» SMITH: It seems to me that Chapter Ten begins to raise the question of the historical context and the historical specificity of capitalism, around the working-day in Chapter Ten, but in the context of machinery, in the context of labor in the context of the relation to nature and in many other ways. Until of course we get to the general theory of capital accumulation, where you couldn’t have that argument without that historical contextualization, together with the analytical work that went into the early chapters. It seems to me that that chapter is the crucial chapter in Volume One. » HARVEY: Yeah, it’s the culmination of the argument of Volume One, What you’re saying is really interesting and important to grasp, which is the relationship in this book, between the theoretical logic and the historical circumstances, And sometimes you get a little bit confused as to
whether he’s making a historical argument or a logical argument, sometimes he’s making both together. So there’s an interesting dialogue,
dialectic, if you like, between that. In the chapter on the working-day, what you see is a confrontation with actually existing circumstances, it’s very historical. But you couldn’t understand it unless you really understood the theoretical underpinning of it, which is: why is it that capitalists are so obsessed with other people’s time? and what does it mean to be in a situation: I am a worker and have somebody else totally obsessed with commanding my time and commanding every second of it? So, at that point the two really merge together, both the theoretical and the historical. Now, when you get to the general law of capitalist accumulation, there are number of complicated things going on, there’s the theoretical argument, which actually stretches right back to the beginning, where you have to remember that this book is about a critique of political economy. And what was it that the political economists were saying? The political economists were saying, in aggregate: let the free market do its work and
everything will be okay. They weren’t all saying that but there
was a free market utopianism around in Marx’s time, and Marx said: alright,
let’s assume that you constructed your utopia – and it’s interesting that that utopian vision of the market doing its work has been around us over the last 20-30 years, as we’re told again and again and again: let the market do its work and everything will be okay- what Marx does in this chapter is to say, what will happen if we let the market do its work? The first thing is that you get more and more monopoly, which you’re not supposed to have. The idea is that capitalism should be competitive, what Marx is showing is in the utopian kind of free market, what you get is in
the end the big ones dominate. Of course, one of the things that’s interesting
to look at in our own history over the last 30 years is the degree to which we’ve been preached a lot about free market,
but at the same time the incredible consolidation that’s going on in terms of oligopolies, in terms of pharmaceuticals and energy and all the rest of it. So it’s self-destructive, he says this is a self-destructive utopian vision. It’s unstable and it’s always going to end up in monopoly.
The second thing is: will it work to the benefit of the worker?
Because that’s what we’ve been told, that if you let the free market do its work then, you, the worker will benefit. But what Marx shows is: no, that’s not going to happen at all, what happens in a free market society, if you push it that way, is that the rich get incredibly richer and the poor get incredibly poorer. And of course what’s happened over the last 30 years? The rich have gotten incredibly richer and the poor have gotten incredibly poorer. But what Marx does is to prove,
rigorously, that actually this is what the free-market capitalism will produce. More and more monopoly and more and more social inequality. And I think that these two propositions that came out of Chapter 25, were predictions of what would happen
if you went in that direction. Of course, in the 1950s-60 capitalism was not organized along this highly competitive rat race kind of line, since the 1970s it has. And so what we’ve seen is coming back closer and closer to Marx his prediction, and I think this is a crucial chapter to understand both the theoretical argument and relationship with that, and the practical argument. But the practical argument is contingent: it doesn’t say capitalism is bound to end up this way, it says: capitalism will only end up this way if you believe that myth about the freedom of market being the gods to which we have bow down and to whom we have to pay obeisance. So, I think it’s a brilliant chapter in that way, and right now, I think it’s devastatingly right and it’s so obviously true that this is what has happened and this is what’s going on. So I always find that chapter a great moment in Capital, to say this is a culmination of his argument of Volume One and this is where you’re going to
get to if you go this path, and wow! everybody gets it immediately, yeah, we can see how that’s happened! What Marx does is to try to put together a synthetic model, if you like, of how a capitalist system works, and what its dynamics are like. In chapter 23, he looks at that from the standpoint of the reproduction of the class- relation between capital and labor.
And you notice Marx is much more interested in the question of social reproduction than he is in the question of the technical means by which it is done. Chapter 24 looks at the implications of capital accumulation from the standpoint of the capitalist, so for a fleeting moment in chapter 24
you feel sorry for the capitalists caught in this Faustian dilemma of having to
consume or having to reinvest. And you also see that, given the coercive laws of competition, that capitalists are not necessarily free to choose, as Milton Friedman would hope they would be, that they have to reinvest whether they like it or not, and that therefore there is accumulation for accumulation’s sake, production for production’s sake. The topic of chapter 25 is to look at what this all means from the standpoint of the labourer, and what it implies for the fate of the working class. Here you will notice that one of the assumptions we’ve started out with, that everything was traded at its value, still holds except in the case of labor-power. We’re going to look at that now as
something which is a bit flexible and alike. As often happens with Marx, we’ve seen this in the chapter on the working-day, but also in the passages on machinery and large-scale industry, is that having derived a theoretical positionality, what Marx then wants to do is to go out and say: can you see this actually at work in the world around you? So the last part of this chapter, section five, is very much about ‘yeah, here’s the theory, now when we go out there what do we see?’ The theory says that it’s absolutely essential, for capitalism to function, that there be an industrial reserve army, a surplus of labor-power and that the surplus of labour-power would not be kept in a condition of great affluence but that it’d be in a position of relative impoverishment. So by looking at the conditions of labor power in cities but also more importantly in terms of rural areas of Britain, and then looking at the condition of the Irish in relationship to British industry, you get some explanation why those structures in the population, which can be identified historically at that time, existed. So the theory is connected to the historical realities in this chapter. I’m going to largely be concerned with the theory, but again I want to remind you that the theory that Marx is going to lay out here is not a theory devoid of assumptions. The assumptions he started out with, that there is no problem in the market, the way in which the surplus gets divided up between interested and rent, the profit of merchants capital, taxes and all the rest of it, have no relevance for the argument. In other words, we’re just simply going to look at the relationship between the capitalist class totality, and the working class. And that is an assumption which is not really warranted, in terms of what actually goes on and what actually exists, but it nevertheless is one which will help us identify some of the basic dynamics with which Marx is concerned, as will the assumption that there is no problem in the market. Marx starts off, with introducing three concepts. We’ve encountered the concept of the organic composition of capital once before in Capital, but this is the first time that they’re being laid out in general. And i have to say, actually you could construct this argument here without these three concepts if you really needed to. But they’re crucial to Marx’s thinking, particularly when it comes to Volume Three of Capital and they have been crucial in a lot of the argument that is going on as to how to understand Marx his general theory of dynamics of capitalism. So, we need to spend just a little bit of time on them. He starts off by saying: “The composition of capital is to be understood in a twofold sense.” The trouble is he then goes on immediately to identify it in a threefold sense. The twofold sense: “As value, it is determined by the proportion in which it is divided into constant capital, or the value of the means of production, and variable capital, or the value of labour-power, the sum total of wages.” He then goes on to talk about the physical composition of capital which he calls the “technical composition of capital”. And he insists, he says, “There is a close correlation between the two. To express this, I call the value-composition of capital, in so far as it is determined by its technical composition and mirrors the changes in the latter, the organic composition of capital. Wherever I refer to the composition of capital, without further qualification, its organic composition is always understood.” Now, what does this really amount to? We have, first of all, technical composition, the technical composition is
the physical productivity of labour. And it’s typical measure would be the number of widgets produced per worker-hour, tons of steel produced per worker-hour, a very physical thing. And obviously technological change alters these physical ratios, increasing productivity means that the number of widgets per hour increases, so it’s a physical thing. The value composition, how much the capitalist lays out for means of production versus labor power. And the value of composition is really equivalent to ‘C over V’. That is, if ‘C’ is the total amount of value, which you have to lay out in terms of gaining access to means of production, the raw materials, machinery and all the rest of it. And ‘V’ is the variable capital which you have to lay out, which depends on the value of labor power. The organic composition is this value composition insofar as it is affected by changes
in physical productivity. Now, let us indicate straight-out that there
are some problems with this idea. First: is this an internal measure, or an internal
effect within the firm? Within the firm, I change my productivity i.e. my technical composition, I therefore have to go out into the market and I have to buy more means of production and maybe less labour-power. So, as a particular entrepreneur in a particular industry, that ratio ‘C over V’ that I’m utilizing, may change for that reason. But then there are external measures, external effects, let’s suppose that there’s technological change going on in the production of intermediate inputs, production of means of production. That will mean that I have to lay out less in the way of ‘C’ because the value of ‘C’ is falling, because of the rising productivity in the industries that are producing cotton thread, for example. The industries that are producing cotton thread become much more productive, cotton thread becomes much cheaper, i have to lay out less in the way of ‘C’. Similarly, remember what happens to ‘V’, as industries which are producing wage goods increase in productivity, ‘V’ goes down. So there are all kinds of interactive market effects which could also go on as a result of these technical changes, changing the technical composition of capital in a given industry which is producing means of production for another industry, these are going to affect the ‘C over V’ ratio. Now, it’s not clear from Marx’ presentation in this chapter
whether he’s talking about internal measures only, that is, not including all of these interaction effects, or whether he’s also including all of these interaction effects. In fact, he does at some point indicate he understands there may be interaction effects, but these interaction effects are in his view relatively muted, for reasons that we’ll come back to. Now, there is a third possibility, that is the value composition of capital, ‘C over V’, is subject to all kinds of other influences. For example the discovery of a new set of resources (new oil wells), so that suddenly the cost of acquiring a raw material goes down, bad harvests over a series of years
in which case the value of cotton rises, the value of wheat is rising right now for those kinds of reasons. But we also saw in the chapter earlier where there are all sorts of other ways in which capitalists can gain surplus- value: Free goods, second-hand machinery, for example, or machinery which is out outdated but which you can continue to employ for free, so there’s all sorts of other elements in here that can affect the value composition. So we can actually suggest that there is a good reason why Marx distinguished between value composition and organic composition. Because he wants to talk about the value composition in so far as it’s affected by technical changes and organizational changes that affect physical productivity.
So the organic composition refers to -that-, the value composition as it is affected by -this -. But as I suggested there’s this ambiguity -here- as to whether we should be concerned with examining what happens in a given line of production or in a given firm, or whether we’re actually going to be looking at the aggregate in the economy. His view, he says, is this: “The many individual capitals invested in a particular branch of production have compositions which differ from each other to a greater or lesser extent.” Some lines of production are capital intensive, or ‘C’ intensive, if you want to call it that,
others are labour intensive or ‘V’ intensive. “The average of their individual compositions gives us the composition of the total capital in the branch of production under consideration. Finally, the average of all the average compositions in all branches of production gives us the composition of the total social capital of a country…” -notice: this is a country, it’s not over the world- “…and it is with this alone that we are
concerned here in the final analysis.” It seems like he’s saying both the internal and external after
they’re all taken into account run together, that those should be what I understand by organic composition. At this point he just lays out these questions, before he then goes on to talk through what in effect is a simple first model of accumulation dynamics. And the argument goes like this: the capitalist has surplus-value at the end of the day, some of this surplus-value is going to be re-accumulated. For the moment we’re going to
assume there’s no technical change, no change in productivity . If part of that surplus-value is going to
be reinvested then you need more labour, therefore, says Marx, accumulation of capital means, as he says on page 764: “multiplication of the proletariat.” An increase in the number of the wage labourers. Where does this labour surplus come from? So he then goes through scurrilous
views of Mandeville and others, and suggests that Mandeville was more
honest than some of the people who came after him, in recognizing that what is necessary for such a
system to work is that there be a pool of impoverished non-workers to be absorbed into it, thus continuing the expansion of capital. He says on page 765: “What Mandeville,
an honest man with a clear mind, had not yet grasped was the fact that the mechanism of the accumulation process itself not only increases the amount of capital but also the mass of the ‘labouring poor’ i.e. the wage-labourers, who turn their labour-power into a force for increasing the valorization of the growing capital…” This then leads Marx into the beginnings of a discussion of Malthus and of course, the long footnote six on p.766 is given over to the superficial plagiarism of Malthus
and the like in terms of his theory of population and how “the hour of
the Protestant parsons struck”. He then comes back on p.768, to say this: “Under the conditions of accumulation
we have assumed so far…” -notice ‘assumed ‘- “…conditions which are the most favourable to the workers, their relation of dependence on capital takes on forms which are endurable or,
as Eden says, ‘easy and liberal’.” That it can, in fact, as this accumulation process goes on at the time, absorb the surplus labour and start lead to conditions of rising wages, so on p.769 he says: there can be “A rise in the price of labour, as a consequence of the accumulation
of capital, only means in fact that the length and weight of the golden chain the wage-labourer has already forged for himself allow it to be loosened somewhat.” At the bottom he makes this other point:
“it is clear that at the best of times an increase in wages means only a quantitative reduction in the amount of unpaid labour the worker has to supply. This reduction can never go so far
as to threaten the system itself.” Then he mentions “Apart from violent conflicts…” and so on. And he says this, on p.770: “Either the price of labour
keeps on rising, because its rise does not interfere with the progress of accumulation.” About ten lines down: “Or, the other alternative, accumulation
slackens as a result of the rise in the price of labour, because
the stimulus of gain is blunted. The rate of accumulation lessens;
but this means that the primary cause of that
lessening itself vanishes, i.e. the disproportion between capital
and exploitable labour-power. The mechanism of the capitalist production process removes the very obstacles it temporarily creates. The price of labour falls again to a level corresponding with capital’s requirements for self-valorization,…” We can diagram this in this way: there’s a certain accumulation of capital, accumulation of surplus-value, part of that surplus-value is capitalized, that is, it’s converted back into capital. This generates an increase in the
demand for labour for labour-power. Where is that increased demand going to come from? It’s going to come from surplus population. Over time, what will happen is there will be an absorption of this surplus population and as the surplus population is increasingly absorbed, so we will get rising wages, which either does not interfere at all with the accumulation process, or if it does, means less surplus-value for the capitalist. Which means less surplus-value gets accumulated,
which means there’s less surplus-value for reinvestment and capitalization. To say nothing of the fact that, capitalists looking at a situation of this kind will say: What’s the point of me going back into the market, paying all of that for labour? I’m not going to get much profit out of it or surplus-value out of it so i’m not going to even bother. So the stimulus to gain is blunted by the fact that wages have risen so high. How could a situation of rising wages not interfere with the accumulation of capital? Can you remember a situation where we discussed that could happen? In the theory of relative surplus-value, where we argued, in a situation of increasing productivity gains some of the productivity gains can to the worker in terms of an increased standard of living. So that you can get an increasing standard of living for the worker, i.e. an increase in the value of labour-power which is consistent with an increasing rate of exploitation of labour. So if there is rising productivity going around this system then, alright, wages can rise a little bit
but we’ve still got plenty of (…) in other words you don’t get less surplus-value, you get more surplus-value even though wages are rising. But notice what this does, it basically says that inherent in capitalism is a kind of homeostatic adjustment mechanism of the rate of accumulation and the wage rate. That, if we looked at it like this, the wage rate is doing something like this, it’s rising, then, as the rate of accumulation is falling so reinvestment diminishes and so the demand for labour slackens and so wage rates come down, this goes up. And you could imagine a situation of this kind, that they just simply oscillate in this kind of fashion, a homeostatic adjustment mechanism, wages rise, rate of accumulation slackens, demand for labour falls off, the labour surplus reappears. Now, clearly, this surplus population depends upon the rate of population growth, where the population is relative to all of this. So where the surplus population is also matters. So what Marx does here is to say: you might notice historical situations in which wage rates and and profit rates will be going opposite to each other. And what would a bourgeois economist read into this? they’re going to look at it and say ‘it’s greedy workers’, greedy unions or something like that, they’re always wanting
more wages and the wage rate goes up and if the wage rate goes up then, sorry, you’re going to get stagnation. I’m sure you’ve heard that argument, right? If you push the wage rate too high,
then you’re just gonna get stagnation. So, if we get a crisis it’s not our fault it’s the labourer’s fault. So if you get a crisis it’s not our fault, it’s the labourers’ fault, they push the wage rate too high. What Marx does is to point out that in this system, he says the bottom of p.770: “To put it mathematically: the rate of accumulation is the independent, not the dependent variable; the rate of wages is the dependent, not the
independent variable.” In other words what Marx is insisting is that it is capital and capital accumulation that is driving this, its capitalists who are making the decisions, it’s capitalists who are pushing the system. So if you do see fluctuations of this kind it’s because that’s the way capitalism is pushing it. This then leads Marx into a consideration of what he calls the so-called “natural law of population”.
You can tell this is coming given his stuff about Malthus. He really describes exactly what we’ve just gone through very succinctly, in the middle of p.771: “If the quantity of unpaid labour supplied by the working class and accumulated by the capitalist class increases so rapidly that its transformation into capital requires an extraordinary addition of paid labour, then wages rise and, all other circumstances remaining equal, the unpaid labour diminishes in proportion. But as soon as this diminution touches the point at which the surplus labour that nourishes capital is no longer supplied in normal quantity, a reaction sets in: a smaller part of revenue is capitalized, accumulation slows down, and the rising movement of wages comes up against an obstacle. The rise of wages is therefore confined within limits that not only leave intact the foundations of the capitalist system, but also secure its reproduction on an increasing scale.” So, this is if you like the description of a simple model of the dynamics of accumulation. Which takes us into part two. p.772 What Marx wants to do here is to say, well this argument we just made pays absolutely not mind to technological change. That is, you’re assuming the technology remains constant in this first version. He says: “So far, we have considered only one special phase of this process, that in which the increase of capital occurs while the technical composition of capital remains constant.” But we know it does not remain constant from the theory of relative surplus-value. He then goes on: “Given the general basis of the capitalist system, a point is reached in the course of accumulation at which the development of the productivity of social labour becomes the most powerful lever of accumulation.” So, we’re now going to look at this model when we introduce into it the dynamics of relative surplus-value seeking, and technological and organizational change. He starts off by going a little bit over the technical composition of capital, going back over -this- argument and we’re going to see this developed even further now in this section. As far as the technical conditions are concerned, there are both causes and consequences, he says, of changing value-composition. Causes, those which arise out of the need to buy new machinery, new means of production. So he talks about buildings and furnaces and means of transport etc. The consequence is that you need more means of production; so, sorry, it’s not a cause, its a condition of this, you buy a new machine, more ‘C’ in the form of the machine. But then the machine also has a consequence, which is that you now need more raw materials. Bottom of p.773 he says: “This change in the technical composition of capital, this growth in the mass of the means of production, as compared with the mass of the labour-power that vivifies them, is reflected in its value-composition by the increase of the constant constituent of capital at the expense of its variable constituent.” He then uses the phrase which created quite a lot of problems: “This law of the progressive growth of the constant part of capital in comparison with the variable part is confirmed at every step (as already shown) by the comparative analysis of the prices of commodities, whether we compare different economic epochs or different nations in the same epoch.” There is, he says, a tendency for the organic composition of capital to increase over time. He’s proposing that we think in terms of the law of the increase of the ‘C over V’ ratio, that is, you need to buy less and less labour and you need to buy more more means of production. Interestingly he then introduces on the middle of p.774 the possibility that ‘C’ could also diminish through technological change. But he simply treats it here as something that restraints what would otherwise be a very rapid increase in the ‘C over V’ ratio, in the organic
composition of capital. Here he’s saying middle of p.774: “The reason is simple: with the increasing productivity of labour, the mass of the means of production consumed by labour increases, but their value in comparison with their mass diminishes. Their value therefore rises absolutely,
but not in proportion to the increase in their mass. The increase of the difference between constant and variable capital is therefore much less than that of the difference between the mass of the means of production into which the constant capital, and the mass of the labour-power into which the variable capital, is converted. The former difference increases with
the latter, but in a smaller degree.” In other words, yes, you can get constant capital saving innovations which reduce the value of constant capital, but this simply holds down what Marx sees as an inexorable law of the rising organic composition of capital. That, in short, capitalism is going to become increasingly capital-intensive over time as opposed to labour-intensive. He then uses some examples. What this means, is that the mass of surplus-value that the capitalist can gain diminishes, unless you can raise the rate of exploitation. This is a problem. And in the third volume of Capital, he’ll argue roughly in the following way: The rate of profit (P) is equivalent to ‘S over (C + V)’, The surplus over the total capital advanced. Now, by a little bit of algebraic manipulation, you could turn this into… that this is equivalent to the rate of exploitation over (1 + the organic composition of capital). From which you would see immediately that, if the rate of exploitation remains constant, then the law of the rising organic composition of capital gives you a falling rate a profit. -this- quantity becomes larger and larger and larger, -this- remains constant, therefore the profit rate must fall. This is the simplest version of Marx his falling profit-rate argument. In order to sustain that however, you have to do two things, one is, you have to keep the rate of exploitation constant and the second is, you have to assume that all of -these- interactions which are going on in the economy are actually leading to an increasing organic composition of capital. There are lots of reasons why, as subsequent theorists have shown, this is not necessarily so. Situations can arise in which it actually goes in the other way, that you get a falling organic composition of capital simply because of the nature of the interaction effects. Whether there’s a falling or a rising, really depends. On the other hand, if you dare to gain say, in certain circles, the theory of the falling rate a profit, Marxists come down on you like a ton of bricks, because, as I think Marx himself suggested, this is one of the main ways in which you can see how technological innovations i.e. the search for relative surplus-value, creates a contradiction because you’re displacing labour out of production, and as you displace labour out of production, you’re displacing the source of surplus-value. My own view of it, for what it’s worth, is that technological dynamism is indeed a potent source of contradictions within this system, but you cannot assume that there is a law of rising organic composition, that it’s always going to be there, nor can you necessarily assume that there is a law of falling rates of profit.
Situations arise in which, yes indeed rising organic composition gets turned into falling profit rates. But it’s perfectly possible for other patterns of innovation to enter into the picture which reverse that process. This is the reason these concepts are important and why you have to think about them, because they’re foundational for what happens in Volume three of Capital and parts of Marx his argument there. But what is brilliant about the argument is that most of the classical political-economists, including Ricardo, believed in a falling rate of profit. Many of them thought in terms of capitalism in the end winding down. Ricardo, for example, talks about the inevitable demise of a capitalist
system because it will not be able to sustain itself. But all of them actually appealed to Malthus and the idea of resource constraints, and what is known as diminishing returns in agriculture. That there would be an inherent barrier to increasing productivity in agriculture, and that therefore the end of capitalism was essentially legislated in terms of its relation to nature. What Marx says is: No, there is a way you can talk about a falling rate of profit which has nothing to do with nature. It has to do with the internal contradictions of capitalism. As he says of Ricardo, he says, Ricardo when faced with the idea of a crisis took refuge in organic chemistry. Marx says you can’t do that, if there is going to be a crisis of capitalism, it’s going to be a crisis which is generated by its own internal contradictions. And I think his intuitions are absolutely correct. That one of the centerpieces of those contradictions lies in the dynamic and trajectory of technological and organizational changes, and that these technological and organizational changes are highly disruptive, in some instances, of the capacity to gain surplus-value. The trouble is here is he has put it in this law form. And the law form is where we hit some of the problems. This then leads him to say that, this rising organic composition of capital doesn’t mean less surplus-value for the capitalist, provided that you actually expand your labour force dramatically. That is, by increasing production you accelerate accumulation. As he says on p.774: “The progress of accumulation lessens the relative magnitude of the variable part of capital, but this by no means thereby excludes the possibility of a rise in its absolute magnitude.” Then he goes through this example: let’s suppose the ‘C over V’ ratio rises, but “If, in the meantime, the original capital, say £6,000, has increased to £18,000, its variable constituent has also increased, in fact by 20 percent. It was £3,000, it is now £3,600.” Out of eighteen-thousand. “But whereas formerly an increase of capital by 20 percent would have sufficed to raise the demand for labour by 20 percent, now the original capital needs to be tripled to secure an increase of 20 percent in the demand for labour. ” This then immediately raises the question: where is the surplus capital gonna come from to increase from 6,000 to 18,000? How are you going to get that? That leads him immediately to the idea that there is an original accumulation which goes on, and he introduces this idea of primitive accumulation on p.775. The capitalists go out and they rob people, to get the extra 12 thousand pounds they need. Somehow or other they accumulate it. He says we’re going to look at this historically in part 8, so we’ll do that next week. Then, on p.776-777 he says, maybe there’s another way in which capitalists can do this, and he introduces the distinction between concentration and centralization. Concentration of capital arises in -this- model in the following way: each time you increase the amount of capital that’s circulating, so you go around this system again, and you get more capital … more capital,
so concentration means: over time, bit by bit, increment by increment, you’re increasing your capital, so capital is becoming concentrated. He then introduces something which I think is always important, because sometimes people talk about the law of increasing concentration and centralization. He suggests that at the bottom of p.776 that not only are you going to get concentration of capital, but you could also get something else going on right at the bottom of p.776 he says, concentration that accompanies accumulation, is not only “scattered over many points, but the increase of each functioning capital is thwarted by the formation of new capitals and the subdivision of old. Accumulation, therefore, presents itself on the one hand as increasing concentration of the means of production, and of the command over labour; and on the other hand as repulsion of many individual capitals from one another.” Then he talks about the fragmentation of the total social capital. What in effect is going on here is this: Why would you put your surplus-value back into the same production system? What happens if I took a part of my surplus-value and spawned it off into a new line of production? And I opened up a small factory making something else? So, capitalism is not only about increasing concentration,
it’s also about increasing diversification, increasing fragmentation. And what he’s suggesting here is that there is some sort of relationship between concentration and dispersal, concentration and fragmentation. And that therefore you cannot necessarily look to concentration of capital, to do what you wanted to do in terms of increasing the amount of ‘V’ which is available to you at a given rate of exploitation. So there is something else, he introduces centralization of capital. Centralization is effectively taking people over, takeovers, merges, driving people out of competition, taking over their businesses, hostile takeovers, and the like. And what he’s pointing to here is a very important process which goes on in capitalism, which is about centralization. And we start to see how it works, and he introduces at the bottom of p.777 a very important idea which he’s not going to take up, which is the role of the credit system in doing this. He talks about various mechanisms whereby larger capitals could take over smaller, through competition and alike, but then he says: “Apart from this, an altogether new force comes into existence with the development of capitalist production: the credit system. In its first stages, this system furtively creeps in as the humble assistant of accumulation, drawing into the hands of individual or associated capitalists by invisible threads the money resources, which lie scattered in larger or smaller amounts over the surface of society; but it soon becomes a new and terrible weapon in the battle of competition and is finally transformed into an enormous social mechanism for the centralization of capitals.” One of the main businesses of Wall Street these days is asset merger activity, the centralization of capital that’s been going on under neo-liberalism has been absolutely astonishing. Oil companies, pharmaceutical companies, telecommunications companies, are constantly merging into each other, asset merger activities is one of the big businesses of Wall Street, and of course this is about precisely the centralization of capital. And what does the centralization of capital do to the workers? Well, it doesn’t do them any good that’s for sure. It usually destroys worker organization and worker contracts, increases the rate of exploitation and the like. So, what Marx is onto here is the beginnings of a centralization process in which the credit system starts to play a central role. And we would argue,
I think, today that this is of course one of the huge drivers of the economy. and Marx is seeing its potential here, but having said that all he does then is to say that these levers of centralization,
which are competition and credit, draw together individual capitals and
deals with this problem of how to get the extra 12,000 pounds: you get it through centralization. As he says at the bottom of p.779: “Capital can grow into powerful masses in a single hand in one place… …In any given branch of industry centralization would reach its extreme limit if all the individual capitals invested there
were fused into a single capital.” i.e. monopoly. “In a given society this limit would be reached only when the entire social capital was united in the hands of either a single capitalist or a single capitalist company. Centralization supplements the work of accumulation by enabling industrial capitalists to extend the scale of their operations.” Increasing scale of organization. And centralization, he says, is much more dramatic, as he says on p.780: “accumulation, the gradual increase of capital by reproduction as it passes from the circular to the spiral form, is clearly a very slow procedure compared with centralization…” Centralization is much faster. Then he goes on to point out: “The world would still be without railways if it had had to wait until accumulation had got a few individual capitals far enough to be adequate for the construction of a railway.” So, it’s consortia, business consortia and things like that, that start to move into the picture. He then says: “centralization … thereby becomes the new and powerful lever of social accumulation. Therefore, when we speak of the progress of social accumulation, we tacitly include — these days — the effects of centralization.” But this doesn’t necessarily solve the problem of less and less labour being employed, as he says right at the end: “On the one hand, therefore, the additional capital formed in the course of further accumulation attracts fewer and fewer workers in proportion to its magnitude. On the other hand, the old capital periodically reproduced with a new composition repels more and more of the workers formerly employed by it.” So what’s coming out here is, these processes of transformation, both in organizational form of capital but also in technological forms, are diminishing the demand for labour-power in the labour market. The consequences for that are taken up in the next section, but we should probably break here five minutes and than do the next two sections. The next section, what we get is another version of this model but with technological change incorporated. This system really looks something like this: You start with accumulation, but in this instance, we’re gonna talk about reinvestment of capitalized surplus-value, which in this instance is invested in new technologies, which reduces the demand for labour; produces a surplus population which gives you a high rate of exploitation, which gives you more accumulation. So, he starts off by again assuming a rising organic composition of capital, but now we’re looking at this dynamic in which technological change is becoming central. The demand for labour, he says at the bottom of p.781: “is determined not by the extent of the total capital but by its variable constituent alone, that demand falls progressively with
the growth of the total capital… …and at an accelerated rate, as this magnitude, increases.” So the variable capital becomes a constantly diminishing proportion. The consequence is, on p.782 in the middle, he says: “in fact, it is capitalist accumulation itself that constantly produces, and produces indeed in direct relation with its own energy and extent, a relatively redundant working population, i.e. a population which is superfluous to capital’s average requirements for its own valorization, and is therefore a surplus population.” Then he talks, p.782-3, on what we now colloquially call downsizing. The consequence, as he points out on p.783 at the bottom: “The working population therefore produces both the accumulation of capital and the means by which it is itself made relatively superfluous; and it does this to an extent which is always increasing.” There’s a lot of discussion these days about disposable labour and the idea of disposable labour-forces. This is exactly what Marx is talking about, how do we get to a point where we can talk about massive disposal working populations? and how does that dynamic work? This leads Marx then to point out, at the bottom of p.783: “The working population therefore produces both the accumulation…” …I’ve just read that… “This is a law of population peculiar to the capitalist mode of production; and in fact every particular historical mode of production has its own special laws of population, which are historically valid within that particular sphere. An abstract law of population exists only for plants and animals, and even then only in the absence of any historical intervention by man.” What he’s saying here is that Malthus had this law of population that explained poverty, again, because of these two forces of the tendency to increase the population,
on the part of the labouring classes, in relationship to scarcities in nature. So, the problem of poverty for Malthus had everything to do with natural proclivities of the working class to reproduce too fast, versus scarcity in nature, therefore: poverty is natural. Marx is saying: that’s nonsense! Poverty is actually produced, this is his point, going back to the ‘Fable of the bees’ and Mandeville, Poverty is actually produced by the capitalist dynamic, and he says in next paragraph: “But if a surplus population of workers is a necessary product of accumulation or of the development of wealth on a capitalist basis, this surplus population also becomes, conversely, the lever of capitalist accumulation, indeed it becomes a condition for the existence of the capitalist mode of production. It forms a disposable industrial reserve army, which belongs to capital just as absolutely as if the latter had bred it at its own cost. Independently of the limits of the actual increase of population, it creates a mass of human material always ready for exploitation by capital in the interests of capital’s own changing valorization requirements.” Then he talks about the varying phases of re-absorption of some of this surplus that is thrown out of work, and then throwing them out of work by another round of technological change. And as he says, this sophisticated system was not really possible in capitalism’s infancy. Again he comes back to the irony, on p.786, when he says: “This increase [of the surplus population] is effected by the simple process that constantly ‘sets free’ a part of the working class…” It ‘sets them free’ by engaging technologically induced unemployment. Some kind of freedom that is! He says, again and again, that the existence of a surplus population is absolutely crucial. p.788: “Capitalist production can by no means content itself with the quantity of disposable labour-power which the natural increase of population yields. It requires for its unrestricted activity an industrial reserve army which is independent of these natural limits.” In other words: it wouldn’t matter what the rate of population increase was, you’d still have poverty, even if Malthus was all wrong about working-class reproducing, and being too fecund and all of that. It wouldn’t matter because capitalism would simply go ahead and produces its surplus population in this kind of way. And this has a number of effects, one is: it allows the capitalist to discipline the labour-force. In other words, it’s a constant threat which the capitalist has of forcing unemployment upon the working-class. And one of those threats to be exercised with the purpose of deskilling, as he says on p.788 at the bottom, the displacement of more skilled labour-power by inferior labour-power. It also allows, as he says on the next page: “If the means of production, as they increase in extent and effective power, become to a lesser extent means for employing workers, this relation is itself in turn modified by the fact that in proportion as the productivity of labour increases, capital increases its supply of labour more quickly than its demand for workers. The over-work of the employed part of the working class swells the ranks of its reserve… The condemnation of one part of the working class to enforced idleness by the over-work of the other part, and vice versa, becomes a means of enriching the individual capitalists, and accelerates at the same time the production of the industrial reserve army on a scale corresponding with the progress of social accumulation.” Now, there’s a very interesting thing that’s been going on over the last 30 years, which is we’ve seen extensive structural unemployment, at the same time as the existing employed working class, in many instances has been forced to do over-time, has been forced by the threat of unemployment to intensify their efforts. So in other words, this mechanism of capital is not simply about unemploying people, it’s also about exercising a political power over the workers. The result, he says (p.790), is that the general movement of wages in turn “are exclusively regulated by the expansion and contraction of the industrial reserve army, and this in turn corresponds to the periodic alternations of the industrial cycle.” On p.792 in the middle: “The industrial reserve army, during the periods of stagnation and average prosperity, weighs down the active army of workers; during the periods of over-production and feverish activity, it puts a curb on their pretensions. The relative surplus population is therefore the background against which the law of the demand and supply of labour does its work. It confines the field of action of this law to the limits absolutely convenient to capital’s drive to exploit and dominate the workers.” Here we’re taking up the idea of technological change, organizational changes, as a weapon of class struggle with a vengeance. You’ve come across it in the chapter on machinery. and the oddity of this, he then remarks on p.793, is that “The demand for labour is not identical with increase of capital, nor is supply of labour identical with increase of the working class. It is not a case of two independent forces working on each other. Capital acts on both sides at once.” Capital, in fact, controls the demand for labour, at the same time as it also controls the supply of a surplus population, a relative surplus population, an industrial reserve army. He then goes on to say: “If its accumulation on the one hand increases the demand for labour, it increases on the other hand the supply of workers by ‘setting them free’, while at the same time the pressure of the unemployed compels those who are employed to furnish more labour, and therefore makes the supply of labour to a certain extent independent of the supply of workers. The movement of the law of supply and demand of labour on this basis completes the despotism of capital.” Capital works on both sides, it has control of both sides. The answer, of course, is for workers to organize, so Marx here, for the first time introduces the idea of trade-unions and labour organization. “as soon as the workers learn the secret of why it happens that the more they work, the more alien wealth they produce, and that the more the productivity of their labour increases, the more does their very function as a means for the valorization of capital become precarious… …as soon as, by setting up trade unions, etc., they try to organize planned co-operation between the employed and the unemployed in order to obviate or to weaken the ruinous effects of this natural law of capitalist production on their class, so soon does capital and its sycophant, political economy, cry out at the infringement of the ‘eternal’ and so to speak ‘sacred’ law of supply and demand. Every combination between employed and unemployed disturbs the ‘pure’ action of this law.” Then Marx introduces the idea of colonies and so on, “…will prevent the creation of an industrial reserve army…” So the point here is that, in this model of accumulation, what we see is the utilization of capital’s command over organizational forms and technologies, centralization, new technological forms, organizational forms, as a weapon in class struggle which actually regulates both the demand and supply of labour. This is, if you like the more sophisticated version of the model of capital accumulation which Marx constructs. And as we’ll see in the next section, this leads him to the construction of production of a relative surplus population, so Marx then talks about that. But I’d just like to pause here and ask if you’ve got any kind of questions about these two models and the bit in between about organic, and value, and technical composition. Or is it all clear? » STUDENT: You said that there could be some factors that go against the idea of a falling rate of profit? » HARVEY: Well, one would be, for example, a pattern of technological change which is capital saving, which is not labour saving at all, but capital saving. I.e: the means of production become cheaper faster. Out of that comes… Marx mentions foreign trade, and while he doesn’t mention the word ‘imperialism’, you could also introduce into this, imperialist domination of raw material sources to make them extremely cheap, so that raw materials become cheaper and cheaper and cheaper because of imperialist domination. As I already mentioned, there are patterns of technological change, which would not give you a rising organic composition of capital at all, but a stable organic composition of capital, and in certain instances you might even get a declining organic composition of capital. It really depends upon what kind of technological change you’re talking about. Now, I think there’s no question that Marx’ intuition that a lot of capitalist technological change is about labour-saving, is correct. And to the degree that it is biased towards labour saving, it would indeed produce some of the difficulties that Marx is pointing to, but there’s no necessity for that, you could imagine something else. In other words, there are people who now would argue that actually you can set up a dynamic model of this kind with a pattern of technological change which is going to equilibrate the system, and give you a stable rate of profit over time. The difficulty is to define exactly what the pattern of technological changes is that does that. And so people talk for example about a knife-edge, the appropriate technological change which is going to keep you in balance, you move too far in one direction, you get a crisis of the sort that Marx is talking about,
you move to far in the other direction, you’ve got another kind of crisis. And in any case, don’t forget the assumptions we started out with, for instance, if there is a serious problem in the market then you may want to employ more workers and you might want to give them more purchasing power because they’ve become an important part of the consumerism that is going to mob up the surplus-value. We ruled that out by assumption, so far, we assume that’s not a problem, but you see that could indeed be a problem, in which case you wouldn’t want to go this way anyway. The social system would have to go in another direction, that is to try to employ more workers, as a way of consuming the capitalist product, otherwise you got a problem of to whom do capitalists market their product? Actually, it’s very interesting, Marx himself at various points, both in the Grundrisse
and in Volume 3 of Capital, talks about counter-acting influences, and he changes his language in Volume 3: The falling rate of profit goes from being a law, to being a law of a tendency, to being a tendency. So, you see he’s beginning to see that there may be some problems with it. And at various points, both in Capital and the Grundrisse, he talks about the factors that can offset the law of the tendency of the falling rate of profit. And by the time to go through all of those factors, you say to yourself ‘well, if you add all of these up, this law of the falling rate of profit is no law, it’s a tendency which you can see there, it has elements of truth to it but you can’t call it a mechanical law, and it’s very dangerous, i think, to do that. And after all, if Marx was correct in saying that there’s a law of rising organic composition of capital, and there’s a falling rate of profit, we should have been having a falling rate of profit since 1850 at least. And we should be closer and closer to zero, but we are not closer and closer to zero, we plainly are not. And this is then one of the things he mentions, is opening up new sectors of production which are labour intensive. Now think of that. Think about what global capitalism has been doing, a lot of the sectors of production which have opened up has been labour intensive, and in fact the proletariat has increased by about two billion people over the last thirty years. China, Indonesia, so new lines of production have opened up, many of which are labour intensive. And actually, interestingly, in China they’re even in some instances dismantling these new technologies, which are highly capital-intensive because they’re so expensive. They can buy these new technologies from the United States, very expensive, which are labour saving, or they can actually reinvent the production process which is labour-intensive. And in many instances they’ve done that, they’ve gone back to labour intensive, and say ‘why should we buy this expensive piece of machinery, when we have these incredible available labour resources around? Which then, by the way, brings back one point of limitation on this new technology stuff, can you remember what it is that puts a limitation on the employment of new machines? STUDENT: Not until everyone catches up and gets…
HARVEY: Well, yes, but the other is that the machine, the value of the machine has to be less than the labour that’s saved by it. So, when you get to the point where the demand for labour and the wage rate has gone down so much because you have such a massive surplus population, at some point or other there’s no point in continuing technological innovation. So -that- cycle will go on until such point, as you remember the case in Britain, which did not employ the technologies which was employed in the United States because there was such a surplus of labour in Britain, that it didn’t make economic sense to employ those technologies. So what you may get is a situation where you produce such a surplus of population at a given place, that therefore there’s no incentive for technological innovation, and you go back, in effect, you switch back into this model 1 situation. So again there are many situations where you can imagine this, if you emphasize the fluid possibilities of this, and that’s why this language of a law strikes me as a bit odd. Marx generally speaking is always talking about the fluidity and the process and the capacity. And then turned up with a pretty rigid statement about the law of rising organic composition of capital as he does here. He clearly thought that he’d cracked the problem of the falling rate of profit. And that was to come in Volume Three of Capital, and he felt it very important to insert into Volume One of Capital his arguments about organic value composition and technical composition, as a foundation for the Volume 3 argument. He never completed the Volume 3 argument, it’s a bit all over the place and as i’ve suggested to you, the language there switches from law to law of a tendency to tendency, and in any case, there are all these counteracting forces which exist. But I think as always with Marx, he’s onto something which is important by the way he has voiced it here is in this seemingly rigid form which as many subsequent theorists have suggested, doesn’t really work. And these kinds of models by the way have now being worked out mathematically, so if you want a good mathematical version of all of this, you go read somebody like Morishima, ‘Marx’s economics’. Morishima is a first-rate mathematician, and works all these things out mathematically, and basically says: there are instances where a falling rate of profit could occur, but there are plenty of instances where it won’t. But what Morishima emphasizes is the destabilizing role of technological change. Which I think is right. and if you look at our own society and we look at the patterns of technological change, and its relationship to worker control, and the production of a relative surplus population and
the role that that relative surplus population has played, say in Europe in particular, has been particularly strong. I mean, the structural unemployment in Europe is going on now for about twenty years, and this is one of the ways in which you try to discipline the labour force all of the time, hasn’t worked too well, but that’s part of the dynamics of it. In this country, of course, we’ve had no need for that, the dynamics have gone on, the insecurity generated amongst the working-class, labour organization has not been that strong, labour organizations being effectively minimized, the powers of technological change are not resisted, and so capitalists can pretty much have it their own way, and in addition if they can’t have it their own way here, they go to China or maquila zones or whatever. But again, I think it’s very important to recognize, i think i mentioned this before, that one of the biggest sources of insecurity in the labour force and loss of jobs in this country is technological change, not outsourcing. So, again, I think Marx is correct very much to talk about the power of technological change to structure an industrial reserve-army, and create an industrial-reserve army, and to put pressures on workers so that they don’t create a problem. As we’ve seen over the last 30 years, capitalists have not shared with the workers any of the gains that have been had from rising productivity, capitalists have taken it all. Workers essentially won nothing in terms of the benefits that come from rising productivity, which was not true in the 1950s-60s, was not even true in the 1920s. So that, this is a very unique period in US history where none of those gains have been shared. Ok, so if there are no more questions, lets go on to look at section 4. We get three forms of an industrial reserve army: floating, the latent and the stagnant. The floating, essentially are workers who’ve been fully proletarianized, fully integrated into the commodification of labour-power and have been employed but were thrown out by these waves of technological innovation which create unemployment. They are people who are in the workforce and out of the workforce, depending upon the industrial cycle. They are typically registered as unemployed, people seeking employment, who’ve got unemployed. So you can get a measure of the floating population in this country by looking at data on the unemployed, the data is not that great, and the category of the ‘discouraged worker’ ought to be in there, as well, which is workers who have just given up trying to get a job. So, you’ve got a floating population. The latent population are groups in the population who have not yet been fully proletarianized. Marx frequently mentions the way in which women and children were drawn into the labour force. In his time one of the biggest reserves was of course the peasant, agrarian population increasingly thrown off the land. And that has not gone away, if you look at Mexico or India and so on, you’ll find an agrarian population that’s increasingly being forced off the land into the cities as a latent reserve. Now, the point about the latent reserve is they have to be mobilized in some way. By what processes are they going to be mobilized? But there are other latent reserves also, there is the petit-bourgeoisie, an independent petit-bourgeoisie. An artisan and self-employed population that can be forced into the labour force. So that, when we start to talk about latent reserves, we’re talking about a wide range of population possibilities. And as soon as we start to think of it geographically, then we would say, the floating reserve is usually around where capital is, the latent reserve is all over the world and can be mobilized. In the 19th century you would mobilize coolie labour and take it to South-Africa, Fiji or whatever. You’d mobilize Indian labour and take it to Trinidad, those kinds of things. So the surplus population can be global, and increasingly we saw them within Europe, in the late 1960s, there was a labour shortage in Europe, and labour was well-organized, strongly unionized, socialist parties, communist parties, and how was the shortage of labour addressed? Well, the French government went out and organized a massive importation of labour from the Maghreb. This was official government policy in the 1970s, they brought them into the car industry and many other areas, Maghrebians came into the factories, it was a the government policy, which of course it’s not anymore, now they want to send them back (!) but at that time there was a mobilization of this labour-surplus from the Maghreb. And look at the incredible significance of Mexico to the economy of this country, in terms of the labour surplus in Mexico. And it’s not only in Mexico it’s elsewhere, much of Latin-America, but the Mexican labour-surplus is absolutely crucial as a threat against American labour. But also, it has to be mobilized, which is why all this stuff about immigration is getting so interesting, because the more you
keep Mexican labour out, the less the threat that labour surplus becomes, and if you really shut it all out, and we already see in agribusiness they’re already hurting, they haven’t got the labour-surplus. Strawberries are rotting in the fields and apples aren’t being picked of the trees because the labour surplus isn’t available. Immigration stuff is there. So the whole question of ‘where is the labour surplus?’ and how it is mobilized, the history of where that latent surplus is and how it gets mobilized in relationship to the dynamics of capital accumulation, is in itself a very fascinating history. Countries like Sweden maintain full employment, and everybody says see: you can have full employment, in a country like Sweden and this, what Marx is talking about, doesn’t work. And the answer to that is: there are all these labourers coming from Yugoslavia, Turkey, etc. There was a labour-surplus available to the Swedes and they used it, both as labour-control but also as the necessary labour-surplus in order to fuel accumulation of capital. Now, the latent category… or rather stagnant category, is different from the latent, in many way it’s… Marx says of it, this is about… he’s not very kind to groups of this sort this is the lumpenproletariat, the almost unemployable population. In some cases you can have sympathy, because as he says, this is the hospital of the reserve army. And they’re people who are so destroyed mentally or physically, that it’s very hard to mobilize them into the population. You can in extremis, I guess it’s what William Julius Wilson liked to call the ‘underclass’, a term I don’t like, anymore than I like the term ‘lumpenproletariat’, but what Marx is talking about is that there’s a group in the population that has been in the proletariat but which can no longer function, for a variety of reasons, as part of that proletariat. This then leads into the production of pauperism, and as he says on p.798: “The more extensive, finally, the pauperized sections of the working class and the industrial reserve army, the greater is official pauperism. This is the absolute general law of capitalist accumulation.” Again this is strong language, “the absolute general law of capitalist accumulation”, but then of course, he introduces his modifier: “like all other laws it is modified in its working by many circumstances, the analysis of which does not concern us here.” Nevertheless, it’s a very strong statement but its got its modifier. So, “The first word of this adaptation is the creation of a relative surplus population, or industrial reserve army. Its last word is the misery of constantly expanding strata of the active army of labour, and the dead weight of pauperism.” He says right at the bottom: “We saw in Part IV, when analysing the production of relative surplus-value, that within the capitalist system all methods for raising the social productivity of labour are put into effect at the cost of the individual worker; that all means for the development of production undergo a dialectical inversion so that they become means of domination and exploitation of the producers; they distort the worker into a fragment of a man, they degrade him to the level of an appendage of a machine, they destroy the actual content of his labour by turning it into a torment; they alienate [entfremden] from him the intellectual potentialities of the labour process in the same proportion as science is incorporated in it as an independent power; they deform the conditions under which he works, subject him during the labour process to a despotism the more hateful for its meanness; they transform his life-time into working-time, and drag his wife and child beneath the wheels of the juggernaut of capital. But all methods for the production of surplus-value are at the same time methods of accumulation, and every extension of accumulation becomes, conversely, a means for the development of those methods. It follows therefore that in proportion as capital accumulates, the situation of the worker, be his payment high or low, must grow worse. Finally, the law which always holds the relative surplus population or industrial reserve army in equilibrium with the extent and energy of accumulation rivets the worker to capital more firmly than the wedges of Hephaestus held Prometheus to the rock. It makes an accumulation of misery a necessary condition, corresponding to the accumulation of wealth. Accumulation of wealth at one pole is, therefore, at the same time accumulation of misery, the torment of labour, slavery, ignorance, brutalization and moral degradation at the opposite pole, i.e. on the side of the class that produces its own product as capital.” This is of course the famous thesis of the increasing immiseration of the proletariat, which is a necessary condition of capitalist accumulation. And you’ll find people saying immediately: ‘well that’s not true, let’s face it, the working-class in this country is much better off than it was a 100 years ago. And yeah, okay some of this stuff may be going on in China, Bangladesh, Indonesia etc. but let’s face it: there has been progress, for many of the workers of the world, even when they weren’t particularly united’. So, this is one of Marx his predictions, if you want to call it that, or statements, which is often used both in a dogmatic way on the part of some marxists, who say ‘see this is what capitalism is bound to do’, and an equally dogmatic way by a lot of non-marxists who say ‘well this is what Marx says is bound to happen, it didn’t happen that way’. I think here again it’s very important to go back to the assumptions, this statement is a statement which is contingent upon the dynamics of accumulations as Marx has set this up. This is Volume One of Capital, we are simply looking at the dynamics of production, what goes on within the realm of production and within the realm of capital accumulation. From that standpoint what we will find is that, at the end of Volume Two, Marx will start to talk about the problems of effective demand, and that the only way which the effective demand problem could be solved is by “rational consumption on the part of the working-class”. And he means by “rational consumption on the part of the working-class”, two things. First, that the working class should have sufficient resources available to be able to consume the goods that capitalists produce, and secondly, the working class will have acquired the consumption habits whereby it will utilize its money incomes in ways which fit with the dynamic of accumulation. So at the end of Volume 2 we find bourgeois philanthropy is going in and teaching the working class how to consume right. So they can have a rational consumption from the standpoint of the dynamics of accumulation process. So the end of Volume 2 gives you a completely different story to this one. This one says, if capitalism worked like this, just like this, then what what you get? You would get this. Can we see some of this going on in the world economy? The answer is ‘yes’. You go to China, or Indonesia or Bangladesh and you’ll see it, appalling conditions of exploitation you see people being forced off the land, forced into the cities the latent reserves are being mobilized all over the place by all kinds of mechanisms. So yes, you’ll see the latent reserves being mobilized. And indeed you will see agony and toil, and indeed you will see the accumulation of wealth at one pole, right now I don’t think anybody would deny that capitalism is about the accumulation of wealth, at that pole, and there’s huge accumulation of wealth going on. But where is the production going on that backs up that huge accumulation of wealth and what are the conditions of labour which exist? Well, you can find out, NGOs that have reports and Oxfam and others have reports on this sort of thing. Labor organizations have reports on this kind of thing, you’ll find reports of this sort in UN reports and so on. So, yes indeed, the accumulation of wealth at one pole, and accumulation of misery at the other pole. In many respects over the last thirty years the accumulation of wealth at one pole has gone astronomically high, and the accumulation of misery at the other end has gone very much in the other direction. In other words, in many respects, whereas in the 1950s-60s when you had strong labour organizations and social democratic parties and see a lot of political pressure on the consumer side and all the rest of it, you’d argue that in aggregate, the whole question of rational consumption was crucial to get the people to consume automobiles. How do you do that? You build cities where the only way you can get around is with automobiles, things of that sort. which means that workers have to have money to buy automobiles and buy the gasoline and all the things that go with it. So, indeed, this was not happening in the core parts of the world where capitalism was very well-established, but since the neo-liberal agenda has taken off, since the 1970s or so this has increasingly been happening. Working class in this country hasn’t gone anywhere but workers have been absorbed into, about two billion of them since 1970, have been mobilized in from the latent reserves into active membership of the proletariat, not least in China. But also of course in the Soviet Union, the ex-Soviet Union, and also in several of those countries like India and so on which had large agrarian bases, large agrarian bases sometimes in Latin-America too. So that the latent reserves have been really pulled in over the last thirty years and you’d argue that you’re pretty close, you’re much closer to this story that’s told at the end of Volume One now, than you were 30 years ago. And that, in a curious kind of way, is predictable you see, because what Marx has done, and remember this, what Marx has done is to take the words of the classical political-economists seriously and imagined we are in a perfectly competitive market society. In other words he’s taken the utopian vision, liberal vision, taken it at its word and then said ‘what is the consequence of trying to construct a society around that utopian vision?’ Adam Smith said what? The consequence is everybody’s gonna be better off, Marx’s argument is: the closer you get to that utopian vision, the closer you get to accumulation of wealth at one pole, and accumulation of misery at the other pole. And that’s how it was working in the 19th century and that’s what the neo-liberal economic and political project has yielded us over the last thirty years. In other words, it’s brought us back much closer to the Volume One analysis to the degree that capitalism has changed its trajectory and moved back towards that liberal utopian vision, in neo-liberal guise. So, Marx in a sense has taken the classical political-economists seriously, at their word, step-by-step shown us how the dynamic of capitalism works and brought us to the point of saying: if capitalism works this way and under the assumptions we’ve already laid out at the beginning then this is the result that’s going to come out. So why would anybody in their right mind take this particular path? Well, the answer is obvious: it’s obviously the wealthy. And who put us on this path, this neo-liberal path? Well, it was the wealthy, who decided they weren’t getting enough.
The wealthy weren’t getting enough surplus-value, wages and real wages were going too high, we have to do something about it.
What are we gonna do? We launch into this version of the model, really push the technological change big time at the same time as we discipline labour and we outsource and do all those other things, mobilize the latent population. That’s what globalization has been about, it’s about creating the necessary conditions which allow this result to be achieved, in which there’s an immense accumulation of wealth at one pole. With no mind as to what goes on at the other pole. What Marx does in section 5, as I’ve suggested to you, it to talk about what’s going all over the place, in Britain at that time. We could write section 5 about conditions of labour in Nike factories, GAP factories, all the rest of it, in Guatamala, in maquila zones, in China etc. We could write this stuff, it’s not hard to go the reports in the press and to go to reports in the press and assemble it. In fact, when I used to set exams on this class, about six years ago, one of the exams I had set was: imagine you’ve had a letter from your parents at home, saying ‘Oh, I hear you’re taking a course on Marx’s Capital, I guess it’s pretty interesting, once upon a time capital worked like that but thank god it’s no longer like that. Then I gave them a great wadge of newspaper accounts, from respectable sources like the New York Times, about Indonesian factories and Vietnamese factories and what’s going on in Guatemala, and what happened to Kathie Lee Gifford when she found out that all of her nice clothing system was being produced in Guatemala by thirteen-year-old kids who hadn’t been paid for 6 months, all those kinds of things.
So I said, why don’t you construct a letter back to your parents explaining this. So they did, and then I asked them: well, did you send it? They said: No! No! It’s actually really quite shocking right now, when you go into that literature, you don’t have to go far to find a vast literature from which you construct the equivalent of section 5 around this thesis and you’ll just show how this is going on globally without any difficulty whatsoever. And that again, I think, is in part, a tribute to Marx’s strength in analysis. That he brings you to the point where you can see clearly that a free market system will produce this result to the degree that it’s followed. Including, by the way, and this is interesting: including the increasing centralization of capital, that the free market system is going to disrupt and destroy its own conditions by actually tending more and more to oligopoly and monopoly etc. and the centralization of capital
will go on a pace as well, and if you ask yourself the question:
has the centralization of capital increased dramatically over the last thirty years? i think the answer is: oh yes! So, in fact you can defend Marx in a conditional way, you can defend Marx in this statement, by saying: we know that’s not the whole story “Like all other laws, it is modified in its working by many circumstances, the analysis of which does not concern us here.” You can introduce the qualifier. but it certainly tells us something about one of the major trends within a free-market capitalism, and where those kinds are directed and where they’re likely to go and to the degree that they’ve gone there, gives you a great deal, I think, of confidence in Marx’ analysis, that this is the way the system works. And how it got there and how it all started is of course one of the other big questions which we’ll deal with next time. We’re out of time now, next time i want you to read the whole of part 8, short chapters, not too long, and we need to talk through this. This is of course the historical origins of this whole system. This, if you like, is where it’s going to, what we’ve been looking at here is where it’s going go, all other things being equal which they never are. What we’re now going to look at is where it came from, and how it originated. okay, so next week we’ll take up part 8.