The first part of this article told the story of how Capital -- the result of a lifetime of study and research -- came to be written; discussed the structure, method and essential content of the great work; and then introduced the most crucial question: how far does Capital explain the way capitalism functions today? We seek an answer to this question in the second part.
Let us take the six most conspicuous features of contemporary capitalism and see, keeping in mind the caveats1 mentioned at the end of Part I, whether they correspond to the relevant tenets of Marxian economics.
Giants such as JP Morgan and HSBC, Walmart and Alibaba, Microsoft and Apple, Unilever and Monsanto, General Electric and Exxon Mobil and the like -- constitute arguably the most visible feature of the global economy. So enormous are their economic power, social influence and political leverage that JK Galbraith in his last book Economics of Innocent Fraud (2004) said that if one were to find a new name for capitalism, it could only be "corporatism" and certainly not the false and bland "market system". The interesting question is, how did these predators grow this big?
The answer we get in Capital is, two processes are involved here. One, a capitalist reinvests her/his profits in the same business and thus expands its scale of operation. This is called concentration of capital. Two, in addition to this rudimentary process of capital accumulation, there is another method: a more successful farm buys up one or more less successful one(s) or two (or more) firms merge into one. In all such cases, two or more capitals (this is the term Marx uses for individual units of capital or firms in common language) come under one management or centralised control – hence this is called centralisation. In the latter case borrowed money usually plays an important role, increasingly so in modern times thanks to the enormous growth of finance.
Under capitalism, labour power (the human capacity for production) itself is a commodity, like any other. In the past, slaves and serfs were not free to sell their labour power; today the wage worker has the right to sell this commodity to the capitalist. The latter buys it at an agreed rate, and then consumes it, uses it in production. This process of consumption of labour power is exercise of labour, and labour creates value. This is the unique property of the commodity called labour power. Explains Lenin:
“The owner of money buys labour power at its value, which, like the value of every other commodity, is determined by the socially necessary labour time required for its production (i.e., the cost of maintaining the worker and his family)A Having bought labour power, the owner of money is entitled to use it, that is, to set it to work for a whole day — twelve hours, let us say. Yet, in the course of six hours (“necessary” labour time) the worker creates product sufficient to cover the cost of his own maintenance; in the course of the next six hours (“surplus” labour time), he creates “surplus” product, or surplus value, for which the capitalist does not pay. Therefore from the standpointof the process of production, two parts must be distinguished in capital: constant capital, which is expended on means of production (machinery, tools, raw materials, etc.) whose value, without any change, is transferred (immediately or part by part) to the finished product; secondly, variable capital, which is expended on labour power The value of this latter capital is not invariable, but grows in the labour process, creating surplus value. Therefore, to express the degree of capital’s exploitation of labour power, surplus value must be compared, not with the entire capital but only with the variable capital.”B
Thus, every capitalist — even the most progressive and kind-hearted — extracts surplus value, without the worker or even the capitalist knowing it. This is perfectly legal and appears to be a ‘natural’ process. No amount of wage rise can basically alter this circumstance and that is why Marxists fight for the abolition of the system of wage labour as such.
The two processes combine and complement each other, with credit-aided centralisation ("One capitalist always kills many", as Marx pointed out at the end of Volume III 2 ) emerging as the more important process since the late 19th century, to give rise to bigger and bigger units of capital. Competition leads to monopolies and monopolies tend to generate fiercer competition. Marx did not live to study the emerging monopolies. But he noted the growing impact of monopolies and “monopoly prices” and identified, with deep insight, the disintegrating role of monopolies in capitalism. "… monopoly of capital becomes a fetter upon the mode of production"and intensifies the principal contradiction of capitalism, he observed (more on this in Part III of this article).
Much later, Lenin in Imperialism the Highest Stage of Capitalism made a detailed study of this rapidly developing process and demonstrated how it had culminated in a global system of monopoly capitalism or imperialism – a qualitatively new and so far the highest stage of capitalism. The trend continued to develop by leaps and bounds and led to the emergence of multinational corporations (MNCs) especially after World War II, which gobbled up weaker competitors abroad and also setup what we now call "greenfield projects" in other countries.
This marked a new stage in the operation of the law of concentration and centralisation of capital -- that on an international scale. The phenomenon was duly captured in the works of Marxist scholars like Paul A. Baran and Paul M. Sweezy – both based in the US, the bastion of the MNC/TNC movement – and many others. From their studies we now know a lot about the working of the global giants, e.g., how in many cases the monopolistic firms also reach some sort of understanding to limit or mitigate competition in mutual interest.
Over the past two decades and more, this has been one of the most talked about – hailed and protested – feature of contemporary capitalism. How does Marxism conceive or explain the phenomenon?
We all know about the concise yet highly insightful analysis of globalisation in the Communist Manifesto (CM), which has been universally acclaimed for its current relevance. In Capital, we come across phrases and comments such as “Creation of the world-market” being one of the “Three cardinal facts of capitalist production” (Vol. III, Chapter 15), “the world-market … being the basis and the vital element of capitalist production” (Vol. III, Chapter 7), “the entanglement of all peoples in the net of the world market, and with this, the international character of the capitalistic regime” (Vol. III, Chapter 32) and so on in different contexts. But we do not find any chapter specifically dedicated to this topic, because Marx planned to write a whole volume on it. Unfortunately, he did not find the time to realise this part of his plan. However, Lenin and other followers of his carried forward the analysis of globalization in the stage of imperialism -- or imperialist globalization – as noted above.
A long-drawn secular trend that recently caught the world's attention with the publication of Thomas Piketty's Capital in the Twenty-First Century (2014) concerns ever-growing levels of wealth and income inequality around the world. Subsequent work by Piketty and others, and surveys made by the UN and other international agencies, have shown that despite all the warnings and good advice from the well-meaning bourgeois intelligentsia, inequality continues to rise and rise. In our country for example, between 1980 and 2014, the share of national income accruing to the top 1 per cent of India’s population increased from 6 per cent to 22 per cent. During the same period, the share of the top 10 per cent increased from 30 per cent to 50 per cent; the share of the middle 40 per cent (the middle class) fell from 43 per cent to 30 per cent; the share of the bottom 50 per cent fell from 24 per cent to 15 per cent. Most remarkably, the top 0.1 per cent of earners captured a higher share of the total growth than the bottom 50 per cent (12 per cent vs 11 per cent).3
This phenomenon, along with others noted hereafter (permanent unemployment and chronic crisis) are inevitable under capitalism because they follow directly from the very nature of capitalist accumulation. Simply put, inequality, unemployment and pauperisation are part and parcel of the way capital exists and grows. What actually happens is this.
With better machines and latest technologies, production becomes less and less labour-intensive. Some workers lose their jobs, fewer of jobseekers get jobs. In a depressed labour market (less demand and more supply of labour power) wages tend to go down. Workers get poorer while capitalists use improved technology to exploit every serving worker more intensively than before (to say the same thing in Marxian terms, at a higher rate of surplus value 4 ) and thus augment their profits. So at one pole of society we find mounting wealth, income and conspicuous consumption (of the bourgeoisie) and at the other, growing impoverishment 5 , economic insecurity and social instability (of the working people) – both resulting from the selfsame process of capitalist accumulation.
Marx eloquently described the process in the following words:
“The greater the social wealth, the functioning capital, the extent and energy of its growth, and, therefore, also the absolute mass of the proletariat and the productiveness of its labour, the greater is the industrial reserve army. The same causes which develop the expansive power of capital, develop also the labour power at its disposal. The relative mass of the industrial reserve army increases therefore with the potential energy of wealth. But the greater this reserve army in proportion to the active labour army, the greater is the mass of a consolidated surplus population, whose misery is in inverse ratio to its torment of labour. The more extensive, finally, the lazarus layers of the working class, and the industrial reserve army, the greater is official pauperism. This is the absolute general law of capitalist accumulation. (Emphasis in the original) Like all other laws it is modified in its working by many circumstances …” (Vol. I, Chapter 32)
This is now almost a standard model, so to say, in both advanced and developing/backward economies. The basic reason is that, as we have already seen, with the development of productive forces under capitalism, variable capital (and therefore the number of workers employed) tends to decrease relative to constant capital. In the words of Marx, “… as the capitalist mode of production develops, an ever larger quantity of capital is required to employ the same, let alone an increased, amount of labour-power. Thus, on a capitalist foundation, the increasing productiveness of labour necessarily and permanently creates a seeming over-population of labouring people.” (Vol III, Chapter 13; emphasis added).
Keeping unemployment figures in check is indeed a headache of governments everywhere, because failure to do so can prove costly at the hustings. However, this pool of jobseekers or "industrial reserve army" is indeed a "reserve" on which capitalists can draw in periods of brisk business, while in normal or bad times they can hire cheap labour because supply of labour power far outstrips demand. As Marx remarks tauntingly,
“The great beauty of capitalist production consists in this – that it not only constantly reproduces the wage-worker as wage-worker, but produces always, in proportion to the accumulation of capital, a relative surplus-population of wage-workers. Thus the law of supply and demand of labour is kept in the right rut, the oscillation of wages is pegged within limits satisfactory to capitalist exploitation, and lastly, the social dependence of the labourer on the capitalist, that indispensable requisite, is secured…” (Vol. III, Chapter 33).
Ever-growing damage to ecosystems and living environments caused by global warming and climate change resulting from excessive greenhouse gas emissions and other factors is now one of the most terrifying concerns of humankind. Burning problems like unbearable air and water pollution, erratic monsoons, rising ocean levels and so on have already made life miserable especially for the most vulnerable sections of the people – and the worst is yet to come. While much of these are directly attributable to anti-people, pro-big capital state policy, the root cause lies in the very nature or modus operandi of capitalism. Some hundred years before environmental concerns became a matter of public discourse, Marx wrote:
“Capitalist production … disturbs the circulation of matter between man and the soil, i.e., prevents the return to the soil of its elements consumed by man in the form of food and clothing; it therefore violates the conditions necessary to lasting fertility of the soil…. Moreover, all progress in capitalistic agriculture is a progress in the art, not only of robbing the labourer, but of robbing the soil; all progress in increasing the fertility of the soil for a given time, is a progress towards ruining the lasting sources of that fertility. … Capitalist production, therefore, develops technology … only by sapping the original sources of all wealth -- the soil and the labourer.” (Vol. I, Chapter 15)
As against this shortsighted and ultimately devastating bourgeois approach to development, Marx lays down a responsible, environment-friendly, proletarian approach:
“… Even a whole society, a nation, or even all simultaneously existing societies taken together, are not the owners of the globe. They are only its possessors, its usufructuaries, and, like bonipatresfamilias 6 , they must hand it down to succeeding generations in an improved condition.” (Vol. III, Chapter 46).
This, however, does not call for an abstentionist position. Marx fully recognises the necessity of fulfilling the ever-expanding human needs. But he underscores the need for enlightened freedom in this realm/field ofnecessity and asserts that this – the responsible and caring attitude to nature – is possible only in a post-capitalist society of associated producers:
“Just as the savage must wrestle with Nature to satisfy his wants, to maintain and reproduce life, so must civilised man, and he must do so in all social formations and under all possible modes of production. With his development this realm of physical necessity expands as a result of his wants; but, at the same time, the forces of production which satisfy these wants also increase. Freedom in this field can only consist in socialised man, the associated producers, rationally regulating their interchange with Nature, bringing it under their commoncontrol, instead of being ruled by it as by the blind forces of Nature; and achieving this with the least expenditure of energy and under conditions most favourable to, and worthy of, their human nature.” (Vol. III, Chapter 48; emphasis ours).
Without a doubt, economically the most devastating feature of capitalism is recurring crises of different magnitudes. And it is on this issue that Marx's help has been most frantically sought by the bourgeoisie and all those who are, in the words of the CM, "desirous of reducing social grievances in order to secure the continued existence of bourgeois society." Thus with the onset of the 2008 crisis, leading magazines from Europe and America carried articles like "Marx Is Back" and "Can Marx Save Capitalism?"-- even as VVIPs like the then President of France and the Pope were reportedly reading Capital in quest of a way out of the crisis!
In contradistinction to those who seek to downplay the menace and also the immediate doomsday theorists, Marx developed a perfectly dialectical approach to capitalist crisis. He showed the two-fold character of crisis. On the one hand, they constitute capitalism’s inbuilt mechanism for spontaneously and ruthlessly eliminating excess or over-accumulated capital, “so that the cycle would run its course anew” (Vol. III, Chapter 15).The weaker and less efficient firms are driven out of business, while stronger and more efficient capitals survive, and emerge from it even more powerful. In this sense, crises accelerate the centralization of capital. On the other hand, they (crises) achieve this in a manner that “paves the way for more extensive and more destructive crises, and diminishes the means whereby crises are prevented” (CM) and paves the way for the “violent overthrow” of the rule of capital (Grundrisse, Section Three).
In CM, published nearly 20 years before the first volume of Capital, we hear Marx and Engels talk of an “epidemic of overproduction”. This is overproduction of commodities relative to effective demand: more is produced than can be sold. Thanks to inadequate purchasing power of the masses, a big chunk of commodities remain unsalable and drag their owners (producers/traders) down to ruin. This characteristic feature of capitalism led Marx to remark, “The ultimate reason for all real crises always remains the poverty and restricted consumption of the masses as opposed to the drive of capitalist production to develop the productive forces as though only the absolute consuming power [as distinct from purchasing power – A Sen] of society constituted their limit.” (Volume III Chapter 30, emphasis ours).
But this is the ultimate reason; we need to know how the complex process actually plays itself out. We have seen that variable capital – in effect, live labour – is the only source of surplus value, the source of profit. It follows that replacing labour by machinery entails a proportionate decrease in the rate of profit on total (constant plus variable) capital employed.
Such increase in the organic composition of capital 7 and the resultant tendency of the average rate of profit to fall, are the general laws of development of the capitalist mode of production. However, reduced rate of profit can go hand in hand with increased mass of profit if the total magnitude of capital on which profit is earned is sufficiently increased. And that is what usually happens in real life. As Marx puts it,
“…the same development of the social productiveness of labour expresses itself … on the one hand in a tendency of the rate of profit to fall progressively and, on the other, in a progressive growth of the absolute mass of the appropriated surplus-value, or profit; so that on the whole a relative decrease of variable capital and profit is accompanied by an absolute increase of both. This two-fold effect… can express itself only in a growth of the total capital at a pace more rapid than that at which the rate of profit falls.” (Vol. III, Chapter 13; emphasis ours).
So here we have an apparent riddle – the coexistence of falling rate of average profit and growing mass of total profit (and wealth of the capitalist class) -- solved for us.
We also see that this tendency/law does not operate in a simple, linear fashion. It is realised only in course of cyclical movements of capital, through breakdowns and restorations of equilibriums. It has its own “internal contradictions” and unleashes a slew of countervailing forces or “counteracting influences”, such as more intense exploitation of labour, depression of wages below the value of labour power, cheapening of the elements of constant capital, relative over-population (the “reserve army” of unemployed),foreign trade (skewed terms of trade and imperialist super profits), monopoly pricing and so on. We should therefore view the law “rather as a tendency, i.e., as a law whose absolute action is checked, retarded and weakened by counteracting circumstances” (Vol. III, Chapter 14). In other words, its effect becomes decisive only under certain particular circumstances and over long periods.
Moreover, Marxism does not posit a monocausal understanding of economic crises and business cycles. Crucial other causes are also there, such as anarchy of the capitalist mode of production which, inter alia, periodically upsets the conditions of equilibrium between the two main sectors – one producing capital goods and the other producing consumer goods – of capitalist economy. Marx also discussed several auxiliary factors which influence the specific courses and peculiar features of particular crises. More important among them are: movements in wage levels, competition among capitalist concerns, fluctuations in raw material prices, movements in interest rates and financial turmoil,trends in international trade, and so on.
“These different influences”, says Marx,“may at one time operate predominantly side by side in space, and at another succeed each other in time. From time to time the conflict of antagonistic agencies finds vent in crises. The crises are always but momentary and forcible solutions of the existing contradictions. They are violent eruptions which for a time restore the disturbed equilibrium.” (Vol. III, Chapter 15)
But this is not to say that capitalism can go on like this for ever. Expanded capitalist reproduction is also intensified reproduction of all its contradictions and therefore within the recurring cycles reside the possibility of violent destruction of the system:
“The highest development of productive power together with the greatest expansion of existing wealth will coincide with depreciation [devaluation] of capital, degradation of the labourer, and a most strained exhaustion of his vital powers. These contradictions lead to explosions, cataclysms, crises, in which by momentous suspension of labour and annihilation of a great portion of thecapital, the latter is violently reduced to the point where it can go on.... Yet these regularly recurring catastrophes lead to their repetition on a higher scale, and finally to its violent overthrow.” (Grundrisse, Section Three, emphasis added).
Does this imply that crisis-ridden capitalism will automatically collapse under its own weight? By no means. The term "violent overthrow" (emphasis ours) clearly presupposes a powerful, ideologically and politically well-equipped and organised social force to carry out this act of overthrowing. How this is to come about we shall see in Part III.
(To be continued)