Marx, Karl Heinrich (1818 1883) · 2017-08-27 · M Marx, Karl Heinrich (1818–1883) Ernest Mandel...

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Marx, Karl Heinrich (1818–1883)

Ernest Mandel

Karl Marx was born on 5May 1818, the son of thelawyer Heinrich Marx and Henriette Pressburg.His father was descended from an old family ofJewish rabbis, but was himself a liberal admirer ofthe Enlightenment and not religious. Heconverted to Protestantism a few years beforeKarl was born to escape restrictions still imposedupon Jews in Prussia. His mother was of Dutch-Jewish origin.

Life and Work

Karl Marx studied at the Friedrich-Wilhelm Gym-nasium in Trier, and at the universities of Bonnand Berlin. His doctoral thesis, Differenz derdemokritischen und epikurischen Naturphi-losophie, was accepted at the University of Jenaon 15 April 1841. In 1843 he married Jenny vonWestphalen, daughter of Baron vonWestphalen, ahigh Prussian government official.

Marx’s university studies covered many fields,but centred around philosophy and religion. He

frequented the circle of the more radical followersof the great philosopher Hegel, befriended one oftheir main representatives, Bruno Bauer, and wasespecially influenced by the publication in 1841of Ludwig Feuerbach’s Das Wesen desChristentums (The Nature of Christianity). Hehad intended to teach philosophy at the university,but that quickly proved to be unrealistic. He thenturned towards journalism, both to propagandizehis ideas and to gain a livelihood. He becameeditor of the Rheinische Zeitung, a liberal news-paper of Cologne, in May 1942. His interestturned more and more to political and social ques-tions, which he treated in an increasingly radicalway. The paper was banned by the Prussianauthorities a year later.

Karl Marx then planned to publish a magazinecalledDeutsch-Französische Jahrbücher in Paris,in order to escape Prussian censorship and to bemore closely linked and identified with the realstruggles for political and social emancipationwhich, at that time, were centred around France.He emigrated to Paris with his wife and met therehis lifelong friend Friedrich Engels.

Marx had become critical of Hegel’s philo-sophical political system, a criticism whichwould lead to his first major work, Zur Kritik desHegelschen Rechtsphilosophie (A Critique ofHegel’s Philosophy of Right). Intensively study-ing history and political economy during his stayin Paris, he became strongly influenced by social-ist and working-class circles in the French capital.With his ‘Paris Manuscripts’ (Oekonomisch-

This chapter was originally published in The NewPalgrave: A Dictionary of Economics, 1st edition, 1987.Edited by John Eatwell, Murray Milgate and PeterNewman

# The Author(s) 1987Palgrave Macmillan (ed.), The New Palgrave Dictionary of Economics,DOI 10.1057/978-1-349-95121-5_1019-1

philosophische Manuskripte, 1844), he definitelybecame a communist, i.e. a proponent of collec-tive ownership of the means of production.

He was expelled from France at the beginningof 1845 through pressure from the Prussianembassy and migrated to Brussels. His definiteturn towards historical materialism (see below)would occur with his manuscript Die DeutscheIdeologie (1845–6) culminating in the eleven The-ses on Feuerbach, written together with Engelsbut never published during his lifetime.

This led also to a polemical break with the mostinfluential French socialist of that period, Prou-dhon, expressed in the only book Marx wouldwrite in French, Misère de la Philosophie (1846).

Simultaneously he became more and moreinvolved in practical socialist politics, and startedto work with the Communist League, which askedEngels and himself to draft their declaration ofprinciple. This is the origin of the CommunistManifesto (1848),Manifest der KommunistischenPartei).

As soon as the revolution of 1848 broke out, hewas in turn expelled from Belgium and went firstto France, then, from April 1848 on, to Cologne.His political activity during the German revolu-tion of 1848 centred around the publication of thedaily paper Neue Rheinische Zeitung, whichenjoyed wide popular support. After the victoryof the Prussian counter-revolution, the paper wasbanned in May 1849 and Marx was expelled fromPrussia. He never succeeded in recovering hiscitizenship. Marx emigrated to London, wherehe would stay, with short interruptions, till theend of his life. For fifteen years, his time wouldbe mainly taken up with economic studies, whichwould lead to the publication first of Zur Kritikder Politischen Oekonomie (1859) and later ofDas Kapital, Vol. I (1867). He spent long hoursat the British Museum, studying the writings of allthe major economists, as well as the governmentBlue Books, Hansard and many other contempo-rary sources on social and economic conditions inBritain and the world. His reading also coveredtechnology, ethnology and anthropology, besidespolitical economy and economic history; manynotebooks were filled with excerpts from thebooks he read.

But while the activity was mainly studious, henever completely abandoned practical politics. Hefirst hoped that the Communist League would bekept alive, thanks to a revival of revolution. Whenthis did not occur, he progressively dropped out ofemigré politics, but not without writing a scathingindictment of French counter-revolution in Der18. Brumaire des Louis Bonaparte (1852),which was in a certain sense the balance sheet ofhis political activity and an analysis of the1848–52 cycle of revolution and counter-revolution. He would befriend British trade-union leaders and gradually attempt to drawthem towards international working class interestsand politics. These efforts culminated in the crea-tion of the International Working Men’s Associa-tion (1864) – the so-called First International – inwhich Marx and Engels would play a leading role,politically as well as organizationally.

It was not only his political interest and revo-lutionary passion that prevented Marx frombecoming an economist pure and simple. It wasalso the pressure of material necessity. Contrary tohis hope, he never succeeded in earning enoughmoney from his scientific writings to sustain him-self and his growing family. He had to turn tojournalism to make a living. He had initial, be itmodest, success in this field, when he becameEuropean correspondent of the New York DailyTribune in the summer of 1851. But he never had aregular income from that collaboration, and itended after ten years.

So the years of his London exile were mainlyyears of great material deprivation and moral suf-fering. Marx suffered greatly from the fact that hecould not provide a minimum of normal livingconditions for his wife and children, whom heloved deeply. Bad lodgings in cholera-strickenSoho, insufficient food and medical care, led to achronic deterioration of his wife’s and his ownhealth and to the death of several of their children;that of his oldest son Edgar in 1855 struck him anespecially heavy blow. Of his seven children, onlythree daughters survived, Jenny, Laura and Elea-nor (Tussy). All three were very gifted and wouldplay a significant role in the international labourmovement, Eleanor in Britain, Jenny and Laura in

2 Marx, Karl Heinrich (1818–1883)

France (where they married the socialist leadersLonguet and Lafargue).

During this long period of material misery,Marx survived thanks to the financial and moralsupport of his friend Friedrich Engels, whosedevotion to him stands as an exceptional exampleof friendship in the history of science and politics.Things started to improve when Marx came intohis mother’s inheritance; when the first indepen-dent working-class parties (followers of Lassalleon the one hand, of Marx and Engels on the other)developed in Germany, creating a broader marketfor his writings; when the IWMA became influ-ential in several European countries, and whenEngels’ financial conditions improved to thepoint where he would sustain the Marx familyon a more regular basis.

The period 1865–71 was one in which Marx’sconcentration on economic studies and on thedrafting of Das Kapital was interrupted moreand more by current political commitments tothe IWMA, culminating in his impassioneddefence of the Paris Commune (Der Bürgerkriegin Frankreich [The Civil War in France] 1871).But the satisfaction of being able to participate asecond time in a real revolution – be it onlyvicariously – was troubled by the deep divisionsinside the IMWA, which led to the split with theanarchists grouped around Michael Bakunin.

Marx did not succeed in finishing a final ver-sion of Das Kapital vols II and III, which werepublished posthumously, after extensive editing,by Engels. It remains controversial whether heintended to add two more volumes to these,according to an initial plan. More than 25 yearsafter the death of Marx, Karl Kautsky edited whatis often called vol. IV of Das Kapital, his exten-sive critique of other economists: Theorien überden Mehrwert (Theories of Surplus Value).

Marx’s final years were increasingly markedby bad health, in spite of slightly improved livingconditions. Bad health was probably the mainreason why the final version of vols II and III ofCapital could not be finished. Although he wrotea strong critique of the Programme which wasadopted by the unification congress (1878) of Ger-man social democracy (Kritik des Gothaer Pro-gram), he was heartened by the creation of that

united working-class party in his native land, bythe spread of socialist organizations throughoutEurope, and by the growing influence of hisideas in the socialist movement. His wife fell illin 1880 and died the next year. This came as adeadly blow to Karl Marx, who did not surviveher for long. He himself died in London on14 March 1883.

Historical Materialism

Outside his specific economic theories, Marx’smain contribution to the social sciences has beenhis theory of historical materialism. Its startingpoint is anthropological. Human beings cannotsurvive without social organization. Social orga-nization is based upon social labour and socialcommunication. Social labour always occurswithin a given framework of specific, historicallydetermined, social relations of production. Thesesocial relations of production determine in the lastanalysis all other social relations, including thoseof social communication. It is social existencewhich determines social consciousness and notthe other way around.

Historical materialism posits that relations ofproduction which become stabilized and repro-duce themselves are structures which can no lon-ger be changed gradually, piecemeal. They aremodes of production. To use Hegel’s dialecticallanguage, which was largely adopted (andadapted) by Marx: they can only change qualita-tively through a complete social upheaval, a socialrevolution or counter-revolution. Quantitativechanges can occur within modes of production,but they do not modify the basic structure. In eachmode of production, a given set of relations ofproduction constitutes the basis (infrastructure) onwhich is erected a complex superstructure,encompassing the state and the law (except inclassless society), ideology, religion, philosophy,the arts, morality etc.

Relations of production are the sum total ofsocial relations which human beings establishamong themselves in the production of their mate-rial lives. They are therefore not limited to whatactually happens at the point of production.

Marx, Karl Heinrich (1818–1883) 3

Humankind could not survive, i.e. produce, ifthere did not exist specific forms of circulationof goods, e.g. between producing units(circulation of tools and raw materials) andbetween producing units and consumers. A prioriallocation of goods determines other relations ofproduction than does allocation of goods throughthe market. Partial commodity production (whatMarx calls ‘simple commodity production’ or‘petty commodity production’ – ‘einfacheWarenproduktion’) also implies other relations ofproduction than does generalized commodityproduction.

Except in the case of classless societies, modesof production, centred around prevailing relationsof production, are embodied in specific class rela-tions which, in the last analysis, overdeterminerelations between individuals.

Historical materialism does not deny the indi-vidual’s free will, his attempts to make choicesconcerning his existence according to his individ-ual passions, his interests as he understands them,his convictions, his moral options etc. What his-torical materialism does state is: (1) that thesechoices are strongly predetermined by the socialframework (education, prevailing ideology andmoral ‘values’, variants of behaviour limited bymaterial conditions etc); (2) that the outcome ofthe collision of millions of different passions,interests and options is essentially a phenomenonof social logic and not of individual psychology.Here, class interests are predominant.

There is no example in history of a ruling classnot trying to defend its class rule, or of anexploited class not trying to limit (and occasion-ally eliminate) the exploitation it suffers. So out-side classless society, the class struggle is apermanent feature of human society. In fact, oneof the key theses of historical materialism is that‘the history of humankind is the history of classstruggles’ (Marx, Communist Manifesto, 1848).

The immediate object of class struggle is eco-nomic and material. It is a struggle for the divisionof the social product between the direct producers(the productive, exploited class) and those whoappropriate what Marx calls the social surplusproduct, the residuum of the social product oncethe producers and their offspring are fed (in the

large sense of the word; i.e. the sum total of theconsumer goods consumed by that class) and theinitial stock of tools and raw materials isreproduced (including the restoration of initialfertility of the soil). The ruling class functions asa ruling class essentially through the appropria-tion of the social surplus product. By getting pos-session of the social surplus product, it acquiresthe means to foster and maintain most of thesuperstructural activities mentioned above; andby doing so, it can largely determine theirfunction – to maintain and reproduce the givensocial structure, the given mode ofproduction – and their contents.

We say ‘largely determine’ and not‘completely determine’. First, there is an ‘imma-nent dialectical’, i.e. an autonomous movement,of each specific superstructural sphere of activity.Each generation of scientists, artists, philoso-phers, theologists, lawyers and politicians finds agiven corpus of ideas, forms, rules, techniques,ways of thinking, to which it is initiated througheducation and current practice, etc. It is not forcedto simply continue and reproduce these elements.It can transform them, modify them, change theirinterconnections, even negate them. Again: his-torical materialism does not deny that there is aspecific history of science, a history of art, ahistory of philosophy, a history of political andmoral ideas, a history of religion etc., which allfollow their own logic. It tries to explain why acertain number of scientific, artistic, philosophi-cal, ideological, juridical changes or even revolu-tions occur at a given time and in given countries,quite different from other ones which occurredsome centuries earlier elsewhere. The nexus ofthese ‘revolutions’ with given historical periodsis a nexus of class interests.

Second, each social formation (i.e. a givencountry in a given epoch) while being character-ized by predominant relations of production (i.e. agiven mode or production at a certain phase of itsdevelopment) includes different relations of pro-duction which are largely remnants of the past, butalso sometimes nuclei of future modes of produc-tion. Thus there exists not only the ruling class andthe exploited class characteristic of that prevailingmode of production (capitalists and wage earners


under capitalism). There also exist remnants ofsocial classes which were predominant whenother relations of production prevailed andwhich, while having lost their hegemony, stillmanage to survive in the interstices of the newsociety. This is for example the case with pettycommodity producers (peasants, handicraftsmen,small merchants), semifeudal landowners, andeven slave-owners, in many already predomi-nantly capitalist social formations throughout the19th and part of the 20th centuries. Each of thesesocial classes has its own ideology, its own reli-gious and moral values, which are intertwinedwith the ideology of the hegemonic ruling class,without becoming completely absorbed by that.

Third, even after a given ruling class (e.g. thefeudal or semi-feudal nobility) has disappeared asa ruling class, its ideology can survive throughsheer force of social inertia and routine (custom).The survival of traditional ancien régime catholicideology in France during a large part of the 19thcentury, in spite of the sweeping social, politicaland ideological changes ushered in by the Frenchrevolution, is an illustration of that rule.

Finally, Marx’s statement that the ruling ideol-ogy of each epoch is the ideology of the rulingclass – another basic tenet of historicalmaterialism – does not express more than it actu-ally says. It implies that other ideologies can existside by side with that ruling ideology withoutbeing hegemonic. To cite the most important ofthese occurrences: exploited and (or) oppressedsocial classes can develop their own ideology,which will start to challenge the prevailing hege-monic one. In fact, an ideological class struggleaccompanies and sometimes even precedes thepolitical class struggle properly speaking. Reli-gious and philosophical struggles preceding theclassical bourgeois revolutions; the first socialistcritiques of bourgeois society preceding the con-stitution of the first working-class parties and rev-olutions, are examples of that type.

The class struggle has been up to now the greatmotor of history. Human beings make their ownhistory. No mode of production can be replaced byanother one without deliberate actions by largesocial forces, i.e. without social revolutions(or counter-revolutions). Whether these revolutions

or counter-revolutions actually lead to the long-termimplementation of deliberate projects of social reor-ganization is another matter altogether. Very often,their outcome is to a large extent different from theintention of the main actors.

Human beings act consciously, but they can actwith false consciousness. They do not necessarilyunderstand why they want to realize certain socialand (or) political plans, why they want to maintainor to change economic or juridical institutions;and especially, they rarely understand in a scien-tific sense the laws of social change, the materialand social preconditions for successfully conserv-ing or changing such institutions. Indeed, Marxclaims that only with the discovery of the maintenets of historical materialism have we made asignificant step forward towards understandingthese laws, without being able to predict ‘all’future developments of society.

Social change, social revolutions and counter-revolutions are furthermore occurring within deter-mined material constraints. The level of develop-ment of the productive forces – essentially toolsand human skills, including their effects upon thefertility of the soil – limits the possibilities ofinstitutional change. Slave labour has shown itselfto be largely incompatible with the factory systembased upon contemporary machines. Socialismwould not be durably built upon the basis of thewooden plough and the potter’s wheel. A socialrevolution generally widens the scope for thedevelopment of the productive forces and leads tosocial progress inmost fields of human activity in amomentous way. Likewise, an epoch of deepsocial crisis is ushered in when there is a growingconflict between the prevailing mode of produc-tion (i.e. the existing social order) on the one hand,and the further development of the productiveforces on the other. Such a social crisis will thenmanifest itself on all major fields and social activ-ity: politics, ideology, morals and law, as well as inthe realm of the economic life properly speaking.

Historical materialism thereby provides a mea-suring stick for human progress: the growth of theproductive forces, measurable through the growthof the average productivity of labour, and thenumber, longevity and skill of the human species.This measuring stick in no way abstracts from the


natural preconditions for human survival andhuman growth (in the broadest sense of the con-cept). Nor does it abstract from the conditionaland partial character of such progress, in terms ofsocial organization and individual alienation.

In the last analysis, the division of society intoantagonistic social classes reflects, from the pointof view of historical materialism, an inevitablelimitation of human freedom. For Marx and Eng-els, the real measuring rod of human freedom,i.e. of human wealth, is not ‘productive labour’;this only creates the material pre-condition for thatfreedom. The real measuring rod is leisure time,not in the sense of ‘time for doing nothing’ but inthe sense of time freed from the iron necessity toproduce and reproduce material livelihood, andtherefore disposable for all-round and free devel-opment of the individual talents, wishes, capaci-ties, potentialities, of each human being.

As long as society is too poor, as long as goodsand services satisfying basic needs are too scarce,only part of society can be freed from the neces-sity to devote most of its life to ‘work for alivelihood’ (i.e. of forced labour, in the anthropo-logical/sociological sense of the word, that is inrelation to desires, aspirations and talents, not to ajuridical status of bonded labour). That is essen-tially what represents the freedom of the rulingclasses and their hangers-on, who are ‘being paidto think’, to create, to invent, to administer,because they have become free from the obliga-tion to bake their own bread, weave their ownclothes and build their own houses.

Once the productive forces are developed farenough to guarantee all human beings satisfactionof their basic needs by ‘productive labour’ limitedto a minor fraction of lifetime (the half work-dayor less), then the material need of the division ofsociety in classes disappears. Then, there remainsno objective basis for part of society to monopo-lize administration, access to information, knowl-edge, intellectual labour. For that reason,historical materialism explains both the reasonswhy class societies and class struggles arose inhistory, and why they will disappear in the futurein a classless society of democratically self-administering associated producers.

Historical materialism therefore contains anattempt at explaining the origin, the functions,and the future withering away of the state as aspecific institution, as well as an attempt toexplain politics and political activity in general,as an expression of social conflicts centred arounddifferent social interests (mainly, but not only,those of different social classes; important frac-tions of classes, as well as non-class social group-ings, also come into play.

For Marx and Engels, the state is not existentwith human society as such, or with ‘organizedsociety’ or even with ‘civilized society’ in theabstract; neither is it the result of any voluntarilyconcluded ‘social contract’ between individuals.The state is the sum total of apparatuses,i.e. special groups of people separate and apartfrom the rest (majority) of society, that appropriateto themselves functions of a repressive or integra-tive nature which were initially exercised by allcitizens. This process of alienation occurs in con-junction with the emergence of social classes. Thestate is an instrument for fostering, conserving andreproducing a given class structure, and not aneutral arbiter between antagonistic classinterests.

The emergence of a classless society is there-fore closely intertwined, for adherents to historicalmaterialism, with the process of withering awayof the state, i.e. of gradual devolution to the wholeof society (self-management, self-administration)of all specific functions today exercised by specialapparatuses, i.e. of the dissolution of these appa-ratuses. Marx and Engels visualized then dictator-ship of the proletariat, the last form of the state andof political class rule, as an instrument for assur-ing the transition from class society to classlesssociety. It should itself be a state of a special kind,organizing its own gradual disappearance.

We said above that, from the point of view ofhistorical materialism, the immediate object ofclass struggle is the division of the social productbetween different social classes. Even the politicalclass struggle in the final analysis serves that mainpurpose; but it also covers a much broader field ofsocial conflicts. As all state activities have somebearing upon the relative stability or instability ofa given social formation, and the class rule to


which it is submitted, the class struggle can extendto all fields of politics, from foreign policy toeducational problems and religious conflicts.This has of course to be proven through painstak-ing analysis, and not proclaimed as an axiom or arevealed truth. When conducted successfully,such exercises in class analysis and class defini-tion of political, social and even literary strugglesbecome impressive works of historical explana-tion, as for example Marx’s Class Struggles inFrance 1848–50, Engels’ The German PeasantWar, Franz Mehring’s Die Lessing-Legende,Trotsky’s History of the Russian Revolution, etc.

Marx’s Economic Theory – GeneralApproach and Influence

A general appraisal of Marx’s method of eco-nomic analysis is called for prior to an outline ofhis main economic theories (theses andhypotheses).

Marx is distinct from most important econo-mists of the 19th and 20th centuries in that he doesnot consider himself at all an ‘economist’ pure andsimple.

The idea that ‘economic science’ as a specialscience completely separate from sociology, his-tory, anthropology etc. cannot exist, underliesmost of his economic analysis. Indeed, historicalmaterialism is an attempt at unifying all socialsciences, if not all sciences about humankind,into a single ‘science of society’.

For sure, within the framework of this general‘science of society’, economic phenomena couldand should be submitted to analysis as specificphenomena. So economic theory, economical sci-ence, have a definite autonomy after all; but isonly a partial and relative one.

Probably the best formula for characterizingMarx’s economic theory would be to call it anendeavour to explain the social economy. Thiswould be true in a double sense. For Marx, thereare no eternal economic laws, valid in every epochof human prehistory and history. Each mode ofproduction has its own specific economic laws,which lose their relevance once the general socialframework has fundamentally changed. For Marx

likewise, there are no economic laws separate andapart from specific relations between humanbeings, in the primary (but not only, as alreadysummarized) social relations of production. Allattempts to reduce economic problems to purelymaterial, objective ones, to relations betweenthings, or between things and human beings,would be considered by Marx as manifestationsof mystification, of false consciousness,expressing itself through the attempted reificationof human relations. Behind relations betweenthings, economic science should try to discoverthe specific relations between human beingswhich they hide. Real economic science has there-fore also a demystifying function compared tovulgar ‘economics’, which takes a certain numberof ‘things’ for granted without asking the ques-tion: Are they really only what they appear to be?From where do they originate? What explainsthese appearances? What lies behind them?Where do they lead? How could they (will they)disappear? Problemblindheit, the refusal to seethat facts are generally more problematic thanthey appear at first sight, is certainly not areproach one could address to Marx’s economicthought.

Marx’s economic analysis is therefore charac-terized by a strong ground current of historicalrelativism, with a strong recourse to the geneticaland evolutionary method of thinking (that is whythe parallel with Darwin has often been made,sometimes in an excessive way). The formula‘genetic structuralism’ has also been used in rela-tion to Marx’s general approach to economic anal-ysis. Be that as it may, one could state that Marx’seconomic theory is essentially geared to the dis-covery of specific ‘laws of motion’ for successivemodes of production. While his theoretical efforthas been mainly centred around the discovery ofthese laws of motion for capitalist society, hiswork contains indications of suchlaws – different ones, to be sure – for precapitalistand postcapitalist social formations too.

The main link between Marx’s sociology andanthropology on the one hand, and his economicanalysis on the other, lies in the key role of sociallabour as the basic anthropological feature under-lying all forms of social organization. Social


labour can be organized in quite different forms,thereby giving rise to quite different economicphenomena (‘facts’). Basically different forms ofsocial labour organization lead to basically differ-ent sets of economic institutions and dynamics,following basically different logics (obeying basi-cally different ‘laws of motion’).

All human societies must assure the satisfac-tion of a certain number of basic needs, in order tosurvive and reproduce themselves. This leads tothe necessity of establishing some sort of equilib-rium between socially recognized needs,i.e. current consumption and current production.But this abstract banality does not tell us anythingabout the concrete way in which social labour isorganized in order to achieve that goal.

Society can recognize all individual labour asimmediately social labour. Indeed, it does so ininnumerable primitive tribal and village commu-nities, as it does in the contemporary kibbutz.Directly social labour can be organized in a des-potic or in a democratic way, through custom andsuperstition as well as through an attempt atapplying advanced science to economic organiza-tion; but it will always be immediately recognizedsocial labour, inasmuch as it is based upon a prioriassignment of the producers to their specific work(again: irrespective of the form this assignationtakes, whether it is voluntary or compulsory, des-potic or simply through custom etc.).

But when social decision-taking about workassignation (and resource allocation closely tiedto it) is fragmented into different units operatingindependently from each other – as a result ofprivate control (property) of the means of produc-tion, in the economic and not necessarily thejuridical sense of the word – then social labourin turn is fragmented into private labours whichare not automatically recognized as socially nec-essary ones (whose expenditure is not automati-cally compensated by society). Then the privateproducers have to exchange parts or all of theirproducts in order to satisfy some or all of theirbasic needs. Then these products become com-modities. The economy becomes a (partial or gen-eralized) market economy. Only by measuring theresults of the sale of his products can the producer(or owner) ascertain what part of his private labour

expenditure has been recognized (compensated)as social labour, and what part has not.

Even if we operate with such simple analyticaltools as ‘directly social labour’, ‘private labour’,‘socially recognized social labour’, we have tomake quite an effort at abstracting from immedi-ately apparent phenomena in order to understandtheir relevance for economic analysis. This is truefor all scientific analysis, in natural as well as insocial sciences. Marx’s economic analysis, aspresented in his main books, has not beenextremely popular reading; but then, there arenot yet so many scientists in these circumstances.This has nothing to do with any innate obscurityof the author, but rather with the nature of scien-tific analysis as such.

The relatively limited number of readers ofMarx’s economic writings (the first English paper-back edition of Das Kapital appeared only in1974!) is clearly tied to Marx’s scientific rigour,his effort at a systematic and all-sided analysis ofthe phenomena of the capitalist economy.

But while his economic analysis lacked popu-larity, his political and historical projectionsbecame more and more influential. With the riseof independent working-class mass parties, anincreasing number of these proclaimed them-selves as being guided or influenced by Marx, atleast in the epoch of the Second and the ThirdInternationals, roughly the half century from 1890till 1940. Beginning with the Russian revolutionof 1917, a growing number of governments and ofstates claimed to base their policies and constitu-tions on concepts developed by Marx. (Whetherthis was ligitimate or not is another question.) Butthe fact itself testifies to Marx’s great influence oncontemporary social and political developments,evolutionary and revolutionary alike.

Likewise, his diffused influence on social sci-ence, including academic economic theory, goesfar beyond general acceptance or even substantialknowledge of his main writings. Some key ideasof historical materialism and of economic analysiswhich permeate his work – e.g. that economicinterests to a large extent influence, if not deter-mine, political struggles; that historic evolution islinked to important changes in material condi-tions; that economic crises (‘the business cycle’)


are unavoidable under conditions of capitalistmarket economy – have become near-platitudes.It is sufficient to notice howmajor economists andhistorians strongly denied their validity through-out the 19th century and at least until the 1920s, tounderstand how deep has been Marx’s influenceon contemporary social science in general.

Marx’s Labour Theory of Value

As an economist, Marx is generally situated in thecontinuity of the great classical school of AdamSmith and Ricardo. He obviously owes a lot toRicardo, and conducts a current dialogue with thatmaster in most of his mature economic writings.

Marx inherited the labour theory of value fromthe classical school. Here the continuity is evenmore pronounced; but there is also a radical break.For Ricardo, labour is essentially a numeraire,which enables a common computation of labourand capital as basic elements of production costs.For Marx, labour is value. Value is nothing butthat fragment of the total labour potential existingin a given society in a certain period (e.g. a year ora month) which is used for the output of a givencommodity, at the average social productivity oflabour existing then and there, divided by the totalnumber of these commodities produced, andexpressed in hours (or minutes), days, weeks,months of labour.

Value is therefore essentially a social, objectiveand historically relative category. It is socialbecause it is determined by the overall result ofthe fluctuating efforts of each individual producer(under capitalism: of each individual firm or fac-tory). It is objective because it is given, once theproduction of a given commodity is finished andis thus independent from personal (or collective)valuations of customers on the market place; andit is historically relative because it changes witheach important change (progress or regression) ofthe average productivity of labour in a givenbranch of output, including in agriculture andtransportation.

This does not imply that Marx’s concept ofvalue is in any way completely detached fromconsumption. It only means that the feedback of

consumers’ behaviour and wishes upon value isalways mediated through changes in allocation oflabour inputs in production, labour seen assubdivided into living labour and dead (dated)labour, i.e. tools and raw materials. The marketemits signals to which the producing units react.Value changes after these reactions, not beforethem. Market price changes can of course occurprior to changes in value. In fact, changes inmarket prices are among the key signals whichcan lead to changes in labour allocation betweendifferent branches of production, i.e. to changes inlabour quantities necessary to produce given com-modities. But then, for Marx, values determineprices only basically and in the medium-termsense of the word. This determination onlyappears clearly as an explication of medium andlong-term price movements. In the shorter run,prices fluctuate around values as axes. Marxnever intended to negate the operation of marketlaws, of the law of supply and demand, in deter-mining these short-term fluctuations.

The ‘law of value’ is but Marx’s version ofAdam Smith’s ‘invisible hand’. In a society dom-inated by private labour, private producers andprivate ownership of productive inputs, it is this‘law of value’, an objective economic law operat-ing behind the backs of all people, all ‘agents’involved in production and consumption, which,in the final analysis, regulates the economy, deter-mines what is produced and how it is produced(and therefore also what can be consumed). The‘law of value’ regulates the exchange betweencommodities, according to the quantities ofsocially necessary abstract labour they embody(the quantity of such labour spent in their produc-tion). Through regulating the exchange betweencommodities, the ‘law of value’ also regulates,after some interval, the distribution of society’slabour potential and of society’s non-living pro-ductive resources between different branches ofproduction. Again, the analogy with Smith’s‘invisible hand’ is striking.

Marx’s critique of the ‘invisible hand’ conceptdoes not dwell essentially on the analysis of how amarket economy actually operates. It would aboveall insist that this operation is not eternal, notimmanent in ‘human nature’, but created by


specific historical circumstances, a product of aspecial way of social organization, and due todisappear at some stage of historical evolution asit appeared during a previous stage. And it wouldalso stress that this ‘invisible hand’ leads neitherto the maximum of economic growth nor to theoptimum of human wellbeing for the greatestnumber of individuals, i.e. it would stress theheavy economic and social price humankind hadto pay, and is still currently paying, for the unde-niable progress the market economy produced at agiven stage of historical evolution.

The formula ‘quantities of abstract humanlabour’ refers to labour seen strictly as a fractionof the total labour potential of a given society at agiven time, say a labour potential of 2 billionhours a year (1 million potential producers sup-posedly capable of working each 2000 hours ayear). It therefore implies making abstraction ofthe specific trade or occupation of a given male orfemale producer, the product of a day’s work of aweaver not being worth less or more than that of apeasant, a miner, a housebuilder, a milliner or aseamstress. At the basis of that concept of‘abstract human labour’ lies a social condition, aspecific set of social relations of production, inwhich small independent producers are essentiallyequal. Without that equality, social division oflabour, and therefore satisfaction of basic con-sumers’ needs, would be seriously endangeredunder that specific organizational set-up of theeconomy. Such an equality between small com-modity owners and producers is later transformedinto an equality between owners of capital underthe capitalist mode of production.

But the concept of homogeneity of productivehuman labour, underlying that of ‘abstract humanlabour’ as the essence of value, does not imply anegation of the difference between skilled andunskilled labour. Again: a negation of that differ-ence would lead to breakdown of the necessarydivision of labour, as would any basic heteroge-neity of labour inputs in different branches ofoutput. It would then not pay to acquire skills:most of them would disappear. So Marx’s labourtheory of value, in an internally coherent way,leads to the conclusion that one hour of skilledlabour represents more value than one hour of

unskilled labour, say represents the equivalent of1.5 hours of unskilled labour. The differencewould result from the imputation of the labour itcosts to acquire the given skill. While an unskilledlabourer would have a labour potential of120,000 hours during his adult life, a skilledlabourer would only have a labour potential of80,000 hours, 40,000 hours being used for acquir-ing, maintaining and developing his skill. Only ifone hour of skilled labour embodies the samevalue of 1.5 hours of unskilled labour, will theequality of all ‘economic agents’ be maintainedunder these circumstances, i.e. will it ‘pay’ eco-nomically to acquire a skill.

Marx himself never extensively dwelled onthis solution of the so-called reduction problem.This remains indeed one of the most obscure partsof his general economic theory. It has led to some,generally rather mild, controversy. Much moreheat has been generated by another facet ofMarx’s labour theory of value, the so-called trans-formation problem. Indeed, from Böhm-Bawerkwriting a century ago till the recent contributionsof Sraffa (1960) and Steedman (1977), the wayMarx dealt with the transformation of values into‘prices of production’ in Capital Vol. III has beenconsidered by many of his critics as the mainproblem of his ‘system’, including being a reasonto reject the labour theory of value out of hand.

The problem arises out of the obvious modifi-cation in the functioning of a market economywhen capitalist commodity production substitutesitself for simple commodity production. In simplecommodity production, with generally stabletechnology and stable (or easily reproduceable)tools, living labour is the only variable of thequantity and subdivision of social production.The mobility of labour is the only dynamic factorin the economy. As Engels pointed out in hisAddendum to Capital Vol. III (Marx, g,pp. 1034–7) in such an economy, commoditieswould be exchanged at prices which would beimmediately proportional to values, to the labourinputs they embody.

But under the capitalist mode of production,this is no longer the case. Economic decision-taking is not in the hands of the direct producers.It is in the hands of the capitalist entrepreneurs in


the wider sense of the word (bankers – distributorsof credit – playing a key role in that decision-taking, besides entrepreneurs in the productivesector properly speaking). Investment decisions,i.e. decisions for creating, expanding, reducing orclosing enterprises, determine economic life. It isthe mobility of capital and not the mobility oflabour which becomes the motive force of theeconomy. Mobility of labour becomes essentiallyan epiphenomenon of the mobility of capital.

Capitalist production is production for profit.Mobility of capital is determined by existing orexpected profit differentials. Capital leavesbranches (countries, regions) with lower profits(or profit expectations) and flows towardsbranches (countries, regions) with higher ones.These movements lead to an equalization of therate of profit between different branches of pro-duction. But approximately equal returns on allinvested capital (at least under conditions ofprevailing ‘free competition’) coexist withunequal proportions of inputs of labour in thesedifferent branches. So there is a disparity betweenthe direct value of a commodity and its ‘price ofproduction’, that ‘price of production’ beingdefined by Marx as the sum of production costs(costs of fixed capital and raw materials pluswages) and the average rate of profit multipliedwith the capital spent in the given production.

The so-called ‘transformation problem’ relatesto the question of whether a relation can never-theless be established between value and these‘prices of production’, what is the degree of coher-ence (or incoherence) of the relation with the ‘lawof value’ (the labour theory of value in general),and what is the correct quantitative way to expressthat relation, if it exists.

We shall leave aside here the last aspect of theproblem, to which extensive analysis has recentlybeen devoted (Mandel and Freeman 1984). FromMarx’s point of view, there is no incoherencebetween the formation of ‘prices of production’and the labour theory of value. Nor is it true that hecame upon that alleged difficulty when he startedto prepare Capital III, i.e. to deal with capitalistcompetition, as several critics have argued (seee.g. Joan Robinson 1942). In fact, his solution ofthe transformation problem is already present in

the Grundrisse (Marx, d), before he even startedto draft Capital Vol. I.

The sum total of value produced in a givencountry during a given span of time (e.g. oneyear) is determined by the sum total of labour-inputs. Competition and movements of capitalcannot change that quantity. The sum total ofvalues equals the sum total of ‘prices of produc-tion’. The only effect of capital competition andcapital mobility is to redistribute that givensum – and this through a redistribution of surplusvalue (see below) – between different capitals, tothe benefit of some and at the expense of others.

Now this redistribution does not occur in ahaphazard or arbitrary way. Essentially value(surplus-value) is transferred from technicallyless advanced branches to technologically moreadvanced branches. And here the concept of‘quantities of socially necessary labour’ comesinto its own, under the conditions of constantrevolutions of productive technology that charac-terize the capitalist mode of production. Brancheswith lower than average technology (organiccomposition of capital, see below) can be consid-ered as wasting socially necessary labour. Part ofthe labour spent in production in their realm istherefore not compensated by society. Brancheswith higher than average technology (organiccomposition of capital) can be considered to beeconomizing social labour; their labour inputs cantherefore be considered as more intensive thanaverage, embodying more value. In this way, thetransfer of value (surplus-value) between differentbranches, far from being in contradiction with thelaw of value, is precisely the way it operates andshould operate under conditions of ‘capitalistequality’, given the pressure of rapid technologi-cal change.

As to the logical inconsistency often suppos-edly to be found in Marx’s method of solving the‘transformation problem’ – first advanced by vonBortkiewicz (1907) – it is based upon a misunder-standing in our opinion. It is alleged that in his‘transformation schemas’ (or tables) (Marx, g,pp. 255–6) Marx calculates inputs in ‘values’and outputs in ‘prices of production’, therebyomitting the feedback effect of the latter on theformer. But that feedback effect is unrealistic and


unnecessary, once one recognizes that inputs areessentially data. Movements of capital posterior tothe purchase of machinery or raw materials,including ups and downs of prices of finishedproducts produced with these raw materials, can-not lead to a change in prices and therefore ofprofits of the said machinery and raw materials,on sales which have already occurred. Whatcritics present as an inconsistency between‘values’ and ‘prices of production’ is simply arecognition of two different time-frameworks(cycles) in which the equalization of the rate ofprofit has been achieved, a first one for inputs, anda second, later one for outputs.

Marx’s Theory of Rent

The labour theory of value defines value as thesocially necessary quantity of labour determinedby the average productivity of labour of eachgiven sector of production. But these values arenot mathematically fixed data. They are simplythe expression of a process going on in real life,under capitalist commodity production. So thisaverage is only ascertained in the course of acertain time-span. There is a lot of logical argu-ment and empirical evidence to advance thehypothesis that the normal time-span for essen-tially modifying the value of commodities is thebusiness cycle, from one crisis of over-production(recession) to the next one.

Before technological progress and (or) better(more ‘rational’) labour organizationetc. determines a more than marginal change(in general: decline) in the value of a commodity,and the crisis eliminates less efficient firms, therewill be a coexistence of firms with various ‘indi-vidual values’ of a given commodity in a givenbranch of output, even assuming a single marketprice. So, in his step-for-step approach towardsexplaining the immediate phenomena (facts ofeconomic life) like prices and profits, by theiressence, Marx introduces at this point of his anal-ysis a newmediating concept, that ofmarket value(Marx, g, ch. 10). The market value of a commod-ity is the ‘individual value’ of the firm, or a groupof firms, in a given branch of production, around

which the market price will fluctuate. That ‘mar-ket value’ is not necessarily the mathematical(weighted) average of labour expenditure of allfirms of that branch. It can be below, equal orabove that average, for a certain period(generally less than the duration of the businesscycle, at least under ‘free competition’), accordingto whether social demand is saturated, just cov-ered or to an important extent not covered bycurrent output plus existing stocks. In these threecases respectively, the more (most) efficient firms,the firms of average efficiency, or even firms withlabour productivity below average, will determinethe market value of that given commodity.

This implies that the more efficient firms enjoysurplus profits (profits over and above the averageprofit) in case 2 and 3 and that a certain number offirms work at less than average profit in all threecases, but especially in case 1.

The mobility of capital, i.e. normal capitalistcompetition, generally eliminates such situationsafter a certain lapse of time. But when that mobilityof capital is impeded for long periods by eitherunavoidable scarcity (natural conditions not renew-able or non-substitutable, like land and mineraldeposits) or through the operation of institutionalobstacles (private property of land and mineralresources forbidding access to available capital,except in exchange for payments over and aboveaverage profit), these surplus profits can be frozenand maintained for decades. They thus becomerents, of which ground rent and mineral rent arethe most obvious examples in Marx’s time, exten-sively analysed in Capital vol. III (Marx, g, part 6).

Marx’s theory of rent is themost difficult part ofhis economic theory, the one which has witnessedfewer comments and developments, by followersand critics alike, than other major parts of his‘system’. But it is not obscure. And in contrast toRicardo’s or Rodbertus’ theories of rent, it repre-sents a straightforward application of the labourtheory of value. It does not imply any emergenceof ‘supplementary’ value (surplus value, profits) inthe market, in the process of circulation of com-modities, which is anathema to Marx and to allconsistent upholders of the labour theory of value.Nor does it in any way suggest that land or mineraldeposits ‘create’ value.


It simply means that in agriculture and miningless productive labour (as in the general caseanalysed above) determines the market value offood or minerals, and that therefore more efficientfarms and mines enjoy surplus profits which Marxcalls differential (land and mining) rent. It alsomeans that as long as productivity of labour inagriculture is generally below the average of theeconomy as a whole (or more correctly: that theorganic composition of capital, the expenditure inmachinery and raw materials as against wages, isinferior in agriculture to that of industry and trans-portation), the sum-total of surplus-value producedin agriculture will accrue to landowners + capital-ist farmers taken together, and will not enter thegeneral process of (re)distribution of profitthroughout the economy as a whole.

This creates the basis for a supplementary formof rent, over and above differential rent, rentwhich Marx calls absolute land rent. This is,incidentally, the basis for a long-term separationof capitalist landowners from entrepreneurs infarming or animal husbandry, distinct from feudalor semi-feudal landowners or great landownersunder conditions of predominantly petty com-modity production, or in the Asiatic mode ofproduction, with free peasants.

The validity of Marx’s theory of land and min-ing rents has been confirmed by historical evi-dence, especially in the 20th century. Not onlyhas history substantiated Marx’s prediction that,in spite of the obstacle of land and mining rent,mechanization would end up by penetrating foodand raw materials production too, as it has for along time dominated industry and transportation,thereby causing a growing decline of differentialrent (this has occurred increasingly in agriculturein the last 25–50 years, first in North America, andthen in Western Europe and even elsewhere). Ithas also demonstrated that once the structuralscarcity of food disappears, the institutional obsta-cle (private property) loses most of its efficiencyas a brake upon the mobility of capital. Thereforethe participation of surplus-value produced inagriculture in the general process of profit equal-ization throughout the economy cannot beprevented any more. Thereby absolute rent tendsto wither away and, with it, the separation of land

ownership from entrepreneurial farming and ani-mal husbandry. It is true that farmers can then fallunder the sway of the banks, but they do so asprivate owners of their land which becomes mort-gaged, not as share-croppers or entrepreneursrenting land from separate owners.

On the other hand, the reappearance of struc-tural scarcity in the realm of energy enabled theOPEC countries to multiply the price of oil by tenin the 1970s, i.e. to have it determined by theoilfields where production costs are the highest,thereby assuring the owners of the cheapest oilwells in Arabia, Iran, Libya, etc. huge differentialmineral rents.

Marx’s theory of land and mineral rent can beeasily extended into a general theory of rent, appli-cable to all fields of production where formidabledifficulties of entry limit mobility of capital forextended periods of time. It thereby becomes thebasis of a marxist theory of monopoly and monop-oly surplus profits, i.e. in the form of cartel rents(Hilferding 1910) or of technological rent (Mandel1972). Lenin’s and Bukharin’s theories of surplusprofit are based upon analogous but not identicalreasoning (Bukharin 1914, 1926; Lenin 1917).

But in all these cases of general application ofthe marxist theory of rent, the same caution shouldapply as Marx applied to his theory of land rent.By its very nature, capitalism, based upon privateproperty, i.e. ‘many capitals’ – that is,competition – cannot tolerate any ‘eternal’monopoly, a ‘permanent’ surplus profit deductedfrom the sum total of profits which is dividedamong the capitalist class as a whole. Technolog-ical innovations, substitution of new products forold ones including the fields of raw materials andof food, will in the long run reduce or eliminate allmonopoly situations, especially if the profit dif-ferential is large enough to justify huge researchand investment outlays.

Marx’s Theory of Money

In the same way as his theory of rent, Marx’stheory of money is a straightforward applicationof the labour theory of value. As value is but theembodiment of socially necessary labour,


commodities exchange with each other in propor-tion of the labour quanta they contain. This is truefor the exchange of iron against wheat as it is truefor the exchange of iron against gold or silver.Marx’s theory of money is therefore in the firstplace a commodity theory of money. A given com-modity can play the role of universal medium ofexchange, as well as fulfil all the other functionsof money, precisely because it is a commodity,i.e. because it is itself the product of sociallynecessary labour. This applies to the preciousmetals in the same way it applies to all the variouscommodities which, throughout history, haveplayed the role of money.

It follows that strong upheavals in the ‘intrin-sic’ value of the money-commodity will causestrong upheavals in the general price level. InMarx’s theory of money, (market) prices are noth-ing but the expression of the value of commoditiesin the value of the money commodity chosen as amonetary standard. If £1 sterling 1

10ounce of gold,

the formula ‘the price of 10 quarters of wheat is £1means that 10 quarters of wheat have been pro-duced in the same socially necessary labour timeas 1

10ounce of gold. A strong decrease in the

average productivity of labour in gold mining(as a result for example of a depletion of the richergold veins) will lead to a general depression of theaverage price level, all other things remainingequal. Likewise, a sudden and radical increase inthe average productivity of labour in gold mining,through the discovery of new rich gold fields(California after 1848; the Rand in South Africain the 1890s) or through the application of newrevolutionary technology, will lead to a generalincrease in the price level of all othercommodities.

Leaving aside short-term oscillations, the gen-eral price level will move in medium and long-term periods according to the relation between thefluctuations of the productivity of labour in agri-culture and industry on the one hand, and thefluctuations of the productivity of labour in goldmining (if gold is the money-commodity), on theother.

Basing himself on that commodity theory ofmoney, Marx therefore criticized as inconsistentRicardo’s quantity theory (Marx, h, part 2). But

for exactly the same reason of a consistent appli-cation of the labour theory of value, the quantityof money in circulation enters Marx’s economicanalysis when he deals with the phenomenon ofpaper money (Marx, c).

As gold has an intrinsic value, like all othercommodities, there can be no ‘gold inflation’, aslittle as there can be a ‘steel inflation’. Abstractionmade of short-term price fluctuations caused byfluctuations between supply and demand, a per-sistent decline of the value of gold (exactly as forall other commodities) can only be the result of apersistent increase in the average productivity oflabour in gold mining, and not of an ‘excess’ ofcirculation in gold. If the demand for gold fallsconsistently, this can only indirectly trigger off adecline in the value of gold through causing theclosure of the least productive gold mines. But inthe case of the money-commodity, suchoverproduction can hardly occur, given the spe-cial function of gold of serving as a universalreserve fund, nationally and internationally. Itwill always therefore find a buyer, be it not, ofcourse, always at the same ‘prices’ (in Marx’seconomic theory, the concept of ‘price of gold’is meaningless. As the price of a commodity isprecisely its expression in the value of gold, the‘price of gold’ would be the expression of thevalue of gold in the value of gold).

Paper money, bank notes, are a money signrepresenting a given quantity of the money-commodity. Starting from the above-mentionedexample, a banknote of £1 represents 1

20ounce of

gold. This is an objective ‘fact of life’, which nogovernment or monetary authority can arbitrarilyalter. It follows that any emission of paper moneyin excess of that given proportion will automati-cally lead to an increase in the general price level,always other things remaining equal. If £1 sud-denly represents only 1

10ounce of gold, because

paper money circulation has doubled without asignificant increase in the total labour time spentin the economy, then the price level will tend todouble too. The value of 1

10ounce of gold remains

equal to the value of 10 quarters of wheat. But as110ounce of gold is now represented by £2 in paper

banknotes instead of being represented by £1, the


price of wheat will move from £1 to £2 for10 quarters (from two shillings to four shillings aquarter before the introduction of the decimalsystem).

This does not mean that in the case of papermoney,Marx himself has become an advocate of aquantity theory of money.While there are obviousanalogies between his theory of paper money andthe quantity theory, the main difference is therejection by Marx of any mechanical automatismbetween the quantity of paper money emitted onthe one hand, and the general dynamic of theeconomy (including on the price level) on theother.

In Marx’s explanation of the movement of thecapitalist economy in its totality, the formulaceteris paribus is meaningless. Excessive(or insufficient) emission of paper money neveroccurs in a vacuum. It always occurs at a givenstage of the business cycle, and in a given phase ofthe longer-term historical evolution of capitalism.It is thereby always combined with given ups anddowns of the rate of profit, of productivity oflabour, of output, of market conditions(overproduction or insufficient production). Onlyin connection with these other fluctuations can theeffect of paper money ‘inflation’ or ‘deflation’ bejudged, including the effect on the general pricelevel. The key variables are in the field of produc-tion. The key synthetic resultant is in the field ofprofit. Price movements are generally epiphenom-ena as much as they are signals. To untwine thetangle, more is necessary than a simple analysis ofthe fluctuations of the quantity of money. Only inthe case of extreme runaway inflation of papermoney would this be otherwise; and even in thatborder case, relative price movements (differentdegrees of price increases for different commodi-ties) would still confirm that, in the last analysis,the law of value rules, and not the arbitrary deci-sions of the Central Bank, or any other authoritycontrolling or emitting paper money.

Marx’s Theory of Surplus-Value

Marx himself considered his theory of surplus-value his most important contribution to the

progress of economic analysis (Marx, l; letter toEngels of 24 August 1867). It is through thistheory that the wide scope of his sociologicaland historical thought enables him simultaneouslyto place the capitalist mode of production in hishistorical context, and to find the roots of its innereconomic contradictions and its laws of motion inthe specific relations of production on which it isbased.

As said before, Marx’s theory of classes isbased on the recognition that in each class society,part of society (the ruling class) appropriates thesocial surplus product. But that surplus productcan take three essentially different forms (or acombination of them). It can take the form ofstraightforward unpaid surplus labour, as in theslave mode of production, early feudalism orsome sectors of the Asian mode of production(unpaid corvée labour for the Empire). It cantake the form of goods appropriated by the rulingclass in the form of use-values pure and simple(the products of surplus labour), as under feudal-ism when feudal rent is paid in a certain amount ofproduce (produce rent) or in its more modernremnants, such as sharecropping. And it can takea money form, like money-rent in the final phasesof feudalism, and capitalist profits. Surplus-valueis essentially just that: the money form of thesocial surplus product or, what amounts to thesame, the money product of surplus labour. Ithas therefore a common root with all other formsof surplus product: unpaid labour.

This means that Marx’s theory of surplus-valueis basically a deduction (or residual) theory of theruling classes’ income. The whole social product(the net national income) is produced in the courseof the process of production, exactly as the wholecrop is harvested by the peasants. What happenson the market (or through appropriation of theproduce) is a distribution (or redistribution) ofwhat already has been created. The surplus prod-uct, and therefore also its money form, surplus-value, is the residual of that new (net) socialproduct (income) which remains after the produc-ing classes have received their compensation(under capitalism: their wages). This ‘deduction’theory of the ruling classes’ income is thus ipsofacto an exploitation theory. Not in the ethical


sense of the word – although Marx and Engelsobviously manifested a lot of understandablemoral indignation at the fate of all the exploitedthroughout history, and especially at the fate of themodern proletariat – but in the economical one.The income of the ruling classes can always bereduced in the final analysis to the product ofunpaid labour: that is the heart of Marx’s theoryof exploitation.

That is also the reason why Marx attached somuch importance to treating surplus-value as ageneral category, over and above profits(themselves subdivided into industrial profits,bank profits, commercial profits etc.), interestand rent, which are all part of the total surplusproduct produced by wage labour. It is this generalcategory which explains both the existence (thecommon interest) of the ruling class (all those wholive off surplus value), and the origins of the classstruggle under capitalism.

Marx likewise laid bare the economic mecha-nism through which surplus-value originates. Asthe basis of that economic mechanism is a hugesocial upheaval which started in Western Europein the 15th century and slowly spread over the restof the continent and all other continents (in manyso-called underdeveloped countries, it is stillgoing on to this day).

Through many concomitant economic(including technical), social, political and culturaltransformations, the mass of the direct producers,essentially peasants and handicraftsmen, are sep-arated from their means of production and cut offfrom free access to the land. They are thereforeunable to produce their livelihood on their ownaccount. In order to keep themselves and theirfamilies alive, they have to hire out their arms,their muscles and their brains, to the owners of themeans of production (including land). If and whenthese owners have enough money capital at theirdisposal to buy raw materials and pay wages, theycan start to organize production on a capitalistbasis, using wage labour to transform the rawmaterials which they buy, with the tools theyown, into finished products which they then auto-matically own too.

The capitalist mode of production thus presup-poses that the producers’ labour power has

become a commodity. Like all other commodities,the commodity labour power has an exchangevalue and a use value. The exchange value oflabour power, like the exchange value of allother commodities, is the amount of socially nec-essary labour embodied in it, i.e. its reproductioncosts. This means concretely the value of all theconsumer goods and services necessary for alabourer to work day after day, week after week,month after month, at approximately the samelevel of intensity, and for the members of thelabouring classes to remain approximately stablein number and skill (i.e. for a certain number ofworking-class children to be fed, kept andschooled, so as to replace their parents whenthey are unable to work any more, or die). Butthe use value of the commodity labour power isprecisely its capacity to create new value, includ-ing its potential to create more value than its ownreproduction costs. Surplus-value is but that dif-ference between the total new value created by thecommodity labour power, and its own value, itsown reproduction costs.

The whole marxian theory of surplus-value istherefore based upon that subtle distinctionbetween ‘labour power’ and ‘labour’ (or value).But there is nothing ‘metaphysical’ about thisdistinction. It is simply an explanation(demystification) of a process which occurs dailyin millions of cases.

The capitalist does not buy the worker’s‘labour’. If he did that there would be obvioustheft, for the worker’s wage is obviously smallerthan the total value he adds to that of the rawmaterials in the course of the process of produc-tion. No: the capitalist buys ‘labour power’, andoften (not always of course) he buys it at its justumpretium, at its real value. So he feels unjustlyaccused when he is said to have caused a ‘dishon-est’ operation. The worker is victim not of vulgartheft but of a social set-up which condemns himfirst to transform his productive capacity into acommodity, then to sell that labour power on aspecific market (the labour market) characterizedby institutional inequality, and finally to contenthimself with the market price he can get for thatcommodity, irrespective of whether the new valuehe creates during the process of production


exceeds that market price (his wage) by a smallamount, a large amount, or an enormous amount.

The labour power the capitalist has bought‘adds value’ to that of the used-up raw materialsand tools (machinery, buildings etc.). If, and untilthat point of time, this added value is inferior orequal to the workers’wages, surplus-value cannotoriginate. But in that case, the capitalist has obvi-ously no interest in hiring wage labour. He onlyhires it because that wage labour has the quality(the use value) to add to the raw materials’ valuemore than its own value (i.e. its own wages). This‘additional added value’ (the difference betweentotal ‘value added’ and wages) is preciselysurplus-value. Its emergence from the process ofproduction is the precondition for the capitalists’hiring workers, for the existence of the capitalistmode of production.

The institutional inequality existing on thelabour market (masked for liberal economists,sociologists and moral philosophers alike byjuridical equality) arises from the very fact thatthe capitalist mode of production is based upongeneralized commodity production, generalizedmarket economy. This implies that a propertylesslabourer, who owns no capital, who has noreserves of larger sums of money but who has tobuy his food and clothes, pay his rent and evenelementary public transportation for journeyingbetween home and workplace, in a continuousway in exchange of money, is under the economiccompulsion to sell the only commodity he pos-sesses, to wit his labour power, also on a contin-uous basis. He cannot withdraw from the labourmarket until the wages go up. He cannot wait.

But the capitalist, who has money reserves, cantemporarily withdraw from the labour market. Hecan lay his workers off, can even close or sell hisenterprise and wait a couple of years beforestarting again in business. This institutional dif-ference makes price determination of the labourmarket a game with loaded dice, heavily biasedagainst the working class. One just has to imaginea social set-up in which each citizen would beguaranteed an annual minimum income by thecommunity, irrespective or whether he isemployed or not, to understand that ‘wage deter-mination’ under these circumstances would be

quite different from what it is under capitalism.In such a set-up the individual would really havethe economic choice whether to sell his labourpower to another person (or a firm) or not. Undercapitalism, he has no choice. His is forced byeconomic compulsion to go through that sale,practically at any price.

The economic function and importance oftrade unions for the wage-earners also clearlyarises from that elementary analysis. For it isprecisely the workers’ ‘combination’ and theirassembling a collective resistance fund (whatwas called by the first French unions caisses derésistance, ‘reserve deposits’) which enablesthem, for example though a strike, to withdrawthe supply of labour power temporarily from themarket so as to stop a downward trend of wages orinduce a wage increase. There is nothing ‘unjust’in such a temporary withdrawal of the supply oflabour power, as there are constant withdrawals ofdemand for labour power by the capitalists, some-times on a huge scale never equalled by strikes.Through the functioning of strong labour unions,the working class tries to correct, albeit partiallyand modestly, the institutional inequality on thelabour market of which it is a victim, without everbeing able to neutralize it durably or completely.

It cannot neutralize it durably because in thevery way in which capitalism functions there is apowerful built-in corrective in favour of capital:the inevitable emergence of an industrial reservearmy of labour. There are three key sources forthat reserve army: the mass of precapitalist pro-ducers and self-employed (independent peasants,handicraftsmen, trades-people, professional peo-ple, small and medium-sized capitalists); the massof housewives (and to a lesser extent, children);the mass of the wage-earners themselves, whopotentially can be thrown out of employment.

The first two sources have to be visualized notonly in each capitalist country seen separately buton a world scale, through the operations of inter-national migration. They are still unlimited to agreat extent, although the number of wage-earnersthe world over (including agricultural wagelabourers) has already passed the one billionmark. At the third source, while it is obviouslynot unlimited (if wage labour would disappear


altogether, if all wage labourers would be fired,surplus-value production would disappear too;that is why ‘total robotism’ is impossible undercapitalism), its reserves are enormous, precisely intandem with the enormous growth of the absolutenumber of wage earners.

The fluctuations of the industrial reserve armyare determined both by the business cycle and bylong-term trends of capital accumulation. Rapidlyincreasing capital accumulation attracts wagelabour on amassive scale, including through inter-national migration. Likewise, deceleration, stag-nation or even decline of capital accumulationinflates the reserve army of labour. There is thusan upper limit to wage increases, when profits(realized profits and expected profits) are ‘exces-sively’ reduced in the eyes of the capitalists,which triggers off such decelerated, stagnating ordeclining capital accumulation, thereby decreas-ing employment and wages, till a ‘reasonable’level of profits is restored.

This process does not correspond to any ‘nat-ural economic law’ (or necessity), nor does itcorrespond to any ‘immanent justice’. It justexpresses the inner logic of the capitalist modeof production, which is geared to profit. Otherforms of economic organization could function,have functioned and are functioning on the basisof other logics, which do not lead to periodicmassive unemployment. On the contrary, a social-ist would say – and Marx certainly thoughtso – that the capitalist system is an ‘unjust’, orbetter stated ‘alienating’, ‘inhuman’ social sys-tem, precisely because it cannot function withoutperiodically reducing employment and the satis-faction of elementary needs for tens of millions ofhuman beings.

Marx’s theory of surplus-value is thereforeclosely intertwined with a theory of wages whichis far away from Malthus’s, Ricardo’s or the earlysocialists’ (like Ferdinand Lassalle’s) ‘iron law ofwages’, in which wages tend to fluctuate aroundthe physiological minimum. That crude theory of‘absolute pauperization’ of the working classunder capitalism, attributed to Marx by manyauthors (Popper 1945, et al.), is not Marx’s at all,as many contemporary authors have convincinglydemonstrated (see among others Rosdolsky

1968). Such an ‘iron law of wages’ is essentiallya demographic one, in which birth rates and thefrequency of marriages determine the fluctuationof employment and unemployment and therebythe level of wages.

The logical and empirical inconsistencies ofsuch a theory are obvious. Let it be sufficient topoint out that while fluctuations in the supply ofwage-labourers are considered essential, fluctua-tions in the demand for labour power are left outof the analysis. It is certainly a paradox that thestaunch opponent of capitalism, Karl Marx,pointed out already in the middle of the 19thcentury the potential for wage increases undercapitalism, even though not unlimited in timeand space. Marx also stressed the fact that foreach capitalist wage increases of other capitalists’workers are considered increases of potential pur-chasing power, not increases in costs (Marx, d).

Marx distinguishes two parts in the workers’wage, two elements of reproduction costs of thecommodity labour power. One is purely physio-logical, and can be expressed in calories andenergy quanta; this is the bottom below whichthe wage cannot fall without destroying slowlyor rapidly the workers’ labour capacity. The sec-ond one is historical-moral, as Marx calls it(Marx, i), and consists of those additional goodsand services which a shift in the class relationshipof forces, such as a victorious class struggle,enables the working class to incorporate into theaverage wage, the socially necessary (recognized)reproduction costs of the commodity labourpower (e.g. paid holidays after the French generalstrike of June 1936). This part of the wage isessentially flexible. It will differ from country tocountry, continent to continent, and from epoch toepoch, according to many variables. But it has theupper limit indicated above: the ceiling fromwhich profits threaten to disappear, or to becomeinsufficient in the eyes of the capitalists, who thengo on an ‘investment strike’.

So Marx’s theory of wages is essentially anaccumulation-of-capital theory of wages whichsends us back to what Marx considered the first‘law of motion’ of the capitalist mode of produc-tion: the compulsion for the capitalists to step upconstantly the rate of capital accumulation.


The Laws of Motion of the CapitalistMode of Production

Marx’s theory of surplus-value is his most revo-lutionary contribution to economic science, hisdiscovery of the basic long-term ‘laws of motion’(development trends) of the capitalist mode ofproduction constitutes undoubtedly his mostimpressive scientific achievement. No other19th-century author has been able to foresee insuch a coherent way how capitalism would func-tion, would develop and would transform theworld, as did Karl Marx. Many of the most distin-guished contemporary economists, starting withWassily Leontief (1938), and Joseph Schumpeter(1942) have recognized this.

While some of these ‘laws of motion’ haveobviously created much controversy, we shallnevertheless list them in logical order, ratherthan according to the degree of consensus theycommand.

The Capitalist’s Compulsion to AccumulateCapital appears in the form of accumulatedmoney, thrown into circulation in order to increasein value. No owner of money capital will engagein business in order to recuperate exactly the suminitially invested, and nothing more than that. Bydefinition, the search for profit is at the basis of alleconomic operations by owners of capital.

Profit (surplus-value, accretion of value) canoriginate outside the sphere of production in aprecapitalist society. It represents then essentiallya transfer of value (so-called primitive accumula-tion of capital); but under the capitalist mode ofproduction, in which capital has penetrated thesphere of production and dominates it, surplus-value is currently produced by wage labour. Itrepresents a constant increase in value.

Capital can only appear in the form of manycapitals, given its very historical-social origin inprivate property (appropriation) of the means ofproduction. ‘Many capitals’ imply unavoidablecompetition. Competition in a capitalist mode ofproduction is competition for selling commoditiesin an anonymous market. While surplus-value isproduced in the process of production, it is real-ized in the process of circulation, i.e. through the

sale of the commodities. The capitalist wants tosell at maximum profit. In practice, he will besatisfied if he gets the average profit, which is apercentage really existing in his consciousness(e.g. Mr Charles Wilson, the then head of the USautomobile firm General Motors, stated before aCongressional enquiry: we used to fix theexpected sales price of our cars by adding 15 %to production costs). But he can never be sure ofthis. He cannot even be sure that all the commod-ities produced will find a buyer.

Given these uncertainties, he has to strive con-stantly to get the better of his competitors. Thiscan only occur through operating with more cap-ital. This means that at least part of the surplus-value produced will not be unproductively con-sumed by the capitalists and their hangers-onthrough luxury consumption, but will be accumu-lated, added to the previously existing capital.

The inner logic of capitalism is therefore notonly to ‘work for profit’, but also to ‘work forcapital accumulation’. ‘Accumulate, accumulate;that is Moses and the Prophets’, states Marx inCapital, Vol. I (Marx, e, p. 742). Capitalists arecompelled to act in that way as a result of compe-tition. It is competition which basically fuels thisterrifying snowball logic: initial value of capital! accretion of value (surplus-value)-! accretion of capital ! more accretion ofsurplus-value ! more accretion of capitaletc. ‘Without competition, the fire of growthwould burn out’ (Marx, g, p. 368).

The Tendency Towards ConstantTechnological RevolutionsIn the capitalist mode of production, accumulationof capital is in the first place accumulation ofproductive capital, or capital invested to producemore and more commodities. Competition istherefore above all competition between produc-tive capitals, i.e. ‘many capitals’ engaged in min-ing, manufacturing, transportation, agriculture,telecommunications. The main weapon in compe-tition between capitalist firms is cutting produc-tion costs. More advanced production techniquesand more ‘rational’ labour organization are themain means to achieve that purpose. The basictend of capital accumulation in the capitalist mode


of production is therefore a trend towards moreand more sophisticated machinery. Capitalistgrowth takes the dual form of higher and highervalue of capital and of constant revolutions in thetechniques of production, of constant technologi-cal progress.

The Capitalists’ Unquenchable Thirstfor Surplus-Value ExtractionThe compulsion for capital to grow, the irresistibleurge for capital accumulation, realizes itself aboveall through a constant drive for the increase of theproduction of surplus-value. Capital accumula-tion is nothing but surplus-value capitalization,the transformation of part of the new surplus-value into additional capital. There is no othersource of additional capital than additionalsurplus-value produced in the process ofproduction.

Marx distinguishes two different forms ofadditional surplus-value production. Absolutesurplus-value accretion occurs essentially throughthe extension of the work day. If the worker repro-duces the equivalent of his wages in 4 hours a day,an extension of the work day from 10 to 12 hourswill increase surplus-value from 6 to 8 hours.Relative surplus-value accretion occurs throughan increase of the productivity of labour in thewage-goods sector of the economy. Such anincrease in productivity implies that the equiva-lent of the value of an identical basket of goodsand services consumed by the worker could beproduced in 2 hours instead of 4 hours of labour. Ifthe work day remains stable at 10 hours and realwages remain stable too, surplus-value will thenincrease from 6 to 8 hours.

While both processes occur throughout thehistory of the capitalist mode of production (viz.the contemporary pressure of employers in favourof overtime!), the first one was prevalent first, thesecond one became prevalent since the secondhalf of the 19th century, first in Britain, Franceand Belgium, then in the USA and Germany, laterin the other industrialized capitalist countries, andlater still in the semi-industrialized ones. Marxcalls this process the real subsumption(subordination) of labour under capital (Marx,k), for it represents not only an economic but

also a physical subordination of the wage-earnerunder the machine. This physical subordinationcan only be realized through social control. Thehistory of the capitalist mode of production istherefore also the history of successive formsof – tighter and tighter – control of capital overthe workers inside the factories (Braverman1974); and of attempts at realizing that tighteningof control in society as a whole.

The increase in the production of relativesurplus-value is the goal for which capitalismtends to periodically substitute machinery forlabour, i.e. to expand the industrial reserve armyof labour. Likewise, it is the main tool formaintaining a modicum of social equilibrium,for when productivity of labour stronglyincreases, above all in the wage-good producingsectors of the economy, real wages and profits(surplus-value) can both expand simultaneously.What were previously luxury goods can evenbecome mass-produced wage goods.

The Tendency Towards GrowingConcentration and Centralization of CapitalThe growth of the value of capital means that eachsuccessful capitalist firm will be operating withmore and more capital. Marx calls this the ten-dency towards growing concentration of capital.But in the competitive process, there are victorsand vanquished. The victors grow. Thevanquished go bankrupt or are absorbed by thevictors. This process Marx calls the centralizationof capital. It results in a declining number of firmswhich survive in each of the key fields of produc-tion. Many small and medium-sized capitalistsdisappear as independent business men andwomen. They become in turn salary earners,employed by successful capitalist firms. Capital-ism itself is the big ‘expropriating’ force,suppressing private property of the means of pro-duction for many, in favour of private propertyfor few.

The Tendency for the ‘Organic Compositionof Capital’ to IncreaseProductive capital has a double form. It appears inthe form of constant capital: buildings, machin-ery, raw materials, energy. It appears in the form


of variable capital: capital spent on wages ofproductive workers. Marx calls the part of capitalused in buying labour power variable, becauseonly that part produces additional value. In theprocess of production, the value of constant cap-ital is simply maintained (transferred in toto or inpart into the value of the finished product). Vari-able capital on the contrary is the unique source of‘added value’.

Marx postulates that the basic historic trend ofcapital accumulation is to increase investment inconstant capital at a quicker pace than investmentin variable capital; the relation between the two hecalls the ‘organic composition of capital’. This isboth a technical/physical relation (a given produc-tion technique implies the use of a given numberof productive wage earners, even if not in anabsolutely mechanical way) and a value relation.The trend towards an increase in the ‘organiccomposition of capital’ is therefore a historicaltrend towards basically labour-saving technolog-ical progress.

This tendency has often been challenged bycritics of Marx. Living in the age of semi-automation and ‘robotism’, it is hard to under-stand that challenge. The conceptual confusionon which this challenge is mostly based is anoperation with the ‘national wage bill’, i.e. a con-fusion between wages in general and variablecapital, which is only the wage bill of productivelabour. A more correct index would be the part ofthe labour costs in total production costs in themanufacturing (and mining) sector. It is hard todeny that this proportion shows a downward sec-ular trend.

The Tendency of the Rate of Profit to DeclineFor the workers, the basic relation they areconcerned with is the rate of surplus-value,i.e. the division of ‘value added’ by them betweenwages and surplus-value. When this goes up, theirexploitation (the unpaid labour they produce)obviously goes up. For the capitalists however,this relationship is not meaningful. They areconcerned with the relation between surplus-value and the totality of capital invested, nevermind whether in the form of machinery and rawmaterials or in the form of wages. This relation is

the rate of profit. It is a function of two variables,the organic composition of capital and the rate ofsurplus-value. If the value of constant capital isrepresented by c, the value of variable capital(wages of productive workers) by v and surplus-value by s, the rate of profit will be s/(c + v). Thiscan be rewritten as

s=v

cþ vð Þ= vð Þ þ 1

with the two variables emerging (c + v/v obvi-ously reflects c).

Marx postulates that the increase in the rate ofsurplus value has definite limits, while theincrease in the organic composition of capitalhas practically none (automation, robotism).There will therefore be a basic tendency for therate of profit to decline.

This is however absolutely true only on a verylong-term, i.e. essentially ‘secular’, basis. In othertime-frameworks, the rate of profit can fluctuateunder the influence of countervailing forces. Con-stant capital can be devalorized, through ‘capitalsaving’ technical process, and through economiccrises (see below). The rate of surplus-value canbe strongly increased in the short or medium term,although each strong increase makes a furtherincrease more difficult (Marx, d, pp. 335–6); andcapital can flow to countries (e.g. ‘Third World’ones) or branches (e.g. service sectors) where theorganic composition of capital is significantlylower than in the previously industrialized ones,thereby raising the average rate of profit.

Finally, the increase in the mass of surplus-value – especially through the extension of wagelabour in general, i.e. the total number ofworkers – offsets to a large extent the depressingeffects of moderate declines of the average rate ofprofit. Capitalism will not go out of business if themass of surplus-value produced increases ‘only’from £10 to £17 billion, while the total mass ofcapital has moved from 100 to 200 billion; andcapital accumulation will not stop under thesecircumstances, nor necessarily slow down signif-icantly. It would be sufficient to have theunproductively consumed part of surplus-value


pass e.g. from £3 to £2 billion, to obtain a rate ofcapital accumulation of 15/200, i.e. 7.5 %, evenhigher than the previous one of 7/100, in spite of adecline of the rate of profit from 10 % to 8.5 %.

The Inevitability of Class Struggle UnderCapitalismOne of the most impressive projections by Marxwas that of the inevitability of elementary classstruggle under capitalism. Irrespective of thesocial global framework or of their own historicalbackground, wage-earners will fight everywherefor higher real wages and a shorter work day. Theywill form elementary organizations for the collec-tive instead of the individual sale of the commod-ity labour power, i.e. trade unions. While at themoment Marx made that projection there wereless than half a million organized workers in atthe most half a dozen countries in the world, todaytrade unions encompass hundreds of millions ofwage-earners spread around the globe. There is nocountry, however remote it might be, where theintroduction of wage labour has not led to theappearance of workers’ coalitions.

While elementary class struggle and elemen-tary unionization of the working class are inevita-ble under capitalism, higher, especially politicalforms of class struggle, depend on a multitude ofvariables as to the rapidity with which they extendbeyond smaller minorities of each ‘national’working class and internationally. But there toothe basic secular trend is clear. There were in 1900innumerably more conscious socialists than in1850, fighting not only for better wages but, touseMarx’s words, for the abolition of wage labour(Marx, i) and organizing working class parties forthat purpose. There are today many more thanin 1900.

The Tendency Towards Growing SocialPolarizationFrom two previously enumerated trends, the trendtowards growing centralization of capital and thetrend towards the growth of the mass of surplus-value, flow the trend towards growing socialpolarization under capitalism. The proportion ofthe active population represented by wage-labourin general, i.e. by the modern proletariat (which

extends far beyond productive workers in and bythemselves) increases. The proportion representedby self-employed (small, medium-sized and bigcapitalists, as well as independent peasants, hand-icraftsmen, tradespeople and ‘free professions’working without wage-labour) decreases. In fact,in several capitalist countries, the first categoryhas already passed the 90 per cent mark, while inMarx’s time it was below 50 per cent everywherebut in Britain. In most industrialized (imperialist)countries, it has reached 80–85 per cent.

This does not mean that the petty entrepreneurshave tended to disappear. Ten or 15–20 per centout of 30 million people, not to say out of 120 mil-lion, still represent a significant social layer.Whilemany small businesses disappear, especially intimes of economic depression, as a result of severecompetition, they also are constantly created,especially in the interstices between big firms,and in new sectors where they play an exploratoryrole. Also, the overall social results of growingproletarization are not simultaneous with the eco-nomic process in and by itself. From the point ofview of class consciousness, culture, political atti-tude, there can exist significant time-lags betweenthe transformation of an independent farmer, gro-cer or doctor into a wage-earner, and his accep-tance of socialism as an overall social solution forhis own and society’s ills. But again, the seculartrend is towards growing homogeneity, less andless heterogeneity, of the mass of the wage-earning class, and not the other way around. It issufficient to compare the differences in consumerpatterns, attitudes towards unionization or votinghabits between manual workers, bank employeesand government functionaries in say 1900 andtoday, to note that they have decreased and notincreased.

The Tendency Towards Growing ObjectiveSocialization of LabourCapitalism starts in the form of private productionon a medium-sized scale for a limited number oflargely unknown customers, on an uncontrollablywide market, i.e. under conditions of near com-plete fragmentation of social labour and anarchyof the economic process. But as a result of grow-ing technological progress, tremendously


increased concentration of capital, the conquest ofwider and wider markets throughout the world,and the very nature of the labour organizationinside large and even medium-sized capitalist fac-tories, a powerful process of objective socializa-tion of labour is simultaneously set in motion.This process constantly extends the sphere ofeconomy in which not blind market laws by con-scious decisions and even large-scale cooperationprevail.

This is true especially inside mammoth firms(inside multinational corporations, such ‘plan-ning’ prevails far beyond the boundaries ofnation-states, even the most powerful ones!) andinside large-scale factories; but it is also increas-ingly true for buyer/seller relations, in the firstplace on inter-firm basis, between public authori-ties and firms, and more often than one thinksbetween traders and consumers too. In all theseinstances, the rule of the law of value becomesmore and more remote, indirect and discontinu-ous. Planning prevails on a short and evenmedium-term basis.

Certainly, the economy still remains capitalist.The rule of the law of value imposes itself brutallythrough the outburst of economic crises. Wars andsocial crises are increasingly added to these eco-nomic crises to remind society that, under capital-ism, this growing objective socialization of labourand production is indissolubly linked to privateappropriation, i.e. to the profit motive as motor ofeconomic growth. That linkage makes the systemmore and more crisis-ridden; but at the same timethe growing socialization of labour and produc-tion creates the objective basis for a generalsocialization of the economy, i.e. represents thebasis of the coming socialist order created bycapitalism itself, within the framework of itsown system.

The Inevitability of Economic Crises UnderCapitalismThis is another of Marx’s projections which hasbeen strikingly confirmed by history. Marxascertained that periodic crises of overproductionwere unavoidable under capitalism. In fact, sincethe crisis of 1825, the first one occurring on theworld market for industrial goods to use Marx’s

own formula, there have been twenty-one busi-ness cycles ending (or beginning, according to themethod of analysis and measurement used) withtwenty-one crises of overproduction. A twenty-second is appearing on the horizon as we arewriting.

Capitalist economic crises are always crises ofoverproduction of commodities (exchangevalues), as opposed to pre- and post-capitalisteconomic crises, which are essentially crises ofunderproduction of use-values. Under capitalistcrises, expanded reproduction – economicgrowth – is brutally interrupted, not because toolittle commodities have been produced but, on thecontrary, because a mountain of produced com-modities finds no buyers. This unleashes a spiralmovement of collapse of firms, firing of workers,contraction of sales (or orders) for raw materialsand machinery, new redundancies, new contrac-tion of sales of consumer goods etc. Through thiscontracted reproduction, prices (gold prices) col-lapse, production and income is reduced, capitalloses value. At the end of the declining spiral,output (and stocks) have been reduced more thanpurchasing power. Then production can pick upagain; and as the crisis has both increased the rateof surplus-value (through a decline of wages and amore ‘rational’ labour organization) anddecreased the value of capital, the average rateof profit increases. This stimulates investment.Employment increases, value production andnational income expand, and we enter a newcycle of economic revival, prosperity, overheatingand the next crisis.

No amount of capitalists’ (essentially largecombines’ and monopolies’) ‘self-regulation’, noamount of government intervention, has been ableto suppress this cyclical movement of capitalistproduction. Nor can they succeed in achievingthat result. This cyclical movement is inextricablylinked to production for profit and private prop-erty (competition), which imply periodic over-shooting (too little or too much investment andoutput), precisely because each firm’s attempt atmaximizing profit unavoidably leads to a lowerrate of profit for the system as a whole. It islikewise linked to the separation of value produc-tion and value realization.


The only way to avoid crises of overproductionis to eliminate all basic sources of disequilibriumin the economy, including the disequilibriumbetween productive capacity and purchasingpower of the ‘final consumers’. This calls forelimination of generalized commodity produc-tion, of private property and of class exploitation,i.e. for the elimination of capitalism.

Marx’s Theory of Crises

Marx did not write a systematic treatise on capi-talist crises. His major comments on the subjectare spread around his major economic writings, aswell as his articles for theNew York Daily Tribune.The longest treatment of the subject is in hisTheorien über den Mehrwert, subpart on Ricardo(Marx, h, Part 2). Starting from these profound butunsystematic remarks, many interpretations of the‘marxist theory or crisis’ have been offered byeconomists who consider themselves marxists.‘Monocausal’ ones generally centre around‘disproportionality’ (Bukharin, Hilferding, OttoBauer) – anarchy of production as the key causeof crises – or ‘underconsumption’ – lack of pur-chasing power of the ‘final consumers’ as thecause of crises (Rosa Luxemburg, Sweezy).‘Non-monocausal’ ones try to elaborate Marx’sown dictum according to which all basic contra-dictions of the capitalist mode of production comeinto play in the process leading to a capitalist crisis(Grossman, Mandel).

The question of determining whetheraccording to Marx, a crisis of overproduction isfirst of all a crisis of overproduction of commod-ities or a crisis of overproduction of capital isreally meaningless in the framework of Marx’seconomic analysis. The mass of commodities isbut one specific form of capital, commodity cap-ital. Under capitalism, which is generalized com-modity production, no overproduction is possiblewhich is not simultaneously overproduction ofcommodities and overproduction of capital(over-accumulation).

Likewise, the question to know whether thecrisis ‘centres’ on the sphere of production or thesphere of circulation is largely meaningless. The

crisis is a disturbance (interruption) of the processof enlarged reproduction; and according to Marx,the process of reproduction is precisely a(contradictory) unity of production and circula-tion. For capitalists, both individually(as separate firms) and as the sum total of firms,it is irrelevant whether more surplus-value hasactually been produced in the process of produc-tion, if that surplus-value cannot be totally real-ized in the process of circulation. Contrary tomany economists, academic and marxist alike,Marx explicitly rejected any Say-like illusionthat production more or less automatically findsits own market.

It is correct that in the last analysis, capitalistcrises of overproduction result from a downslideof the average rate of profit. But this does notrepresent a variant of the ‘monocausal’ explana-tion of crisis. It means that, under capitalism, thefluctuations of the average rate of profit are in asense the seismograph of what happens in thesystem as a whole. So that formula just refersback to the sum-total of partially independentvariables, whose interplay causes the fluctuationsof the average rate of profit.

Capitalist growth is always disproportionategrowth, i.e. growth with increasing disequilib-rium, both between different departments of out-put (Marx basically distinguishes department I,producing means of production, and departmentII, producing means of consumption; otherauthors add a department III producingnon-reproductive goods – luxury goods andarms – to that list), between different branchesand between production and final consumption.In fact, ‘equilibrium’ under capitalism is but aconceptual hypothesis practically never attainedin real life, except as a border case. The abovementioned tendency of ‘overshooting’ is only anillustration of that more general phenomenon. So‘average’ capital accumulation leads to overaccu-mulation which leads to the crisis and to aprolonged phenomenon of ‘underinvestment’during the depression. Output is then consistentlyinferior to current demand, which spurs on capitalaccumulation, first to a ‘normal’ level and then torenewed overaccumulation, all the more so aseach successive phase of economic revival starts


with new machinery of a higher technologicallevel (leading to a higher average productivity oflabour, and to a bigger and bigger mountain aproduced commodities. Indeed, the very durationof the business cycle (in average 7.5 years for thelast 160 years) seemed for Marx determined bythe ‘moral’ life-time of fixed capital, i.e. the dura-tion of the reproduction cycle (in value terms, notin possible physical survival) of machinery.

The ups and downs of the rate of profit duringthe business cycle do not reflect only the gyrationsof the output/disposable income relation; or of the‘organic composition of capital’. They alsoexpress the varying correlation of forces betweenthe major contending classes of bourgeois society,in the first place the short-term fluctuations of therate of surplus-value reflecting major victories ordefeats of the working class in trying to uplift ordefend its standard of living and its working con-ditions. Technological progress and labour orga-nization ‘rationalizations’ are capital’s weaponsfor neutralizing the effects of these fluctuationson the average rate of profit and on the rate ofcapital accumulation.

In general, Marx rejected any idea that theworking class (or the unions) ‘cause’ the crisisby ‘excessive wage demands’. He would recog-nize that under conditions of overheating and ‘fullemployment’, real wages generally increase, butthe rate of surplus-value can simultaneouslyincrease too. It can, however, not increase in thesame proportion as the organic composition ofcapital. Hence the decline of the average rate ofprofit. Hence the crisis.

But if real wages do not increase in times ofboom, and as they unavoidably decrease in timesof depression, the average level of wages duringthe cycle in its totality would be such as to causeeven larger overproduction of wage goods, whichwould induce an even stronger collapse of invest-ment at the height of the cycle, and in no way helpto avoid the crisis.

Marx energetically rejected any idea that cap-italist production, while it appears as ‘productionfor production’s sake’, can really emancipate itselffrom dependence on ‘final consumption’(as alleged e.g. by Tugan-Baranowsky). Whilecapitalist technology implies indeed a more and

more ‘roundabout-way-of-production’, and a rel-ative shift of resources from department II todepartment I (that is what the ‘growing organiccomposition of capital’ really means, after all), itcan never develop the productive capacity ofdepartment I without developing in the mediumand long-term the productive capacity of depart-ment II too, admittedly at a slower pace and in alesser proportion. So any medium or long-termcontraction of final consumption, or final con-sumers’ purchasing power, increases instead ofeliminates the causes of the crisis.

Marx visualized the business cycle as inti-mately intertwined with a credit cycle, which canacquire a relative autonomy in relation to whatoccurs in production properly speaking (Marx, g,pp. 570–73). An (over)expansion of credit canenable the capitalist system to sell temporarilymore goods that the sum of real incomes createdin current production plus past savings could buy.Likewise, credit (over)expansion can enable themto invest temporarily more capital than reallyaccumulated surplus-value (plus depreciationallowances and recovered value of raw materials)would have enabled them to invest (the first partof the formula refers to net investments; the sec-ond to gross investment).

But all this is only true temporarily. In thelonger run, debts must be paid; and they are notautomatically paid through the results ofexpanded output and income made possible bycredit expansion. Hence the risk of a krach, of acredit or banking crisis, adding fuel to the mass ofexplosives which cause the crisis ofoverproduction.

Does Marx’s theory of crisis imply a theory ofan inevitable final collapse of capitalism throughpurely economic mechanisms? A controversy hasraged around this issue, called the ‘collapse’ or‘breakdown’ controversy. Marx’s own remarks onthe matter are supposed to be enigmatic. They areessentially contained in the famous chapter 32 ofvolume I of Capital entitled ‘The historical ten-dency of capitalist accumulation’, a section cul-minating in the battle cry: ‘The expropriators areexpropriated’ (Marx, e, p. 929). But the relevantparagraphs of that chapter describe in a clearlynon-enigmatic way, an interplay of ‘objective’


and ‘subjective’ transformations to bring about adownfall of capitalism, and not a purely economicprocess. They list among the causes of the over-throw of capitalism not only economic crisis andgrowing centralization of capital, but also thegrowth of exploitation of the workers and oftheir indignation and revolt in the face of thatexploitation, as well as the growing level ofskill, organization and unity of the workingclass. Beyond these general remarks, Marx, how-ever, does not go.

Marx and Engels on the Economyof Post-Capitalist Societies

Marx was disinclined to comment at length abouthow a socialist or communist economy wouldoperate. He thought such comments to be essen-tially speculative. Nevertheless, in his majorworks, especially the Grundrisse and DasKapital, there are some sparse comments on thesubject. Marx returns to them at greater length intwo works he was to write in the final part of hislife, his comments on the Gotha Programme ofunited German social-democracy (Marx, j), andthe chapters on economics and socialism he wroteor collaborated with for Engels’ Anti-Dühring(1878). Generally his comments, limited andsketchy as they are, can be summarized in thefollowing points.

Socialism is an economic system based uponconscious planning of production by associatedproducers (nowhere does Marx say: by the state),made possible by the abolition of private propertyof the means of production. As soon as that privateproperty is completely abolished, goods producedcease to be commodities. Value and exchangevalue disappear. Production becomes productionfor use, for the satisfaction of needs, determinedby conscious choice (ex ante decisions) of themass of the associated producers themselves.But overall economic organization in apostcapitalist society will pass through two stages.

In the first stage, generally called ‘socialism’,there will be relative scarcity of a number ofconsumer goods (and services), making it neces-sary to measure exactly distribution based on the

actual labour inputs of each individual (Marxnowhere refers to different quantities and qualitiesof labour; Engels explicitly rejects the idea that anarchitect, because he has more skill, should con-sume more than a manual labourer). Likewise,there will still be the need to use incentives forgetting people to work in general. This will bebased upon strict equality of access for all tradesand professions to consumption. But as humanneeds are unequal, that formal equality masksthe survival of real inequality.

In a second phase, generally called ‘commu-nism’, there will be plenty, i.e. output will reach asaturation point of needs covered by materialgoods. Under these circumstances, any form ofprecise measurement of consumption(distribution) will wither away. The principle offull needs satisfaction covering all different needsof different individuals will prevail. No incentivewill be needed any more to induce people to work.‘Labour’ will have transformed itself into mean-ingful many-fold activity, making possibleall-round development of each individual’shuman personality. The division of labourbetween manual and intellectual labour, the sepa-ration of town and countryside, will wither away.Humankind will be organized into a free federa-tion of producers’ and consumers’ communes.

Selected Works

There is still no complete edition of all of Marxand Engels’ writings. The standard Germanand Russian editions by the Moscow and EastBerlin Institutes for Marxism-Leninism, gen-erally referred to as Marx-Engels-Werke(MEW), do not include hundreds of pagesprinted elsewhere (e.g. Marx’s Enthüllungenzur Geschichte der Diplomatie im 18.Jahrhundert [Revelations on the History of18th-century Diplomacy]), and several thou-sand pages of manuscripts not yet printed atthe time these editions were published. At pre-sent, a monumental edition called Marx-Engels-Gesamtausgabe (MEGA) has beenstarted, again both in German and in Russian,by the same Institutes. It already encompasses


many of the unpublished manuscripts referredto above, in the first place a previouslyunknown economic work which makes abridge between the Grundrisse and vol. 1 ofCapital, and which was written in the years1861–1863 (published under the title ZurKritik der PolitischenOekonomie – Contribution to a Critique ofPolitical Economy 1861–1863 in MEGA II/3/1–6, Berlin Dietz Verlag, 1976–1982).Whether it will include all of Marx’ and Eng-els’ writings remains to be seen.

In English, key works by Marx and Engels havebeen systematically published by ProgressPublishers, Moscow, and Lawrence &Wishart,London; but this undertaking is by nomeans anapproximation of the Marx-Engels-Werkementioned above. The quality of the translationis often poor. The translations of Marx’s andEngels’ writings published by Penguin Booksin the Marx Pelican Library are quite superiorto it. We therefore systematically refer to thelatter edition whenever there is a choice.Marx’s and Engels’ books and pamphletsreferred to in the present text are mostly inchronological order:

(Marx a) Die Deutsche Ideologie (1846), togetherwith Friedrich Engels.

(Marx b) Manifest der Kommunistischen Partei(1848), written in collaboration with FriedrichEngels. In English:Manifesto of the communistparty, in Marx: The revolutions of 1848.Harmondsworth: Penguin Books, 1973.

(Marx c) Zur Kritik der Politischen Oekonomie(1858). In English: Contribution to the critiqueof political Economy. London: Lawrence &Wishart, 1970.

(Marx d) Grundrisse der Kritik der PolitischenOekonomie (written in 1858–1859, firstpublished in 1939). English edition: Founda-tions of a critique of political economy.Harmondsworth: Penguin Books, 1972.

(Marx e): Das Kapital, Band I (1867). In English:Capital, vol. I. Harmondsworth: PenguinBooks, 1976.

(Marx f) Das Kapital, Band II, published by Eng-els in 1885. In English: Capital, vol.II. Harmondsworth: Penguin Books, 1978.

(Marx g) Das Kapital, Band III, published byEngels in 1894. In English: Capital, vol. II-I. Harmondsworth: Penguin Books, 1981.

(Marx h) Theorien über den Mehrwert, publishedby Karl Kautsky 1905–1910. In English: The-ories of surplus value. Moscow: ProgressPublishers, 1963.

(Marx i) Lohn, Preis und Profit, written in 1865.In English: Wages, price and profits, in Marx-Engels selected works, vol. II. Moscow: Pro-gress Publishers, 1969.

(Marx j) Kritik des Gothaer Programms, writtenin 1878 in collaboration with Engels. InEnglish: Critique of the Gotha programme, inMarx-Engels: The first international and after.Harmondsworth: Penguin Books, 1974.

(Marx k) Resultate des unmittelbaren Produktion-sprozesses (unpublished section VII of Vol. I ofCapital), first published in 1933. In English:Results of the immediate process of production,appendix to capital, vol. I. Harmondsworth:Penguin Books, 1976.

(Marx l) Marx-Engels: Briefwechsel (Letters).There is no complete English edition of theletters.

Some are included in the Selected Works in 3 vols,published by Progress Publishers, Moscow.(Engels): Anti-Dühring (1878). The chapteron economy was written by Marx, who alsoread all the other parts and collaborated in theirfinal draft. In English: Anti-Dühring, London:Lawrence & Wishart, 1955.

Bibliography

There are innumerable books and articles devoted to com-ments or elaborations on Marx’s economic thought, orwhich criticize them. We list here those works we referto in the above text, as well as those we consider themost important ones (based, needless to say, uponsubjective judgement).

Baran, P.A. 1957. The political economy of growth. Lon-don: John Calder.

Baran, P.A., and P.M. Sweezy. 1966. Monopoly capital.New York/London: Monthly Review Press.

Böhm-Bawerk, E. von. 1896. Zum Abschluss desMarxschen Systems. English edn, Karl Marx and theClose of his System, including a reply by RudolfHilferding, Böhm-Bawerk’s Criticism of Karl


Marx, ed. P.M. Sweezy. New York: AugustusM. Kelley, 1949.

Bortkiewicz, L. von. 1907. Zur Berichtigung dergrundlegenden theoretischen Konstruktion von Marxim Dritten Band des ‘Kapital’. Trans. by P.M. Sweezyas ‘On the correction of Marx’s fundamental theoreticalconstruction in the third volume of Capital’. In Böhm-Bawerk (1949), 197–221.

Braverman, H. 1974. Labor and Monopoly capital: Thedegradation of work in the twentieth century. NewYork/London: Monthly Review Press.

Bronfenbrenner, M. 1970. The Vicissitudes of MarxianEconomics. London.

Bukharin, N. 1914. Imperialism and world economy.English trans. London: M. Lawrence, 1915.

Bukharin, N. 1926. Imperialism and the accumulation ofcapital. Trans. by R.Wichmann, ed. K.J. Tarbuck. Lon-don: Allen Lane, 1972.

Dobb, M. 1937. Political economy and capitalism: Someessays in economic tradition. London: G. Routledge &Sons. Reprinted Westport, Conn.: Greenwood Press,1972.

Emmanuel, A. 1969. L’echange inégal. Essai sur lesantagonismes dans les rapports économiquesinternationaux. Paris: François Maspero. Trans. byB. Pearce as Unequal exchange: A study of the imperi-alism of trade. London: New Left Books, 1972.

Grossman, H. 1929. Das Akkumulations- und Zusammen-bruchsgesetz des kapitalistischen Systems. Leipzig:C.L. Hirschfeld.

Hilferding, R. 1910. Das Finanzkapital. Vienna: WienerVolksbuchhandlung. Trans. by M. Watnick andS. Gordon, ed. T. Bottomore as Finance capital. Lon-don: Routledge & Kegan Paul, 1981.

Itoh, M. 1980. Value and crisis: Essays on Marxian eco-nomics in Japan. London: Pluto.

Kolakowski, L. 1976–8. Main currents of Marxism: Itsrise, growth and dissolution, 3 vols. Trans. by P.S. Falla.Oxford: Clarendon Press, 1978.

Lange, O. 1963. Political economy, 2 vols. Trans., ed. P.-F. Knightsfield, Oxford/Warsaw: Pergamon Press/PWN – Polish Scientific Publishers.

Lange, O., and F.M. Taylor. 1938. On the economic theoryof socialism. 2 vols. Minneapolis: University of Min-nesota Press.

Lenin, V.I. 1917. Imperialism, last stage of capitalism.Petrograd. English trans., Imperialism, the higheststage of capitalism. Moscow: Foreign Languages Pub-lishing House, 1947.

Leontief, W. 1938. The significance of Marxian economicsfor present-day economic theory. American EconomicReview, Supplement, March. Reprinted in Marx andModern Economists, ed. D. Horowitz. London:MacGibbon & Kee, 1968.

Luxemburg, R. 1913. Akkumulation des Kapitals. Trans.by A. Schwarzschild, with an introduction byJ. Robinson, as The Accumulation of Capital. London:Routledge & Kegan Paul, 1951.

Mandel, E. 1962. Traité d’économie marxiste. Paris:R. Juillard. Trans. by B. Pearce as Marxist EconomicTheory, 2 vols. London: Merlin Press, 1968.

Mandel, E. 1972. Der Spätkapitalismus. Frankfurt amMain: Suhrkampf. Trans. by J. De Bres as Late Capi-talism. London: New Left Books. Revised edn, 1975.

Mandel, E. 1980. Long waves of capitalist development:The Marxist interpretation. Cambridge: CambridgeUniversity Press.

Mandel, E., and A. Freeman (eds.). 1984. Ricardo, Marx,Sraffa. London: Verso.

Mattick, P. 1969.Marx and Keynes: The limits of the mixedeconomy. Boston: P. Sargent.

Mises, L. von. 1920. Die Wirtschaftsrechnung imsozialistischen Gemeinwesen. Trans. by S. Adler as‘Economic calculations in the socialist common-wealth’. InCollectivist economic planning, ed. F.A. vonHayek. London: G. Routledge & Sons, 1935.

Morishima, M. 1973. Marx’s economics: A dual theory ofvalue and growth. Cambridge: Cambridge UniversityPress.

Nutzinger, H.G., and E. Wolfstetter. (eds.) 1974. DieMarx’sche Theorie und ihre Kritik. 2 vols. Frankfurtam Main: Campus.

Pareto, V. 1966. Marxisme et économie pure. Geneva:Droz.

Popper, K. 1945. The open society and its enemies. 2 vols.London: G. Routledge & Sons.

Robinson, J. 1942. An essay on Marxian economics,2nd ed. London: Macmillan, 1966.

Rosdolsky, R. 1968. Entstehungsgeschichte desMarxschen ‘Kapital’. Frankfurt am Main: EuropäischeVerlagsanstalt. Trans. by P. Burgess as The making ofMarx’s capital. London: Pluto Press, 1977.

Rubin, I.I. 1928. Essays on Marx’s theory of value. Mos-cow. English trans. Detroit: Black and Red, 1972.

Schumpeter, J. 1942. Capitalism, socialism and democ-racy. New York/London: Harper & Brothers.

Steedman, I. 1977. Marx after Sraffa. London: New LeftBooks.

Sternberg, F. 1926. Der Imperialismus. Berlin: Malik-Verlag.

Sweezy, P.M. 1942. The theory of capitalist development.New York: Monthly Review Press.

Sraffa, D. 1960. Production of commodities by means ofcommodities. Cambridge: Cambridge University Press.

von Hayek, F.A. 1944. The road to Serfdom. Chicago/London: University of Chicago Press/G. Routledge &Sons.

von Tugan-Baranowsky, M. 1905. TheoretischeGrundlagen der Marxismus. Leipzig: Duncker &Humblot.

Wygodsky, S. 1972. Der gegenwärtige Kapitalismus.Trans. by C.S.V. Salt as The story of a great discovery:How Karl Marx wrote ‘Capital’. Tunbridge Wells:Abacus Press.


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