A World to Win

by Sven-Eric Liedman

  The basic formula of capital, M – C – M’ – C’ – M” indicates a continual increase in the amount of both money and commodities. Surplus value is transformed again and again into new capital, and capital increases both for the successful individual capitalist (the less successful one is constantly threatened by elimination) and for society in general. Briefly put, capitalism grows; it accumulates. Marx spoke about the development of capitalism as a process of accumulation.

  Capital is accumulated through labour. Technological development makes the labour more efficient, and the workers can produce more. But at the same time this means that fewer workers can accomplish just as much production as previously. The workforce can decrease, which means that variable capital becomes less. A growing number of people are without work and form what Marx called a reserve army, which is constantly prepared to step in as soon as work opportunities present themselves. This means there is a relative overpopulation, forced to take the work on offer regardless of the conditions. For capital, this is an excellent situation; wages can be pushed down through unemployment. Many workers are compelled to go from job to job in positions that are at most temporary. Others drag themselves along as agricultural proletarians, defenceless against ruthless owners. Still others are forced into unproductive occupations, chiefly as servants in aristocratic or bourgeois families.

  Well-functioning capitalism offers more and more commodities on the market. But the process cannot continue forever. One day, a surfeit sets in, the commodities are not sold; the money people have to purchase with is no longer enough. In brief, there are too many commodities and not enough money; prices drop and it costs everyone. The crisis has become a fact.

  According to Marx, periodic crises are inevitable in capitalism. If the crisis is to be surmounted, production and consumption must meet again but now at a lower level than before the crisis. And so, a new cycle begins again; production and consumption increased to a certain, unpredictable level …

  So far, Marx has followed the capitalist system as it is in working order. But the question also arises of how it first became possible. For this, both original capital and a sufficient number of people who are no longer bound to any master but free to sell their labour power are required. Here, Marx could largely put together what he had already investigated in the Grundrisse: merchant capital and usury, the discovery of precious metals in America, and people who were driven out of their tenancies on the land and herded into the cities without other opportunities to survive than to pounce upon the jobs that were offered.

  Once Marx had opened the view back to the time before the genesis of industrial capitalism, he could also play with the idea of the time after it. He could not say which crisis would knock down the system. He only knew that the end would come ‘with the inexorability of a law of Nature’. ‘It is the negation of the negation.’ ‘Individual property’ would thereby be restored, but on the basis of ‘the acquisitions of the capitalist era’.30 We will have reason to return to these words.

  The first volume of Capital is a comprehensive and ingenious construction of concepts. The second volume seems significantly simpler in comparison. The title itself offers the greatest problem: ‘The Process of Circulation of Capital’. Marx himself had declared in 1864 that the production process, regarded as a totality, comprises one point of the process of production and circulation. ‘Production’ thus signifies a part of the totality on the one hand, and the totality itself on the other. It is in principle the same idea found in the incomplete ‘Introduction’ to the Grundrisse. Even here, its purpose is surely to emphasize the unique position of production. It is with production that everything begins anew, he said in the earlier text.31

  At the same time, circulation would be given ever greater significance in Marxist theory through money having assumed a role that it did not yet have in the Grundrisse, where it could be completely separated from value.

  In Volume II, Marx carefully surveys the entire circulation of the commodity, which contains a number of important transformations. The journey begins with the capitalist’s purchase of machines and raw materials, and ends with their selling the commodities that production resulted in. The money invested in the first moment will be reaped with interest in the last; anything else is a failure.

  From the point of view of circulation, production is a black box, the workings of which are mysterious: money seems to become more money through the market’s own dynamic. Money differs from other money only through its quantity; in the flow of money and commodities, the latter only appear as bearers of a certain value that can be expressed in money. At the same time, commodities are concrete things with fixed use values.

  The concept of circulation means an unceasing flow. If the flow is interrupted in any of its moments, circulation ceases. The capitalist who does not invest their money in new production accumulates wealth instead. If production itself does not start, the means of production are of no use; if the commodities produced lie unsold, crisis threatens.

  Transport of commodities and people must be consumed in the same moment as they are produced. A train trip cannot be put into storage. Production is the transfer itself of commodities and people, and consumption is the journey. This is how it is in general where services are concerned.

  Seen from the point of view that the circulation of commodities provides us, the transport of commodities is only one moment necessary in what Marx called total circulation. This circulation begins with the money that the capitalist invests and ends with the money they earn on the commodities they sold. It thus encompasses both circulation and production. Once the circulation has been concluded, a new one immediately begins.

  So far, we have seen money – that is, money capital – as the starting point of circulation. But we can just as easily start from productive capital, thereby taking our starting point in production – or for that matter start from commodity capital, with the path of the commodities. Marx developed the three possibilities with almost scholastic exactitude. The point is that different economic theories placed the main emphasis on one kind of capital or another – the mercantilists on money, Quesnay and the Physiocrats on commodities, and the classical economists (Ricardo, Smith, and their followers) on production. But wherever they begin, industrial capital runs through all three stages. Marx found it suitable, however, to distinguish between the circulation of money capital (which he called Form I) and the circulation of productive capital (which he called Form II).

  The time that both production and circulation require has particular significance. The more quickly both processes go, the more quickly the value of the capital invested can increase. But the increase itself comes almost solely from production; the only exception is transport, which is necessary so that commodities find their consumers. Others involved in the process, such as advertising executives and salesmen, perform no productive work. This does not prevent their efforts from being necessary. Marx made a clear distinction between productivity and benefit. All conscious human activity may be beneficial, but only a small part of it is productive – that is, it contributes to increasing value.

  Marx called the total of production and circulation time turnover time, and he was interested in how many turnovers a given amount of capital could manage to go through in a year. But here it is important to distinguish between fixed and circulating capital. Tools and machinery necessary for production do not circulate; the only change they undergo after they have been put to work is a more or less slow wearing out. They can sometimes be replaced in advance, for example if newer, more efficient machinery has come out on the market. In production, on the other hand, raw materials are consumed – as is labour power – and must thus be completely replaced. Simply put, they are variable.

  In the continuation of Volume II, Marx studied the relationship between production, circulation, and time in more detail, and he devoted great attention to the ideas and theories of his predecessors. As he did in the first volume, he concluded with
the problem of accumulation. An important distinction, which he did not introduce into the more abstract Volume I, is the one between production of means of production and production of consumer commodities. Production of machines, for example, serves to make other production possible and more efficient. Marx spoke of this as Department I, while production intended for consumption became Department II. Commodities from Department I are necessary for production in Department II, and the costs within the different departments must therefore be assessed differently. Marx experimented with a number of calculation examples that we do not need to go into. The main thing is that whatever department we are in, the owner of capital cannot devote all their profit to their own consumption but must reinvest a substantial portion in order to assert themselves in competition with other capitalists.

  The Volume II that Engels put together after Marx’s death is a compilation from a number of different manuscripts that Marx had worked out – most of them after Volume I had been published. We cannot get a clear idea of why Marx was never satisfied with any of these versions, but constantly began new ones. Obviously, as Engels said in the foreword, his failing health played a role. But his health still didn’t prevent him from writing these versions and, moreover, from going deep into comprehensive studies of the literature in a number of different subjects.32

  One of the versions – the fourth – was even edited for print but clearly was still not good enough; it was outbid by newer versions. Marx obviously wrestled a lot with his calculation examples, which he always hoped would show more than they actually did. The final version naturally bore the mark of Engels; this applies to an even greater degree to Volume III, which is built on a single, large, but unfinished manuscript by Marx. The manuscript is one example among many of Marx’s enormous productivity during the early 1860s. He wrote thousands of pages, all of which were left open for later revisions. The manuscript Engels primarily had to go on contains approximately 900 printed pages. This substantial mass of text, which Marx left to its fate in December 1865, was in no way ready for print; it gave Engels a great deal of work before, towards the end of his life in 1894, he was able to complete the edition. Since 1992, Marx’s own manuscript has existed in a model critical edition, and it is thus now an important task of research to see what Engels’s editing meant for the final result. A great deal of literature has developed in which these differences are analysed. The evaluations of Engels’s influence change, but there is great unanimity that it had been crucial for posterity’s views of Volume III and thus all of Capital.

  We will return to the problem of the relationship between the worlds of Marx’s and Engels’s ideas. For now, it is important to remember that the original of the third volume came to be before the first was ready for print, nor is the former completely in step with the latter.

  According to Marx’s own declaration, Volume III of Capital would ‘locate and describe the concrete forms which grow out of the movements of capital as a whole’.33 In order to manage this task, Marx first made an important distinction between surplus value and profit. As we will remember, surplus value is the value conveyed to the product through the worker only receiving wages for a certain portion of their labour time. As soon as we talk about profit, we are regarding the matter more from the capitalist’s point of view. For them, profit is the difference between what was invested in machines, raw materials, and labour power, and what they bring in from the sale of their commodities. It appears as though it was capital, and not labour, that generated profit. In Marx’s opinion, it is the same error of judgement as seeing workers’ wages as compensation for the entire labour time.

  Now there is also another difference between surplus value and profit: profit, but not surplus value, is calculated in dollars and cents. Profit has a price, but value does not. We are thus faced with what is known as the transformation problem, which has led to many controversies among interpreters of Marx; we will also return to this in a moment. In Volume III, Marx tried to solve it himself but came to the conclusion that the method selected did not work. He put it aside rather casually with the words: ‘Our present analysis does not necessitate a closer examination of this point.’34 Posterity has not been as unconcerned about the issue.

  It is from the concept of profit that Marx developed his law of the tendency of the rate of profit to fall. Essentially, this law says that the ratio between profit and capital invested falls over time. When Marx overshadowed all his predecessors and the age he lived in, it is easy to believe that this is a thesis that was original to him. This is not so. Most economists from Smith forward embraced it, but their explanations varied. Marx was original in finding the cause, as he described it, in ‘the nature (Wesen) of the capitalist mode of production’.35 His line of thought is simple and clear. Capitalism is dependent on the unceasing development of labour power. But at the same time, this development means that the value of fixed capital increases. Dead labour, which has passed into the machines, grows at the expense of new, living labour. Calling constant capital c and variable capital v, the ratio c/v thus increases. Profit will constitute an increasingly smaller portion of the capital its owner commands.

  Marx also entered upon more concrete economic relationships that play a crucial role for capitalism. Interest belongs here. It is certainly ancient, but it is no longer just a speciality for profiteers. Even ordinary workers take out loans, and the interests they have to pay can be of use for capital. Certain capitalists specialize in loaning out portions of their wealth to other capitalists, who invest the money in production. Marx distinguishes between money capitalists and industrial capitalists. The money of the money capitalists seems to grow by itself through interest. Interest-bearing capital, Marx said, is thereby the ‘most external and most fetish-like form’ of capital.36 Its formula is M–M’: money that yields more money. The money seems to be given life; it is equipped with its own inner power. This organic increase, in Marx’s opinion, is an illusion that capitalism inevitably creates. (We can observe today that the illusion remains. Money in an account seems to grow under its own power.)

  According to Marx, the banks take on ever greater significance in capitalism, and especially through them credits of various kinds as well. Marx also spoke about fictitious capital, by which he meant stocks and shares. He certainly would also have counted options and other derivatives as part of that, if he had only lived to experience them.

  One important theme in Volume III is the recurring crises of capitalism. Through its constantly increasing productivity, the system is constantly threatened by overproduction. No previous society could have been stricken with an overabundance of commodities. Capitalism can. It happens again and again.

  We will remember that the crisis of the late 1850s filled Marx with hopes of speedy social change. The disappointment he experienced when nothing of what he imagined happened meant that he toned down the significance of crises. He developed no theory of crises in Volume III, but still emphatically asserted that crises constitute an inescapable ingredient of the capitalist mode of production. Aggregate production gradually and inevitably becomes greater than the consumption that people can manage. The crisis means that value is destroyed and many people – primarily the workers – suffer greatly. But on the other side of the crisis, production and consumption will meet again, a new cycle of development begins, and productivity again increases up until the next crisis. From inside the system, it is impossible to determine when the increase of production leads to increased sales, and thereby increased wealth, or when it yields overproduction. The individual capitalist always has to invest in producing more and selling more, and the illusion that new crises are impossible re-emerges. It is still so now, at the beginning of the twenty-first century.

  Marx’s hopes that an economic crisis would pave the way for a revolution have been toned down in Capital. There is no obvious path from the crisis to a new society. Change can only be the work of the working class, and it is not at all certain that the working
class will be ready when the crisis breaks out. Marx did not say this directly, but this is the conclusion that can be drawn from how his words changed from the time he wrote the Grundrisse.

  At the end of Volume III, he returned to a theme that played a large role in Volume I – namely, the ideas that are inevitably generated by the capitalist mode of production. Modern society may have liberated itself from diverse traditional religious ideas, but their counterparts exist in people’s relationships with the coldest economic conditions. Marx spoke about superstitions that only the scientific gaze is able to penetrate, which find expression in what he called the ‘Trinity Formula’ – in which the appropriate parts of the Godhead were capital, landed property, and labour power. They provide income to their respective owners, and for the observer they thus seem to also create value to an equivalent extent. But this is not so, and the basis for this error lies in the fact that the character of labour under capitalism does not emerge for the observer. The worker appears as free as the capitalist and the landowner. But this freedom is illusory, since the worker is compelled to sell their labour power for their survival. Nor does it become clear that the worker sells only their labour power, and that the capitalist in return pays for only a part of what was created through labour power. A part of the surplus value created goes to the landowner, while the capitalist keeps the rest for themselves – and above all for future investments in new production.37

  The very last chapter in the work is only a torso, if that. The subject – the social classes – is central enough, but it is interesting to note that while the class struggle appeared before all other concepts in the Manifesto, as the actual driving force of society, Marx put off its systematic treatment until the end in Capital – so late, in fact, that he did not even manage to bring his argument to its point. This of course does not mean that classes had negligible significance for him. His Trinity Formula deals with exactly those three classes that his predecessor David Ricardo had already pointed out as involved in an irreconcilable struggle. Rather, the essential thing is that Marx’s last words on the class struggle were never spoken in his main scientific work.