The socialisation of capital

Karl Marx’s alternative to capitalism part 39

Marx notes that a certain accumulation of capital is a precondition for the capitalist mode of production that it then develops accumulation enormously:

“The continual re-transformation of surplus-value into capital now appears in the shape of the increasing magnitude of the capital that enters into the process of production. This in turn is the basis of an extended scale of production, of the methods for raising the productive power of labour that accompany it, and of accelerated production of surplus-value.” (Marx Capital Volume 1)

This involves an increasing division of labour inside and outside the workplace; the introduction of machinery and development of large-scale industry; the application of science and knowledge to production; and the increasing transformation of the natural world, all of which can only be the work of many workers combined together.

While many Marxists have prioritised regard to the underdevelopment of imperialist dominated countries and the remaining industrial backwardness of many, they have been loath to also recognise the growth of capitalism which is a necessary feature of its existence. Instead of capitalist development being the grounds for socialism its relative lack of development is often considered to be the warrant for revolution.

This increasing accumulation of capital results in its concentration and centralisation, the former “only another name for reproduction on an extended scale.”  Centralisation of capital on the other hand allows the greater extension of capitalist accumulation: “a more comprehensive organisation of the collective labour of many people, for a broader development of their material motive forces, i.e. for the progressive transformation of isolated processes of production, carried on by customary methods, into socially combined and scientifically arranged processes of production.” (All quotes from Marx, Capital Volume III).

This centralisation accelerates accumulation and allows the creation of forces of production hitherto beyond the capacity of previous numerous smaller capitals, with Marx noting the example of the construction of railways in the 19th century.  These in turn add to the productive power of any particular capitalism, raising the standard of productivity required by any newly aspiring capitalist power; requiring it to match the already existing scale, division of labour and technology in order to successfully compete.  New capitalist enterprises or countries must aim to at least match this level of development in order to survive, even allowing for temporary protectionist measures it may adopt in then meantime.

The concentration and centralisation of production is but one aspect of the centralisation of capital, with capital in its money form also concentrated and centralised; through its expansion it becomes an enormous means for further development of production and accumulation.

As this accelerated accumulation becomes ever more powerful it heightens the contradictions of capitalism, including the elimination of smaller, or even larger, capitals by competitors, which becomes less and less acceptable to such capitals.

Cartels are formed that predetermine the level of production in order to support the prices and profitability of participating firms, and when even this is not enough socialisation goes further with the creation of monopolies.

“This is the abolition of the capitalist mode of production within the capitalist mode of production itself, and hence a self-abolishing contradiction, which presents itself prima facie as more a point of transition to a new form of production.”

Marx notes that expropriation as the starting point of capitalism – through depriving of peasants etc. of their means of production by severing their ties to the land so that they must sell their labour power to capital – becomes the expropriation of other capitals and the creation of monopolies.

The scope and scale of capital no longer allows for the great productive powers created to be the product of individual capitals but the combined power of socialised capital.  The financial system becomes one mechanism through which this socialised capital is concentrated, centralised and distributed.

The scale of production – including huge monopolies – and the power of the financial system require the intervention of the state to secure and regulate their workings, while the monopolies and financial system in turn intervene into the state to defend and advance its collective and specific interests.

This socialisation of production comes more and more into contradiction with the appropriation of production by individual capitals and tiny class of capitalists at its apex.  The massive planning of huge companies with internal economies larger than many countries stands in contrast to the uncontrolled gyrations of the economy as a whole.  The product of socialised labour is inimical to capitalist appropriation of its product, resulting in greater or lesser, but nevertheless permanent, inequalities due to class distinctions. 

The socialisation of production continues today, reflected in the growth of the concentration and centralisation of capital in monopolies and growth of the capitalist state.  Even after decades of ‘neoliberalism’ that supposedly relegated the importance of the state, in the US government spending as a percentage of Gross Domestic Product has reached around 40%, having been 34% in 1979 and 7% before World War I.

The expanding role of the state includes vital support for production as noted in the book of economist Mariana Mazzucato:

“Mazzucato lists twelve crucial technologies that make smartphones “smart “: (1) microprocessors; (2) memory chips; (3) solid state hard drives; (4) liquid crystal displays; (5) lithium-based batteries; (6) fast Fourier transform algorithms; (7) the internet; (8) HTTP and HTML protocols; (9) Global Positioning Systems (GPS); (11) touchscreens; and (12) voice recognition.  Every last one was supported by the public sector at key stages of development.” 

The extent of the concentration and centralisation of capital is recorded in a database of 37 million ‘economic actors’ from 194 countries (the Orbis 2007 marketing database reported on by New Scientist).  The socialisation of capital is illustrated by the 13 million ownership links involving ownership of shares etc. between these agents.  The study of these identified 43,000 transnational companies in 116 countries, plus an additional 500,000 other corporations and 77,000 individual shareholders to which the transnational corporations have direct or indirect ownership relations.  A core of 147 firms controls 40% of the value of the transnational corporations while 737 companies or individuals control 80%.

Such integration is also illustrated by the chance that any two firms in the S&P 1500 US stock market index will have a common owner holding at least 5% per cent of shares in both is 90 per cent, up from around 20 per cent only twenty years ago (People’s Republic of Walmart

In another academic paper (from 2018) the authors find that:

“In the last two decades, over 75% of U.S. industries have experienced an increase in concentration levels. We find that firms in industries with the largest increases in product market concentration have enjoyed higher profit margins and more profitable M&A deals. At the same time, we do not find evidence of a significant increase in operational efficiency, which suggests that market power is becoming an important source of value.”  The paper thus appears as another example of the view that monopolisation is at variance with the essential operation of capitalism.

This growth of the forces of production has relied upon the development of the labour of the working class, even if its powers have been turned against it; illustrated by notoriously anti-worker companies such as Amazon that are to the fore in developing unheard of levels of planning in their operations.

Nevertheless, the growing concentration and centralisation of capital, with its increased planning and networking of production and distribution, makes the potential for the working class to control such forces manifestly easier.  As Engels notes in an addition to Volume III of Capital, when speaking of the chemical industry, “competition has been replaced in England by monopoly, thus preparing in the most pleasing fashion its future expropriation by society as a whole, by the nation.” 

Back to part 38

Forward to part 40

4 thoughts on “The socialisation of capital

  1. This continues to be a significant and interesting series of posts. Your describe the nature of socialised capital as necessarily requiring planning and regulation, using methods, as Engels and Marx state borrow from the future socialist organisation. In fact, its not just socialised capital for which this is true. If we take a very large private capital, i.e. one in which all of the capital is provided by and owned by private owners, be it an individual, a family or a partnership of several owners, rather than one in which the company is itself a legal entity, such as a corporation or cooperative, the same would be true.

    Its actually not the essence of socialised capital that requires this, but the essence of large-scale production. Its just that, today, there are very few such very large privately owned capitals. It requires someone like Bill Gates, Elon Musk, Jeff Bezos etc, to have the wealth, where they could just out of their pocket, buy the factory, the machines, the materials and hire the labour, and so have ownership of the capital rather than just of shares. Even then, most even of these people do the latter rather than the former. Microsoft, Amazon and Tesla are all socialised capitals which borrow money from shareholders and so on, and pay them interest/dividends on those shares.

    The point about the scale of production, is what is important in relation to the requirements of planning and regulation, which necessitates the social-democratic state, and its use of planning and regulation then also at a macro-economic level, and increasingly at an international/global level, hence the EU etc., and global para state bodies such as the IMF, WTO, World Bank and so on, but it is the nature of socialised capital as capital that is not owned by capitalists either individually or collectively, but which is owned by itself, i.e. by the company – which as Marx says can only be the associated producers within it, which is the significant development in relation to the class struggle.

    It is significant because of this socialised capital is owned by the associated producers, i.e. the workers and managers – the latter also now coming from the working class – this begs the question of why they do not have control over that capital, which is basic bourgeois property law. Why is it that rather than the owners of this capital exercising control over it, instead control is exercised by a particular group of creditors of the company, i.e. shareholders. Such control is not granted to bondholders, who are just as much creditors of the company, nor to the bank that lends money to the company, nor to landlords who lend to the company in the form of land or property. Each of these lenders obtains what they are entitled to, as the price of the loan of money-capital, the shareholders bondholders and banks get interest on the money they loan, in different forms, and the landlord obtains rent. The reason they are entitled to these revenues, as Marx sets out in Capital III, is precisely that they give up possession of the thing they have lent, i.e. money-capital, land/property, in other words they have sold it for a given period of time.

    But, the whole point about such sale/loan is that the borrower becomes the owner of what has been lent, and has control over it for that period. A bank lends you money on a mortgage, giving you possession of that money for a given period. You use it to buy a house, but the fact that the bank loaned you the money does not mean they own the house, or have control over it. It is your house, provided you comply with the terms of the mortgage. Yet shareholders not only get the revenue they are entitled to for having sold money-capital to the company, they also get to act as though they had not sold it at all! They get to act as though the money-capital they have loaned to the company, and for which they have been paid, still belongs to them, and as if, therefore, the things bought with that money also belongs to them. In the famous jurisprudence discussion of the matter by Honore, its like someone selling you an umbrella, but then insisting on their right to use it themselves! In fact, not even all shareholders get to exercise this power. Some shares are classified as non-voting shares.

    This is the point that Marx makes in Capital III, Chapter 23, setting out the real nature and significance of socialised capital, as a transitional form of property between capital and socialised means of production. In the case of the workers cooperative the matter is clear. The individual workers and managers in the coop do not own the capital. The coop is itself the owner of the capital, but the coop is the associated producers within it, and it is only they that can act as its personification, and take votes, make decisions etc. If any individual worker dies, or leaves the coop, they do not take any ownership rights with them, whilst new workers coming into the coop do acquire such rights, and this is irrespective of whether they lend money to it, or not, for which, as Marx sets out in his Programme for the First International, would entitle them only to a small rate of interest on the loan, and nothing more.

    As Marx sets out, however, there is no difference between a joint stock company and a cooperative. Both are socialised capitals in the sense that the capital of the firm belongs to the company itself, not to any individuals or collections of individuals, be they workers, shareholders, bondholders or other creditor. The only thing any such creditor is entitled to is the price of the use value they lend to the company money/interest, land or property/rent.

    So, this is increasingly significant for the class struggle, and for the essence of your series of posts. The essence of concentration and centralisation is that all capital must tend to become socialised capital of this sort, which means as Marx says that a separation of the capital itself from the capitalist must take place. The capitalists become mere money lenders/coupon clippers, whereas the control of the actual capital should become the function of the professional managers, themselves drawn from the working-class, and who, as with the cooperatives should act as merely performing the function of labour of superintendence, like the conductor of an orchestra on the basis of democratic decisions taken by the associated producers themselves.

    In other words, not only do we have large scale industrial capital, and the state that rises up ion the basis of it, having to borrow the tools of the coming socialist society, but this very process of accumulation leads to the overthrow of capitalism within capitalist production itself, because the capitalists are no longer the owners of the actual capital. They are owners merely of loanable money-capital, which takes the shape of fictitious capital (shares, bonds, derivatives). And, as Marx says, once you arrive at this stage the money-lending capitalists function itself becomes as redundant as already had been the case with the role of the landlord in agricultural production. Credit means that the state itself can simply provide the required money-capital required by all of the socialised capital.

    But, in the meantime, as Marx describes, there is another development of the class struggle that occurs alongside this change of form of property, and its ownership. The interests of the fictitious capital/shareholders, and its owners is antagonistic to the interest of the real capital. The real capital needs to continue to expand, and to do so needs to maximise the profit of enterprise, i.e. to minimise what is paid as rent, or interest/dividends. The interest of shareholders, however, is to maximise dividends, or more recently the increase in share price, so as to obtain capital gains, which can be converted into revenues. So, as Marx says, because the shareholders continue to have this control over capital they do not own, they appoint Boards of Directors, which in turn appoint executives that sit on top of the actual functioning capitalists, the day to day professional managers, and the function of these higher boards is to look after the interests not of the company and its capital, but the interests of the shareholders. So, they have continually increased the proportion of profits going to dividends rather than accumulation, from 10% in the 1970’s, to 70% today; they use profits to buy back stock to inflate share prices, rather than using them to expand the business and so on.

    This is the objective basis of the class struggle today between socialised capital as real capital and fictitious capital, whose owners exercise control over capital they do not own. This is the property question that confronts us today. It is why the basic demand today should revolve around a struggle for industrial democracy, in the same way that in the 18th and 19th century a struggle for political democracy was waged. As Trotsky describes the demand for workers control is not one that can be raised sporadically, and for any individual capital, although that is the way the Left, when it raises it, tends to do so, as something tagged on to the end of demands for the capitalist state to nationalise this or that failing firm. No capitalist is going to voluntarily grant workers control, and in the case of corporations that means the executives who act in the interests of shareholders. Even less is the capitalist state going to do so. Demands for workers control for individual firms or industries are really just a deception, as Trotsky sets out, meaning either Mondism.

    A struggle for industrial democracy, for an end to the illegitimate control by shareholders over capital they do not own, and for control to be in the hands of the associated producers, is today, the basis of the political revolution required for Socialism. As such it can only be conducted as a class struggle, i.e. a political struggle of the whole class against the capitalist class and its state.

  2. One thing you might like to comment on at some point is a structural change in capitalism that is often not thought to be important enough for ‘marxists’ to debate. I am referring to the shift in the capitalism from industrialism to a largely service based economy. The typical way of not registering this as not being important is simply to say that the old industrial sectors have been relocated to what used to be called the third world, examples like China and India etc.

    We don’t do heavy industry and manufacturing in the advanced ‘West’ but it does get done in the semi-colonial world so the industrial working class is not contracting on a world scale. The prospect for class struggle are not diminishing on a world perspective.

    What are the ramifications of this structural change? Once upon a time ‘maoists’ claimed that the working class of the advanced world were no longer even potentially revolutionary, they shared in the profits accrued in the colonies. This sort of perspective disappeared for more than one reason, though China itself becoming super capitalist may have been a factor.

    There is reason to believe that the industrial companies of China and India will travel to the same destiny as the advanced West, that the service sector will gradually become the dominant one.
    So the argument that the size of the industrial working class is not contracting on a world scale is certainly open to debate.

    I am not sure that the shift to a largely service based economy has no consequence for class politics stands up to further study. While it is true that the process of the extraction of surplus value carries on into the service economy the experiences of those involved in the service based work places are very different to what occurred in the industrial past.

    In the days of the formation workers Soviets and Councils beginning in 1905 in Russia and then occurring in Italy, Germany and Hungary and other courtiers too, the process was based in industrial sectors that employed then of thousands of workers, ie centralised and concentrated workplaces. My favourite example of the change is with dock workers, there used to be tens of thousands of them is most port cites, including Belfast, today only a mere handful of dockers are required.

    The general point being that in the past the high points of class struggle and consciousness coincided with the rise of massive concentration of industrial workers in giant work places. In the west these nightmarish work places have largely disappeared to replaced by more agreeable service employment, fewer workers in concentration and solidarity and less nightmarish experiences. So the centralisation and concentration of capital does not seem to have resulted in the concentration of workers in bigger numbers, the number of workers involved have been in decline for decades, it is said that the British economy is 20 percent industrial and 80 percent services. I watch that BBC programme called the Factory and am struck by how few in number the actual workers are. Back in the day the same factories would have employed hundred and even thousands.

    I think it is all too easy to dismiss the shift from industrialism to service capitalism by pointing to what is held in common ie the surplus value extraction, the changes is more long lasting and profound.

    • Because the series of posts is about Marx’s views it is outwith its scope to deal with all the issues that arise for his views from later capitalist development; otherwise the series would last forever!

      You are right that what is known as service employment still involves wage labour, and extraction of surplus value, and still involves a (bourgeois) propertyless working class. The basic contradictions of capitalism arising from this therefore still exist.

      The concentration and centralisation of capital does not require larger and larger individual concentrations of workers. To the extent that technology replaces manual labour, their number will fall at any particular location, while the cheaper and more efficient production techniques will allow labour to be employed elsewhere, in other industries for example.

      The change from industrial employment to service employment is important for the development of class consciousness. as you say. My favourite example, is the Forge complex in the east end of Glasgow where I lived for a few years. At its height the Forge steelworks employed 20,000 workers. It closed in 1976, when I was living in Glasgow, and was replaced by ‘The Forge’ shopping centre; one of the kind that could exist anywhere.

      I might take up the question of class consciousness in future posts in the series, but that is a some way off yet, but you are right that it is important.

      • Quite correct. I covered this in my posts on Lenin on Economic Romanticism. Lenin makes the same point about concentration of capital as against concentration in one place of number of workers. The Narodniks made great play of the latter, in trying to show that Russia was not following the path of capitalist development, described by Marx.

        Lenin using Marx’s data from Capital shows that, the majority of workers in Britain, at the height of the Industrial Revolution, were not employed concentrated in large factories, but, in fact in domestic services, as the growth of a large middle class soaked up available labour. The concentration of large numbers of industrial workers is crucial for conditions of creating a vanguard, and for class consciousness, but once created, these ideas and consciousness are by no means then confined only to such layers of society.

        Lenin makes the same point about how, young workers who came to the cities and absorbed this more developed culture and ideas, then acted as transmitters for it back to the rural areas from which they had come. I have made the same point in relation to the metropolitan areas being the focus for the development of the class vanguard, and the role of young workers being the transmitter of these ideas, culture and class consciousness back into the decaying urban areas.

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