Chris Harman

Zombie Capitalism

Part One: Understanding the System: Marx and Beyond

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Marx’s Concepts

A world of commodities

The most obvious feature of the economic system in which we live is that it is centred around the buying and selling of goods of all sorts. We have to pay for food, shelter, clothing, energy to light and heat our homes, transport to move around, everything we need to keep ourselves and our families alive. And in order to buy we have to sell, even if all we have to sell is our capacity to work for others. Our very lives depend on the movements of commodities. Hence Marx’s starting point in Capital:

The wealth of those societies in which the capitalist mode of production prevails, presents itself as an immense accumulation of commodities.

Marx was writing at a time when market relations had still not penetrated large parts of the world. There were still societies in which all production was for people’s immediate needs, whether in “primitive communist” societies based on hunter-gathering or light agriculture [1], where people agreed freely among themselves how and what to produce, or in peasant societies where a local lord or ruler dictated to them from above. Even in most of the societies where the market already existed, the majority of the population were still subsistence farmers, producing most of the things they needed to keep their families alive, with only a small proportion bought or sold. Today we can extend Marx’s words to say that “the wealth of the whole world, with a few exceptions, presents itself as a mass of commodities”. And the exceptions – the provision, for instance, of free health and education in a number of advanced countries – are increasingly subject to forces seeking to commodify them. This near universality of commodity production marks society today off from anything that has ever happened before. To understand what is happening to the world we have to begin by understanding the workings of commodity production.

Marx was not the first to try to understand such workings. He was preceded by the classical political economists – early supporters of capitalism who tried to understand its basic dynamics as it struggled to break through, in a Europe still dominated by landowning classes. Two were of special importance: Adam Smith, who wrote in the 1770s at the time when the first modern factory, a spinning mill, was opening at Cromford in Derbyshire; and David Ricardo, who defended the interests of the early industrialists against the big landowners 40 years later in the aftermath of the Napoleonic wars.

Use value and exchange value

Smith is often treated as the patron saint of present day capitalism and of its neoclassical economic theorists. But he made an important point, developed further by Ricardo, which has been completely obliterated by nearly all those mainstream economists who claim to follow in his footsteps. He noted that once society is based on production for the market, every commodity can be seen from two completely different points of view:

The word value ... has two different meanings, and sometimes expresses the utility of some particular object, and sometimes the power of purchasing other goods which the possession of that object conveys. The one may be called “value in use”; the other, “value in exchange”. The things which have the greatest value in use have frequently little or no value in exchange; and on the contrary, those which have the greatest value in exchange have frequently little or no value in use. Nothing is more useful than water: but it will purchase scarce any thing; scarce any thing can be had in exchange for it. A diamond, on the contrary, has scarce any value in use; but a very great quantity of other goods may frequently be had in exchange for it. [2]

Marx’s Capital took up and developed this insight, removing certain ambiguities found in Smith’s work:

The utility of a thing makes it a use value ... Being limited by the physical properties of the commodity, it has no existence apart from that commodity. A commodity, such as iron, corn, or a diamond, is therefore, so far as it is a material thing, a use value, something useful. This property of a commodity is independent of the amount of labour required to appropriate its useful qualities.

But commodities are also:

the material depositories of exchange value [which] presents itself as a quantitative relation, as the proportion in which values in use of one sort are exchanged for those of another sort, a relation constantly changing with time and place. [3]

This distinction is not made by today’s mainstream neoclassical economists. [4] The only sort of value they see is “marginal utility”, based on people’s subjective appreciation of use values. Nor is it made by some of those dissident economists who claim to be in the tradition of Ricardo (the so-called “Sraffians”). [5] Their model is based on the inputs and outputs of physical objects, in other words, again on use values. Finally there are some present day Marxists who argue the distinction is not relevant, since the important point Marx was making was about exploitation, not value. [6]

In erasing the distinction made by Smith, Ricardo and Marx, all such theories miss something essential to a system based on commodity production: everything that happens in it is subject to two different sets of scientific laws.

On the one side there are the laws of the physical world – of physics, chemistry, biology, geology and so on. It is these which determine the ways in which different things have to be combined to produce goods (the different components of a machine, the material structure of a factory, the techniques used in a surgical operation and so on) and also the usefulness of those goods to those who finally consume them (the nutritional value of food, the warmth provided by fuels and electricity, the number of children who can be accommodated in a school or patients in a hospital, etc.).

On the other side, there is the way things relate to each other as exchange values. These often behave in a very different way to use values. The exchange value of something can fall while its use value remains unaltered. This has happened to the price of computers in recent years – the computer I used to write my last book was twice the price of the much more powerful one I am using now. What is more, exchange values are infinitely divisible while use values are usually not; you might say that a bicycle is worth one twentieth of a car, but if you cut a car up into twenty parts it is of nil use to anyone. This matters immensely when it comes to things which are important for modern capitalism like factories, oil wells, airliners, schools and hospitals. The market treats these as exchange values that can be infinitely divided into parts (worth so many pounds, pence, etc.); but they have a physical existence that cannot usually be divided in that way.

The exchange values of commodities are also infinitely fluid. In the form of money they can move from one part of the economy to another, from one part of the world to another, be spent on one item or any other of the same price. But the fluidity of use values, like their divisibility, is restricted by their physical make up. You can move £100 million in cash from Britain to India overnight, but you cannot move a factory worth £100 million at anything like the same speed. Use values and exchange values operate according to different, often contradictory, logics and a failure to see this leads to a failure to understand the most basic thing about a commodity producing economy. It does not operate smoothly, just through the flow of exchange values, but is always subject to bumps, to stopping and starting, due to the embodiment of exchange values in use values with physical properties that limit their fluidity.

Labour and money

Smith and Ricardo were not content just with seeing the double nature of commodities. They went on to argue that it was only possible to ascribe exchange values to objects with very different physical properties because they have one thing in common – they are all products of human labour.

As Smith wrote:

The real price of every thing, what every thing really costs to the man who wants to acquire it, is the toil and trouble of acquiring it. What every thing is really worth to the man who has acquired it, and who wants to dispose of it or exchange it for something else, is the toil and trouble which it can save to himself, and which it can impose upon other people. What is bought with money or with goods is purchased by labour, as much as what we acquire by the toil of our own body... They contain the value of a certain quantity of labour which we exchange for what is supposed at the time to contain the value of an equal quantity.

Labour was the first price, the original purchase-money that was paid for all things. It was not by gold or by silver, but by labour, that all the wealth of the world was originally purchased; and its value, to those who possess it, and who want to exchange it for some new productions, is precisely equal to the quantity of labour which it can enable them to purchase or command. [7]

This understanding Marx also incorporated into his own analysis:

The exchange values of commodities must be capable of being expressed in terms of something common to them all, of which thing they represent a greater or less quantity. This common “something” cannot be a geometrical, a chemical, or any other natural property of commodities ... If then we leave out of consideration the use value of commodities, they have only one common property left, that of being products of labour.

But Marx refined the analysis of Smith and Ricardo in a very important way. It was not the particular concrete exertions of labour as such that determined exchange value. For different people with different skills take different amounts of time and use different amounts of effort to produce particular commodities:

Some people might think that if the value of a commodity is determined by the quantity of labour spent on it, the more idle and unskilful the labourer, the more valuable would his commodity be, because more time would be required in its production. [8]

Rather the exchange value of a commodity depends on the “socially necessary labour time”:

that is required to produce an article under the normal conditions of production, and with the average degree of skill and intensity prevalent at the time ... [9]

It is social labour that has transformed nature to create the means that humans depend on for a livelihood. So it is the amount of social labour incorporated in it that constitutes the underlying value of a commodity. The concrete labour of individuals is transformed through exchange in a commodity-producing society into a proportionate [10] part of “homogenous”, “social” labour – or “abstract labour”. Marx calls this abstract labour the “substance of value”. It finds expression in exchange value and determines the level around which the commodity’s price will fluctuate on the market:

Every child knows that any nation that stopped working, not for a year, but let us say, just for a few weeks, would perish. And every child knows, too, that the amounts of products corresponding to the differing amounts of needs demand differing and quantitatively determined amounts of society’s aggregate labour ... And the form in which this proportional distribution of labour asserts itself in a state of society in which the interconnection of social labour expresses itself as the private exchange of the individual products of labour, is precisely the exchange value of these products. [11] All the different kinds of private labour, which are carried on independently of each other ... are continually being reduced to the quantitative proportions in which society requires them. [12]

Neoclassical economists tried to develop a notion of value out of people’s subjective judgements, with some even trying to incorporate labour as “disutility”. Marx, by contrast, saw value as something objective, as indicating the proportion of total social labour “embodied” [13] in it. But what that value is only comes to light as a result of the continual, blind, interaction of commodities on the market. [14] The system as a whole forces its individual components to worry about how the individual labour they employ relates to labour elsewhere. [15] He calls this process the operation of “the law of value”.

Values, however, are not unchanging. All the time there is the introduction of new techniques or new methods somewhere in the system. This results in a change in the amount of socially necessary labour needed to produce certain commodities – and that changes their exchange value. The use values of objects remain fixed until natural processes of wear, tear and decay damage them. But the exchange value of things – the value that matters for the system as a whole – declines every time the technical advance somewhere in the system decreases the amount of labour required to make them.

This leads Marx to a “counter-intuitive” conclusion which distinguishes his account of the system – and it is one which even some Marxists have difficulties coming to terms with. A rise in productivity reduces the value at which things exchange. It seems absurd on the face of it. Yet there are numerous examples of increased productivity causing some goods to fall in price compared to others. Marx provided one from his own time:

The introduction of power-looms into England probably reduced by one-half the labour required to weave a given quantity of yarn into cloth. The hand-loom weavers, as a matter of fact, continued to require the same time as before; but for all that, the product of one hour of their labour represented after the change only half an hour’s social labour and consequently fell to one-half its former value. [16]

Thousands more examples could be given today. For we are living in a period in which technical advance is much faster in some industries (especially those involving microprocessors) than others, and so the prices of things like DVDs, televisions and computers produced by industries using the most technologically advanced equipment are tending to fall while those in other industries using older techniques remain fixed or tend to rise. This is something of central importance as we shall see later when we discuss the dynamics of 21st century capitalism.

Once commodity production is generalised across a society, one particular good comes to be used to represent the value of all others – money (Marx calls it “the universal equivalent”). In Marx’s day it was usually in the form of gold (or sometimes silver), and a certain quantity of gold (say an ounce), produced by a certain amount of average labour time, could act as a measure of the value for all the other goods that were bought and sold. As capitalism developed as a system, banks and then governments found that they could use paper notes to stand in for gold in many transactions and eventually to dispense with reliance on it at all, so long as people believed others would accept those notes (known technically as “fiat money”) for goods. Credit from banks could also function in the same way, so long as people continued to trust the banks.

The development of commodity production had one important effect. It systematically distorted people’s understanding of reality through what Marx called the “fetishism of commodities”:

The ... relation of the producers to the sum total of their own labour is presented to them as a social relation, existing not between themselves, but between the products of their labour ... A definite social relation between men assumes, in their eyes, the fantastic form of a relation between things. In order to find an analogy, we must have recourse to the mist-enveloped regions of the religious world. In that world the productions of the human brain appear as independent beings endowed with life, and entering into relation both with one another and the human race. So it is in the world of commodities with the products of men’s hands. [17]

People speak of “the power of money”, as if its power did not come from the human labour for which it is a token; or of the “needs of the market”, as if the market was anything more than an arrangement for linking together the concrete acts of labour of different human beings. Such mystical attitudes lead people to ascribe social ills to things beyond human control – the process which the young Marx had called “alienation” and which some Marxists since Marx have called “reification”. Simply seeing through such mysticism does not in itself deal with the social ills. As Marx noted, simply arriving at a scientific understanding of the character of existing society leaves it intact just as “after the discovery of the component gases of air, the atmosphere itself remained unaltered”. [18] But without seeing through the fetishism, conscious action to transform society cannot take place. Hence the importance of grasping the distinction between use value and exchange value and of grounding value in socially necessary labour.

Exploitation and surplus value

We do not only live in a world of commodity production. We live in a world where control of most of that production is concentrated in relatively few hands. In 2008 the sales of the world’s biggest 2,000 companies equalled about half of total world output. [19] If we assume that around ten directors sit on the board of each of the multinationals, then the out of a world population of over six billion, a mere 20,000 people exercise decisive control over the creation of wealth; in fact, the figure will be considerably lower than that because most of the directors will sit on the boards of more than one firm. Production, of course, is not carried out simply by the multinationals. Alongside them are a mass of nationally based medium-sized firms that have not achieved multinational status, and alongside them exist an even larger number of small firms, some little more than family operations employing perhaps a couple of people. But, even taking all these into consideration, only a small percentage of the world’s population control the means of production responsible for producing the major portion of its wealth.

Those who do not own and control such means of production have no choice if they are to make a livelihood, beyond the minimum provided by welfare programmes, other than to try to sell their ability to work to those that do. They get paid a wage, while their labour produces goods that are the property of those who control the means of production. Some of the value of these goods is used to cover the wages of the workers, some to pay for the materials used in production, some to cover the wear and tear of means of production. But some forms an excess which is the basis of the profits of the owners – what Marx called “surplus value” and some non-Marxist economists simply call “the surplus”.

Adam Smith had already suggested where this surplus came from (although he did not stick consistently to this view):

In the original state of things, which precedes both the appropriation of land and the accumulation of stock, the whole product of labour belonged to the labourer ... But as soon as the land becomes private property, the landowner demands a share of the produce ... The produce of almost all other labour is liable to the like deduction of profit. In all arts and manufactures the greater part of the workmen stand in need of a master to advance them the materials of their work, and their wages and maintenance till it be completed. He shares in the produce of their labour, or in the value which it adds to the materials upon which it is bestowed; and in this share consists his profit. [20]

Profit, then, arises when the land, tools and materials required for production become the private property of one section of society. This section is then able to get control of the labour of others.

Ricardo took up and developed Smith’s ideas. In doing so he pointed to a central ambiguity in Smith’s own writings. Smith mixes with the view that labour alone creates value another approach, in which profits and rent as well as labour contribute to the final value of goods. Ricardo rejected this latter view. But soon after his death in the 1820s it became the orthodoxy among pro-capitalist economists. It was much more palatable to defenders of the existing system than implying that profits were parasitic on labour.

Marx, however, saw that the development of Smith’s views by Ricardo could alone provide the basis for a scientific account of how capitalism functioned. Like Ricardo, he recognised it was absurd to say that profits somehow created value when they were part of value that had already been created. But he went much further than Ricardo had in clarifying the issues and working out the implications of the theory.

The first important advance he made was to differentiate clearly two different meanings given to “the value of labour” by Smith. On the one hand it meant the amount of labour required to keep the labourer for the time during which he or she worked. Adam Smith had argued:

There is ... a certain rate below which it seems impossible to reduce for any considerable time the ordinary wages of even the lower species of labour. A man must always live by his work, and his wages must at least be sufficient to maintain him. They must even upon most occasions be somewhat more otherwise it would be impossible for him to bring up a family, and the race of such workmen would not last beyond the first generation. [21]

From this point of view, the “value of labour” was the value of the wage of the labourer.

But Smith also used the term “labour” to refer to the amount of labour actually performed by the worker. And, Marx stressed, the two amounts were by no means the same. Labour, he pointed out, was like all other commodities in that it was bought and sold. But it differed from them because it had the peculiar property that when put to use it performed more labour than required to produce it.

In the 1850s he introduced a new term designed to make the distinction between the two uses of the concept of labour in Smith and Ricardo (and in his own earlier writings) absolutely clear. He said that what the capitalist paid for when he employed someone was not labour as such but “labour power” – the ability of someone to work for a certain period of time. The value of labour power depended, like that of any other commodity, on the amount of labour needed to produce it. Workers could not provide labour power unless they had adequate food, clothing, housing, a certain amount of relaxation, etc. These were their requirements if they were to be fit and capable of working. Their wage had to cover the cost of these things – that is, to correspond to the amount of social labour needed to produce them. This determined the value of labour power.

It should be noted that Marx did not see the minimal level of subsistence alone as determining the value of labour power. There was also the need to make minimal provision for the upbringing of the workers’ children, since they would constitute the next generation of labour power. And there was a “historical and moral element” which depended on the “habits and degree of comfort” which the workers were accustomed to. Without it they would not apply their full faculties to their labour and might even rebel against it. In this way the cumulative effect of workers’ struggles could influence the value of labour power. Marx was not, as he is sometimes presented, a believer in an “iron law of wages” whereby only a fixed portion of national output could go to the workers. [22]

Be that as it may, the labour people could perform was greater than the amount of labour needed to provide them with at least a minimal livelihood – to replenish their labour power. It might, for instance, take an average of only four hours work a day to provide the level of consumption necessary for someone to be able to perform a day’s work. But they could then perform eight, nine or even ten hours work a day. The extra labour went to the employer, so that the value of the goods turned out by his factory was always greater than his investment. It was this which enabled him continually to get surplus value, which he could keep for himself or pass on to other members of the capitalist class in the form of interest and rent.

The relation between the employer and the worker had the appearance of being between equals. The employer agreed to give the wage and the worker his or her labour. No coercion was involved. On the face of it the situation was very different to that between the slave owner and the slave, or between the feudal lord and the serf. It was compatible with a juridical system based on “the rights of man”, of equality before the law of all citizens. Even if actually existing bourgeois societies were tardy in granting this, it seemed engraved on their structure. Yet the surface appearance of equality hid a deeper inequality. The employer possessed the prerequisites for the workers engaging in social production and getting a livelihood. The workers were “free” in the sense that they do not have to work for any individual firm or capitalist. But they could not escape having to try to work for someone. As Marx put it:

the worker can leave the individual capitalist to whom he hires himself whenever he likes ... But the worker, whose sole source of livelihood is the sale of his labour, cannot leave the whole class of purchasers, that is the capitalist class, without renouncing his existence. He belongs not to this or that bourgeois, but to the bourgeois class. [23]

The difference between the value of the worker’s labour power and the value created by the labour done was the source of the surplus value. Once the employer had got this surplus value, it could be kept directly as profit, it could be used to pay off interest on any money borrowed to build the factory, or as rent to the owner of the land on which the factory stood. But however surplus value was divided up into profits, interest and rent, its source remained the excess work done by the workers – the exploitation by those who owned the means of production of those who did not. Once the owner had got the profit, he could use it to build new means of production, increasing still further his capacity to blackmail workers into labouring for him on his terms if they were to get a livelihood.

It was this process which made the employer a capitalist. It also gave a special meaning to the word “capital”. The word is used by mainstream economists and in everyday life simply to mean longterm investment as opposed to immediate consumption. But it has a deeper significance once the means of production are in the control of one group of society, compelling others who want a livelihood to work for them. It is now a product of past labour which is able to expand through the exploitation of current labour. It is, as Marx put it, not a thing, but a relation:

Value-creating and value-enhancing power belongs not to the worker but to the capitalist... All the development of the productive forces of labour is development of the productive forces of capital. By incorporating into itself this power, capital comes alive and begins to work “as if its body were by love possessed”. Living labour thus becomes a means whereby objectified labour is preserved and increased ... [24]

The fetishism of commodities now takes the form of making it seem that creativity does not lie with living human beings but with the products of their labour, so that people talk of capital creating wealth and employers “providing people with work”, whereas in reality it is labour that adds to the value of capital and the worker who provides labour to the employer.

Absolute and relative surplus value

Marx distinguished between two ways in which firms could raise the ratio of surplus value to wages. One was by the crude method of lengthening the working day. He called this “absolute surplus value”. This method of forcing up profits was very widespread in the early days of industrial capitalism, and Marx in Capital provides many examples of it. But Marx also noted in Capital that prolonging the working day over much could be counterproductive for the capitalist:

A point must inevitably be reached, where extension of the working day and intensity of the labour mutually exclude one another, in such a way that lengthening of the working day becomes compatible only with a lower degree of intensity. [25]

So it was that, after putting up massive opposition to successive attempts to provide a legal limit to the working day for children, major capitalist interests gave way to working class pressure – and sometimes found that production actually increased once hours were shorter. For much of the 20th century the method of prolonging the working day seemed to belong to the past. In the advanced industrial countries, at least, workers’ resistance had forced capitalists to concede a shorter working week and holidays with pay. The 72-hour week of Victorian times had become the 48-hour week and then the 44-hour week.

But there was another range of methods for increasing the amount of surplus value to be obtained from each worker, which Marx called “relative surplus value”. It relied on reducing the proportion of the work time that went into covering the cost of replenishing worker’s capacity to work, that is, their labour power.

This took three forms. The first was to introduce new machinery into the workplace, so as to increase productivity and reduce the amount of time it took for the workers to produce goods whose sale would cover their wages. In effect, instead of, say, four hours work covering the cost of their labour power, two hours would do so – with two hours extra going to produce surplus value.

Marx saw this as the method of increasing exploitation capitalists turned to as they faced difficulties in extending the working week any further in the mid-19th century. The productivity of the workforce per hour became central, rather than extending the number of hours worked. [26] But it was in itself only a short-term expedient for the capitalist. The first capitalist to introduce new machinery would be able to produce the same amount of value with less hours of labour. Once other capitalists also introduced new machinery, the socially necessary time needed for production fell and with it the value of the goods he sold and the excess surplus value he obtained.

The second form it took was increased productivity in the consumer goods industries and agriculture. This would reduce the amount of labour time needed to produce their output and the prices workers had to pay for their means of livelihood. This meant that the cost to the capitalists everywhere of providing workers with their accustomed living standard (of paying for their labour power) fell, and the amount of surplus value extracted could be increased without cutting real wages or extending the working day.

The third method was to intensify the pressure on workers to work harder. As Marx puts it, the only way to “change the relative magnitudes” of the working day going to the capitalist rather than the worker without cutting real wages was to “change either the productivity of labour or its intensity”. [27] There was a drive to impose “on the workman increased expenditure of labour in a given time, heightened tension of labour-power, and closer filling up of the pores of the working-day”. [28] Or again, “What is lost by shortening the duration is gained by the increasing tension of labour power.” [29]

The drive for increased productivity became an obsession for big business, as was shown by the movement for “scientific management” founded by the American F.W. Taylor in the 1890s.

Taylor believed that every task done in industry could be broken down into individual components and timed, so as to determine the maximum which workers could accomplish. In this way, any breaks in the tempo of work could be eliminated, with Taylor claiming he could increase the amount of work done in a day by as much as 200 percent.

“Taylorism” found its fullest expression with the introduction of the assembly line in Henry Ford’s car plants. The speed at which people worked now depended on the speed at which the line moved, rather than their individual motivation. In other industries the same pressure on people to work flat out was achieved by increasing surveillance by supervisors, with, for instance, mechanical counters on machines indicating the level of work achieved. And today a similar approach is being attempted in a variety of white collar occupations with increased use of assessment, attempts at payment by results, the use of key stroke counters on computers, and so on.

Accumulation and competition

A world of commodity production is a world of competition between producers. It is this element of competition which distinguishes a society based on commodity production and exchange value from one where individuals or groups decide on what use values to produce for their own consumption. Through exchange the effort put in by those working in one unit of production is linked to those of millions of other individuals in other units, but the link only takes place through competition between those taking the decisions about production in the individual units. In Engels’ phrase there is “social production but capitalist appropriation”. [30]

The capitalist firm which exploits the worker is therefore, necessarily, in competition with other capitalist firms. If it cannot out-compete them, eventually it will be forced out of business. To out-compete means keeping ahead in developing new, more productive techniques – only in that way can it ensure that it is not going to be driven out of business by rivals producing and selling goods more cheaply than it can. It cannot guarantee being able to afford new equipment using such techniques unless its profits are as high as possible. But if it raises its profits in order to be able to reinvest, so must its rivals. The fact that each firm is involved in exploiting wage labour means that none of them dare rest on its laurels.

However successful a firm may have been in the past, it lives in fear of a rival firm investing profits in newer and more modern plant and machinery. No capitalist dare stand still for any length of time, for that would mean falling behind the competitors. And to fall behind is eventually to go bust. It is this which explains the dynamism of capitalism. The pressure on each capitalist to keep ahead of every other leads to the continual upgrading of plant and machinery.

So it is that capitalism becomes not merely a system of exploiting “free” wage workers, but also a system of compulsive accumulation. The Communist Manifesto, which Marx wrote with Engels early in 1848, insisted:

The bourgeoisie, during its rule of scarce one hundred years, has created more massive and more colossal productive forces than all the preceding generations put together.

It emphasised the continual transformation of industry under capitalism:

The bourgeoisie cannot exist without constantly revolutionising the means of production ... Constant revolutionising of production ... distinguishes the bourgeois epoch from all earlier ones.

In Capital Marx sees the continual drive to build up ever bigger industry as the characteristic feature of capitalism:

Fanatically bent on making value expand itself, he [the capitalist] ruthlessly forces the human race to produce for production’s sake ... Accumulation for the sake of accumulation, production for production’s sake! [31]

The work’s first volume begins with analysing production for the market (“commodity production”), then looks at what happens when wage labour arises and labour power becomes a commodity, and finally culminates in showing how production using wage labour brings about a process of compulsive accumulation that ignores human need and individual desires.

Capital is not then defined just by exploitation (which occurred in many precapitalist societies), but by its necessary drive to self-expansion. The motivation for production and exchange is increasing the amount of value in the hands of the capitalist firm – a process for which some Marxist writers use the (in my view confusing) neologism “valorisation”. [32]

So the system is not just a system of commodity production; it is also a system of competitive accumulation. This creates limits to the action possible not only for workers, but also for capitalists. For if they do not continually seek to exploit their workers as much as is practically possible, they will not dispose of the surplus value necessary to accumulate as quickly as their rivals. They can choose to exploit their workers in one way rather than another. But they cannot choose not to exploit their workers at all, or even to exploit them less than other capitalists do – unless they want to go bust. They themselves are subject to a system which pursues its relentless course whatever the feelings of individual human beings.

Surplus value, accumulation and the rate of profit

Machines and raw materials do not themselves create value. Only the exercise of human labour has added to the natural wealth that existed in a state of nature and only continued human labour can increase it still further. Machines and raw materials exist because human labour has been applied in the past and they cannot substitute for it in the creation of new value. But they are necessary if labour is to achieve the average level of productivity prevailing in a particular society at a particular time. The final value of goods produced has to include an element covering the cost of the machines and materials used.

When a company produces cloth by employing workers to work on power looms that weave wool, the price of the final product has to cover not only the cost of providing the labour power of the workers (their wages) and the profit of the company, but also the cost of the wool and the wear and tear to the power looms. If the power loom can keep going for ten years, then in each year one tenth of its cost has to be covered by the annual sales of the cloth – this is what accountants refer to the depreciation costs of capital. Or, to put it another way, the labour incorporated in the value of the cloth includes not only the new socially necessary labour expended by the workers, but also the “dead labour” used to produce the wool and one tenth of the power loom.

For these reasons, Marx argued that the investment made by the capitalist could be divided into two parts. One was the expenditure on paying wages to hire the workers. This he called “variable capital” – because it was capital that by putting labour power to work expanded value to create surplus value in the course of production. The other part was expenditure on the means of production. He called this “constant capital” because its existing value passed into the value of the goods produced without growing any bigger – its value was simply transferred to the final product. In the case of fixed constant capital (factory buildings, machinery etc.) this took place over several production cycles; in the case of circulating constant capital (raw materials, energy, components) in a single production cycle.

Marxists usually use the letter v to stand for variable capital (wages that purchase workers’ labour); c to stand for constant capital (plant, equipment and raw materials); s to stand for surplus value. The ratio of surplus value to variable capital (wages) is the ratio of the length of the working day the worker gives to capital compared to that which provides for themselves – sometimes called the rate of exploitation. It can be represented by s/v.

But for the capitalist, the ratio of surplus value to wages is not the only thing that matters, since his investment is bigger than simply what he has spent on wages. He is interested in making his total capital expand, not just that which goes into wages. What matters, therefore, is the ratio of surplus value to total investment – that is, expenditure on instruments and materials of production as well as on wages. This is the “rate of profit”, which Marx depicted as s/(c+v).

It is affected not only by the ratio of surplus value to wages, but also by the ratio of expenditure on instruments and materials of production (constant capital) to wages (variable capital). Marx called this last ratio (c/v) the “organic composition of capital”. This varies from industry to industry and over time. Different production processes can use the same amount of labour but different amounts of plant and equipment; the cost of equipment in a factory employing 1,000 people to sew cloth into clothes is less than that to employ the same number to smelt iron ore into steel. This has important implications for the dynamic of capitalism. It is driven forward not only by concern with the ratio of surplus value to wages, but by the drive to maintain and increase the ratio of surplus value to different levels of total investment. It is a point we will have to return to repeatedly.

Primitive accumulation

Today we take the buying and selling of labour power for granted. It seems as “natural” as the rising and setting of the sun. Yet nowhere was it more than a minor feature of any society until a few hundred years ago. So in Europe in the late Middle Ages, or in Africa and Asia at the time of European colonisation in the 18th and 19th centuries, most people had at least some direct access to the means of getting a livelihood – even if they had to hand over a slice of what they produced to a parasitic landlord. Peasants could grow food on their own land and craftsmen make goods in their own little workshops.

What changed this, according to Marx, was a primeval act of robbery – the use of force to remove masses of people from any control over the means of production. This was often carried through by the state at the behest of some of the most privileged groups in society. In England and Wales, for example, the rise of capitalism was accompanied by “enclosures” – the forcible driving of peasants from common land they had cultivated for centuries. Laws against “vagrancy” then compelled the dispossessed peasants to seek work at whatever wage they could get. In Scotland the “clearances” had the same effect, as the lairds drove the crofters (small farmers) from the land so as to replace them first by sheep and then by deer. As Britain’s rulers carved out an empire for themselves throughout the rest of the world, they took measures to bring about the same separation of the mass of people from control over the means of gaining a livelihood. In India, for example, they granted complete ownership of the land to the already highly privileged zamindar class. In East and South Africa they usually forced each household to pay a fixed sum of money, a poll tax, which it could only raise by sending some of its members to seek employment with European ranchers or businessmen.

Marx called this process of creating the conditions for the growth of capitalist production “the primitive accumulation of capital”. Marx tells how:

The discovery of gold and silver in America, the extirpation, enslavement and entombment in mines of the aboriginal population, the beginning of the conquest and looting of the East Indies, the turning of Africa into a warren for the commercial hunting of black skins, signalised the rosy dawn of the era of capitalist production ... [33]

But by itself this could not lead to capitalist production. There had, after all, been pillage of one sort or another throughout the history of class society, going back to Babylonian times, without it leading to the rapid accumulation that characterises capitalism. The forcible separation of masses of people from any control over the means of production – and so from any possibility of making a livelihood without selling their labour power – was indispensable. “The expropriation of the agricultural producer, of the peasant, from the soil, is the basis of the whole process.” [34] For this reason, it can be misleading to refer to any forcible seizure of wealth by capitalists as “primitive accumulation”. [35]

In Marx’s writings it has two aspects: on the one hand the “freeing” of the mass of population from any direct access to the means of making a livelihood; on the other the accumulation of wealth by a class that can use economic necessity to make such “free labour” toil for it.

Once capitalism had established itself, its own economic mechanisms pushed the process of separating people from control over the means of production even further, without necessarily needing intervention by the state or the use of force to bring it about. Thus in Britain in the late 18th century there were still hundreds of thousands of handloom weavers, who worked for themselves weaving cloth to sell. Within 50 years they had all been driven out of business by capitalist firms using power looms. In Ireland in the 1840s a terrible famine caused by the requirement that hungry peasants pay rent to (mainly British) landlords led a million to die of hunger and another million to abandon their holdings and seek work in Britain and the US. The market could achieve such horrors without the direct help of the state (except, of course, in protecting the property of the landlords). Capitalism had become a self-sustaining and self-expanding system destined to absorb the whole world into its workings.

* * *


1. Usually called “horticultural societies” by anthropologists.

2. Adam Smith, The Wealth of Nations, Book One, Chapter 4, available at; see also David Ricardo, On the Principles of Political Economy and Taxation (Cambridge 1995), p. 11.

3. Karl Marx, Capital, Volume One (Moscow, Progress Publishers, 1961), pp. 35–36.

4. It has, however, been partially recognised by some dissident mainstream economists belonging to the so-called Austrian school. So the conservative enthusiast for the “free market” Friedrich August von Hayek put considerable emphasis on the physical distinctiveness of commodities which cost the same price in his account of the business cycle. See, for example, his Prices and Production (London 1935).

5. Followers of Piero Sraffa (1898–1983), an Italian economist at Cambridge University who did not see his own system as departing from Marx’s, though people like Ian Steedman have used his writings in this sense.

6. This was the conclusion arrived at by “Analytical Marxists” like G.A. Cohen and Eric Olin Wright. See, for instance, G.A. Cohen, The Labour Theory of Value and the Concept of Exploitation, in Ian Steedman and others, The Value Controversy (London, Verso, 1981), pp. 202–223.

7. Adam Smith, The Wealth of Nations, Book One, Chapter 5, available at

8. Marx, Capital, Volume One, p. 39.

9. As above.

10. Some translations into English use the archaic word “aliquot” for proportionate, adding considerably to the difficulty of Marx’s work for new readers.

11. Karl Marx, Letter to Kugelman (11 July 1868), in Karl Marx and Frederick Engels, Collected Works, Vol. 43 (New York 1987).

12. Marx, Capital, Volume One, p. 75.

13. The use of the word “embodied” sometimes causes confusion. For clarification, see Guglielmo Carchedi, Frontiers of Political Economy (London, Verso, 1991), pp. 100–101.

14. See also I.I. Rubin, Essays on Marx’s Theory of Value (Montreal, Black Rose, 1990), p. 71.

15. This is not always immediately obvious from Marx’s exposition in Chapter One of Capital. This involves him analysing the commodity in abstraction from other features of the capitalist system which he deals with later. Competition is taken for granted, since commodity production assumes the competitive sale of commodities, but there is no account at this stage of its further impact. In the same way, Chapter One does not deal with capital although Marx later insists that it is only in a capitalist society that “being a commodity is the dominant and determining characteristic of its products” (Capital, Volume Three, Moscow, Progress Publishers, 1974, p. 857). For a fully rounded exposition of how competition between capitals subordinates each of them to the law of value, see Capital, Volume Three, p. 858; and Marx’s posthumously published manuscript, Results of the Direct Production Process, Karl Marx and Frederick Engels, Collected Works, Vol. 34, pp. 355–466, available at

16. Marx, Capital, Volume One.

17. As above, p. 72.

18. As above, p. 74.

19. Figures for biggest 2,000 companies from The Big Picture,, 4 September 2008 [unable to find link to document].

20. Adam Smith, The Wealth of Nations, Book One, Chapter 8.

21. As above.

22. It was one of the points with which Marx disagreed with Ferdinand Lassalle, and it also caused him to write a pamphlet directed to an English working class audience, Wages, Price and Profit.

23. Karl Marx, Wage Labour and Capital. A slightly different translation to that used here is to be found at http://www.

24. Karl Marx, Grundrisse (London, Penguin, 1973). Also available at

25. Marx, Capital, Volume One, p. 409.

26. So the chapters in Capital on manufacturing and machinery fall within the section of the work entitled The Production of Relative Surplus Value, Capital, Volume One, pp. 336–504.

27. Marx, Capital, Volume One, p. 411. There is a minor ambiguity in Marx’s work as to whether the intensification of the labour without any changing of technique amounts to “relative” or “absolute surplus value”, since a passage on page 410 seems to imply the latter, and this is how some people read Marx. The point has no wide significance. I prefer the “relative surplus value” option since it is invariably combined with the introduction of machinery which, as Marx points out repeatedly, usually increases rather than diminishes the burden on the worker – and produces a different sort of resistance to that produced by extending the working day.

28. Marx, Capital, Volume One, p. 410.

29. As above, p. 411.

30. Engels, Socialism: Scientific and Utopian, in Marx, Engels and Lenin, The Essential Left (London, Unwin Books, 1960), p. 130. There is sometimes confusion among Marxists about this. Some contend competition cannot be constitutive of capital since Marx’s method in Volume One of Capital is to arrive at the general laws of the system by abstracting from the impact of competition over the distribution of surplus value between the different units of the system. Competition then supposedly belongs to the sphere of distribution, not that of production. But the competition is between producing units. It arises from the fact that their interaction with each other is not planned. This then imposes on each the general features of the system Marx analyses in Volume One. Without it there would be no reason for the individual capitals to abide by the law of value, even if some of the necessary effects of competition express themselves in the sphere of distribution. As Marx puts it, “The inner law [of value] enforces itself only through their competition, their mutual pressure upon one another.” Hence it is absurd for some theorists to claim that the notion of capital does not include the notion of many competing capitals; the concept of capital presupposes commodity production. It is similar to substituting input-output tables relating particular industries to each other for the competition between capitals and then claiming to have a model of capitalist society, as do the “Ricardian” critics of Marx’s theories.

31. Marx, Capital, Volume One.

32. “Valorisation” is the French translation of the German term used by Marx, Verwertung. “Valorisation” in French means an expansion in the value of something (e.g. a company share). But the general English meaning of the word is different, meaning simply “fixing the price or value of a commodity, etc., especially by a centralised organised scheme” (Shorter Oxford English Dictionary, Third Edition). This usage leads to confusion with the very different concept of “realisation” (i.e. getting the monetary value of commodities), which is how the term valorization is used in the English translation of the Grundrisse by Martin Nicolaus. All this is confusing for newcomers to Marx’s writings – and encourages an academicist tendency to dense, often nearly unintelligible, expositions of Marx’s analyses.

33. Marx, Capital, Volume One, p. 751.

34. As above, p. 716.

35. This is something David Harvey slips into in his books The New Imperialism (Oxford 2005) and A Short History of Neoliberalism (Oxford 2007).

Last updated on 05 April 2020