An exchange of views on Marx’s relations of production 2

The previous post raised a host of issues and it would take a great deal of time to address all of them adequately. Instead I’ll limit myself to only four, which I will still only touch upon.

1.In Marx’s time the main form of the petty bourgeoisie was the peasantry.   This class has declined dramatically across Europe, North America and Japan and is declining relatively in the rest of the world.  By contrast the working class, those that live by their wage labour, has grown enormously, and continues to do so, most recently in East Asian countries including China.  An ILO report from 2013 reported that in 2011 the world-wide labour force employed in agriculture was 1.208 billion, while that working in industry and services totaled 2.057 billion.  There may be more recent figures and more detailed analysis but the basic point would only be reinforced.

These trends are important because they reveal not just class numbers loosely defined but property relationships and class relationships as understood by Marxists. They reveal the growth of the class that Marx held was the grave-digger of capitalism and reduction in that class which owns, or is otherwise tied to, the means of production as land.  It also reveals the increasing role of capital and the class that personifies it. After all, the growth of wage labour and the working class implies the growth of capital that employs and exploits this wage labour.

2. It is argued that there is an emergence of a petty bourgeoisie and the example of Britain is referred to, where “the number of small firms paying taxes to the State as documented by government statistics is 5.7 million. a small firm in the statistics is defined as employing 250 people or less. Many of the 5.7 million we can presume to have families of at least one other person, so the number of people belonging to the petty bourgeoisie could be said to be about 11. 4 million.” Given that the population of the UK is 65.6m the petty bourgeoisie would be over 17% of this population.

But who are these petty bourgeoisie?  Well 76% of these small firms don’t employ anyone.  In Marxist parlance, they don’t exploit labour power. Of the remaining small businesses 96% employ an average of 1.6 workers.

On the other hand, seven thousand large businesses employ 40% of the labour force and account for 49% of total turnover of business.  The rest of the labour force, and just over half of the turnover, is accounted for 5,687,000 businesses. We therefore have a position in which 96% of businesses have fewer than 10 employees.

Over the 15 years from 2001 to 2016, in each year, 10% to 12% of businesses die while 10 to15% of businesses are born. Over ten years the odds aren’t good on surviving, although obviously, many do.  Not so far the makings of a powerful social class.

So over three quarters of the “petty bourgeoisie” don’t employ labour power.  They are self-employed.  So who are these self-employed?

It is first necessary to note that this group has grown in the UK over the last number of years from 3.3 million people in 2001 to 4.8 million in 2017, or from 12% of the labour force to 15%.  However, this growth has been driven by those self-employed who employ no one but themselves, accounting for 2.4 million in 2001 and 4 million in 2016.

The level of earnings among the self-employed is lower than those in employment.  The most common level is £400 per week for employees but only £240 per week for the self-employed, and the difference in the median earnings between the two groups has grown during these fifteen years.

Earnings of part time self-employed male workers were only just over half of their total income while almost 34% came from pension and retirement income, which was also the second most important source of income for female part-time self-employed workers, who also relied on benefits and tax credits for over 17% of their total income. Many of the self-employed are therefore at an age to collect their pension, or rely on welfare benefits and tax credits.

In terms of wealth just over 25% of the self-employed do not own property, while a slightly greater proportion (26.9%) of employees own no property.  The proportion owning less than £125,000 is less than 30% but around 35% for employees.  At the highest end about 10% of self-employed have property wealth of £500, 000 and over, while the share is only just over 5% for employees.

Just over 45% of the self-employed have no private pension wealth and the self-employed lag behind employees in all the income ranges of such wealth, from those with private pensions worth less than £25,000 to those that have pensions worth more than £500,000. If we look at financial wealth there is little difference between the two groups in the 35 to 54 age group, although 19.4% of the self-employed fall into the £100,000 and over range while only 12.2% of employees do so.

So even if we took, as a crude estimate, the top 20% of the self-employed as owning significant wealth, wealth that is however not enough to save them from working – as we have seen many still do so after retirement, we are talking about roughly 20% of 4.8m, which is nearly 1 million.

If we repeat the exercise of adding one additional family member, which may be on the low side, we get 2 million people.  If we add the number of small and medium businesses that actually employ people, and also add one family member to each, we get 2.7 million people.  In other words, this method of estimating the petty bourgeoisie gives us a total of 4.7 million, not 11.4.  If we round this figure up to 5 million (this is hardly a scientific exercise anyway) we get a percentage of 7.6% of the UK population. Even if we made a crude estimate to work out this group as a proportion of the adult population, the percentage would be something like 10% of the total population. By no means insignificant but less impressive when we consider the tiny fraction of the population that can be considered as consisting of the capitalist class and the vast majority who can be considered as the working class.

The point of this exercise is only to show that this approach to trying to show the power of a new petty bourgeoisie is faulty.  For example, many of the self-employed are construction workers enticed into such status through tax incentives, while many are described as ‘dependent self-employed’, who have none of the advantages of workers’ rights such as employment protection, holiday and sickness entitlements.  In these ways they are exploited more than many employed workers.

Of course, there are self-employed finance consultants, some making do after redundancy from the City; and others are IT consultants, journalists, engineers, accountants etc.  We have seen that many earn less than ordinary employees and could be more accurately classified as such.  The self-employed include in their ranks taxi drivers, plumbers, hairdressers, lorry drivers, musicians and other artists, as well as a host of others.  Legal definition should not get in the way of class analysis.

3. Belfast Plebian makes reference to the idea that the petty bourgeoisie “lived off a surplus extracted from the manual proletariat.”  So far as Marx was concerned the distribution of surplus value involved the payment of state employees out of the surplus created by workers in the productive sector of the economy through taxation.  By productive sector we mean productive of surplus value.  In this case cleaners in the NHS, civil servants in offices and teachers in schools are all paid from surplus value created by other workers.

Most people would understand these people as part of the working class, and they would be right. Irrespective of legal definition, this is also true of many self-employed workers.

Productive workers (productive of surplus value) are not by that account exploited by these workers, since the latter are paid a wage, not out of capital but out of taxation of surplus value.  Their labour is not exploited but the productive labour from which their wages originate is exploited by capital, which is taxed.  They are paid a wage that generally represents a value equal to their labour power, which may be less than the value that their labour time worked might otherwise produce in the productive sector.

Those self-employed, or highly paid state employees, or even more highly paid managers of capitalist enterprises, may be paid a salary that is so high it would not involve any exploitation, where they productive workers.  That is, their salary would cover not only the value of their labour power, the assumed value created by their necessary labour that corresponds to a normal wage, but also any potential surplus value that they could create, that normally would be appropriated by the capitalist as profit.

It should be recognised that many workers described as middle managers or even senior managers are not in any real sense allied to capital in the suppression of their fellow workers, in their assurance of the social reproduction of the capitalist system.  In the state sector in the NHS for example, you can be a ‘senior manager’ but have little control over the organisation you work for, and such control as you have is simply supervision of more junior staff, and if you’re lucky, some minor control over your own work.

Many professions are being proletarianised, with accountants and lawyers more and more divided between those training and earning a pittance; those qualified and hoping for a decent wage; and those earing smaller or larger fortunes at the top of the profession.

That a worker therefore lives off the surplus value created by another worker, either in the state or private sector, does not therefore make them part of the petty bourgeoisie; just as in the contrary case, someone earning a salary could be paid so much that they are amassing capital through savings. The latter might move from well-paid worker creating surplus value, to a petty bourgeois that isn’t exploited, to a manager aspiring to becoming a capitalist. As we have seen, most self-employed are not in the last camp, not in the second camp either, but are in the first – they are effectively working class.

4. Belfast Plebian states that ‘the division of mental and manual labour is directly bound up with the monopolisation of knowledge, Those ‘Marxists’ who do acknowledge the mediating role of the petty bourgeoisie try to save the two class schema of Marx by classifying the new petty bourgeoisie in terms more akin to high skilled workers and therefore still make them receptive to a future socialism, but what sort of socialism?”

Belfast plebian is right that what he calls the petty bourgeoisie are often skilled workers, as I have argued above.  In contrast to many socialists today, who equate socialism with the interests of simply the poor, it has often been reactionary conservatives who have appealed to skilled workers as a means of dividing the working class.

But Marx makes clear that capitalism makes the working class fit to become the ruling class of society and it has done so by increasingly destroying any basis for the monopolization of knowledge.  As this post makes clear, capitalism has created and is still creating an educated working class, and without it no socialism is possible.  Only a view that socialism arises solely from crisis and oppression can fail to recognise and welcome this development as, far from postponing or calling into question the potential to create a new society, the increasing education of working people makes it more likely.

And what sort of socialism does this make workers receptive to? Well, one in which they can develop to the full their existing freedom, knowledge and capacities, that capitalism has promised and given potential to, but which it frustrates and limits.  That is, not the experience of the Russian revolution, where workers found themselves reliant on ‘bourgeois’ experts, but rather the situation more prevalent now, in which they increasingly find the experts from within their own ranks.

Lenin never made the mistake of thinking socialism relied on the most oppressed, otherwise he would have stood on the ground of the peasantry.  Marxists believe the working class is the potential creator of a single class i.e. a classless society, because it is much more than an oppressed class but has the interests and capacity to liberate the whole of society.

Back to part 1

An exchange of views on Marx’s relations of production 1

In response to an earlier post on Marx’s views on the contradiction between the forces and relations of production, which gives rise to the potential transition to socialism, a comment questioned the relevance of Marx’s views on the relations of production for understanding current society.  This comment is reproduced below and will be followed by a reply in a further post.

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The historical scheme that Marx was familiar with is barely credible for us today. He argued that in the pre-capitalist era there existed two primary social classes the landed nobility and the peasant serfs. Then a third class emerged that developed the productive forces to a higher degree than was normal for feudalism, this class he called the bourgeoisie. The economic activity of the bourgeoisie really quite quickly brought into play a new class of wage labourers called the proletariat. So we had a transition out of feudalism requiring three classes, being superseded by a capitalist society involving only two primary social classes. The argument then goes the further development of the productive forces within capitalism requires another transition into a society consisting of only one social class, the ‘associated producers’. So we start with three social classes and end up with only one social class, this is not of conscious choice but due mainly to the economic rationality implicit in the act of developing the productive forces. 

The problem is that the schema leaves out the emergence of another social class that we like to dismiss all too readily, called the petty bourgeoisie. It has been a fixed point or Marxism to refer to this social class as a declining or disappearing social class, it is often referred to in the language of harsh politics as the reactionary or conservative social class, Trotsky even spoke about fascism in terms of the petty bourgeoisie having gone wild. The empirical evidence for the gradual disappearance of the petty bourgeoisie is based on economic criteria and not actual sociological numbers, what one could call a political criteria. In Britain for example the number of small firms paying taxes to the State as documented by government statistics is 5.7 million. a small firm in the statistics is defined as employing 250 people or less. Many of the 5.7 million we can presume to have families of at least one other person, so the number of people belonging to the petty bourgeoisie could be said to be about 11. 4 million. This is close to the 12 million who for about one hundred years have been voting for the Conservative Party.

One economic argument that is deployed to downgrade the social importance of the petty bourgeoisie is that the numerically large small business class is in the last instance dependent and subordinate to the real bourgeoisie that in numerical terms is very small, the so called 1 percent. So despite the large numbers, the petty bourgeoisie is responsible for a falling portion of the GDP. The assumption is that small businesses are by definition less efficient than large businesses, small farms and small shops etc. are sure to be eliminated by the larger efficient firms. 

The historical argument is that the petty bourgeoisie is bound to decline and disappear because they stand as an obstacle in the way of the further development of the productive forces. This was taken as basic to Marxist analysis until Nicos Poulantzas in his book Classes in Contemporary Capitalism proposed an account for an emergent class standing between the bourgeoisie and the proletariat that was qualitatively different from the historic property owning petty bourgeoisie, he called them the ‘new petty bourgeoisie’. He used three criteria to differentiate the new petty bourgeoisie, the most important being their supervisory and management position role within the monopoly firms. They were the numerous senior and junior managers, work supervisors, scientists, engineers, accountants, technical and legal staff advisers that the absentee bourgeoisie needed to maintain their portfolio owned firms :

‘The division of mental and manual labour is directly bound up with the monopolisation of knowledge,the capitalist form of appropriation of scientific discoveries and the reproduction of ideological relations of domination/subornation, by the permanent exclusion on the subordinated side of those who are deemed not to know how’

One revolutionary characteristic of this new petty bourgeoisie was their interest in developing the productive forces to the highest degree possible, maybe this might make them a potential resource for a transition to socialism but experience suggested otherwise. This looks like the very same class of ‘knowing people’ that Lenin had to call on to maintain and modernise the factories, and the same class that Stalin had to offer special economic privileges to keep them loyal, and the same knowledge class that eventually overthrew ‘socialism’ in the Soviet Union.

In short a third social class emerged between the two classes of bourgeois and proletarian, Poulantzas called them the ‘new petty bourgeoisie’, and this class does have an interest in the further development of the of the productive forces. It is because of the obvious presence of this social class that bourgeois commentary assures itself of the long term stability of capitalism, bourgeois commentary in academia and journalism operates under the assumption that we inhabit a class divided yet solid bourgeois society. The working class is an integral part of bourgeois society but it is not the only the real stakeholder, the big bourgeois in the form of the bankers and the global bond holders can be hated and despised without fear of social instability because they also are not the solid part, it is the the political solidarity of the old and the new petty bourgeois that really preserves the private property basis of capitalism.

Those ‘Marxists’ who do acknowledge the mediating role of the petty bourgeoisie try to save the two class schema of Marx by classifying the new petty bourgeoisie in terms more akin to high skilled workers and therefore still make them receptive to a future socialism, but what sort of socialism? Could it be the socialism of a new class society that became the Soviet Union? The class that came to organise the Soviet Union seems to fit with the three criteria Poulantzas used to define the new petty bourgeoisie that emerged out of monopoly capitalism:

1 They lived off a surplus extracted from the manual proletariat. 2 They conducted supervisory activity over other workers. 3 They performed mental labour and possessed specialised knowledge of a scientific kind.

Forward to part 2

Karl Marx’s alternative to capitalism part 27 – forces and relations of production 10

The endorsement of workers’ cooperatives by Marx with which the previous post in this series finished needs emphasis because all too many of today’s Marxists fail to acknowledge their place in Marx’s alternative to capitalism. To take just one example: the Irish Marxist Kieran Allen, in his ‘Karl Marx and the Alternative to Capitalism’, references workers’ cooperatives under the heading of ‘Marx and Utopianism’, and with a view that appears to see these cooperatives as ‘islands of socialism’ within a capitalist sea, that “could not break with the logic of capitalism.”  The endorsement of workers’ cooperatives by Marx is not referred to by him, which is more than remiss given the title of the book.

Instead trade union organisation is endorsed and the perspectives of Marx described thus:

“Marx’s approach, therefore, was not to build alternatives within the existing mode of production but to overthrow it”

This is a view common to many of today’s Marxists.  However, by using this example of this approach, a number of points can be made, by way of illustration how it may be contrasted to the approach set out so far in these posts.

First, it might be pointed out that while cooperatives may not break completely with the logic of capitalism, this was well understood by Marx, as the first sentence of the extensive quote from the last post makes plain – “The co-operative factories of the labourers themselves represent within the old form the first sprouts of the new, although they naturally reproduce, and must reproduce, everywhere in their actual organisation all the shortcomings of the prevailing system.”

Second, it may be noted that not only do trade unions enforce the logic of capitalism, by bargaining the price of labour power in the labour market, but they are obviously built within the existing system and generally do not seek to overthrow it, a criticism levelled at cooperatives.

In this sense, it is equally obvious that unless the alternative is built “within the existing mode of production” there will be nothing with which “to overthrow it”.   Something as true of a working class party as of cooperative workplaces.  Without material foundations for example, there will be no revolution, certainly not one that is successful.  This will be the case because it is not just a question of overthrowing capitalism but of replacing it, and the replacement cannot be conjured out of nothing.  It cannot arise from empowering the state to take control – because this is not socialism, as the series of posts on the Russian revolution demonstrated.  But it will also not arise from within the heads of the working class unless the real world outside their heads, the’being that determines consciousness’, propels them to it.

Both within workers’ consciousness and the real world that creates this consciousness there must be a viable alternative, one that the creation of workers’ cooperatives within capitalism can represent.  In this sense, such cooperatives can be made, if not islands of socialism, then sites of struggle to win workers to ownership of the means of production right across society, and a giant step towards it within the existing system.

Allen argues that “unlike the capitalist class, workers need direct political power to begin the process of liberating themselves” (emphasis added), but this confuses the requirement for revolution, and the conquering of political power by the working class, with the process to get there, and what the working class needs to do afterwards in order to rule, not just in the political sense but as a ruling social class.  Much of the Marxist movement has been handicapped by failure to properly understand the necessity to advance the economic, social and political power of the working class, in the way Marx sought to do, within capitalism, as a prerequisite of, and prior to, overthrowing and replacing it.

Since this is a necessity whether one believes it is required or not, the vacuum created by lack of such understanding is filled by reformist and statist conceptions of working class struggle and socialism, which are as routinely condemned as much as they are advanced in practice.  These statist conceptions of socialism were opposed by Marx, as by many Marxists today, but he had conceptions of the alternative, which many of today’s Marxists do not. They thus lapse into Keynesian remedies and calls for nationalisation, ignoring experience of the latter when it happens and results in enforcement of the logic of capitalism – as in Ireland with bank nationalisation and creation of an enormous property development company by the state – NAMA.

This yawning gap in the conception of how the working class prepares itself to be the ruling class, to carry out a revolution, has all sorts of other deleterious consequences, leading not just to reformist capitulation but alternatively to ultra-left isolation, and retreat into vanguardist conceptions that amazingly can include reformist politics as well.  Since the real prerequisites for socialist revolution are ignored, the experience of heightened episodes of class struggle are continually misapprehended as revolutionary outbreaks when they are not.  Their failure leads to a search for scapegoats, for villains who have betrayed, without pausing to ask how this betrayal could have been allowed if the working class was already revolutionary.

It means that even those parties with the purest revolutionary programmes will be compelled to retreat and betray their revolutionary beliefs because the working class they seek to lead, and may even succeed in leading for a time, is simply not in a position to make a revolution, a weakness inevitably reflected in their political consciousness.  Retreat in such circumstances is inevitable regardless of subjective wishes and intentions.

In practice, such realisation affects the most radical parties long before they are in a position to claim outright leadership of the majority of the working class, whereupon the left section denounces the right as betraying socialism and the right denounces the left as lacking in realism.  Meanwhile the decisive question is how the working class has prepared itself for political power, because it is the class that creates the party, not the other way round.

The prevailing general conception of many Marxists is presented by Allen this way:

“It was only in the process of revolution that the mass of people learnt to clarify their own interests and develop a different understanding of their society. In normal times, the majority accept the legitimacy of their rulers and at least some of their ideas.  This cannot be changed simply through preaching, teaching or good example.  A new consciousness cannot emerge on a mass scale by workers ‘waking up’ and then passively following the teachings of their intellectual masters or clever television presenters.  Experience of class struggle is the only way in which people can learn, and, as Draper put it, ‘revolution speeded up the curriculum and enriched the course.’”

What this says is that only revolution can bring about the consciousness within workers that a revolution is required, which is actually partly true but obviously hardly adequate; in other words inadequate.  Read in reverse, the paragraph quoted above makes the weakness of this conception clearer; for it reads – revolution becomes the means of ‘waking up’ the workers, while revolution is the result of their ‘waking up’.

As a more or less sudden and abrupt process, of greater or shorter duration, a revolution alone cannot equip the working class with the consciousness that society must be organised by themselves and that they have the capacity to do so.  Marxists often note that consciousness lags behind material changes in the real world, and stand firmly on the ground that such material reality is the soil upon which consciousness grows.  It is therefore the case that anticipations of the new socialist society must appear within capitalism for the consciousness of the new society to also appear and grow, and to achieve hegemony within the working class.  As we have noted, of all the developments of the forces and relations of production under capitalism, it is cooperative production, working class control of the means of production – even within the capitalist system – that Marx notes should be considered one of the“transitional forms from the capitalist mode of production to the associated one.”

The creation of workers’ cooperatives raises the potential for increasing numbers of workers to understand the possibility of working class ownership of the means of production.  Such ownership also has the potential to demonstrate the benefits of increasing the scale and scope of cooperative production within capitalism – the benefit of cooperative enterprises cooperating with each other.

It also has the potential to demonstrate the ultimate requirement to defend this working class control through rejecting a capitalist state that exists to defend capitalist ownership and control.   The need for the working class to have its own state can be demonstrated when it becomes clear that it needs it to defend its own cooperative property.

Cooperative production has the potential to burst asunder the existing relations of capitalist production and release the fetters on the forces of production increasingly under strain from the limitations imposed on the socialisation of production by capitalist property relations. So, for example, the savings of workers, including their pension funds, can be mobilised using the existing system of socialised capital to provide the funding for workers to create their own cooperatives.

Workers’ cooperatives are not however a ‘magic bullet’ and do not replace the various other means by which workers must organise, in trade unions and political parties etc. as the example of Marx and Engels’ own lives demonstrates.  Cooperative factories were however important for how they conceived of the transition from capitalism to socialism and clearly fit their conceptions relating to the forces and relations of production that we have reviewed in these last number of posts.

Back to part 26

Karl Marx’s Alternative to capitalism part 26 – forces and relations of production 9

In the previous series of posts I have set out Marx’s views on the contradictions of capitalism, between its productive forces and the relations of production, and have gone to some length to explain the concepts involved.

Much of this might seem rather tenuously related to the issue of Marx’s alternative to capitalism.  Previously, however, I have explained that this alternative can only arise out of existing society, and not from any sort of blueprint, either based on high moral values of equality and justice etc. or more or less elaborate plans for the a society, for example how a planned economy might be made to work more efficiently than capitalism.

More particularly, this alternative cannot be conceived as simply political revolution, for such a revolution presupposes the grounds for its success – on the development of the forces and relations of production as set out in these previous posts, this one and the next one.

The development of the forces and relations of production explains how the alternative that grows within capitalism and will supersede it might be conceived, and on these grounds that political revolution might be considered a reasonable objective.

In this way, Marx explains how the development of capitalism creates the grounds and tendencies of development of an alternative society:

“The conditions for production become increasingly general, communal and social, relying less on the individual capitalist. We have seen that the growing accumulation of capital implies its growing concentration. Thus grows the power of capital, the alienation of the conditions of social production personified in the capitalist from the real producers. Capital comes more and more to the fore as a social power, whose agent is the capitalist. This social power no longer stands in any possible relation to that which the labour of a single individual can create. It becomes an alienated, independent, social power, which stands opposed to society as an object, and as an object that is the capitalist’s source of power.”

“The contradiction between the general social power into which capital develops, on the one hand, and the private power of the individual capitalists over these social conditions of production, on the other, becomes ever more irreconcilable, and yet contains the solution of the problem, because it implies at the same time the transformation of the conditions of production into general, common, social, conditions. This transformation stems from the development of the productive forces under capitalist production, and from the ways and means by which this development takes place.”

Marx sets out “Three cardinal facts of capitalist production:

1) Concentration of means of production in few hands, whereby they cease to appear as the property of the immediate labourers and turn into social production capacities. Even if initially they are the private property of capitalists. These are the trustees of bourgeois society, but they pocket all the proceeds of this trusteeship.

2) Organisation of labour itself into social labour: through co-operation, division of labour, and the uniting of labour with the natural sciences.

In these two senses, the capitalist mode of production abolishes private property and private labour, even though in contradictory forms.”

Marx notes that the bigger, more concentrated and centralised capital becomes, the less important is the role of the capitalist himself, while this process simultaneously involves the centralisation of capital in a few hands including through the decapitalisation of many.  Although “this process would entail the rapid breakdown of capitalist production, if counteracting tendencies were not constantly at work alongside this centripetal force, in the direction of decentralisation.” (Capital Volume III, p 354 – 355)

Ernest Mandel, in his introduction to Volume III of Capital, sets out a flow-diagram putting forward the elements of Marx’s analysis and placing them within separate boxes, with the end point being ‘socialism’, and with the penultimate box the ‘tendency towards collapse of capitalist system’.

While useful as a graphical presentation of the elements of Marx’s analysis, it is misleading if it is assumed that socialism is simply a result of capitalist collapse, rather than capitalist collapse being the result of socialism, in other words the actions of the working class.

It is however useful to sum up the last few posts by itemising these different elements that are  included in Mandel’s schematic, with the understanding that socialism is not the result of the automatic working out of any or even all of these factors, but rather the conscious intervention of the working class, not in a voluntarist way, but arising out of (at least some of) the factors set out below, and in particular ways that we shall later explore.

  • Growing difficulty of maintaining market economy, value realisation, under conditions of growing automation.
  • Periodic crises of overproduction.
  • Tendency to growing centralisation of capital in fewer and fewer hands.
  • Tendency of average rate of profit to decline.
  • Tendency to growing objective socialisation of labour.
  • Growing contradiction between socialised labour and private appropriation.

The contradiction between capitalist relations of production and its productive forces is evident every day, in the inability of capitalism to secure permanent full employment, in fact its inability to function without a reserve army of labour that helps regulate its functioning.

The tendency to the socialisation of production through, for example, the growth of monopoly might be seen as anticipation of socialism, which in a negative fashion it is, but while it entails increased planning within enterprises, it does not otherwise prevent capitalist crises.

Likewise, increased state ownership and intervention also anticipates resolution of the contradiction between the forces and relations of production, but does not resolve it and does not represent a model of future society.  As Engels notes:”

“But, the transformation — either into joint-stock companies and trusts, or into State-ownership — does not do away with the capitalistic nature of the productive forces. In the joint-stock companies and trusts, this is obvious. And the modern State, again, is only the organisation that bourgeois society takes on in order to support the external conditions of the capitalist mode of production against the encroachments as well of the workers as of individual capitalists.”

“The modern state, no matter what its form, is essentially a capitalist machine — the state of the capitalists, the ideal personification of the total national capital. The more it proceeds to the taking over of productive forces, the more does it actually become the national capitalist, the more citizens does it exploit. The workers remain wage-workers — proletarians. The capitalist relation is not done away with. It is, rather, brought to a head. But, brought to a head, it topples over. State-ownership of the productive forces is not the solution of the conflict, but concealed within it are the technical conditions that form the elements of that solution.”

The true anticipation and herald of the new mode of production is contained in the development of workers’ production, anticipation of the associated workers’ mode of production, through the growth of workers cooperatives, as argued by Marx:

“The co-operative factories of the labourers themselves represent within the old form the first sprouts of the new, although they naturally reproduce, and must reproduce, everywhere in their actual organisation all the shortcomings of the prevailing system. But the antithesis between capital and labour is overcome within them, if at first only by way of making the associated labourers into their own capitalist, i.e., by enabling them to use the means of production for the employment of their own labour.”

“They show how a new mode of production naturally grows out of an old one, when the development of the material forces of production and of the corresponding forms of social production have reached a particular stage. Without the factory system arising out of the capitalist mode of production there could have been no co-operative factories. Nor could these have developed without the credit system arising out of the same mode of production. The credit system is not only the principal basis for the gradual transformation of capitalist private enterprises into capitalist stock companies, but equally offers the means for the gradual extension of co-operative enterprises on a more or less national scale.”

“The capitalist stock companies, as much as the co-operative factories, should be considered as transitional forms from the capitalist mode of production to the associated one, with the only distinction that the antagonism is resolved negatively in the one and positively in the other.” (Capital Volume III)

Back to part 25

Forward to part 27

Karl Marx’s Alternative to capitalism part 25 – forces and relations of production 8

For Marx in the 1859 Preface “the material productive forces of society come into conflict with the existing relations of production or – this merely expresses the same thing in legal terms – with the property relations within the framework of which they have operated hitherto. From forms of development of the productive forces these relations turn into their fetters. Then begins an era of social revolution.”

At this stage, it is useful to let Marx’s writings themselves set out what he means.  Explaining the nature of this conflict in Capital Vol III: “the contradiction in this capitalist mode of production consists precisely in its tendency towards the absolute development of productive forces that come into continuous conflict with the specific conditions of production in which capital moves, and can alone move.”

“On the other hand, too many means of labour and necessities of life are produced at times to permit of their serving as means for the exploitation of labourers at a certain rate of profit. Too many commodities are produced to permit of a realisation and conversion into new capital of the value and surplus-value contained in them under the conditions of distribution and consumption peculiar to capitalist production, i.e., too many to permit of the consummation of this process without constantly recurring explosions.”

“Not too much wealth is produced. But at times too much wealth is produced in its capitalistic, self-contradictory forms.”

“The limitations of the capitalist mode of production come to the surface:

“1) In that the development of the productivity of labour creates out of the falling rate of profit a law which at a certain point comes into antagonistic conflict with this development and must be overcome constantly through crises.”

“2) In that the expansion or contraction of production are determined by the appropriation of unpaid labour and the proportion of this unpaid labour to materialised labour in general, or, to speak the language of the capitalists, by profit and the proportion of this profit to the employed capital, thus by a definite rate of profit, rather than the relation of production to social requirements, i.e., to the requirements of socially developed human beings. It is for this reason that the capitalist mode of production meets with barriers at a certain expanded stage of production which, if viewed from the other premise, would reversely have been altogether inadequate. It comes to a standstill at a point fixed by the production and realisation of profit, and not the satisfaction of requirements.”

The barriers to development of the forces of production that would threaten its continued existence are explained.

“The rate of profit, i.e., the relative increment of capital, is above all important to all new offshoots of capital seeking to find an independent place for themselves. And as soon as formation of capital were to fall into the hands of a few established big capitals, for which the mass of profit compensates for the falling rate of profit, the vital flame of production would be altogether extinguished. It would die out. The rate of profit is the motive power of capitalist production. Things are produced only so long as they can be produced with a profit. . . . Development of the productive forces of social labour is the historical task and justification of capital.”

“At any rate, it is but a requirement of the capitalist mode of production that the number of wage-workers should increase absolutely, in spite of its relative decrease. Labour-power becomes redundant for it as soon as it is no longer necessary to employ it for 12 to 15 hours daily. A development of productive forces which would diminish the absolute number of labourers, i.e., enable the entire nation to accomplish its total production in a shorter time span, would cause a revolution, because it would put the bulk of the population out of the running.”

“This is another manifestation of the specific barrier of capitalist production, showing also that capitalist production is by no means an absolute form for the development of the productive forces and for the creation of wealth, but rather that at a certain point it comes into collision with this development. This collision appears partly in periodical crises, which arise from the circumstance that now this and now that portion of the labouring population becomes redundant under its old mode of employment. The limit of capitalist production is the excess time of the labourers. The absolute spare time gained by society does not concern it. The development of productivity concerns it only in so far as it increases the surplus labour-time of the working-class, not because it decreases the labour-time for material production in general. It moves thus in a contradiction.”

Marx contends “that the bourgeois mode of production contains within itself a barrier to the free development of the productive forces, a barrier which comes to the surface in crisis and, in particular over-production – the basic phenomenon in crisis.”  (Theories of Surplus Value Vol !!)

“In world market crises, all the contradictions of bourgeois production erupt collectively; in particular crises (particular in their content and in extent) the eruptions are only sporadical, isolated and one-sided.  Over-production is specifically conditioned by the general law of the production of capital: to produce to the limit set by the productive forces, that is to say, to exploit the maximum amount of labour with the given amount of capital, without any consideration for the actual limits of the market or the needs backed by the ability to pay . . . “

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Karl Marx’s alternative to capitalism part 24 – forces and relations of production 7

Not only do increases in production often require machines to replace living labour but the increase in productivity necessarily increases the share of materials purchased and incorporated into the increased number of products produced.  Materials which pass only their own value into the final product and no new surplus.

Marx is explicit on this general point – “Moreover, it has been shown to be a law of the capitalist mode of production that its development does in fact involve a relative decline in the relation of variable capital to constant, and hence also to the total capital set in motion.” (Capital Volume III p 318)

Of course, there are often efficiencies created in the use of materials and also in the value and cost of machinery, which again is also a result of increased productivity in the industries that produce them. As Marx says “We see here once again how the same factors that produce the tendency for the rate of profit to fall also moderate the realisation of this tendency.” (Capital Volume III p 343)  And, of course, while the number of workers may reduce, the time they spend creating value purely for the capitalist will increase.

These all offset any fall in the share of surplus value in the total value of production but irrespective of this, the compulsion to increase productivity and reduce the employment of labour and its cost, impels individual capitals to seek these improvements because individually they will be able to undercut costs in relation to rivals, while perhaps selling at the same or slightly lower price than competitors while making a more significant profit.

Should their new methods of production become generalised among the majority of capitalists in their sector of production, or the less productive ones fail and exit production, then the overall share of labour in that sector of production will fall and so will the share of surplus value and of profit.  What makes sense for an individual capitalist reduces the share of profits for everyone in the sector – the development of the forces of production conflict with the relations of production which are based on seeking the greatest possible expansion of surplus value.

Such a fall in the amount of living labour in production can be offset by increased levels of exploitation but a rise in level of exploitation can check but may not cancel the fall in the rate of profit, and this is particularly so at high levels of organic composition of capital; although the latter assumes technological development that can do this across more and more industrial sectors, and increasingly so to new sectors and any new independent capitals thrown up.

A falling rate of profit may also be compensated by growth in the absolute size of surplus value although augmentation of this would decline if the absolute amount of living labour (variable capital) declines, or much more likely, its augmentation declines relatively if the quantity of living labour fails to grow at the relatively high rate commensurate with the growth of constant capital – machinery and materials etc.

While the rate of profit may fall, it may thus be the case that the mass of profit still rises, indeed given that capitalism involves the accumulation of more and more capital this mass must increase.  Marx allows that the absolute size of variable capital and surplus value may rise – in fact it “must be the case . . . on the basis of capitalist production.” (Volume III pp 322 – 324) This is certainly the reality of capitalism since Marx developed his analysis.

“Capitalist production is accumulation involving concentration of capital is simply a material means for increasing productivity.  Growth of the means of production entails growth in the working population and creation of a surplus population. (p324 – 325)

“As the process of production and accumulation advances, therefore, the mass of surplus labour that can be and is appropriated must grow, and with it too the absolute mass of profit. . . The same laws , therefore, produce both a growing absolute mass of profit for the social capital, and a falling rate of profit.”  (p 325) “A fall in the profit rate, and accelerated accumulation, are simply different expressions of the same process, in so far as both express the development of productivity. . .” (p349)

“Thus, the same development of the social productiveness of labour expresses itself with the progress of capitalist production on the one hand in a tendency of the rate of profit to fall progressively and, on the other, in a progressive growth of the absolute mass of the appropriated surplus-value, or profit; so that on the whole a relative decrease of variable capital and profit is accompanied by an absolute increase of both. This two-fold effect, as we have seen, can express itself only in a growth of the total capital at a pace more rapid than that at which the rate of profit falls.” (p329 – 330)

It will also be the case, to a greater or lesser extent, that new industries develop that require large amounts of living labour for their production, labour that can only be displaced by technology and machinery over a future, longer or shorter period of time.

New industries widen the range of commodities that capital can produce, and that can be used to produce them, which can create profit, i.e. that can become capital.  The mass of material labour that capital can command depends not only on the value of capital but on the mass of use values that can act as consumption for workers or as means of production and materials of production.  If the latter grows so can the quantity of labour employed, and therefore the accumulation of capital that can proceed, allowing capitalism to continue to develop the forces and relations of production.

It is argued that the growth of these new industries, increasingly ‘service industries’ involve higher relative amounts of living labour than the more mature manufacturing or other industry.  Increased productivity in service industries does not generally involve increased consumption of raw materials even as productivity is increased, or at least not nearly to the same extent.  Increased consumption of circulating constant capital (materials), which simply has its value transferred into the final product and does not add any surplus value but must be advanced as capital, does not occur to the same extent and so does not lead to a reduction in the rate of profit on that account.

Of course, it must be understood that many industries are described as service industries that actually produce physical commodities and these are subject to the same tendencies of development as classical manufacturing industry.

Infrastructure industries are sometimes considered as service industries but the water and sewerage industry for example produces a physical product and then transforms it.  I recall visiting a new sewerage works that had a large bank of electronic equipment.  When I asked the manger how many staff worked at the plant he said there was five, but these were all going to be transferred elsewhere because the plant could work remotely and required only a regular visit by one member of staff to check everything was ok.

Even health services, which in the UK has traditionally had a budget in which over 60 per cent is spent on staff salary and wages, relies more and more on expensive drug treatments and the use of high-tech equipment.

No contradictions are therefore escaped by the development of new industries, even some ‘service’ industries, they are simply reproduced, but then any expansion of capitalism must by definition reproduce its essential nature, which is riven by contradiction.  However, it is not that nothing has thereby changed. The effect of these industries that develop upon a lower average organic composition of capital and higher rate of surplus value is to raise the average of both across the wider economy.

Marx at one point quotes six reasons why decline in the profit rate does not reduce accumulation. “Jones emphasises correctly that in spite of the falling rate of profit the inducements and faculties to accumulate are augmented; first, on account of the growing relative overpopulation; second, because the growing productivity of labour is accompanied by an increase in the mass of use-values represented by the same exchange-value, hence in the material elements of capital; third, because the branches of production become more varied; fourth, due to the development of the credit system, the stock companies, etc., and the resultant case of converting money into capital without becoming an industrial capitalist; fifth, because the wants and the greed for wealth increase; and, sixth, because the mass of investments in fixed capital grows, etc.”

At a recent meeting on Marx’s Capital, one speaker supported the view that the rate of profit did exhibit a tendency to fall and cited, among other reasons for this view, that such a situation confirmed the temporary character of the capitalist system in an objective way.  This, even if it were true, would not thereby equally confirm the inevitability of socialism or even that the seeds of socialism had grown equally as strongly as capitalism was gripped by its objective contradictions.

There are no absolute, predetermined limits which set the boundaries on the development of capitalism such that the contradiction between the development of the forces of production and relations of production just described can be said to lead to a terminal crisis or ending of the capitalist system.  The release of the forces of production from the fetters to their growth, arising from the requirement that such growth requires sufficient profitability that capitalism can no longer deliver, is not something that Marx foresaw as the resolution to the contradictions of capitalism.

The point rather is that the tendency for the rate of profit to fall is a fundamental one within capitalism that is inevitably associated with its equally fundamental drive to increase productivity through increasing relative surplus value.  Both stem from the combined development of the forces of production and relations of production and from the need for capital to accumulate by increasing the appropriation of surplus value. This includes new production with new sources of human labour as well as both increases in absolute and relative surplus value.

It is not necessary for a fall in the rate of profit to be evident at all times, the process by which it falls proceeds regardless and is important in this respect.  If the tendencies that counter this fall outweigh its effects this does not entail its unimportance, since the law exhibits the fact that new value is created only through labour power and the tendency for the fall in the rate of profit reflects this.  The expansion of capitalism, both in terms of the forces and relations of production, requires masses of additional labour, in other words expansion of the numbers and social power of the working class, the gravediggers of the system as Marx saw it.

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Karl Marx’s alternative to capitalism part 23 – forces and relations of production 6

Related imageThe contradiction between the forces and relations of production is extreme under capitalism because the relations of production, while tending to promote the unlimited development of the forces of production, force the latter against the limits of these relations.  Capitalism seeks to expand without limit through the creation and appropriation of surplus value expressed most immediately as the need to make profits.  This is enforced through increased exploitation of labour and the competition of different capitals to capture market share.  No previous mode of production has displayed such rapid development of its own logic of expansion, with such power, and with such effect across the world.

Since the material forces of production and the relations of production within which they are encased are simply two aspects of the same thing it is not the case that their contradiction sees one develop and the other not.  The contradictions that develop within them lead to crises expressed both in the fettering of the forces of production and curbing of capitalist social relations, expressed in economic, social and political crises.

Capitalist forces and relations of production, once established, produce relative surplus value through increased productivity of labour that reduces the time required by workers to create the amount of value that is consumed by them through their wage, so increasing the (surplus) value created and appropriated by the capitalist.  This relative increase is surplus value is consistent with rising living standards of workers because relative surplus value only exists by increasing the productivity of labour, increasing the amount of goods produced and a corresponding reduction in their costs.

The greater share of the value of production appropriated by capital allows still greater expansion of production under its control and yet greater appropriation of profit. Capitalist accumulation advances through investment in machines and hiring of labour: both the material forces of production and specifically capitalist relations of production between capital and wage labour increase in scale.

For each individual capital, the limit of production is presented by the whole of the market for its goods, although this cannot obviously be the case for all capitals in that market.  While the goods and services produced are relevant to the capitalist pursuit of profit, this is only the case in so far as they have an exchange value and can be sold for money.  But they must also have a use for their customer, and even with growing real incomes due to the price of goods having fallen, there are limits to how many of a whole range of goods any individual may want or be able to afford.  The increased production arising from development of the forces of production can lead to the overproduction of commodities in relation to the effective demand available that can realise their sale at a profit, and this structure and limitation of demand is determined by the ownership of the means of production and appropriation of the fruits of production, including the surplus product.

This can lead to economic crises as the scale of commodities produced cannot be sold profitably and the contradiction between the greater development of the forces of production, and the capitalist relations within which they grow, is expressed in economic crises of overproduction, evidenced in the cyclical economic crises that have existed since 1825.  If such crises encompass a number of vital or fundamental commodities, and if they severely affect the circulation of capital, for example either the extension of credit or purchase of labour power, recessions or depressions will result in bankruptcies and unemployment.  Both the forces of production are held back or even reduced while some capitalists cease to be capitalists and workers cease to work.  Periodic recessions leave productive forces unused while human needs, which these forces could fulfil, is unmet because the relations of production demand that these forces only be employed at the requisite profit.

Increased productivity of labour arises primarily through the application of science and technology, that leads more and more to the replacement of human labour with that of machines.  While the capitalist pursuit of absolute surplus value continues even today, in forms such as a “long-hours” culture – especially notorious in Japan or “presenteeism” in many offices – there are social and biological limits to this that conflict with the possibilities contained through increases in relative surplus value.  Increased productivity in the production of goods and services consumed by workers can allow their money wage to fall at least relatively, while maintaining or increasing their real wage in terms of the number of commodities they can buy.

In doing so the relative amount of living labour in the value of production may decline so that the source of surplus value in this human labour also declines relatively, which can produce a decline in the share of surplus value in relation to capital advanced, and therefore of profit. “The progressive tendency for the general rate of profit to fall is thus simply the expression, peculiar to the capitalist mode of production, of the progressive development of the social productivity of labour.  (Capital Volume III p318 – 319)

“The rate of self-expansion of the total capital, or the rate of profit, being the goad of capitalist production (just as self-expansion of capital is its only purpose), its fall checks the formation of new independent capitals and thus appears as a threat to the development of the capitalist production process. It breeds over-production, speculation, crises, and surplus-capital alongside surplus-population. Those economists, therefore, who, like Ricardo, regard the capitalist mode of production as absolute, feel at this point that it creates a barrier itself, and for this reason attribute the barrier to Nature (in the theory of rent), not to production. But the main thing about their horror of the falling rate of profit is the feeling that capitalist production meets in the development of its productive forces a barrier which has nothing to do with the production of wealth as such; and this peculiar barrier testifies to the limitations and to the merely historical, transitory character of the capitalist mode of production; testifies that for the production of wealth, it is not an absolute mode, moreover, that at a certain stage it rather conflicts with its further development.”

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