell. This type of person goes to
market without any commodities; he is an owner of money. Money
cannot be sold; but it can be used to buy, and that is what he
does: buys in order to sell, in order to resell:
M–C–M’.
There is a fundamental
difference between the two types of operation. The second
operation makes no sense if upon its completion we are
confronted by exactly the same value as we had at the beginning.
No one buys a commodity in order to sell it for exactly the same
price he paid for it. The operation “buy in order to sell”
makes sense only if the sale brings a supplementary value, a
surplus value. That is why we state here, by way of
definition. M’ is greater than M and is made
up of M+m; m being the surplus value, the
amount of increase in the value of M.
We now define capital as a
value which is increased by a surplus value, whether this
occurs in the course of commodity circulation, as in the example
just given, or in production, as is the case in the capitalist
system. Capital, therefore, is every value which is augmented by
a surplus value; it therefore exists not only in capitalist
society but in any society founded on small-scale commodity
production as well. For this reason it is necessary to
distinguish very clearly between the life of capital
and that of the capitalist mode of production, of
capitalist society. Capital is far older than the capitalist
mode of production. The former probably goes back some 3,000
years, whereas the latter is barely 200 years old.
What form does capital take in
precapitalist society? It is basically usury capital and
merchant or commercial capital. The passage from precapitalist
society into capitalist society is characterized by the
penetration of capital into the sphere of production. The
capitalist mode of production is the first mode of production,
the first form of social organization, in which capital is not
limited to the sole role of an intermediary and exploiter of
non-capitalist forms of production, of small-scale commodity
production. In the capitalist mode of production, capital takes
over the means of production and penetrates directly into
production itself.
Origins of the Capitalist
Mode of Production
What are the origins of the
capitalist mode of production? What are the origins of
capitalist society as it has developed over the past 200 years?
They lie first of all in the
separation of the producers from their means of production.
Subsequently, it is the establishment of these means of
production as a monopoly in the hands of a single social class,
the bourgeoisie. And finally, it is the appearance of another
social class which has been separated from its means of
production and therefore has no other resources for its
subsistence than the sale of its labor-power to the class which
has monopolized the means of production.
Let us consider each of these
origins of the capitalist mode of production, which are at the
same time the fundamental characteristics of the capitalist
system as well.
First characteristic: separation
of the producer from his means of production. This is the
fundamental condition for existence of the capitalist system but
it is also the one which is generally the most poorly
understood. Let us use an ex ample which may seem paradoxical
since it is taken from the early Middle Ages, which was
characterized by serfdom.
We know that the mass of
peasant-producers were serfs bound to the soil. But when we say
that the serf was bound to the soil, we imply that the soil was
also “bound” to the serf, that is, he belonged to a social
class which always had a base for supplying its needs, enough
land to work so that the individual serf could meet the needs of
a household even though he worked with the most primitive
implements. We are not viewing people condemned to death by
starvation if they do not sell their labor-power. In such a
society, there is no economic compulsion to hire out
one’s arms, to sell one’s labor-power to a capitalist.
We can express this another way
by stating that the capitalist system cannot develop in a
society of this kind. This general truth also has a modern
application in the way colonialists introduced capitalism into
the African countries during the nineteenth and early twentieth
centuries.
Let us look at the living
conditions of the inhabitants in all the African countries. They
were stock breeders and cultivators of the soil, on a more or
less primitive basis, depending on the character of the region,
but always under the condition of a relative abundance of land.
Not only was there no scarcity of land in Africa, but in terms
of the ratio of population to the amount of available land, it
may be said that land reserves were virtually unlimited. It is
true, of course, that the yield from these lands was mediocre
because of the crude agricultural implements and the standard of
living was very low, etc., but there was no material force
pushing this population to work in the mines, on the farms or in
the factories of the white colonialist. Without a transformation
in the administration of land in Equatorial Africa, in Black
Africa, there was no possibility for introducing the capitalist
mode of production. For that, compulsion of a non-economic
character had to be used, a thoroughgoing and brutal separation
of the black masses from their normal means of subsistence had
to be carried out. A large part of the lands had to be
transformed overnight into national domains, owned by the
colonizing state, or into private property belonging to
capitalist corporations. The black population had to be
resettled in domains, or in reserves, as they have been
cynically called, in land areas which were inadequate for
sustaining all their inhabitants. In addition, a head-tax, that
is to say, a money tax on each inhabitant, was imposed as
another lever, since primitive agriculture yielded no money
income.
By these various extra-economic
pressures, the colonialists created a need for the African to
work for wages during perhaps two or three months a year, in
order to earn the money to pay his tax and buy the small
supplement of food necessary for his subsistence, since the land
remaining at his disposal was no longer adequate for a
livelihood.
In such countries as South
Africa, the Rhodesias, and part of the former Belgian Congo,
where the capitalist mode of production was introduced on a
grand scale, these methods were applied on the same scale, and a
large part of the black population was uprooted, expelled, and
forced out of its traditional existence and mode of work.
Let us mention, in passing, the
ideological hypocrisy which accompanied this movement, the
complaints of the capitalist corporations that the blacks were
lazy since they did not want to work even when they had a chance
to make ten times as much in mines and factories as they did
from their traditional labor on the land. These same complaints
had been made about the Indian, Chinese and Arab workers some 50
to 70 years earlier. They were also made – a rather good proof
of the basic equality of all the races which make up humanity
– against the European workers, French, Belgian, English,
German, in the seventeenth or eighteenth centuries. It is simply
a function of this constant fact: normally, because of his
physical and nervous constitution, no man cares to be confined
for 8, 9, 10 or 12 hours a day in a factory, mill or mine; it
really requires a most abnormal and unusual force or pressure to
make a man engage in this kind of convict labor when he has not
been accustomed to it.
A second origin and
characteristic of the capitalist mode of production is this concentration
of the means of production in monopoly form and in the hands of
a single social class, the bourgeoisie. This concentration
is virtually impossible unless a continual revolution is taking
place in the means of production, in which the latter become
increasingly complex and more costly, at least so far as the
minimum means of production required for launching a big
business (initial capital expenditures) are concerned.
In the guilds and trades of the
Middle Ages, there was great stability in the means of
production; the weaving-looms were transmitted from father to
son, from generation to generation. The value of these looms was
relatively small, that is to say, each journeyman could expect
to get back the counter-value of these looms after a certain
number of years of work. The possibility for establishing a
monopoly arrived with the industrial revolution, which unleashed
an uninterrupted development of increasingly complex mechanisms
and concomitantly, a need for ever greater capital sums in order
to start a new enterprise.
From this point on it may be
said that access to the ownership of the means of production
becomes impossible for the overwhelming majority of wage-earners
and salaried personnel, and that such ownership became a
monopoly in the hands of one social class, the class which
possesses capital and capital reserves and can obtain additional
capital by virtue of the single fact that it already has some of
it. And by virtue of this same fact, the class without capital
is condemned to remain perpetually in the same state of
deprivation and consequently under the continuous compulsion to
labor for somebody else.
The third origin and
characteristic of capitalism: the appearance of a social
class which has no possessions save its own hands and no means
of subsistence other than the sale of its labor-power, but
at the same time, is free to sell this labor-power and does so
to the capitalist owners of the means of production. This is the
appearance of the modern proletariat.
We have here three elements
which combine with each other. The proletariat is the free
worker; he constitutes both a step ahead and a step backwards,
compared with the serf of the Middle Ages: a step ahead because
the serf was not free (the serf was himself a step ahead
compared with the slave) and could not move about freely; a step
backwards because, in contrast with the serf, the proletarian
has also been “liberated” from, that is to say, deprived of,
all access to the means of production.
Origins and Definition of
the Modern Proletariat
Among the direct ancestors of
the modern proletariat we must include the uprooted population
of the Middle Ages which was no longer bound to the soil or
incorporated in the trades, corporations and guilds of the free
towns, and was consequently a wandering, rootless population,
which had begun to sell its labor by the day or even by the
hour. There were quite a few cities in the Middle Ages, notably
Florence, Venice and Bruges, where a “labor market” appeared
as early as the thirteenth, fourteenth, or fifteenth centuries.
These cities had a place where the poor who did not belong to
any craft, were not journeymen for an artisan and had no means
of subsistence, assembled and waited to be hired by some
merchant or businessman for an hour, half a day, a day, etc.
Another origin of the modern
proletariat, closer to us in time, lies in what has been called
the disbanding of the feudal retinues. It therefore corresponds
with the long and slow decline of the feudal nobility, which set
in during the thirteenth and fourteenth centuries and terminated
with the bourgeois revolution in France at the end of the
eighteenth century. In the remote Middle Ages, there were
sometimes fifty, sixty to over a hundred households living
directly from the feudal lord. The number of these individual
attendants began to decline, especially during the sixteenth
century, which was marked by a sharp rise in prices, and as a
consequence, a great impoverishment of all those social classes
with fixed money incomes. The feudal lords of Western Europe
were also hard hit because most of them had converted rent in
kind into money rent. One of the results of this impoverishment
was a massive discharge of a substantial section of the feudal
retinues. In this way thousands of former valets, servants, and
clerks to the nobles became wanderers, beggars, etc.
A third origin of the modern
proletariat comes from the expulsion of a part of the peasantry
from its lands as a result of the transformation of these
agricultural lands into grass-lands. The great English Utopian
socialist Thomas More advanced this magnificent formula as far
back as the sixteenth century: “Sheep have eaten men”; in
other words, the transformation of fields into grasslands for
grazing sheep, as a result of the development of the wool
industry, threw thousands upon thousands of English peasants off
their lands and condemned them to starvation.
There is still a fourth origin
of the modern proletariat, one which played a somewhat lesser
role in Western Europe but an enormous one in Central and
Eastern Europe, Asia, Latin America and North Africa: it is the
destruction of the former artisans in the competitive struggle
between the handicrafts and modern industry as the latter made
its way into these underdeveloped countries from the outside.
In summary, the capitalist mode
of production is a regime in which the means of production have
become a monopoly in the hands of a social class and in which
the producers, separated from these means of production, are
free but are deprived of all means of subsistence and
consequently must sell their labor-power to the owners of these
means of production in order to subsist.
What is characteristic of the
proletarian therefore is not the level of his wage, whether this
be high or low, but primarily the fact that he has been cut off
from his means of production, or that his income is insufficient
for him to work for his own account.
In order to learn whether the
proletarian condition is on the road to disappearing or whether,
on the contrary, it is on the road of expansion, it is not so
much the average wage of the worker or the average salary of the
clerk which we must examine, but this wage or salary as compared
with his average consumption; in other words, we must look into
his possibilities for savings and compare them with the expenses
of setting up an independent enterprise. If we determine that
each worker, each clerk, can, after ten years of work, put aside
a pile of savings which would allow him to purchase a store or
small workshop, then we might say that the proletarian condition
is regressive and that we live in a society in which property in
the means of production is spreading and becoming generalized.
If we find, however, that the
overwhelming majority of workers, manual, white-collar and
governmental, remain the same poor fellows after a life of labor
that they were before, in other words with no savings or not
enough capital to buy means of production, we may conclude that
the proletarian condition has become generalized rather than
contracted, and that it is far more prevalent today than it was
50 years ago. When we examine statistics on the social structure
of the United States, for example, we can see that over the past
60 years, there has been an uninterrupted decrease every five
years in the percentage of the active American population
working for its own account and classified as businessmen or
working in a family business, whereas the percentage of this
same population which is compelled to sell its labor-power has
steadily increased.
Moreover, if we examine the
statistics on the distribution of private wealth, we find that
the overwhelming majority of workers, we may say 95 per cent,
and the very great majority of white-collar workers (80 or 85
per cent) are not even able to amass petty sums, small capitals;
in other words, these groups expend their entire incomes.
Fortunes are in reality limited to a very small fraction of the
population. In most capitalist countries, 1%, 2%, 2.5%, 3.5% or
5% of the population possess 40%, 50%, 60% of the private wealth
of the country, the balance being in the hands of 20% or 25% of
this same population. The first category of possessors is the
big bourgeoisie; the second category is the middle and petty
bourgeoisie. And all those who are outside these categories own
nothing but consumer goods (sometimes including their housing).
When honestly compiled,
statistics on estate duties and inheritance taxes are very
revealing on this subject.
A specific study made by the
Brookings Institute (a source above any suspicion of Marxism)
for the New York Stock Exchange reveals that only one or two per
cent of workers own stocks and further that this “ownership”
averages about $1,000 worth.
Virtually all capital is
therefore in the hands of the bourgeoisie and this reveals the
self-reproductive character of the capitalist system: those who
possess capital keep on accumulating more and more; those who do
not possess it rarely can acquire it. In this way the division
in society is perpetuated in a possessing class and a class
compelled to sell its labor-power. The price for this
labor-power, the wage, is virtually consumed in toto,
whereas the possessing class has a capital constantly increasing
from surplus value. Society’s enrichment in capital therefore
takes place, so to speak, for the exclusive profit of a single
social class, namely, the capitalist class.
The Fundamental Mechanism of
Capitalist Economy
And now what is the functioning
basis of this capitalist society?
If you were to go to the
Printed Cottons Exchange on a certain day, you would not know
whether there was exactly enough, or too little, or too much
printed cottons, measured against the existing needs in France
at that moment. You would only find that out after a certain
time: that is to say, if there were overproduction and a part of
production unsaleable, you would see prices fall. If there were,
on the contrary, a scarcity, you would see prices rise. The
movement of prices is the thermometer telling us whether there
is a scarcity or plethora. And since it is only after the event
that we find out whether the quantity of labor expended in an
industrial branch has been expended in a socially necessary way
or whether part of it has been wasted, it is only after the
event that we are able to determine the exact value of a
commodity. This value, therefore, is, if you choose to call it
so, an abstraction; but it is a real constant around which
prices fluctuate.
What causes the movement in
these prices and consequently, in longer terms, the movement in
these values, in this labor productivity, in this production and
in this overall economic life?
What makes Sammy run? What
causes capitalist society to move? Competition. Without
competition there is no capitalist society. A society where
competition is radically or completely eliminated would no
longer be capitalist to the extent that there would no longer be
a major economic motive for accumulating capital and
consequently for carrying out nine tenths of the economic
operations which capitalists execute.
And what is the basis of
competition? Two ideas are basic to it but these do not
necessarily overlap. First is the idea of the unlimited
market, the market without restrictions, without exact
boundaries. Then there is the idea of a multiplicity of
decision centers, above all in matters of investment and
production.
If all production in a given
industrial sector were concentrated in the hands of a single
capitalist firm, competition would still not be eliminated,
because an unlimited market would still exist and there would
still be a competitive struggle between this industrial sector
and other sectors to capture as much of this market as possible.
Furthermore, there would always be a possibility that a foreign
competitor might enter the scene and provide new competition
right in the very same sector.
The reverse is also true. If we
can conceive a totally and completely limited market, but one in
which a great number of enterprises are righting to capture a
part of this limited market, then competition must obviously
survive.
Therefore only if these two
phenomena were to be suppressed simultaneously, that is to say,
if there were only one producer for all commodities and the
market became absolutely stable, frozen and without any capacity
for expansion, could competition disappear completely.
The appearance of the unlimited
market displays all of its significance when compared with the
period of small-scale commodity production. A guild in the
Middle Ages generally worked for a market limited to the city
and its immediate suburbs, and in accordance with fixed and
specific labor techniques.
The historical passage of the
limited market to the unlimited market is illustrated by the
example of the “new clothiers” of the countryside which
replaced the old city clothiers in the fifteenth century. There
were now cloth manufacturers without guild regulations, without
production limits, therefore without any market restrictions,
who tried to infiltrate everywhere, seek clients everywhere, and
not only went beyond the immediate area of their production
centers, but even tried to organize an export trade to very
distant countries. On the other hand, the great commercial
revolution of the sixteenth century stimulated a relative
reduction in the prices of a whole set of products which had
been considered great luxuries in the Middle Ages and were only
within the purchasing range of a small part of the population.
These products suddenly became far less expensive, and even came
within the reach of a significant part of the population. The
most striking example of this trend is sugar, which has become a
commonplace product today and is undoubtedly to be found in
every working-class household in France or in Europe; in the
fifteenth century, however, it was still a highly luxurious
article.
The apologists for capitalism
have always pointed to the reduction in prices and widened
market for a whole set of products as the benefits brought about
by this system. This argument is true. It is one of the aspects
of what Marx called “the civilizing mission of Capital.” To
be sure we are concerned here with a dialectical but real
phenomenon where the value of labor-power has a tendency to fall
by virtue of the fact that capitalist industry produces the
commodity equivalent of wages with ever increasing rapidity
while it simultaneously has a tendency to rise by virtue of the
fact that this value of labor-power progressively takes in the
value of a whole series of commodities which have become mass
consumer goods, whereas formerly they were reserved for a very
small part of the population.
Basically, the entire
history of trade between the sixteenth and twentieth century is
the history of a progressive transformation from trade in luxury
goods into trade in mass consumer goods; into trade in
goods destined for an ever increasing portion of the population.
It is only with the development of the railroads, of the means
for fast navigation, of telegraphy, etc., that it became
possible for the whole world to be marshalled into a real
potential market for each great capitalist producer.
The idea of an unlimited market
does not, therefore, merely imply geographic expansion, but
economic expansion, available purchasing power, also. To take a
recent example: the extraordinary rise in the production of
durable consumer goods in world capitalist production during the
past fifteen years was not at all due to any geographic
expansion of the capitalist market; on the contrary, it was
accompanied by a geographic reduction in the capitalist market,
since a whole series of countries were lost to it during this
period. There are few, if any, automobiles of French, Italian,
German, British, Japanese or American manufacture exported to
the Soviet Union, China, North Vietnam, Cuba, North Korea, or
the countries of East Europe. Nevertheless, this expansion did
take place, thanks to the fact that a much greater fraction of
the available purchasing power, which had increased absolutely
as well, was used for buying these durable consumer goods.
It is no accident that this
expansion has been accompanied by a more or less permanent
agricultural crisis in industrially advanced countries, where
the consumption of a whole group of agricultural products has
not only ceased to increase on a relative basis but is even
beginning to show an absolute decline: for example, the
consumption of bread, potatoes, and of commonplace fruits like
apples, pears, etc.
Production for an unlimited
market, under competitive conditions, results in increased
production, for an increase in production permits a reduction in
costs and affords the means for beating a competitor by
underselling him.
If we look at the long-term
change in the value of all commodities which are produced on a
large scale in the capitalist world, there can be no doubt that
their value has declined considerably. A dress, knife, pair of
shoes, or schoolboy’s notebook today has a value in hours and
minutes of labor which is far lower than it was fifty or a
hundred years ago.
Obviously real production
values must be compared and not sale prices, which include
either enormous distribution and sales expenses or swollen
monopolistic superprofits. Using gasoline as an example,
especially the gasoline distributed in Europe and originating in
the Middle East, we find that its production costs are very low,
barely 10 percent of the sale price.
In any event, there can be no
doubt about the fact that this drop in value has actually taken
place. Growth in labor productivity means a reduction in the
value of goods, since the latter are manufactured with an ever
reduced quantity of labor-time. Therein lies the practical tool
which capitalism possesses for enlarging its markets and
defeating its competitors.
What practical method does the
capitalist have for sharply cutting his production costs and
simultaneously sharply increasing his production? It is the development
of mechanization, the development of means of production,
mechanical instruments of labor of ever increasing complexity,
originally powered by steam power, then by gasoline or diesel
oil, and finally by electricity.
The Growth in the Organic
Composition of Capital
All capitalist production can
be represented in value by the formula: C+V+S. The
value of every commodity consists of two parts: one part
represents crystallized or conserved value and the
other newly created value. Labor-power has a dual
function, a dual use value: that of preserving all existing
values in the instruments of labor, machines, buildings, while
incorporating a fraction of this value into current production;
and that of creating a new value, which contains surplus value,
profit, as one of its components. Another part of this new value
goes to the worker, and represents the counter-value of his
wage. The surplus value portion is appropriated by the
capitalist without any counter-value.
We call the equivalent of wages
variable capital and designate it by V. Why is it
capital? Because, in effect, the capitalist advances this value;
it constitutes, therefore, a part of his capital, which is
expended before the value of the commodities produced by the
workers in-question can be realized.
We call that part of capital
which is transformed into machines, buildings, raw materials,
etc., whose value is not increased by production but merely
preserved by it, constant capital and designate it by C.
The part of capital called variable capital, V, the
part used by the capitalist to buy labor-power, is so termed
because it is the only part of capital which lets the capitalist
increase his capital by means of a surplus value.
Since this is the case, what is
the economic logic of competition, of the drive to increase
productivity, to increase mechanical means, machine labor? The
logic of this drive, that is to say, the fundamental tendency of
the capitalist system, is to increase the weight of C
the weight of constant capital, with respect to variable
capital. In the fraction C/V, C tends to
increase, that is to say, the part of total capital made up by
machines and raw materials, but not in wages, tends to increase
with the advances in mechanization and wherever competition
compels capitalism to step up labor productivity.
We call this fraction C/V
the organic composition of capital: it is therefore the ratio
between constant capital and variable capital, and we say that
in the capitalist system this organic composition has a rising
tendency.
How can the capitalist acquire
new machines? What is the meaning of the statement that constant
capital keeps on increasing?
The fundamental operation of
capitalist economy is the production of surplus value. But so
long as the surplus value has merely been produced, it remains
locked in the commodities and the capitalist cannot use it;
unsold shoes cannot be transformed into new machines, into
greater productivity. In order to be able to buy new machines,
the industrialist possessing shoes must sell these shoes, and a
part of the proceeds of this sale can then serve to purchase new
machines, as a supplementary constant capital.
Expressed another way: realizing
surplus value is the necessary condition for the accumulation of
capital, and capital accumulation is simply the
capitalization of surplus value.
Realizing surplus value means
the sale of goods but also the sale of such goods under
conditions where the surplus value they contain can actually be
realized in the market. All businesses operating at average
productivity in society – whose total production therefore
corresponds with socially necessary labor – are supposed to
realize the total value and surplus value produced in their
plants, neither more nor less, when their goods are sold. We saw
previously that those enterprises which are above the average in
their productivity will capture a part of the surplus value
produced in other enterprises, whereas those operating at a
lower than average productivity will not realize a part of the
surplus value produced in their plants but must surrender it to
other plants which are technologically ahead of them.
Consequently, the realization of surplus value means the sale of
goods under conditions in which all of the surplus value
produced by the workers in a plant manufacturing commodities is
actually paid for by their purchasers.
As soon as the stock of goods
produced in a given period is sold, the capitalist is reimbursed
with a sum of money which constitutes the counter-value of the
constant capital expended in achieving this production, that is
to say, the raw materials used together with the fraction of the
value of machines and goods amortized by this production. He has
also been reimbursed with the counter-value of wages which he
advanced in order to effect this production. In addition, he is
in possession of the surplus value produced by his workers.
What happens to this surplus
value? A part of it is unproductively consumed by the
capitalist, for the poor fellow has to live, has to keep his
family alive together with his entourage; and everything he
spends for these purposes is completely withdrawn from the
process of production.
A second part of the surplus
value is accumulated and is utilized by being transformed into
capital. Accumulated surplus value is, consequently, that entire
part of surplus value which is not unproductively consumed in
meeting the private needs of the ruling class, and which is
transformed into capital, either into supplementary constant
capital, that is to say, into a supplementary quantity (more
exactly: a value) of raw rnaterials, machines, buildings; or
into supplementary variable capital, that is to say, means for
hiring more workers.
We now understand why the
accumulation of capital is the capitalization of surplus value,
that is to say, the transformation of a large part of surplus
value into supplementary capital. And we also understand how the
process of growth in the organic composition of capital
represents an uninterrupted succession of capitalization
processes, that is to say, of the production of surplus value by
workers and its transformation by the capitalists into
supplementary buildings, machines, raw materials and workers.
It is consequently inaccurate
to say that it is the capitalist who creates employment, since
it is the worker who produced the surplus value, which was
capitalized by the capitalist, and used, among other things, for
hiring more workers. In reality, the entire mass of fixed wealth
we see in the world, the whole mass of plants, machines, roads,
railroads, ports, hangars, etc., etc., all of this enormous mass
of wealth is nothing but the materialization of a mass of
surplus value created by the workers, of non-reimbursed labor
which was transformed into private property, into capital for
the capitalists. It is, in other words, a colossal proof of the
continuous exploitation undergone by the working class since the
origin of capitalist society.
Do all capitalists
progressively add machines, increase their constant capital and
the organic composition of their capital? No, the increase in
the organic composition of capital takes Place antagonistically,
by way of a competitive struggle governed by that law which the
great Flemish painter, Peter Breughel, portrayed in an
engraving: the big fish eat the little.
The competitive struggle is
therefore accompanied by a continuous concentration of capital
by the displacement of a large number of businessmen by a
smaller number, and by the transformation of a certain number of
independent business people into technicians, managers, foremen,
and even simple subordinate office personnel and workers.
Competition Leads to
Concentration and Monopoly
The concentration of capital is
another permanent law of capitalist society and is accompanied
by the proletarianization of a part of the bourgeois class, the
expropriation of a certain number of bourgeois by a smaller
number of bourgeois. That is why the Communist Manifesto
of Marx and Engels emphasizes the fact that capitalism, which
claims to defend private property, is in reality a destroyer of
this private property, and carries out a constant, permanent
expropriation of a great number of proprietors by a relatively
small number of proprietors. There are several industrial
branches in which this concentration is particularly striking:
coal mining had hundreds of companies during the nineteenth
century in a country like France (there were almost two hundred
in Belgium); the automobile industry had a hundred or more firms
at the beginning of the century in countries like the United
States and England, whereas today their number has been reduced
to four, five or six such companies at most.
Of course, there are industries
where this concentration has not been carried so far, such as
the textile industry, the food industry, etc. In general, the
greater the organic composition of capital in an industrial
branch, the greater is the concentration of capital, and
conversely, the smaller the organic composition of capital, the
smaller is the concentration of capital. Why? Because the
smaller the organic composition of capital, the less capital is
required at the beginning in order to enter this branch and
establish a new venture. It is far easier to put together the
million or two million dollars necessary for building a new
textile plant than to assemble the hundreds of millions needed
to set up even relatively small steel works.
Capitalism was born of free
competition and is inconceivable without competition. But free
competition produces concentration and concentration produces
the opposite of free competition, namely, monopoly. Where there
are few producers, they can readily reach agreements, at the
expense of the consumers, in dividing up markets and preventing
any lowering of prices.
So in the span of a century,
the whole capitalist dynamic appears to have changed its nature.
First we have a movement proceeding in the direction of a
constant fall in prices because of a constant rise in production
and a constant multiplication of the number of enterprises. At a
certain point, the sharpening of competition brings with it a
concentration of enterprises and a reduction in the number of
enterprises. The remaining companies are now able to reach
agreement on preventing further price reductions and such
agreement can only be honored, of course, by limiting
production. The era of monopoly capitalism thus displaces the
era of free competitive capitalism at the beginning of the last
quarter of the nineteenth century.
Naturally, when we speak of
monopoly capitalism, we must not in the least presume a
capitalism which has completely eliminated competition. There is
no such thing. We simply mean a capitalism whose basic behavior
has changed, that is to say, it no longer strives for a constant
lowering of prices by means of a constant increase in
production; it uses the technique of dividing up the market, of
setting up market quotas. But this process winds up in a
paradox. Why do capitalists who began as competitors now turn to
concerted action in order to limit this competition and to limit
production as well? The answer is that it is a method of
increasing their profits. They only do so if it brings them more
profits. Limiting production permits increasing prices, bringing
greater profits and consequently increased capital accumulation.
This new capital can no longer
be invested in the same branch, since this would mean an
increase in productive capacity, resulting in increased
production, and leading to a lowering of prices. Capitalism has
been caught up in this contradiction commencing with the last
quarter of the nineteenth century. It then suddenly acquired a
quality which only Marx had foreseen and which was not grasped
by economists like Ricardo or Adam Smith; suddenly, the
capitalist mode of production took on a missionary role. It
began to spread throughout the world by means of capital
exports, which enabled capitalist enterprises to be set up
in countries or sectors where monopolies had not yet entrenched
themselves.
The consequence of monopoly in
certain branches and of the spread of monopoly capitalism in
certain countries is that the capitalist mode of production has
been reproduced in branches still free from monopoly control and
in countries which had not yet become capitalist. This is how
colonialism in all its varieties managed, toward the beginning
of the twentieth century to spread like a powder train in the
course of a few decades, starting from the small part of the
world to which the capitalist mode of production was limited,
and eventually embracing the whole world. Every country on the
map was thus transformed into a sphere of influence and field of
investment for capital.
Tendency of the Average Rate
of Profit to Decline
We saw previously that the
surplus value produced by the workers in each factory remained
“locked” in the products, and that the question whether or
not this surplus value would be realized by the capitalist
factory owner was decided by market conditions, that is to say,
by the possibility for the factory to sell its products at a
price which would allow all of this surplus value to be
realized. By applying the law of value developed earlier, we can
set up the following rule: all enterprises which are producing
at the average level of productivity will, roughly speaking,
realize the surplus value produced by their workers, that is to
say, they will sell their products at a price equal to the value
of these products.
But this will not be the case
for two categories of enterprises: those operating below and
those operating above the average level of productivity.
What is the category of
enterprises operating below the average level of productivity?
This is nothing but a generalization of the lazy shoemaker we
mentioned previously. It is, for example, a steel mill which
produces 500,000 tons of steel in 2.2 or 2.5 or 3 million
man-hours, when the national average for this production is 2
million man-hours. It is therefore wasting social labor-time.
The surplus value produced by the workers in this factory will
not be realized in its entirety by the owners of this plant; it
will work at a profit below the average rate of profit for all
enterprises in the country.
But the total mass of surplus
value produced in society is a fixed mass, dependent in the last
analysis on the total number of labor hours supplied by all
workers engaged in production. This means that if there are a
certain number of enterprises which do not realize all the
surplus value produced by their workers because the enterprises
are operating below the average level of productivity and have
therefore wasted social labor-time, then there is an unexpended
balance of surplus value available which is captured by the
plants operating above the average level of productivity. Having
economize on social labor-time, the latter are rewarded by
society.
This theoretical explanation is
a general demonstration of the mechanism determining the
movement of prices in capitalist society. How does this
mechanism operate in practice?
Let us say the average selling
price of a locomotive is a million dollars. What then will be
the difference between a plant operating below the average
productivity of labor and one operating above it? The first will
spend, let us say, $900,000 to produce a locomotive, and its
profit will be $100,000. On the other hand, the plant producing
above the average level of labor productivity, will spend, let
us say, $750,000 and will make $250,000 profit, that is 33 per
cent on its current production, whereas the average rate of
profit is 18 per cent and enterprises working at this average
social labor productivity produced locomotives at a cost of
$850,000, realizing $150,000 in profit, that is to say, 18 per
cent.
In other words, capitalist
competition favors those enterprises which are technologically
ahead; these enterprises realize superprofits as
compared with the average profit. Average profit is basically an
abstract idea, exactly like value. It is an average around which
the real profit rates of different branches and enterprises
fluctuate. Capital flows toward the branches where there are
superprofits and flows away from those branches in which profits
are below the average. By virtue of this ebb and flow of capital
from one branch to another, the rates of profit tend to
approximate this average, without ever completely reaching it in
an absolute and mechanical way.
This is the way then that
equalization of the rates of profit is effected. There is a very
simple way to determine this abstract average rate of profit: we
take the total mass of surplus value produced by all workers in
a given year and in a given country, and draw its ratio to the
total mass of capital investment in that country.
What is the formula for the
rate of profit? It is the ratio between surplus value and total
capital. It is therefore S/(C+V) Still another formula
must be considered as well: this is the rate of surplus
value, or better still, the rate of exploitation of the
working class. It specifies the way in which the newly
produced value is divided between workers and capitalists. If,
for instance, S/V equals 100 per cent this means that
the newly produced value is divided into two equal parts, one
part going to the workers in the form of wages, the other going
to the bourgeois class in the form of profits, interest,
dividends, etc.
When the exploitation rate of
the working class is 100 per cent, the 8-hour working day then
consists of two equal parts: 4 hours of labor in which the
workers produce the counter-value of their wages, and 4 hours in
which they supply gratuitous labor, labor which is not paid for
by the capitalists and its product appropriated by the latter.
At first sight, it seems that
if the organic composition of capital C/V increases,
the profit rate S/(C+V) will decline, since C
becomes increasingly greater relative to V, and S
is a product of V and not of C. But there is a
factor that can neutralize the effect of an increase in the
organic composition of capital: it is precisely an increase in
the surplus value rate.
If S over V,
the surplus value rate increases, this means that in the
fraction S/(C+V), both the numerator and denominator
increase, and in this case the value of the fraction can remain
the same, under conditions where the two increases occur in a
certain proportion.
In other words, an increase in
the surplus value rate can neutralize the effects of an increase
in the organic composition of capital. Let us assume that the
value of production C+V+S goes from 100C+100V+100S
to 20OC+10OV+100S. The organic
composition of capital will therefore go from 100 to 200 per
cent, the profit rate will fall from 50 to 33 per cent. But if
at the same time the surplus value goes from 100 to 150, that is
to say, the surplus value rate goes from 100 to 150 per cent,
then the profit rate 150/300 remains at 50 per cent:
the increase in the surplus value rate neutralizes the effect of
the increase in the organic composition of capital.
Can these two movements occur
in exactly the necessary proportions for them to neutralize each
other? Here we touch the basic weakness, the Achilles heel of
the capitalist system. These two movements cannot develop
proportionally over the long run. There is no limit whatever to
the increase in the organic composition of capital. For V
there is a theoretical limit of zero, assuming the arrival of
total automation. But can S/V also increase in an
unlimited way, without any limit whatever? No, for in order to
produce surplus value it is necessary to have working workers,
and this being the case, the fraction of the workday in which
the worker reproduces his own wage cannot fall to zero. It can
be reduced from 8 hours to 7, from 7 hours to 6, from 6 hours to
5, from 5 hours to 4, from 4 hours to 3, from 3 hours to 2, from
2 hours to 1, from 1 hour to 50 minutes. It would already be a
fantastic productivity which would permit the worker to produce
the counter-value of his entire wage in 50 minutes. But he could
never reproduce the counter-value of his wage in zero minutes
and zero seconds. There is a residual which capitalist
exploitation can never suppress.
This means that in the long run
the fall in the average rate of profit is inevitable, and I
personally believe, contrary to the idea of quite a few
Marxists, that this fall is also demonstrable in statistics,
that is to say that the average rates of profit today in the big
capitalist countries are much lower than they were 50, 100 or
150 years ago.
Of course, if we examine
shorter periods, there are fluctuations up and down; there are
numerous factors which come into play (we will discuss them
later, when dealing with neocapitalism). But for the long run,
the movement is very clear, both for interest rates and profit
rates. We should point out, moreover, that among all the
developmental tendencies of capitalism, this was the one most
clearly perceived by the theoreticians of capitalism themselves.
Ricardo speaks of it; John Stuart Mill stresses it; Keynes is
highly aware of it. There was a maxim in England at the end of
the nineteenth century which was practically a popular saying:
capitalism can withstand anything except a fall in the average
interest rate to 2 per cent, because that would kill investment
incentive.
This maxim obviously contains a
certain kind of error in its reasoning. Calculations of
percentages, of profit rates, have a real value, but it is
still, after all, a relative one to a capitalist. What interests
him is not exclusively the percentage he makes on his capital,
but also the total amount which he makes. And if the 2 per cent
applies not to $100,000 but to $100 million, it still represents
$2 million, and the capitalist would do an awful lot of thinking
before he would say that he preferred to let his capital lie
idle rather than to accept the revolting profit of a mere $2
million a year.
In practice, we see therefore
that there is no total halt in investment activity following a
fall in the profit and interest rates but rather a slowing down
proportional to the fall in profit rate in an industrial branch.
On the other hand, when there is more rapid expansion and a
rising tendency of the profit rate in certain industrial
branches or in certain periods, then investment activity
resumes, speeds up, the movement then seems to feed on itself,
and the expansion appears to have no limits up to the time when
the tendency reverses once more.
The Fundamental
Contradiction in the Capitalist System and the Periodic Crises
of Overproduction
Capitalism has the tendency to
extend production without limits, to extend its arena of
activity over the whole world, to view all human beings as
potential customers. (Parenthetically, there is a pretty
contradiction worth stressing, one which Marx already mentioned:
each capitalist always likes to see other capitalists increase
the wages of their workers, because the wages of those workers
are purchasing power for the goods of the capitalist in
question. But he cannot allow the wages of his own workers to
increase, for this would obviously reduce his own profit.)
The world is consequently
structured in a most extraordinary way, having become an
economic unit with an interdependence of its different parts
which is extremely sensitive. You know all the cliches which
have been used to depict this: if someone sneezes on the New
York Stock Exchange, 10,000 peasants are ruined in Malaya.
Capitalism produces an
extraordinary interdependence in incomes and a unification in
tastes for all human beings. Man has suddenly become conscious
of the wealth of human possibilities, whereas in pre-capitalist
society, he was enclosed in the narrow natural possibilities of
a single region. In the Middle Ages, pineapples were not eaten
in Europe, only locally grown fruits, but today we eat fruits
which may have been produced anywhere in the world and are even
beginning to eat fruits from China and India which we were not
accustomed to eating prior to the second world war.
There are consequently mutual
links being established among products and among men. Expressed
in other terms, there is a progressive socialization of all
economic life, which is becoming a single assemblage, a
single fabric. But this whole movement of interdependence is
simply centered in an insane way around private property,
private appropriation, by a small number of capitalists whose
private interests, moreover, collide more and more with the
interests of the billions of human beings included in this
assemblage.
It is in the economic crises
that the contradiction between the progressive socialization of
production and the private appropriation which serves as its
driving power and its support, breaks out in the most
extraordinary way. For capitalist economic crises are incredible
phenomena like nothing ever seen before. They are not crises of scarcity,
like all pre-capitalist crises; they are crises of overproduction.
The unemployed die of hunger not because there is too little to
eat but because there is relatively too great a supply of
foodstuffs.
At first sight the thing seems
incomprehensible. How can anyone die because there is a surplus
of food, because there is a surplus of goods? But the mechanism
of the capitalist system makes this seeming paradox
understandable. Goods which do not find buyers not only do not
realize their surplus value but they do not even return their
invested capital. The slump in sales therefore forces
businessmen to suspend their operations. They are therefore
forced to lay off their workers and since the laid-off workers
have no reserves, since they can subsist only when they are
selling their labor-power, unemployment obviously condemns them
to the starkest poverty and precisely because the relative
abundance of goods has resulted in a slump in sales.
The factor of periodic economic
crises is inherent in the capitalist system and remains
insurmountable. We shall see further on that this remains
equally true in the neocapitalist regime in which we are now
living, even if these crises are now called “recessions.”
Crises are the clearest manifestation of the fundamental
contradiction in the system and a periodic reminder that it is
condemned to die sooner or later. But it will never die
automatically. It will always be necessary to give it a
conscious little push to effect its demise, and it is our job,
the job of the working-class movement, to do the pushing.
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