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By
Ernest Mandel Click on subtitles to go to relevant parts of the text Karl
Marx was born on 5 May 1818, the son of the lawyer Heinrich Marx and
Henriette Pressburg. His father was descended from an old family of
Jewish rabbis, but was himself a liberal admirer of the Enlightenment
and not religious. He converted to Protestantism a few years before Karl
was born to escape restrictions still imposed upon Jews in Prussia. His
mother was of Dutch-Jewish origin. Karl
Marx studied at the Friedrich-Wilhelm Gymnasium in Trier, and at the
universities of Bonn and Berlin. His doctoral thesis, Differenz der
demokritischen und epikurischen Naturphilosophie, was accepted at the
University of Jena on 15 April 1841. In 1843 he married Jenny von
Westphalen, daughter of Baron von Westphalen, a high Prussian government
official. Marx's
university studies covered many fields, but centred around philosophy
and religion. He frequented the circle of the more radical followers of
the great philosopher Hegel, befriended one of their main
representatives, Bruno Bauer, and was especially influenced by the
publication in 1841 of Ludwig Feuerbach's Das Wesen des Christentums
(The Nature of Christianity). He had intended to teach philosophy at the
university, but that quickly proved to be unrealistic. He then turned
towards journalism, both to propagandise his ideas and to gain a
livelihood. He became editor of the Rheinische Zeitung, a liberal
newspaper of Cologne, in May 1842. His interest turned more and more to
political and social questions, which he treated in an increasing
radical way. The paper was banned by the Prussian authorities a year
later. Karl
Marx then planned to publish a magazine called Die Deutsch-Französische
Jahrbücher in Paris, in order to escape Prussian censorship and to be
more closely linked and identified with the real struggles for political
and social emancipation which, at that time, were centred around France.
He emigrated to Paris with his wife and met there his lifelong friend
Friedrich Engels. Marx
had become critical of Hegel's philosophical political system, a
criticism which would lead to his first major work, Zur Kritik des
Hegelschen Rechtsphilosophie (1843, A Critique of Hegel's Philosophy of
Right). Intensively studying history and political economy during his
stay in Paris, he became strongly influenced by socialist and
working-class circles in the French capital. With his 'Paris
Manuscripts' (Oekonomisch-philosophische Manuskripte, 1844), he
definitely became a communist, i.e. a proponent of collective ownership
of the means of production. He
was expelled from France at the beginning of 1845 through pressure from
the Prussian embassy and migrated to Brussels. His definite turn towards
historical materialism (see below) would occur with his manuscript Die
Deutsche Ideologue (1845-6) culminating in the eleven Theses on
Feuerbach, written together with Engels but never published during his
lifetime. This
led also to a polemical break with the most influential French socialist
of that period, Proudhon, expressed in the only book Marx would write in
French, Misère de la Philosophie (1846). Simultaneously
he became more and more involved in practical socialist politics, and
started to work with the Communist League, which asked Engels and
himself to draft their declaration of principle, This is the origin of
the Communist Manifesto (1848, Manifest der Kommunistischen Partei). As
soon as the revolution of 1848 broke out, he was in turn expelled from
Belgium and went first to France, then, from April 1848 on, to Cologne.
His political activity during the German revolution of 1848 centred
around the publication of the daily paper Die Neue Rheinische Zeitung,
which enjoyed wide popular support. After the victory of the Prussian
counter-revolution, the paper was banned in May 1849 and Marx was
expelled from Prussia. He never succeeded in recovering his citizenship.
Marx
emigrated to London, where he would stay, with short interruptions, till
the end of his life. For fifteen years, his time would be mainly taken
up with economic studies, which would lead to the publication first of
Zur Kritik der Politischen Oekonomie (1859) and later of Das Kapital,
Vol. I (1867). He spent long hours at the British Museum, studying the
writings of all the major economists, as well as the government Blue
Books, Hansard and many other contemporary sources on social and
economic conditions in Britain and the world. His readings also covered
technology, ethnology and anthropology, besides political economy and
economic history; many notebooks were filled with excerpts from the
books he read. But
while the activity was mainly studious, he never completely abandoned
practical politics. He first hoped that the Communist League would be
kept alive, thanks to a revival of revolution. When this did not occur,
he progressively dropped out of emigré politics, but not without
writing a scathing indictment of French counter-revolution in Der 18.
Brumaire des Louis Bonaparte (1852), which was in a certain sense the
balance sheet of his political activity and an analysis of the late
1848-52 cycle of revolution and counter-revolution. He would befriend
British trade-union leaders and gradually attempt to draw them towards
international working class interests and politics. These efforts
culminated in the creation of the International Working Men's
Association (1864) - the so-called First International - in which Marx
and Engels would play a leading role, politically as well as
organisationally. It
was not only his political interest and revolutionary passion that
prevented Marx from becoming an economist pure and simple. It was also
the pressure of material necessity. Contrary to his hopes, he never
succeeded in earning enough money from his scientific writings to
sustain himself and his growing family. He had to turn to journalism to
make a living, He had initial, be it modest, success in this field, when
he became European correspondent of the New York Daily Tribune in the
summer of 1851. But he never had a regular income from that
collaboration, and it ended after ten years. So
the years of his London exile were mainly years of great material
deprivation and moral suffering. Marx suffered greatly from the fact
that he could not provide a minimum of normal living conditions for his
wife and children, whom he loved deeply. Bad lodgings in
cholera-stricken Soho, insufficient food and medical care, led to a
chronic deterioration of his wife's and his own health and to the death
of several of their children; that of his oldest son Edgar in 1855
struck him an especially heavy blow. Of his seven children only three
daughters survived, Jenny, Laura and Eleanor (Tussy). All three were
very gifted and would play a significant role in the international
labour movement, Eleanor in Britain, Jenny and Laura in France (where
they married the socialist leaders Longuet and Lafargue). During
this long period of material misery, Marx survived thanks to the
financial and moral support of his friend Friedrich Engels, whose
devotion to him stands as an exceptional example of friendship in the
history of science and politics. Things started to improve when Marx
came into his mother's inheritance; when the first independent
working-class parties (followers of Lassalle on the one hand, of Marx
and Engels on the other) developed in Germany, creating a broader market
for his writings; when the IWMA became influential in several European
countries, and when Engels' financial conditions improved to the point
where he would sustain the Marx family on a more regular basis. The
period 1865- 71 was one in which Marx's concentration on economic
studies and on the drafting of Das Kapital was interrupted more and more
by current political commitments to the IWMA, culminating in his
impassioned defence of the Paris Commune (Der Bürgerkrieg in Frankreich,
1871). But the satisfaction of being able to participate a second time
in a real revolution - be it only vicariously - was troubled by the deep
divisions inside the IMWA, which led to the split with the anarchists
grouped around Michael Bakunin. Marx
did not succeed in finishing a final version of Das Kapital vols II and
III, which were published posthumously, after extensive editing, by
Engels. It remains controversial whether he intended to add two more
volumes to these, according to an initial plan. More than 25 years after
the death of Marx, Karl Kautsky edited what is often called vol. IV of
Das Kapital, his extensive critique of other economists: Theorien über
den Mehrwert (Theories of Surplus Value). Marx's
final years were increasingly marked by bad health, in spite of slightly
improved living conditions. Bad health was probably the main reason why
the final version of vols II and III of Capital could not be finished.
Although he wrote a strong critique of the Programme which was adopted
by the unification congress (1878) of German social democracy (Kritik
des Gothaer Programms), he was heartened by the creation of that united
working-class party in his native land, by the spread of socialist
organisations throughout Europe, and by the growing influence of his
ideas in the socialist movement. His wife fell ill in 1880 and died the
next year. This came as a deadly blow to Karl Marx, who did not survive
her for long. He himself died in London on 14 March 1883. Outside
his specific economic theories, Marx's main contribution to the social
sciences has been his theory of historical materialism. Its starting
point is anthropological. Human beings cannot survive without social
organisation. Social organisation is based upon social labour and social
communication. Social labour always occurs within a given framework of
specific, historically determined, social relations of production. These
social relations of production determine in the last analysis all other
social relations, including those of social communication. It is social
existence which determines social consciousness and not the other way
around. Historical
materialism posits that relations of production which become stabilised
and reproduce themselves are structures which can no longer be changed
gradually, piecemeal. They are modes of production. To use Hegel's
dialectical language, which was largely adopted (and adapted) by Marx:
they can only change qualitatively through a complete social upheaval, a
social revolution or counter-revolution. Quantitative changes can occur
within modes of production, but they do not modify the basic structure.
In each mode of production, a given set of relations of production
constitutes the basis (infrastructure) on which is erected a complex
superstructure, encompassing the state and the law (except in a
classless society), ideology, religion, philosophy, the arts, morality,
etc. Relations
of production are the sum total of social relations which human beings
establish among themselves in the production of their material lives.
They are therefore not limited to what actually happens at the point of
production. Humankind could not survive, i.e. produce, if there did not
exist specific forms of circulation of goods, e.g. between producing
units (circulation of tools and raw materials) and between production
units and consumers. A priori allocation of goods determines other
relations of production than does allocation of goods through the
market. Partial commodity production (what Marx calls 'simple commodity
production' or 'petty commodity production' - 'einfache Waren-produktion')
also implies other relations of production than does generalised
commodity production. Except
in the case of classless societies, modes of production, centred around
prevailing relations of production, are embodied in specific class
relations which, in the last analysis, over-determine relations between
individuals. Historical
materialism does not deny the individual's free will, his attempts to
make choices concerning his existence according to his individual
passions, his interests as he understands them, his convictions, his
moral options etc. What historical materialism does state is: (1) that
these choices are strongly predetermined by the social framework
(education, prevailing ideology and moral 'values', variants of
behaviour limited by material conditions etc.); (2) that the outcome of
the collision of millions of different passions, interests and options
is essentially a phenomenon of social logic and not of individual
psychology. Here, class interests are predominant. There
is no example in history of a ruling class not trying to defend its
class rule, or of an exploited class not trying to limit (and
occasionally eliminate) the exploitation it suffers. So outside
classless society, the class struggle is a permanent feature of human
society. In fact, one of the key theses of historical materialism is
that 'the history of humankind is the history of class struggles' (Marx,
Communist Manifesto, 1848). The
immediate object of class struggle is economic and material. It is a
struggle for the division of the social product between the direct
producers (the productive, exploited class) and those who appropriate
what Marx calls the social surplus product, the residuum of the social
product once the producers and their offspring are fed (in the large
sense of the word; i.e. the sum total of the consumer goods consumed by
that class) and the initial stock of tools and raw materials is
reproduced (including the restoration of the initial fertility of the
soil). The ruling class functions as a ruling class essentially through
the appropriation of the social surplus product. By getting possession
of the social surplus product, it acquires the means to foster and
maintain most of the superstructural activities mentioned above; and by
doing so, it can largely determine their function - to maintain and
reproduce the given social structure, the given mode of production - and
their contents. We
say 'largely determine' and not 'completely determine'. First, there is
an 'immanent dialectical', i.e. an autonomous movement, of each specific
superstructural sphere of activity. Each generation of scientists,
artists, philosophers, theologists, lawyers and politicians finds a
given corpus of ideas, forms, rules, techniques, ways of thinking, to
which it is initiated through education and current practice, etc. It is
not forced to simply continue and reproduce these elements. It can
transform them, modify them, change their interconnections, even negate
them. Again: historical materialism does not deny that there is a
specific history of science, a history of art, a history of philosophy,
a history of political and moral ideas, a history of religion etc.,
which all follow their own logic. It tries to explain why a certain
number of scientific, artistic, philosophical, ideological, juridical
changes or even revolutions occur at a given time and in given
countries, quite different from other ones which occurred some centuries
earlier elsewhere. The nexus of these 'revolutions' with given
historical periods is a nexus of class interests. Second,
each social formation (i.e. a given country in a given epoch) while
being characterised by predominant relations of production (i.e. a given
mode of production at a certain phase of its development) includes
different relations of production which are largely remnants of the
past, but also sometimes nuclei of future modes of production. Thus
there exists not only the ruling class and the exploited class
characteristic of that prevailing mode of production (capitalists and
wage earners under capitalism). There also exist remnants of social
classes which were predominant when other relations of production
prevailed and which, while having lost their hegemony, still manage to
survive in the interstices of the new society. This is, for example, the
case with petty commodity producers (peasants, handicraftsmen, small
merchants), semi-feudal landowners, and even slave-owners, in many
already predominantly capitalist social formations throughout the 19th
and part of the 20th centuries. Each of these social classes has its own
ideology, its own religious and moral values, which are intertwined with
the ideology of the hegemonic ruling class, without becoming completely
absorbed by that ideology. Third,
even after a given ruling class (e.g. the feudal or semi-feudal
nobility) has disappeared as a ruling class, its ideology can survive
through sheer force of social inertia and routine (custom). The survival
of traditional ancien régime catholic ideology in France during a large
part of the 19th century, in spite of the sweeping social, political and
ideological changes ushered in by the French revolution, is an
illustration of that rule. Finally,
Marx's statement that the ruling ideology of each epoch is the ideology
of the ruling class - another basic tenet of historical materialism -
does not express more than it actually says. It implies that other
ideologies can exist side by side with that ruling ideology without
being hegemonic. To cite the most important of these occurrences:
exploited and (or) oppressed social classes can develop their own
ideology, which will start to challenge the prevailing hegemonic one. In
fact, an ideological class struggle accompanies and sometimes even
precedes the political class struggle properly speaking. Religious and
philosophical struggles preceding the classical bourgeois revolutions;
the first socialist critiques of bourgeois society preceding the
constitution of the first working-class parties and revolutions, are
examples of that type. The
class struggle has been up to now the great motor of history. Human
beings make their own history. No mode of production can be replaced by
another one without deliberate actions by large social forces, i.e.
without social revolution (or counter-revolution). Whether these
revolutions or counter- revolutions actually lead to the long-term
implementation of deliberate projects of social reorganization is
another matter altogether. Very often, their outcome is to a large
extent different from the intention of the main actors. Human
beings act consciously, but they can act with false consciousness. They
do not necessarily understand why they want to realise certain social
and (or) political plans, why they want to maintain or to change
economic or juridical institutions; and especially, they rarely
understand in a scientific sense the laws of social change, the material
and social preconditions for successfully conserving or changing such
institutions. Indeed, Marx claims that only with the discovery of the
main tenets of historical materialism have we made a significant step
forward towards understanding these laws, without claiming to be able to
predict 'all' future developments of society. Social
change, social revolutions and counter-revolutions are furthermore
occurring within determined material constraints. The level of
development of the productive forces - essentially tools and human
skills, including their effects upon the fertility of the soil - limits
the possibilities of institutional change. Slave labour has shown itself
to be largely incompatible with the factory system based upon
contemporary machines. Socialism would not be durably built upon the
basis of the wooden plough and the potter's wheel. A social revolution
generally widens the scope for the development of the productive forces
and leads to social progress in most fields of human activity in a
momentous way. Likewise, an epoch of deep social crisis is ushered in
when there is a growing conflict between the prevailing mode of
production (i.e. the existing social order) on the one hand, and the
further development of the productive forces on the other. Such a social
crisis will then manifest itself on all major fields and social
activity: politics, ideology, morals and law, as well as in the realm of
the economic life properly speaking. Historical
materialism thereby provides a measuring stick for human progress: the
growth of the productive forces, measurable through the growth of the
average productivity of labour, and the number, longevity and skill of
the human species. This measuring stick in no way abstracts from the
natural preconditions for human survival and human growth (in the
broadest sense of the concept). Nor does it abstract from the
conditional and partial character of such progress, in terms of social
organisation and individual alienation. In
the last analysis, the division of society into antagonistic social
classes rejects, from the point of view of historical materialism, an
inevitable limitation of human freedom. For Marx and Engels, the real
measuring rod of human freedom, i.e. of human wealth, is not 'productive
labour'; this only creates the material pre-condition for that freedom.
The real measuring rod is leisure time, not in the sense of 'time for
doing nothing' but in the sense of time freed from the iron necessity to
produce and reproduce material livelihood, and therefore disposable for
all-round and free development of the individual talents, wishes,
capacities, potentialities, of each human being. As
long as society is too poor, as long as goods and services satisfying
basic needs are too scarce, only part of society can be freed from the
necessity to devote most of its life to 'work for a livelihood' (i.e. of
forced labour, in the anthropological/sociological sense of the word,
that is in relation to desires, aspirations and talents, not to a
juridical status of bonded labour). That is essentially what represents
the freedom of the ruling classes and their hangers-on, who are 'being
paid to think', to create, to invent, to administer, because they have
become free from the obligation to bake their own bread, weave their own
clothes and build their own houses. Once
the productive forces are developed far enough to guarantee all human
beings satisfaction of their basic needs by 'productive labour' limited
to a minor fraction of lifetime (the half work-day or less), then the
material need of the division of society in classes disappears. Then,
there remains no objective basis for part of society to monopolise
administration, access to information, knowledge, intellectual labour.
For that reason, historical materialism explains both the reasons why
class societies and class struggles arose in history, and why they will
disappear in the future in a classless society of democratically
self-administering associated producers. Historical
materialism therefore contains an attempt at explaining the origin, the
functions and the future withering away of the state as a specific
institution, as well as an attempt to explain politics and political
activity in general, as an expression of social conflicts centred around
different social interests (mainly, but not only, those of different
social classes; important fractions of classes, as well as non-class
social groupings, also come into play). For
Marx and Engels, the state is not existent with human society as such,
or with 'organised society' or even with 'civilised society' in the
abstract, neither is it the result of any voluntarily concluded 'social
contract' between individuals. The state is the sum total of
apparatuses, i.e. special groups of people separate and apart from the
rest (majority) of society, that appropriate to themselves functions of
a repressive or integrative nature which were initially exercised by all
citizens. This process of alienation occurs in conjunction with the
emergence of social classes. The state is an instrument for fostering,
conserving and reproducing a given class structure, and not a neutral
arbiter between antagonistic class interests. The
emergence of a classless society is therefore closely intertwined, for
adherents to historical materialism, with the process of withering away
of the state, i.e. of gradual devolution to the whole of society
(self-management, self-administration) of all specific functions today
exercised by special apparatuses, i.e. of the dissolution of these
apparatuses. Marx and Engels visualised the dictatorship of the
proletariat, the last form of the state and of political class rule, as
an instrument for assuring the transition from class society to
classless society. It should itself be a state of a special kind,
organising its own gradual disappearance. MARX'S
ECONOMIC THEORY - GENERAL APPROACH AND INFLUENCE A
general appraisal of Marx's method of economic analysis is called for
prior to an outline of his main economic theories (theses and
hypotheses). Marx is distinct from most important economists of the 19th
and 20th centuries in that he does not consider himself at all an
'economist' pure and simple. The idea that 'economic science' as a
special science completely separate from sociology, history,
anthropology etc. cannot exist, underlies most of his economic analysis.
Indeed, historical materialism is an attempt at unifying all social
sciences, if not all sciences about humankind, into a single 'science of
society'. For sure, within the framework of this general 'science of
society', economic phenomena could and should be submitted to analysis
as specific phenomena. So economic theory, economical science, has a
definite autonomy after all; but it is only a partial and relative one. Probably
the best formula for characterising Marx's economic theory would be to
call it an endeavour to explain the social economy. This would be true
in a double sense. For Marx, there are no eternal economic laws, valid
in every epoch of human prehistory and history. Each mode of production
has its own specific economic laws, which lose their relevance once the
general social framework has fundamentally changed. For Marx likewise,
there are no economic laws separate and apart from specific relations
between human beings, in the primary (but not only, as already
summarised) social relations of production. All attempts to reduce
economic problems to purely material, objective ones, to relations
between things, or between things and human beings, would be considered
by Marx as manifestations of mystification, of false consciousness,
expressing itself through the attempted relocation of human relations.
Behind relations between things, economic science should try to discover
the specific relations between human beings which they hide. Real
economic science has therefore also a demystifying function compared to
vulgar 'economics', which takes a certain number of 'things' for granted
without asking the questions: Are they really only what they appear to
be? From where do they originate? What explains these appearances? What
lies behind them? Where do they lead? How could they (will they)
disappear? Problemblindheit, the refusal to see that facts are generally
more problematic than they appear at first sight, is certainly not a
reproach one could address to Marx's economic thought. Marx's
economic analysis is therefore characterised by a strong ground current
of historical relativism, with a strong recourse to the genetical and
evolutionary method of thinking (that is why the parallel with Darwin
has often been made, sometimes in an excessive way). The formula
'genetic structuralism' has also been used in relation to Marx's general
approach to economic analysis. Be that as it may, one could state that
Marx's economic theory is essentially geared to the discovery of
specific 'laws of motion' for successive modes of production. While his
theoretical effort has been mainly centred around the discovery of these
laws of motion for capitalist society, his work contains indications of
such laws - different ones, to be sure - for pre-capitalist and
post-capitalist social formations too. The
main link between Marx's sociology and anthropology on the one hand, and
his economic analysis on the other, lies in the key role of social
labour as the basic anthropological feature underlying all forms of
social organisation. Social labour can be organised in quite different
forms, thereby giving rise to quite All
human societies must assure the satisfaction of a certain number of
basic needs, in order to survive and reproduce themselves. This leads to
the necessity of establishing some sort of equilibrium between social
recognised needs, i.e. current consumption and current production. But
this abstract banality does not tell us anything about the concrete way
in which social labour is organised in order to achieve that goal. Society
can recognise all individual labour as immediately social labour.
Indeed, it does so in innumerable primitive tribal and village
communities, as it does in the contemporary kibbutz. Directly social
labour can be organised in a despotic or in a democratic way, through
custom and superstition as well as through an attempt at applying
advanced science to economic organisation; but it will always be
immediately recognised social labour, inasmuch as it is based upon a
priori assignment of the producers to their specific work (again:
irrespective of the form this assignation takes, whether it is voluntary
or compulsory, despotic or simply through custom etc.). But
when social decision-taking about work assignation (and resource
allocation closely tied to it) is fragmented into different units
operating independently from each other - as a result of private control
(property) of the means of production, in the economic and not
necessarily the juridical sense of the word - then social labour in turn
is fragmented into private labours which are not automatically
recognised as socially necessary ones (whose expenditure is not
automatically compensated by society). Then the private producers have
to exchange parts or all of their products in order to satisfy some or
all of their basic needs. Then these products become commodities, The
economy becomes a (partial or generalised) market economy. Only by
measuring the results of the sale of his products can the producer (or
owner) ascertain what part of his private labour expenditure has been
recognized (compensated) as social labour, and what part has not. Even
if we operate with such simple analytical tools as 'directly social
labour', 'private labour', 'socially recognised social labour', we have
to make quite an effort at abstracting from immediately apparent
phenomena in order to understand their relevance for economic analysis.
This is true for all scientific analysis, in natural as well as in
social sciences. Marx's economic analysis, as presented in his main
books, has not been extremely popular reading; but then, there are not
yet so many scientists in these circumstances. This has nothing to do
with any innate obscurity of the author, but rather with the nature of
scientific analysis as such. The
relatively limited number of readers of Marx's economic writings (the
first English paperback edition of Das Kapital appeared only in 1974!)
is clearly tied to Marx's scientific rigour, his effort at a systematic
and all-sided analysis of the phenomena of the capitalist economy. But
while his economic analysis lacked popularity, his political and
historical projections became more and more influential. With the rise
of independent working-class mass parties, an increasing number of these
proclaimed themselves as being guided or influenced by Marx, at least in
the epoch of the Second and the Third Internationals, roughly the half
century from 1890 till 1940. Beginning with the Russian revolution of
1917, a growing number of governments and of states claimed to base
their policies and constitutions on concepts developed by Marx. (Whether
this was legitimate or not is another question.) But the fact itself
testifies to Marx's great influence on contemporary social and political
developments, evolutionary and revolutionary alike. Likewise,
his diffused influence on social science, including academic economic
theory, goes far beyond general acceptance or even substantial knowledge
of his main writings. Some key ideas of historical materialism and of
economic analysis which permeate his work - e.g. that economic interests
to a large extent influence, if not determine, political struggles; that
historic evolution is linked to important changes in material
conditions; that economic crises ('the business cycle') are unavoidable
under conditions of capitalist market economy - have become
near-platitudes. It is sufficient to notice how major economists and
historians strongly denied their validity throughout the 19th century
and at least until the 1920s, to understand how deep has been Marx's
influence on contemporary social science in general. As
an economist, Marx is generally situated in the continuity of the great
classical school of Adam Smith and Ricardo. He obviously owes a lot to
Ricardo, and conducts a running dialogue with that master in most of his
mature economic writings. Marx
inherited the labour theory of value from the classical school. Here the
continuity is even more pronounced; but there is also a radical break,
For Ricardo, labour is essentially a numeraire, which enables a common
computation of labour and capital as basic elements of production costs.
For Marx, labour is value. Value is nothing but that fragment of the
total labour potential existing in a given society in a certain period
(e.g. a year or a month) which is used for the output of a given
commodity, at the average social productivity of labour existing then
and there, divided by the total number of these commodities produced.
and expressed in hours (or minutes), days, weeks, months of labour. Value
is therefore essentially a social, objective and historically relative
category, It is social because it is determined by the overall result of
the fluctuating efforts of each individual producer (under capitalism:
of each individual firm or factory). It is objective because it is
given, once the production of a given commodity is finished, and is thus
independent from personal (or collective) valuations of customers on the
market place; and it is historically relative because it changes with
each important change (progress or regression) of the average
productivity of labour in a given branch of output, including in
agriculture and transportation. This
does not imply that Marx's concept of value is in any way completely
detached from consumption. It only means that the feedback of consumers'
behaviour and wishes upon value is always mediated through changes in
the allocation of labour inputs in production, labour being seen as
subdivided into living labour and dead (dated) labour, i.e. tools and
raw materials. The market emits signals to which the producing units
react. Value changes after these reactions, not before them. Market
price changes can of course occur prior to changes in value. In fact,
changes in market prices are among the key signals which can lead to
changes in labour allocation between different branches of production,
i.e. to changes in labour quantities necessary to produce given
commodities. But then, for Marx, values determine prices only basically
and in the medium-term sense of the word. This determination only
appears clearly as an explication of medium and long-term price
movements. In the shorter run, prices fluctuate around values as axes.
Marx never intended to negate the operation of market laws, of the law
of supply and demand, in determining these short-term fluctuations. The
'law of value' is but Marx's version of Adam Smith's 'invisible hand'.
In a society dominated by private labour, private producers and private
ownership of productive inputs, it is this 'law of value', an objective
economic law operating behind the backs of all people, all 'agents'
involved in production and consumption, which, in the final analysis,
regulates the economy, determines what is produced and how it is
produced (and therefore also what can be consumed). The 'law of value'
regulates the exchange between commodities, according to the quantities
of socially necessary abstract labour they embody (the quantity Marx's
critique of the 'invisible hand' concept does not dwell essentially on
the analysis of how a market economy actually operates. It would above
all insist that this operation is not eternal, not immanent in 'human
nature', but created by specific historical circumstances, a product of
a special way of social organisation, and due to disappear at some stage
of historical evolution as it appeared during a previous stage. And it
would also stress that this 'invisible hand' leads neither to the
maximum of economic growth nor to the optimum of human wellbeing for the
greatest number of individuals, i.e. it would stress the heavy economic
and social price humankind had to pay, and is still currently paying,
for the undeniable progress the market economy produced at a given stage
of historical evolution. The
formula 'quantities of abstract human labour' refers to labour seen
strictly as a fraction of the total labour potential of a given society
at a given time, say a labour potential of 2 billion hours a year (1
million potential producers, each supposedly capable of working 2000
hours a year). It therefore implies making an abstraction of the
specific trade or occupation of a given male or female producer, the
product of a day's work of a weaver not being worth less or more than
that of a peasant, a miner, a house-builder, a milliner or a seamstress.
At the basis of that concept of 'abstract human labour' lies a social
condition, a specific set of social relations of production, in which
small independent producers are essentially equal. Without that
equality, social division of labour, and therefore satisfaction of basic
consumers' needs, would be seriously endangered under that specific
organisational set-up of the economy. Such an equality between small
commodity owners and producers is later transformed into an equality
between owners of capital under the capitalist mode of production. But
the concept of the homogeneity of productive human labour, underlying
that of 'abstract human labour' as the essence of value, does not imply
a negation of the difference between skilled and unskilled labour.
Again: a negation of that difference would lead to the breakdown of the
necessary division of labour, as would any basic heterogeneity of labour
inputs in different branches of output. It would then not pay to acquire
skills: most of them would disappear. So Marx's labour theory of value,
in an internally coherent way, leads to the conclusion that one hour of
skilled labour represents more value than one hour of unskilled labour,
say represents the equivalent of 1.5 hours of unskilled labour. The
difference would result from the imputation of the labour it costs to
acquire the given skill, While an unskilled labourer would have a labour
potential of 120,000 hours during his adult life, a skilled labourer
would only have a labour potential of 80,000 hours, 40,000 being used
for acquiring, maintaining and developing his skill. Only if one hour of
skilled labour embodies the same value of 1.5 hours of unskilled labour,
will the equality of all 'economic agents' be maintained under these
circumstances, i.e. will it 'pay' economically to acquire a skill. Marx
himself never extensively dwelled on this solution of the so-called
reduction problem. This remains indeed one of the most obscure parts of
his general economic theory. It has led to some, generally rather mild,
controversy. Much more heat has been generated by another facet of
Marx's labour theory of value, the so-called transformation problem.
Indeed, from Böhm-Bawerk writing a century ago till the recent
contributions of Sraffa (1960) and Steedman (1977), the way Marx dealt
with the transformation of values into 'prices of production' in Capital
Vol. III has been considered by many of his critics as the main problem
of his 'system', as well as being a reason to reject the labour theory
of value out of hand. The
problem arises out of the obvious modification in the functioning of a
market economy when capitalist commodity production substitutes Itself
for simple commodity production. In simple commodity production, with
generally stable technology and stable (or easily reproducible) tools,
living labour is the only variable of the quantity and subdivision of
social production. The mobility of labour is the only dynamic factor in
the economy. As Engels pointed out in his Addendum to Capital Vol. III
(Marx, g, pp, 1034-7), in such an economy, commodities would be
exchanged at prices which would be immediately proportional to values,
to the labour inputs they embody. But
under the capitalist mode of production, this is no longer the case.
Economic decision-taking is not in the hands of the direct producers. It
is in the hands of the capitalist entrepreneurs in the wider sense of
the word (bankers - distributors of credit - playing a key role in that
decision-taking, besides entrepreneurs in the productive sector properly
speaking). Investment decisions, i.e. decisions for creating, expanding,
reducing or closing enterprises, determine economic life. It is the
mobility of capital and not the mobility of labour which becomes the
motive force of the economy. Mobility of labour becomes essentially an
epiphenomenon of the mobility of capital. Capitalist
production is production for profit. Mobility of capital is determined
by existing or expected profit differentials. Capital leaves branches
(countries, regions) with lower profits (or profit expectations) and
flows towards branches (countries, regions) with higher ones. These
movements lead to an equalisation of the rate of profit between
different branches of production. But approximately equal returns on all
invested capital (at least under conditions of prevailing 'free
competition') coexist with unequal proportions of inputs of labour in
these different branches. So there is a disparity between the direct
value of a commodity and its 'price of production', that 'price of
production' being defined by Marx as the sum of production costs (costs
of fixed capital and raw materials plus wages) and the average rate of
profit multiplied with the capital spent in the given production. The
so-called 'transformation problem' relates to the question of whether a
relation can nevertheless be established between value and these 'prices
of production', what is the degree of coherence (or incoherence) of the
relation with the 'law of value' (the labour theory of value in
general), and what is the correct quantitative way to express that
relation, if it exists. We
shall leave aside here the last aspect of the problem, to which
extensive analysis has recently been devoted (Mandel and Freeman, 1984).
From Marx's point of view, there is no incoherence between the formation
of 'prices of production' and the labour theory of value. Nor is it true
that he came upon that alleged difficulty when he started to prepare
Capital Vol.III, i.e. to deal with capitalist competition, as several
critics have argued (see e.g. Joan Robinson, 1942). In fact, his
solution of the transformation problem is already present in the
Grundrisse (Marx, d), before he even started to draft Capital Vol. I. The
sum total of value produced in a given country during a given span of
time (e.g. one year) is determined by the sum total of labour-inputs.
Competition and movements of capital cannot change that quantity, The
sum total of values equals the sum total of 'prices of production'. The
only effect of capital competition and capital mobility is to
redistribute that given sum - and this through a redistribution of
surplus value (see below) - between different capitals, to the benefit
of some and at the expense of others. Now
the redistribution does not occur in a haphazard or arbitrary way.
Essentially value (surplus-value) is transferred from technically less
advanced branches to technologically more advanced branches. And here
the concept of 'quantities of socially necessary labour' comes into its
own, under the conditions of constant revolutions of productive
technology that characterise the capital mode of production. Branches
with lower than average technology (organic composition of capital, see
below) can be considered as wasting socially necessary labour. Part of
the labour spent in production in their realm is therefore not
compensated by society. Branches with higher than average technology
(organic composition of capital) can be considered to be economising
social labour; their labour inputs can therefore be considered as more
intensive than average, embodying more value. In this way, the transfer
of value (surplus-value) between different branches, far from being in
contradiction with the law of value, is precisely the way it operates
and should operate under conditions of 'capitalist equality', given the
pressure of rapid technological change. As
to the logical inconsistency often supposedly to be found in Marx's
method of solving the 'transformation problem' - first advanced by von
Bortkiewicz (1907) - it is based upon a misunderstanding in our opinion.
It is alleged that in his 'transformation schemas' (or tables) (Marx, g,
pp. 255-6) Marx calculates inputs in 'values' and outputs in 'prices of
production', thereby omitting the feedback effect of the latter on the
former. But that feedback eject is unrealistic and unnecessary, once one
recognises that inputs are essentially data. Movements of capital
posterior to the purchase of machinery or raw materials, including the
ups and dawns of prices of finished products produced with these raw
materials, cannot lead to a change in prices and therefore of profits of
the said machinery and raw materials, on sales which have already
occurred. What critics present as an inconsistency between 'values' and
'prices of production' is simply a recognition of two different
time-frameworks (cycles) in which the equalisation of the rate of profit
has been achieved, a first one for inputs, and a second, later one for
outputs. The
labour theory of value defines value as the socially necessary quantity
of labour determined by the average productivity of labour of each given
sector of production. But these values are not mathematically fixed
data. They are simply the expression of a process going on in real life,
under capitalist commodity production. So this average is only
ascertained in the course of a certain time-span. There is a lot of
logical argument and empirical evidence to advance the hypothesis that
the normal time-span for essentially modifying the value of commodities
is the business cycle, from one crises of over-production (recession) to
the next one. Before
technological progress and (or) better (more 'rational') labour
organisation etc. determines a more than marginal change (in general:
decline) in the value of a commodity, and the crisis eliminates less
efficient firms, there will be a coexistence of firms with various
'individual values' of a given commodity in a given branch of output,
even assuming a single market price. So, in his step-for-step approach
towards explaining the immediate phenomena (facts of economic life) like
prices and profits, by their essence, Marx introduces at this point of
his analysis a new mediating concept, that of market value (Marx, g, ch.
10). The market value of a commodity is the 'individual value' of the
firm, or a group of firms, in a given branch of production, around which
the market price will fluctuate. That 'market value' is not necessarily
the mathematical (weighted) average of labour expenditure of all firms
of that branch. It can be below, equal or above that average, for a
certain period (generally less than the duration of the business cycle,
at least under 'free competition'), according to whether social demand
is saturated, just covered or to an important extent not covered by
current output plus existing stocks. In these three cases respectively,
the more (most) efficient firms, the firms of average efficiency, or
even firms with labour productivity below average, will determine the
market value of that given commodity. This
implies that the more efficient firms enjoy surplus profits (profits
over and above the average profit) in case 2 and 3 and that a certain
number of firms work at less than average profit in all three cases, but
especially in case 1. The
mobility of capital, i.e. normal capitalist competition, generally
eliminates such situations after a certain lapse of time. But when that
mobility of capital is impeded for long periods by either unavoidable
scarcity (natural conditions that are not renewable or
non-substitutable, like land and mineral deposits) or through the
operation of institutional obstacles (private property of land and
mineral resources forbidding access to available capital, except in
exchange for payments over and above average profit), these surplus
profits can be frozen and maintained for decades. They thus become
rents, of which ground rent and mineral rent are the most obvious
examples in Marx's time, extensively analysed in Capital Vol.III (Marx,
g, part 6). Marx's
theory of rent is the most difficult part of his economic theory, the
one which has witnessed fewer comments and developments, by followers
and critics alike, than other major parts of his 'system'. But it is not
obscure. And in contrast to Ricardo's or Rodbertus's theories of rent,
it represents a straight-forward application of the labour theory of
value. It does not imply any emergence of 'supplementary' value (surplus
value, profits) in the market, in the process of circulation of
commodities, which is anathema to Marx and to all consistent upholders
of the labour theory of value. Nor does it in any way suggest that land
or mineral deposits 'create' value. It simply means that in agriculture
and mining less productive labour (as in the general case analysed
above) determines the market value of food or minerals, and that
therefore more efficient farms and mines enjoy surplus profits which
Marx calls differential (land and mining) rent. It also means that as
long as productivity of labour in agriculture is generally below the
average of the economy as a whole (or more correctly: that the organic
composition of capital, the expenditure in machinery and raw materials
as against wages, is inferior in agriculture to that in industry and
transportation), the sum total of surplus-value produced in agriculture
will accrue to landowners + capitalist farmers taken together, and will
not enter the general process of (re)distribution of profit throughout
the economy as a whole. This
creates the basis for a supplementary form of rent, over and above
differential rent, rent which Marx calls absolute land rent. This is,
incidentally, the basis for a long-term separation of capitalist
landowners from entrepreneurs in farming or animal husbandry, distinct
from feudal or semi-feudal landowners or great landowners under
conditions of predominantly petty commodity production, or in the
Asiatic mode of production, with free peasants. The
validity of Marx's theory of land and mining rents has been confirmed by
historical evidence, especially in the 20th century. Not only has
history substantiated Marx's prediction that, in spite of the obstacle
of land and mining rent, mechanisation would end up by penetrating food
and raw materials production too, as it has for a long time dominated
industry and transportation, thereby causing a growing decline of
differential rent (this has occurred increasingly in agriculture in the
last 25-50 years, first in North America, and then in Western Europe and
even elsewhere). It has also demonstrated that once the structural
scarcity of food disappears, the institutional obstacle (private
property) loses most of its efficiency as a brake upon the mobility of
capital. Therefore the participation of surplus-value produced in
agriculture in the general process of profit equalisation throughout the
economy cannot be prevented any more. Thereby absolute rent tends to
wither away and, with it, the separation of land ownership from
entrepreneurial farming and animal husbandry. It is true that farmers
can then fall under the sway of the banks, but they do so as private
owners of their land which becomes mortgaged, not as share-croppers or
entrepreneurs renting land from separate owners. On
the other hand, the reappearance of structural scarcity in the realm of
energy enabled the OPEC countries to multiply the price of oil by ten in
the 1970s, i.e. to have it determined by the oilfields where production
costs are the highest, thereby assuring the owners of the cheapest oil
wells in Arabia, Iran, Libya, etc. huge differential minerals rents. Marx's
theory of land and mineral rent can be easily extended into a general
theory of rent, applicable to all fields of production where formidable
difficulties of entry limit mobility of capital for extended periods of
time. It thereby becomes the basis of a marxist theory of monopoly and
monopoly surplus profits, i.e. in the form of cartel rents (Hilferding,
1910) or of technological rent (Mandel, 1972). Lenin's and Bukharin's
theories of surplus profit are based upon analogous but not identical
reasoning (Bukharin, 1914, 1926; Lenin, 1917). But
in all these cases of general application of the marxist theory of rent,
the same caution should apply as Marx applied to his theory of land
rent. By its very nature, capitalism, based upon private property, i.e.
'many capitals' - that is competition - cannot tolerate any 'eternal'
monopoly, a 'permanent' surplus profit deducted from the sum total of
profits which is divided among the capitalist class as a whole.
Technological innovations, substitution of new products for old ones
including the fields of raw materials and of food, will in the long run
reduce or eliminate all monopoly situations, especially if the profit
differential is large enough to justify huge research and investment
outlays. In
the same way as his theory of rent, Marx's theory of money is a
straightforward application of the labour theory of value. As value is
but the embodiment of socially necessary labour, commodities exchange
with each other in proportion to the labour quanta they contain. This is
true for the exchange of iron against wheat, as it is true for the
exchange of iron against gold or silver. Marx's theory of money is
therefore in the first place a commodity theory of money. A given
commodity can play the role of universal medium of exchange, as well as
fulfil all the other functions of money, precisely because it is a
commodity, i.e. because it is itself the product of socially necessary
labour. This applies to the precious metals in the same way it applies
to all the various commodities which, throughout history, have played
the role of money. It
follows that strong upheavals in the 'intrinsic' value of the
money-commodity will cause strong upheavals in the general price level.
In Marx's theory of money, (market) prices are nothing but the
expression of the value of commodities in the value of the money
commodity chosen as a monetary standard. If £1 sterling = 1/10 ounce of
gold, the formula 'the price of 10 quarters of wheat is f 1' means that
10 quarters of wheat have been produced in the same socially necessary
labour times as 1/10 ounce of gold. A strong decrease in the average
productivity of labour in gold mining (as a result for example of a
depletion of the richer gold veins) will lead to a general depression of
the average price level, all other things remaining equal. Likewise, a
sudden and radical increase in the average productivity of labour in
gold mining, through the discovery of new rich gold fields (California
after 1848; the Rand in South Africa in the 1890s) or through the
application of new revolutionary technology, will lead to a general
increase in the price level of all other commodities. Leaving
aside short-term oscillations, the general price level will move in
medium and long-term periods according to the relation between the
fluctuations of the productivity of labour in agriculture and industry
on the one hand, and the fluctuations of the productivity of labour in
gold mining (if gold is the money-commodity), on the other. Basing
himself on that commodity theory of money, Marx therefore criticized as
inconsistent Ricardo's quantity theory (Marx, h, part 2). But for
exactly the same reason of a consistent application of the labour theory
of value, the quantity of money in circulation enters Marx's economic
analysis when he deals with the phenomenon of paper money (Marx, c). As
gold has an intrinsic value, like all other commodities, there can be no
'gold inflation ', as little as there can be a 'steel inflation'. An
abstraction made of short-term price fluctuations caused by fluctuations
between supply and demand, a persistent decline of the value of gold
(exactly as for all other commodities) can only be the result of a
persistent increase in the average productivity of labour in gold mining
and not of an 'excess' of circulation in gold. If the demand for gold
falls consistently, this can only indirectly trigger a decline in the
value of gold through causing the closure of the least productive old
mines. But in the case of the money-commodity, such overproduction can
hardly occur, given the special function of gold of serving as a
universal reserve fund, nationally and internationally. It will always
therefore find a buyer, be it not, of course, always at the same
'prices' (in Marx's economic theory, the concept of the 'price of gold'
is meaningless. As the price of a commodity is precisely its expression
in the value of gold, the 'price of gold' would be the expression of the
value of gold in the value of gold). Paper
money, banks notes, are a money sign representing a given quantity of
the money-commodity. Starting from the above-mentioned example, a
banknote of £1 represents 1/10 ounce of gold. This is an objective
'fact of life', which no government or monetary authority can
arbitrarily alter. It follows that any emission of paper money in excess
of that given proportion will automatically lead to an increase in the
general price level, always other things remaining equal. If £1
suddenly represents only 1/20 ounce of gold, because paper money
circulation has doubled without a significant increase in the total
labour time spent in the economy, then the price level will tend to
double too. The value of 1/10 ounce of gold remains equal to the value
of 10 quarters of wheat. But as 1/10 ounce of gold is now represented by
£2 in paper banknotes instead of being represented by £1, the price of
wheat will move from £1 to £2 for 10 quarters (from two shillings to
four shillings a quarter before the introduction of the decimal system).
This
does not mean that in the case of paper money, Marx himself has become
an advocate of a quantity theory of money. While there are obvious
analogies between his theory of paper money and the quantity theory, the
main difference is the rejection by Marx of any mechanical automatism
between the quantity of paper money emitted on the one hand, and the
general dynamic of the economy (including on the price level) on the
other. In
Marx's explanation of the movement of the capitalist economy in its
totality, the formula ceteris paribus is meaningless. Excessive (or
insufficient) emission of paper money never occurs in a vacuum. It
always occurs at a given stage of the business cycle, and in a given
phase of the longer-term historical evolution of capitalism. It is
thereby always combined with given ups and downs of the rate of profit,
of productivity of labour, of output, of market conditions
(overproduction or insufficient production). Only in connection with
these other fluctuations can the effect of paper money 'inflation' or
'deflation' be judged, including the effect on the general price level.
The key variables are in the field of production. The key synthetic
resultant is in the field of profit. Price moments are generally
epiphenomena as much as they are signals. To untwine the tangle, more is
necessary than a simple analysis of the fluctuations of the quantity of
money. Only
in the case of extreme runaway inflation of paper money would this be
otherwise; and even in that border case, relative price movements
(different degrees of price increases for different commodities) would
still confirm that, in the last analysis, the law of values rules, and
not the arbitrary decision of the Central Banks or any other authority
controlling or emitting paper money. MARX'S
THEORY OF SURPLUS-VALUE Marx
himself considered his theory of surplus-value his most important
contribution to the progress of economic analysis (Marx, l; letter to
Engels of 24 August 1867). It is through this theory that the wide scope
of his sociological and historical thought enables him simultaneously to
place the capitalist mode of production in his historical context, and
to find the root of its inner economic contradictions and its laws of
motion in the specific relations of production on which it is based. As
said before, Marx's theory of classes is based on the recognition that
in each class society, part of society (the ruling class) appropriates
the social surplus product. But that surplus product can take three
essentially different forms (or a combination of them). It can take the
form of straightforward unpaid surplus labour, as in the slave mode of
production, early feudalism or some sectors of the Asiatic mode of
production (unpaid corvée labour for the Empire). It can take the form
of goods appropriated by the ruling class in the form of use-values pure
and simple (the products of surplus labour), as under feudalism when
feudal rent is paid in a certain amount of produce (produce rent) or in
its more modern remnants, such as sharecropping. And it can take a money
form, like money-rent in the final phases of feudalism, and capitalist
profits. Surplus-value is essentially just that: the money form of the
social surplus product or, what amounts to the same, the money product
of surplus labour. It has therefore a common root with all other forms
of surplus product: unpaid labour. This
means that Marx's theory of surplus-value is basically a deduction (or
residual) theory of the ruling classes' income. The whole social product
(the net national income) is produced in the course of the process of
production, exactly as the whole crop is harvested by the peasants. What
happens on the market (or through appropriation of the produce) is a
distribution (or redistribution) of what already has been created. The
surplus product, and therefore also its money form, surplus-value, is
the residual of that new (net) social product (income) which remains
after the producing classes have received their compensation (under
capitalism: their wages). This 'deduction' theory of the ruling classes'
income is thus ipso factor an exploitation theory. Not in the ethical
sense of the word - although Marx and Engels obviously manifested a lot
of understandable moral indignation at the fate of all the exploited
throughout history, and especially at the fate of the modern proletariat
- but in the economic one. The income of the ruling classes can always
be reduced in the final analysis to the product of unpaid labour: that
is the heart of Marx's theory of exploitation. That
is also the reason why Marx attached so much importance to treating
surplus-value as a general category, over and above profits (themselves
subdivided into industrial profits, bank profits, commercial profits
etc.), interest and rent, which are all part of the total surplus
product produced by wage labour. It is this general category which
explains both the existence (the common interest) of the ruling class
(all those who live off surplus value), and the origins of the class
struggle under capitalism. Marx
likewise laid bare the economic mechanism through which surplus-value
originates. At the basis of that economic mechanism is a huge social
upheaval which started in Western Europe in the 15th century and slowly
spread over the rest of the continent and all other continents (in many
so-called underdeveloped countries, it is still going on to this day). Through
many concomitant economic (including technical), social, political and
cultural transformations, the mass of the direct producers, essentially
peasants and handicraftsmen, are separated from their means of
production and cut off from free access to the land. They are therefore
unable to produce their livelihood on their own account. In order to
keep themselves and their families alive, they have to hire out their
arms, their muscles and their brains, to the owners of the means of
production (including land). If and when these owners have enough money
capital at their disposal to buy raw materials and pay wages, they can
start to organise production on a capitalist basis, using wage labour to
transform the raw materials which they buy, with the tools they own,
into finished products which they then automatically own too. The
capitalist mode of production thus presupposes that the producers'
labour power has become a commodity. Like all other commodities, the
commodity labour power has an exchange value and a use value. The
exchange value of labour power, like the exchange value of all other
commodities, is the amount of socially necessary labour embodied in it,
i.e. its reproduction costs. This means concretely the value of all the
consumer goods and services necessary for a labourer to work day after
day, week after week, month after month, at approximately the same level
of intensity, and for the members of the labouring classes to remain
approximately stable in number and skill (i.e. for a certain number of
working-class children to be fed, kept and schooled, so as to replace
their parents when they are unable to work any more, or die). But the
use value of the commodity labour power is precisely its capacity to
create new value, including its potential to create more value than its
own reproduction costs. Surplus-value is but that difference between the
total new value created by the commodity labour power, and its own
value, its own reproduction costs. The whole marxian theory of
surplus-value is therefore based upon that subtle distinction between
'labour power' and 'labour' (or value). But there is nothing
'metaphysical' about this distinction. It is simply an explanation
(demystification) of a process which occurs daily in millions of cases. The
capitalist does not buy the worker's 'labour'. If he did that there
would be obvious theft, for the worker's wage is obviously smaller than
the total value he adds to that of the raw materials in the course of
the process of production. No: the capitalist buys 'labour power', and
often (not always of course) he buys it at its justum pretium, at its
real value. So he feels unjustly accused when he is said to have caused
a 'dishonest' operation. The worker is victim not of vulgar theft but of
a social set-up which condemns him first to transform his productive
capacity into a commodity, then to sell that labour power on a specific
market (the labour market) characterised by institutional inequality,
and finally to content himself with the market price he can get for that
commodity, irrespective of whether the new value he creates during the
process of production exceeds that market price (his wage) by a small
amount, a large amount, or an enormous amount. The
labour power the capitalist has bought 'adds value' to that of the
used-up raw materials and tools (machinery, buildings etc.). If, and
until that point of time, this added value is inferior or equal to the
workers' wages, surplus-value cannot originate. But in that case, the
capitalist has obviously no interest in hiring wage labour. He only
hires it because that wage labour has the quality (the use value) to add
to the raw materials' value more than its own value (i.e. its own
wages). This 'additional added value' (the difference between total
'value added' and wages) is precisely surplus-value. Its emergence from
the process of production is the precondition for the capitalists'
hiring workers, for the existence of the capitalist mode of production. The
institutional inequality existing on the labour market (masked for
liberal economists, sociologists and moral philosophers alike by
juridical equality) arises from the very fact that the capitalist mode
of production is based upon generalised commodity production,
generalised market economy. This implies that a propertyless labourer,
who owns no capital, who has no reserves of larger sums of money but who
has to buy his food and clothes, pay his rent and even elementary public
transportation for journeying between home and workplace, in a
continuous way in exchange of money, is under the economic compulsion to
sell the only commodity he possesses, to wit his labour power, also on a
continuous basis. He cannot withdraw from the labour market until the
wages go up. He cannot wait. But
the capitalist, who has money reserves, can temporarily withdraw from
the labour market. He can lay his workers off, can even close or sell
his enterprise and wait a couple of years before starting again in
business. The institutional differences makes price determination of the
labour market a game with loaded dice, heavily biased against the
working class. One just has to imagine a social set-up in which each
citizen would be guaranteed an annual minimum income by the community,
irrespective of whether he is employed or not, to understand that 'wage
determination' under these circumstances would be quite different from
what it is under capitalism. In such a set-up the individual would
really have the economic choice whether to sell his labour power to
another person (or a firm) or not. Under capitalism, he has no choice.
His is forced by economic compulsion to go through that sale,
practically at any price. The
economic function and importance of trade unions for the wage-earners
also clearly arises from that elementary analysis. For it is precisely
the workers' 'combination' and their assembling a collective resistance
fund (what was called by the first French unions caisses de résistance,
'reserve deposits') which enables them, for example through a strike, to
withdraw the supply of labour power temporarily from the market so as to
stop a downward trend of wages or induce a wage increase. There is
nothing 'unjust' in such a temporary withdrawal of the supply of labour
power, as there are constant withdrawals of demand for labour power by
the capitalists, sometimes on a huge scale never equalled by strikes.
Through the functioning of strong labour unions, the working class tries
to correct, albeit partially and modestly, the institutional inequality
on the labour market of which it is a victim, without ever being able to
neutralise it durably or completely. It
cannot neutralise it durably because in the very way in which capitalism
functions there is a powerful built-in corrective in favour of capital:
the inevitable emergence of an industrial reserve army of labour. There
are three key sources for that reserve army: the mass of precapitalist
producers and self-employed The
first two sources have to be visualised not only in each capitalist
country seen separately but on a world scale, through the operations of
international migration. They are still unlimited to a great extent,
although the number of wage-earners the world over (including
agricultural wage labourers) has already passed the one billion mark. As
the third source, while it is obviously not unlimited (if wage labour
would disappear altogether, if all wage labourers would be fired,
surplus-value production would disappear too; that is why 'total
robotism' is impossible under capitalism), its reserves are enormous,
precisely in tandem with the enormous growth of the absolute number of
wage earners. The
fluctuations of the industrial reserve army are determined both by the
business cycle and by long-term trends of capital accumulation. Rapidly
increasing capital accumulation attracts wage labour on a massive scale,
including through international migration. Likewise, deceleration,
stagnation or even decline of capital accumulation inflates the reserve
army of labour. There is thus an upper limit to wage increases, when
profits (realised profits and expected profits) are 'excessively'
reduced in the eyes of the capitalists, which triggers off such
decelerated, stagnating or declining capital accumulation, thereby
decreasing employment and wages, till a 'reasonable' level of profits is
restored. This process does not correspond to any 'natural economic law'
(or necessity), nor does it correspond to any 'immanent justice'. It
just expresses the inner logic of the capitalist mode of production,
which is geared to profit. Other forms of economic organisation could
function, have functioned and are functioning on the basis of other
logics, which do not lead to periodic massive unemployment. On the
contrary, a socialist would say - and Marx certainly thought so - that
the capitalist system is an 'unjust', or better stated 'alienating',
'inhuman' social system, precisely because it cannot function without
periodically reducing employment and the satisfaction of elementary
needs for tens of millions of human beings. Marx's
theory of surplus-value is therefore closely intertwined with a theory
of wages which is far away from Malthus's, Ricardo's or the early
socialists' (like Ferdinand Lassalle's) 'iron law of wages', in which
wages tend to fluctuate around the physiological minimum. That crude
theory of 'absolute pauperisation' of the working class under
capitalism, attributed to Marx by many authors (Popper, 1945, et a1.),
is not Marx's at all, as many contemporary authors have convincingly
demonstrated (see among others Rosdolsky, 1968). Such an 'iron law of
wages' is essentially a demographic one, in which birth rates and the
frequency of marriages determine the fluctuation of employment and
unemployment and thereby the level of wages. The
logical and empirical inconsistencies of such a theory are obvious. Let
it be sufficient to point out that while fluctuations in the supply of
wage-labourers are considered essential, fluctuations in the demand for
labour power are left out of the analysis. It is certainly a paradox
that the staunch opponent of capitalism, Karl Marx, pointed out as early
as in the middle of the 19th century the potential for wage increases
under capitalism, even though not unlimited in time and space. Marx also
stressed the fact that for each capitalist, wage increases of other
capitalists' workers are considered increases of potential purchasing
power, not increases in costs (Marx, d). Marx
distinguishes two parts in the workers' wage, two elements of
reproduction costs of the commodity labour power. One is purely
physiological, and can be expressed in calories and energy quanta; this
is the bottom below which the wage cannot fall without destroying slowly
rapidly the workers' labour capacity. The second one is
historical-moral, as Marx calls it (Marx, i), and consists of those
additional goods and services which a shift in the class relationship of
forces, such as a victorious class struggle, enables the working class
to incorporate into the average wage, the socially necessary
(recognised) reproduction costs of the commodity labour power (e.g.
holidays after the French general strike of June 1936). This part of the
wage is essentially flexible. It will differ from country to country,
continent to continent and from epoch to epoch, according to many
variables. But it has the upper limit indicated above: the ceiling from
which profits threaten to disappear, or to become insufficient in the
eyes of the capitalists, who then go on an 'investment strike'. So Marx's theory of wages is essentially an accumulation-of-capital theory of wages which sends us back to what Marx considered the first 'law of motion' of the capitalist mode of production: the compulsion for the capitalists to step up constantly the rate of capital accumulation. THE
LAWS OF MOTION OF THE CAPITALIST MODE OF PRODUCTION If
Marx's theory of surplus-value is his most revolutionary contribution to
economic science, his discovery of the basic long-term 'laws of motion'
(development trends) of the capitalist mode of production constitutes
undoubtedly his most impressive scientific achievement. No other
19th-century author has been able to foresee in such a coherent way how
capitalism would function, would develop and would transform the world,
as did Karl Marx. Many of the most distinguished contemporary
economists, starting with Wassily Leontief (1938), and Joseph Schumpeter
(1942) have recognised this. While
some of these 'laws of motion' have obviously created much controversy,
we shall nevertheless list them in logical orders rather than according
to the degree of consensus they command. (a)
The capitalist's compulsion to accumulate. Capital appears in the form
of accumulated money, thrown into circulation in order to increase in
value. No owner of money capital will engage in business in order to
recuperate exactly the sum initially invested, and nothing more than
that. By definition, the search for profit is at the basis of all
economic operations by owners of capital. Profit
(surplus-value, accretion of value) can originate outside the sphere of
production in a precapitalist society. It represents then essentially a
transfer of value (so-called primitive accumulation of capital); but
under the capitalist mode of production, in which capital has penetrated
the sphere of production and dominates it, surplus-value is currently
produced by wage labour. It represents a constant increase in value. Capital
can only appear in the form of many capitals, given its very
historical-social origin in private property (appropriation) of the
means of production. 'Many capitals' imply unavoidable competition.
Competition in a capitalist mode of production is competition for
selling commodities in an anonymous market. While surplus-value is
produced in the process of production, it is realised in the process of
circulation, i.e. through the sale of the commodities. The capitalist
wants to sell at maximum profit. In practice, he will be satisfied if he
gets the average profit, which is a percentage really existing in his
consciousness (e.g. Mr Charles Wilson, the then head of the US
automobile firm General Motors, stated before a Congressional enquiry:
we used to fix the expected sales price of our cars by adding 15% to
production costs). But he can never be sure of this. He cannot even be
sure that all the commodities produced will and a buyer. Given
these uncertainties, he has to strive constantly to get the better of
his competitors. This can only occur through operating with more
capital. This means that at least part of the surplus-value produced
will not be unproductively consumed by the capitalists and their
hangers-on through luxury consumption, but will be accumulated, added to
the previously existing capital. The
inner logic of capitalism is therefore not only to 'work for profit',
but also to 'work for capital accumulation'. 'Accumulate, accumulate;
that is Moses and the Prophets', states Marx in Capital, Vol. I (Marx,
e, p. 742). Capitalists are compelled to act in that way as a result of
competition. It is competition which basically fuels this terrifying
snowball logic: initial value of capital ð(r) accretion of value
(surplus-value) ð(r) accretion of capital ð(r) more accretion of
surplus-value ð(r) more accretion of capital etc. 'Without competition,
the fire of growth would burn out, (Marx, g, p. 368). (b)
The tendency towards constant technological revolutions. In the
capitalist mode of production, accumulation of capital is in the first
place accumulation of productive capital, or capital invested to produce
more and more commodities. Competition is therefore above all
competition between productive capitals, i.e. 'many capitals' engaged in
mining, manufacturing, transportation, agriculture, telecommunications.
The main weapon in competition between capitalist firms is cutting
production costs. More advanced production techniques and more
'rational' labour organisation are the main means to achieve that
purpose. The basic trend of capital accumulation in the capitalist mode
of production is therefore a trend towards more and more sophisticated
machinery. Capital growth takes the dual form of higher and higher value
of capital and of constant revolutions in the techniques of production,
of constant technological progress. (c)
The capitalists' unquenchable thirst for surplus-value extraction. The
compulsion for capital to grow, the irresistible urge for capital
accumulation, realises itself above all through a constant drive for the
increase of the production of surplus-value. Capital accumulation is
nothing but surplus-value capitalisation, the transformation of part of
the new surplus-value into additional capital. There is no other source
of additional capital than additional surplus-value produced in the
process of production. Marx
distinguishes two different forms of additional surplus-value
production. Absolute surplus-value accretion occurs essentially through
the extension of the work day. If the worker reproduces the equivalent
of his wages in 4 hours a day, an extension of the work day from 10 to
12 hours will increase surplus-value from 6 to 8 hours. Relative
surplus-value accretion occurs through an increase of the productivity
of labour in the wage-goods sector of the economy. Such an increase in
productivity implies that the equivalent of the value of an identical
basket of goods and services consumed by the worker could be produced in
2 hours instead of 4 hours of labour. If the work day remains stable at
10 hours and real wages remain stable too, surplus-value will then
increase from 6 to 8 hours. While
both processes occur throughout the history of the capitalist mode of
production (viz. the contemporary pressure of employers in favour of
overtime!), the first one was prevalent first, the second one became
prevalent since the second half of the 19th century, first in Britain,
France and Belgium, then in the USA and Germany, later in the other
industrialized capitalist countries, and later still in the
semi-industrialised ones. Marx calls this process the real subsumption
(subordination ) of labour under capital (Marx, k), for it represents
not only an economic but also a physical subordination of the
wage-earner under the machine. This physical subordination can only be
realized through social control. The history of the capitalist mode of
production is therefore also the history of successive forms of -
tighter and tighter - control of capital over the workers inside the
factories (Braverman, 1974); and of attempts at realising that
tightening of control in society as a whole. The
increase in the production of relative surplus-value is the goal for
which capitalism tends to periodically substitute machinery for labour,
i.e. to expand the industrial reserve army of labour. Likewise, it is
the main tool for maintaining a modicum of social equilibrium, for when
productivity of labour strongly increases, above all in the wage-good
producing sectors of the economy, real wages and profits (surplus-value)
can both expand simultaneously. What were previously luxury goods can
even become mass-produced wage-goods. (d)
The tendency towards growing concentration and centralisation of
capital. The growth of the value of capital means that each successful
capitalist firm will be operating with more and more capital. Marx calls
this the tendency towards growing concentration of capital. But in the
competitive process, there are victors and vanquished. The victors grow.
The vanquished go bankrupt or are absorbed by the victors. This process
Marx calls the centralisation of capital. It results in a declining
number of firms which survive in each of the key fields of production.
Many small and medium-sized capitalists disappear as independent
business men and women. They become in turn salary earners, employed by
successful capitalism firms. Capitalism itself is the big
'expropriating' force, suppressing private property of the means of
production for many, in favour of private property for few. (e)
The tendency for the 'organic composition of capital' to increase.
Productive capital has a double form. It appears in the form of constant
capital: buildings, machinery, raw materials, energy, It appears in the
form of variable capital: capital spent on wages of productive workers.
Marx calls the part of capital used in buying labour power variable,
because only that part produces additional value. In the process of
production, the value of constant capital is simply maintained
(transferred in toto or in part into the value of the finished product).
Variable capital on the contrary is the unique source of 'added value'. Marx
postulates that the basic historic trend of capital accumulation is to
increase investment in constant capital at a quicker pace than
investment in variable capital; the relation between the two he calls
the 'organic composition of capital'. This is both a technical/physical
relation (a given production technique implies the use of a given number
of productive wage earners even if not in an absolutely mechanical way)
and a value relation. The trend towards an increase in the 'organic
composition of capital' is therefore a historical trend towards
basically labour-saving technological progress. This
tendency has often been challenged by critics of Marx. Living in the age
of semi-automation and 'robotism', it is hard to understand that
challenge. The conceptual confusion on which this challenge is most
based is an operation with the 'national wage bill', i.e. a confusion
between wages in general and variable capital, which is only the wage
bill of productive labour. A more correct index would be the part of the
labour costs in total production costs in the manufacturing (and mining)
sector. It is hard to deny that this proportion shows a downward secular
trend. (f)
The tendency of the rate of profit to decline. For the workers, the
basic relation they are concerned with is the rate of surplus-value,
i.e. the division of 'value added' between wages and surplus-value. When
this goes up, their exploitation (the unpaid labour they produce)
obviously goes up. For the capitalists, however, this relationship is
not meaningful. They are concerned with the relation between
surplus-value and the totality of capital invested, never mind whether
in the form of machinery and raw materials or in the form of wages. This
relation is the rate of profit. It is a function of two variables, the
organic composition of capital and the rate of surplus-value. If the
value of constant capital is represented by c, the value of variable
capital (wages of productive workers) by v and surplus-value by s, the
rate of profit will be s/(c + v). This can be rewritten as
[s/v]/[(c+v)/v] with the two variables emerging ((c + v)/v obviously
reflects c/v). Marx
postulates that the increase in the rate of surplus value has definite
limits, while the increase in the organic composition of capital has
practically none (automation, robotism). There will be a basic tendency
for the rate of profit to decline. This
is however absolutely true only on a very long-term, i.e. essentially
'secular', basis. In other time-frameworks, the rate of profit can
fluctuate under the influence of countervailing forces. Constant capital
can be devalorised, through 'capital saving' technical process, and
through economic crises (see below). The rate of surplus-value can be
strongly increased in the short or medium terms although each strong
increase makes a further increase more difficult (Marx, d, pp. 335-6);
and capital can flow to countries (e.g. 'Third World' ones) or branches
(e.g. service sectors) where the organic composition of capital is
significantly lower than in the previously industrialised ones, thereby
raising the average rate of profit. |