the historical limits of capitalism

Just as feudalism was historically limited, so too capitalism, writes duvinrouge.

The rise of capitalists and their taking power from the nobility was a reflection of the changing economic conditions as manufacturing became more important than agriculture. Looking back, it’s quite easy to understand how the increasingly economically powerful capitalists seized power. The case for the workers taking power isn’t so obvious though. Many seem to think that capitalism will continue forever unless a political party can persuade working people of a better alternative. Such a subjectivist position shows a lack of understanding of how capitalism works and what Marx was getting at in Volume III of Das Kapital.

‘The Law of the Tendential Fall in the Rate of Profit’ is part three of Volume III. To understand the importance of this requires a good understanding of how capitalism works, what value is and in particular, the difference between absolute and relative surplus value. Value is essentially labour time. Not necessarily the sum of all actual labour time that has gone into all commodities produced, but the market-determined ‘socially necessarily’ labour time; not all commodities taken to market are bought at prices that cover their costs and return a profit because the capitalist has to anticipate demand. (Don’t worry if you don’t fully grasp ‘socially necessary’ labour time, the key point is values (prices) reflect labour time).

The capitalist buys labour and means of production with money. Because money is that commodity that acts as the universal equivalent, money is a measure of labour time. With the labour and means of production, commodities are produced that are then sold for more money (M-C-M’). This means for the capitalist economy as a whole, as time passes, the amount of labour time must grow. More labour time must be worked, which means more labourers. The economic cake is growing and absolute profits are increasing even if the rate of profit is constant.

However, part three of Volume III is only concerned with relative surplus value. In this sense the economic cake isn’t growing – there is not an increase in labour time for the economy as a whole. Under such conditions how can capitalists achieve profits (M-C-M’)? The simple answer is that can do so by taking an increasing share of the economic cake at the expense of the workers. This is what Marx is exploring. Because more labour cannot be bought the capitalists look to more machinery (constant capital), so as production expands without a growing work force so the ratio of machinery to labour increases. Marx referred to this as an increase in the organic composition of capital. This increase may or may not reduce the rate of profit. It depends upon its effect on productivity in the production of means of production relative to the productivity in the means of subsistence (what goes to the workers so the supply of labour can be reproduced). Increases in the productivity of the means of subsistence mean that capitalists can reduce wages easier as the price of means of subsistence also fall (less labour time required to produce them). Hence more can go to the capitalist. But if the productivity in the production of means of production increases more, or the productivity increases for the economy as a whole do not materialise, it is much harder to reduce the workers share of the economic cake (their wages) because it means a cut in their standard of living. This is where we get the conflict between class interests appear so sharply.

The capitalist class with its control of the media can try and hide this class conflict. They can blame greedy bankers as industrial capitalists attack finance capitalists. Or they can blame other nations, as American capitalists attack Chinese state-capitalists. Or we have the blaming of minorities, e.g. ‘illegal’ immigrants. But none of these attacks are focused on the problem and cannot resolve the problem, for the problem is the historical limits of capitalism and the consequent downward pressure on the rate of profit and the subsequent attacks on worker’s lives. Eventually, whether fully conscious or not of what’s happening, the workers will end up taking direct control of the means of production to ensure their needs are met and so end the profit system. It’s not a question of if but when.