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An

Introduction
To M arxist
Econom ic
Theory

B y E r n e st M andel

PATHFINDER PRESS
N E W YORK
Copyright 1969 by Merit Publishers
Copyright 1970 by Pathfinder Press, Inc.
All rights reserved
L ib rary of C ongress C atalog C ard Num ber 73-82169
M anufactured in the United States of America

First Edition, October 1967


Second Printing, October 1968
Third Printing, October 1969
F ourth Printing, December 1969
Fifth Printing, September 1970
Sixth Printing, December 1971
Second edition, June 1973

PA T H FIN D E R PRESS
410 West Street
New York, N. Y. 10014

T h is w ork w as o rig in a lly pub lish e d in F rench


b y E tudes et D ocum entation In tern atio n ales, 29
rue D escartes, P a ris V, a s No. 39-41 of Les
C ahiers du C entre d 'E tu d e s Socialistes, F e b ru a ry ,
1964.
It w as p u b lish e d in E nglish in 1967 by the
Y oung S ocialist Alliance, P.O . Box 4 7 1 , C ooper
S tation, New Y ork, N. Y. 10003.

Cover photo by Ed Weaver


CONTENTS
Page

INTRODUCTION by G eo rge Novack 3

AUTHOR'S NOTE TO THE SECOND EDITION


On Socially Necessary Labor 5

I. THE THEORY OF VALUE A N D SURPLUS-VALUE 7

Social Surplus Product 7

Com m odities, Use-Value and Exchange-Value 9

The Marxist Theory of A lien atio n 11

The Law of V alue 13

D e term ination of the Exchange-Value of Com m odities 17

What is Socially N ecessary Labor? 20

The O rig in and N atu re of Surplus-Value 23

The V a lid ity of the Labor Theory of Value 25

II. CAPITAL A N D CAPITALISM 29

C apital in Precapitalist Society 29

O rig in s of the C apitalist M ode of Production 31

O rig ins and D efinition of the M odern P roletariat 34

The Fundam ental Mechanism of C apitalist Economy 37

The G row th in the O rga nic Com position of Capital 41

C om petition Leads to C oncentration and M onopoly 45

Tendency of the A ve ra g e Rate of Profit to Decline 47

The Fundam ental C ontradiction in the C apitalist System and


the Periodic Crises of O verp ro d uctio n 51
III. NEO CAPITALISM 54

The O rig in s of N eo-C apitalism 54

A Perm anent Technological Revolution 57

The Im portance of A rm a m e n t Expenditures 60

How Crises are "A m ortized" in a Recession 62

The Tendency to Perm anent Inflation 67

"Economic Planning" 69

The State G u a ra n ty of P rofit 73


Introduction

by George Novack
The change in the social and political atm osphere of America
in the last decade h as intensified interest in Marxist ideas both
am ong the general public and in university circles. For a long
time, and especially during the reactionary cold-war era, it was
an axiom of conventional wisdom that M arxism had become
outdated. Some conceded that its teachings might retain value
and validity for the colonial world but lacked any useful ap
plication to America today.
The m ain propositions of M arx, the argum ent went, essential
ly reflected the conditions of an im m ature stage of capitalist de
velopment belonging to the nineteenth century in the West. They
no longer fitted the realities of such advanced capitalism s as
the United States.
This opinion w as voiced not only by conservative scholars
and liberal com m entators but by m entors of the New Left like
C. Wright Mills who highly esteemed M arx's contributions to
social thought and recommended them to students. Nevertheless,
after reviewing the principal postulates of M arxism in his book
The M arxists, the Colum bia professor delivered the following
verdict: "The political, psychological and economic expectations
clearly derivable from his (M arx's) work seem increasingly un
real, his model as a whole increasingly inadequate. His theories
bear the stam p of Victorian capitalism . . . ."
The contention that M arx's theories are irrelevant to our press
ing national problem s h a s become less and less fashionable and
tenable as so m any y oung people h ave begun to question the
foundations and future of American capitalism. The teachings
of M arxism seem cogent to them, not only because they have
been adopted as a guide by the m ajority of progressive h u m an
ity and form an integral and indispensable element of contem
porary thought and culture, but because they serve to explain
the course taken by Am erica's ruling class ab ro ad and at home
more profoundly and convincingly th an any alternative system
of ideas.
The author of this pam phlet has done much to prom ote this
continuing shift of attitude tow ard M arxism. Ernest Mandel, ed
itor-in-chief of the Belgian weekly La Gauche, is probably the
most influential exponent of the political economy of scientific
socialism in the Western world today.
3
He h a s taken a lead in the m odernization of the M arxist her
itage through his masterful two-volume work entitled M arxist
E conom ic Theory. There he analyzes both neocapitalism and
the postcapitalist societies in transition to socialism in a Marxist
m anner through the use of contem porary d ata a n d a critical
exam ination of rival schools in this field.
This w ork h as gone through several editions in France since
it w as first published there in 1962. It h as been translated into
m any other languages, from English to Arabic.
M andel has in addition contributed m any articles on a b ro ad
ran g e of subjects to periodicals throughout the world and h as
spoken at leading universities in the United States and C anada,
although he h a s since been banned from the U. S., Germany,
France, Switzerland, a nd A ustralia for his socialist views. This
ha s b rought widespread protest from scholars all over the world.
These are the resources which Ernest Mandel h a s draw n on in
this pam phlet, which w as originally presented as a course d u r
ing an educational weekend organized by the Paris Federation
of the United Socialist Party in 1963. It h as since been tra n s
lated into several lan g u a g e s and extensively used in classes on
the subject.
This is one of the m ost concise expositions of the elementary
principles of M arxist political economy available. In the first
section M andel elucidates the basic categories of M arx's eco
nomic doctrines from the emergence of the social surplus-product
to the la b o r theory of value. In the second he explains the laws
of m otion of the capitalist system and its inherent contradic
tions. In the final part he applies these concepts to the princi
pal phenom ena of the development of neocapitalism over the
past forty years.
While Mandel, as a Trotskyist, adheres to classical M arxism,
he does not rely on quotations or p a ra p h ra ses from the stan
d a rd M arxist w orks. His fresh and readable ap p ro ach avoids
the dullness often found in other treatm ents of these difficult
topics.
The present edition includes new m aterial in the form of an
answer by M andel to a criticism of his treatm ent of "socially
necessary labor." Students who are looking for a clear and com
pact explanation of the dynam ics of the capitalist system in our
time will find it in these pages. F o r a m ore comprehensive and
detailed exposition they should go on to read the two volumes
of M arxist Econom ic Theory.

^ ---- April 18, 1973

4
Authors Note to the Second Edition:
On Socially Necessary Labor

Three Swedish authors claim that the double determination of


socially necessary labor set forth in this work is the result of a
confusion on the part of the author. According to them, of the
two factors that determine socially necessary labor: ( a ) the
average productivity of lab o r in a sector of production and (b)
the effective social dem and to be satisfied by the given commodity
only the first is valid. The second determines only the difference
between the price and the value of commodities [Peter Dencik,
Lars Herlitz, B-A Lundvall: M arxism ens politiske ekonom i - e n
introduktion, Zenitserien 6, 1969, p. 25].
These critics are m istaken. In Capital (vol. 3, chap. 10) Marx
explains how the two determ inations of the "amount of socially
necessary labor" should be combined. The necessity of the combi
nation arises from the fact that value is a social category. The
term "am ount of socially necessary labor" poses a question: so
cially necessary to do what? Clearly to satisfy an effective de
m and. Without relating it to a need to be satisfied, the notion
of "average productivity of a sector of industry," and even of
"existing productive capacity" is m eaningless in a system based
on the generalized production of commodities where the entrepre
neurs cannot realize surplus value and accum ulate capital unless
they sell the comm odities produced.
In this light, "average productivity" is neither a purely technical
"fact," nor a m athem atical average of the productive capacity of
all the plants in a given branch of industry divided by the total
num ber of producers employed. Rather, it fluctuates according
to the relationship between productive capacity and sales. If two-
thirds of the coal mines in a country are experiencing difficulty
in selling their coal, work at only 50 percent of capacity, or
even cease production, the "average productivity" of the coal
industry will be very different from w hat it is when all the mines
are w orking at full capacity, even if, in the meantime, no technical
innovation is introduced into the industry.
5
M arx distinguishes three cases: (1 ) the case in which the value
of a com m odity Is determined by plants w orking at the technologi
cal average productivity of the sector of industry (structural
equilibrium of supply and dem and); (2 ) the case in which the
value of the com m odity is determined by plants w orking at a
level of productivity above the average for the sector of industry
(supply structurally exceeds dem and); (3 ) the case in which the
value of the com m odity is determined by plants w orking at a
level of productivity below the average for the sector of industry
(dem and structurally exceeds supply) [C apital (In tern atio n al Pub
lishers, 1967), vol. 3, pp. 182-188]. In the first an d third cases,
the plants w orking under better conditions of productivity will
realize surplus profit.
This is why M arx m akes a distinction between "individual value"
of com m odities a nd "m arket value." In order not to complicate
excessively the exposition contained in this pamphlet, which is
only an introduction to M arxist economic theory, the author
chose not to use the term "m arket value," while attempting, at the
sam e time, to reproduce M arx's line of reaso n in g as clearly as
possible.
The simple, abstract, total m ass of living hu m an lab o r ex
pended at a v erage Intensity in the course of production deter
m ines the total m ass of v alue newly created in society. This m ass
is predeterm ined in the process of production. It cannot be in
creased nor reduced by w hat happens on the m arket in the p ro
cess of com m odity circulation. But this rule holds only for society
In its entirety. It is not valid for each sector of production, nor,
a fo rtio ri, for each plant. The m arket value m ay diverge from the
"individual value," or the m ass of ab stract lab o r effectively con
tained in each com m odity (redistribution of the m ass of value
and surplus value within a sector). The prices of production m ay
diverge from this m arket value (redistribution of value and
surplus value am o n g several sectors).
Social needs play an im portant role in the m echanism s of re
distribution of value a nd surplus-value. One of the essential func
tions of the "law of value" consists precisely of reestablishing over
a period of time an equilibrium between the distribution of the
m aterial resources of society am ong different branches of produc
tion and the m anner in which it divides its effective dem and in
o rder to satisfy its v a rio u s needs (i.e., m anner in which it m ea
sures and quantifies its needs under the antagonistic conditions
of distribution characteristic of capitalist society), an equilibrium
th at generalized com m odity production can never realize a priori
nor directly.
I. The Theory of Value
and Surplus-Value
In the last a n a ly sis, every step fo rw a rd in the h isto ry of
civilization h a s been b ro u g h t a b o u t b y a n increase in the p ro
ductivity of la b o r. As lo n g as a given g ro u p of m en b a re ly
produced e n ough to keep itself alive, a s lo n g a s there w as
no su rp lu s ov er a n d a b o v e this necessary p ro d u ct, it w as
im possible for a d ivision of la b o r to tak e place a n d for a r
tisans, artists o r s c h o la rs to m ak e their a p p e ara n c e . U nder
these conditions, the technical prerequisites for such speciali
zation could not p o ssib ly be attained .

Social Surplus Product


As lo n g a s the p ro d u ctiv ity of la b o r rem ain s at a level
where one m a n can only p ro d u ce en o u g h for his own su b
sistence, social d ivision does not take place a n d a n y social
differentiation w ithin society is im possible. U n d er these con
ditions, all m en a re p ro d u ce rs a n d they are all on the sam e
econom ic level.
E very increase in the pro d u ctiv ity of la b o r b e y o n d this low
point m ak es a sm all su rp lu s possible, a n d once there is a
su rp lu s of pro d u cts, once m a n 's two h a n d s can p ro d u ce m ore
than is needed for his own subsistence, then the conditions
have been set for a stru g g le ov er how this su rp lu s will be
shared.
F rom this point on, the total ou tp u t of a social g ro u p no
longer consists solely of la b o r necessary for the subsistence
of the p ro d u ce rs. Som e of this la b o r o u tp u t m ay now be used
to release a section of society from h a v in g to w ork for its
own subsistence.
W henever this situ a tio n arises, a section of society can be
come a ru lin g class, w hose o u tsta n d in g c h a racteristic is its
em a n c ip atio n from the need of w o rk in g for its ow n subsistence.
T hereafter, the la b o r of the p ro d u ce rs can be divided into
7
two p a rts . A p a rt of this la b o r con tin u es to be used for the
subsistence o f the p ro d u c e rs them selves a n d we call this p a rt
ne c essa ry labor; the o ther p a rt is u sed to m a in ta in the ru lin g
c lass a n d we give it the n a m e s u r p lu s labor.
Let us illu stra te this b y the v e ry c le a r e x a m p le of p la n ta
tion s la v e ry , a s it existed in certa in reg io n s a n d p erio d s of
the R o m a n E m pire, o r a s we find it in the West Indies a n d
the isla n d s of P o rtu g ese A frica s ta rtin g with the seventeenth
c entury, o n the g re a t p la n ta tio n s w hich were e stab lish ed there.
In these tro p ic a l a re a s , even the sla v e 's fo o d w as g e n e ra lly
n o t p ro v id e d b y the m aste r; the s la v e h a d to p ro d u ce this
him self b y w o rk in g a tiny plo t of g ro u n d o n S u n d a y s a n d
the p ro d u c ts fro m this la b o r con stitu ted his sto re of food.
On six d a y s o f the week the s la v e w o rk e d o n the p la n ta tio n
a n d received in re tu rn n o n e of the p ro d u c ts of his la b o r. T his
is the la b o r w hich creates a social s u rp lu s p ro d u ct, su rre n d e re d
b y the s la v e a s s o o n a s it is p ro d u ce d a n d b e lo n g in g solely
to the sla v e m a ste r.
T he w o rk week, w hich in this case is seven d a y s, c a n be
d iv id e d in to two p a rts : the w o rk o f o n e d a y , S u n d a y , con
stitutes n e c e s s a ry la b o r, th a t la b o r w hich p ro v id e s the p ro d u cts
fo r the subsistence of the s la v e a n d his fam ily; the w o rk of
the o th e r six d a y s is s u rp lu s la b o r a n d all of its p ro d u cts
g o to the m a ste r, a re used fo r his su sten an ce a n d his e n rich
m ent a s well.
T he g re a t d o m a in s of the e a rly M iddle A ges fu rn ish us with
a n o th e r illu stra tio n . The la n d of these d o m a in s w as divided
into three p a rts : the c o m m u n a l la n d s co n sistin g of forest,
m ea d o w s, sw a m p s, etc.; the la n d w o rk ed b y the serf for his
ow n a n d his fa m ily 's subsistence; a n d finally, the la n d w o rk ed
b y the serf in o rd e r to m a in ta in the feudal lo rd . The w ork
week d u rin g this p e rio d w as u s u a lly six d a y s , n o t seven. It
w a s div id e d into two e q u a l p a rts : the serf w o rk e d three d a y s
on the la n d from w hich the yield b e lo n g e d to him ; the o th er
three d a y s he w o rk e d o n the feud al lo rd 's la n d , w ithout re
m u n e ra tio n , s u p p ly in g free la b o r to the ru lin g class.
T he p ro d u c ts of each of these two v e ry different types of
la b o r c a n be defined in different term s. When the p ro d u c e r
is p e rfo rm in g n e c essa ry la b o r, he is p ro d u c in g a n ecessa ry
p r o d u c t. W hen he is p e rfo rm in g s u rp lu s la b o r, he is p ro d u c
in g a so c ia l s u r p lu s p ro d u ct.
Thus, social su rp lu s p ro d u ct is th at p a rt of social p ro d u c
tion which is pro d u ced by the la b o rin g class but a p p ro p ri
ated by the ru lin g class, reg a rd le ss of the form the social
surplus p ro d u ct m a y assum e, w hether this be one of n a tu ra l
products, o r com m odities to be sold, o r m oney.
Surplus-value is sim ply the m o n eta ry form of the social
surplus product. When the ru lin g class a p p ro p ria te s the p a rt
of society's p ro d u ctio n p rev io u sly defined a s "surplus product"
exclusively in the m o n e ta ry form , then we use the term "sur
plus-value" in stead of " surplus product."
As we sh a ll see late r on, how ever, the ab o v e o n ly con
stitutes a p re lim in a ry a p p ro a c h to the definition of su rp lu s-
value.
How does so cial s u rp lu s p ro d u ct com e into existence? It
arises a s a consequence of a g ra tu ito u s a p p ro p ria tio n , th at
is, an a p p ro p ria tio n w ithout co m p e n sa tio n , b y a ru lin g class
of a p a rt of the p ro d u ctio n of a p ro d u c in g class. When the
slave w orked six d a y s a week o n a p la n ta tio n a n d the total
p roduct of his la b o r w as tak en b y the m aste r w ithout a n y
com pensation to the slave, the o rig in of the social su rp lu s
p roduct here is in the g ra tu ito u s la b o r, the u n c o m p en sated
lab o r, supplied b y the sla v e to the m aster. When the serf
w orked three d a y s a week o n the lo rd 's la n d , the o rig in of
this incom e, of this social s u rp lu s p ro d u ct, is a lso to be found
in the u n c o m p e n sa te d la b o r, the g ra tu ito u s la b o r, fu rnished
by the serf.
We will see fu rth e r o n th at the o rig in of cap ita list surplus-
value, th at is to sa y , the revenue of the b o u rg eo is class in
capitalist society, is e x actly the sam e: it is u n co m p en sated
lab o r, g ra tu ito u s la b o r, which the p ro le ta ria n , the w age w o rk
er, gives the ca p ita list w ithout receiving a n y v a lu e in exchange.

Commodities, Use-Value
and Exchange-Value
We h a v e now developed several b a sic definitions which will
be used th ro u g h o u t this exp o sitio n . A n u m b er of o th ers m ust
be ad d ed at this point.
E very p ro d u c t of h u m a n la b o r n o rm a lly possesses utility;
it m ust be a b le to satisfy a h u m a n need. We m a y therefore
s a y th at every p ro d u ct of h u m a n la b o r h a s a use-value. The
term "use-value" will, how ever, be used in two different senses.
We will sp e a k o f the use-value of a c o m m o d ity ; we will also
talk a b o u t use-values, a s w hen we refer, for exam p le, to a
society in w hich o n ly u se-values a re p ro d u ce d , th at is to say ,
w here p ro d u c ts a re created for direct c o n su m p tio n either b y
the p ro d u c e rs them selves o r b y ru lin g classes which a p p ro p r i
ate them .
T o g e th er with this use-value, a p ro d u c t of h u m a n la b o r can
a ls o h a v e a n o th e r v a lu e , a n excha n g e-va lu e. It m a y be p ro
duced for e x c h an g e o n the m a rk e t place, fo r the p u rp o se of
be in g so ld , r a th e r th a n for direct co n su m p tio n b y the p ro
ducers o r b y w e a lth y classes. A m a s s o f p ro d u cts which h a s
been cre a ted fo r the p u rp o se of b e in g so ld c a n no lo n g er be
c o n sid e red a s the p ro d u c tio n of sim ple u se-values; it is now a
p ro d u c tio n of c o m m odities.
The co m m o d ity , therefore, is a p ro d u c t created to be ex
c h a n g e d o n the m a rk e t, a s o p p o se d to on e which h a s been
m a d e fo r direct co n su m p tio n . E v e r y c o m m o d ity m u s t h a v e
b o th a u se -v a lu e a n d a n exchange-va lu e.
It m u st h a v e a use-v alu e o r else n o b o d y w o u ld b u y it, since
a p u rc h a s e r w ou ld be c oncerned w ith its u ltim ate c o n su m p tio n ,
w ith s a tis fy in g so m e w a n t o f his b y this p u rch a se . A com
m o d ity w ith o u t a u se-value to a n y o n e w ould co n seq u en tly be
u n s a le a b le , w o u ld constitute useless p ro d u ctio n , w ould h av e
no e x c h an g e -v a lu e precisely b ecau se it h a d no use-value.
On the o th e r h a n d , ev e ry p ro d u c t which h a s use-v alu e does
n o t n e c essa rily h a v e ex c h an g e -v a lu e . It h a s a n exchange-
v a lu e o n ly to the extent th a t the society itself, in which the
c o m m o d ity is p ro d u ce d , is fo u n d ed o n ex ch an g e, is a society
w here e x c h a n g e is co m m o n practice.
A re there societies w here p ro d u c ts do n o t h a v e exchange-
v a lu e ? T he b a s is for e x c h an g e -v a lu e , a n d a fo rtio r i for tra d e
a n d the m a rk e t place, is c onstitu ted b y a g iv en degree of
de v e lo p m e n t of the d iv isio n o f la b o r. In o rd e r for p ro d u cts
n o t to be directly co n su m e d b y their p ro d u ce rs, it is essential
th a t e v e ry b o d y s h o u ld n o t be e n g a g e d in tu rn in g ou t the sam e
th in g . If a p a rtic u la r co m m u n ity h a s no d iv isio n of la b o r,
o r o n ly its m o st r u d im e n ta ry form , then it is c lear th at no
re a s o n fo r e x c h an g e exists. N o rm a lly , a w heat farm er h a s
n o th in g to e x c h an g e w ith a n o th e r w heat farm er. But a s so o n
10
as a division of la b o r exists, as so o n as there is contact be
tween social g ro u p s p ro d u cin g different use-values, then ex
change can com e ab o u t, a t first o n a n o c c asio n a l basis, sub
sequently on a m o re p e rm a n e n t one. In this w ay, little b y
little, pro d u cts w hich a re m ad e to be ex ch anged, c o m m o d i
ties, m ake their a p p e a ra n c e alo n g sid e those p ro d u cts which
are sim ply m ad e for the direct co n su m p tio n of their pro d u cers.
In capitalist society, co m m o d ity p ro d u ctio n , the p ro d u ctio n
of exchange-values, h a s reached its g rea te st developm ent. It
is the first society in h u m a n h isto ry where the m a jo r p a rt of
p roduction consists of com m odities. It is no t true, how ever,
that all p ro d u ctio n u n d e r c a p italism is c o m m o d ity p ro d u c
tion. Two classes of p ro d u cts still rem a in sim ple use-value.
The first g r o u p consists of all th in g s p ro d u ce d b y the p eas
a n try for its ow n con su m p tio n , eve ry th in g directly consum ed
on the farm s w here it is p roduced . Such p ro d u ctio n for self
consum ption b y the fa rm e r exists even in a d v a n ce d c a p italist
countries like the U nited States, a lth o u g h it constitutes o n ly
a sm all p a rt of to ta l a g ric u ltu ra l p ro d u ctio n . In g en eral, the
m ore b a c k w a rd the a g ric u ltu re of a c o u n try , the g rea te r is
the fraction o f a g ric u ltu ra l p ro d u ctio n g o in g for self-consum p
tion. This fac to r m ak es it extrem ely difficult to calculate the
exact n a tio n a l incom e of such countries.
The second g ro u p of p ro d u c ts in cap ita list society which
are not com m odities b ut re m a in sim ple u se-value consists of
all things p ro d u ce d in the hom e. Despite the fact th at co n sid
erable h u m a n la b o r goes into this type of h o u se h o ld p ro d u c
tion, it still rem a in s a p ro d u c tio n of use-values a n d n o t of
com m odities. E v e ry tim e a so u p is m ad e o r a b u tto n sewn
on a g a rm e n t, it constitutes p ro d u ctio n , b u t it is no t p ro d u c
tion for the m ark e t.
The a p p e a ra n c e of c o m m o d ity p ro d u ctio n a n d its su b seq u en t
re g u la riz a tio n a n d g e n e ra liz a tio n h a v e ra d ic a lly tra n sfo rm ed
the w a y m en la b o r a n d how they o rg an iz e society.

The Marxist Theory of Alienation


You h a v e n o d o u b t a lr e a d y h e a rd a b o u t the M a rx ist th eo ry
of a lienation. The em ergence, re g u la riz a tio n a n d g e n e ra liz a
tion of c o m m o d ity p ro d u c tio n a re directly related to the ex-
11
p a n d in g c h a ra c te r of this p h e n o m e n o n o f alie n a tio n .
We c a n n o t dwell o n this aspect of the q u estio n here b u t it
is ex trem ely im p o rta n t to call atte n tio n to it, since the h isto ry
of tra d e co v ers f a r m o re th a n the c a p ita list e ra . It a lso in
cludes sm a ll-sca le co m m o d ity p ro d u ctio n , w hich we will dis
cuss later. ^T heS^ is a lso a <{><^st-capitalist society b a sed on
com m odities, a /tr a n s itio n a l s&ciety betw een cap ita lism a n d
so cialism , such ( a s p re se n t-d a y Soviet society, fo r the latter
still rests in v e ry la rg e m e a su re o n the fo u n d atio n s of ex
c h a n g e -v a lu e p ro d u ctio n . Once we h a v e g ra s p e d c ertain fun
d a m e n ta l c h a ra c te ristic s of a society b a s e d o n com m odities,
we c a n r e a d ily see w hy it is im p o ssib le to su rm o u n t certain
p h e n o m e n a of a lie n a tio n in the tra n s itio n a l p e rio d between
c a p ita lism a n d so c ia lism , a s in Soviet society, for exam ple.
O b v io u sly this p h e n o m e n o n of a lie n a tio n d oes n o t exist
a t least in the sa m e fo rm in a society w here co m m o d ity
p ro d u c tio n is u n k n o w n a n d w here the life of the in d iv id u a l
a n d his s o c ia l ac tiv ity a re u nited in the m o st e lem en tary
w ay. M a n w o rk s, b u t g e n e ra lly n o t b y him self; m o st often he
is p a r t of a collective g r o u p h a v in g a m o re o r less o rg a n ic
stru c tu re . H is la b o r is a direct tra n s fo rm a tio n o f m ate ria l
things. All o f this m ea n s th a t la b o r activity, the act of p r o
du c tio n , the act of c o n su m p tio n , a n d the rela tio n s betw een the
in d iv id u a l a n d his society a re ru led b y a co n d itio n of eq u i
lib riu m w hich h a s rela tiv e s ta b ility a n d perm an en ce.
We sh o u ld not, of co u rse, em bellish the picture of prim itiv e
society, w hich w as subject to p ressu re s a n d p erio d ic c a ta s
tro p h e s b ecause of its extrem e p o v e rty . Its eq u ilib riu m w as
co n s ta n tly e n d a n g e re d b y scarcity , h u n g e r, n a tu r a l d isasters,
etc. But in the p e rio d s betw een c a ta s tro p h e s , esp ecially after
a g ric u ltu re h a d a tta in e d a ce rta in degree of d ev elopm ent a n d
w hen clim atic c o n d itio n s w ere fa v o ra b le , this k in d of society
endow ed all h u m a n activities w ith a la rg e degree of unity,
h a rm o n y a n d sta b ility .
Such d is a s tro u s consequences of the d iv isio n of la b o r as
the e lim in a tio n of all aesthetic activity, a rtistic in sp iratio n
a n d cre a tiv e ac tiv ity from the act of p ro d u ctio n a n d the su b
stitu tio n of p u re ly m ec h a n ica l a n d repetitive ta sk s were n o n
existent in p rim itiv e society. On the c o n tra ry , m o st of the
arts , m usic, sculpture, p a in tin g , the d an ce, were o rig in a lly
12
linked to pro d u ctio n , to la b o r. The desire to give a n a ttra c
tive a n d a p p e a lin g form to p rodu cts which were to be used
either by the in d iv id u a l, his fam ily, o r la rg e r k in sh ip g ro u p s,
found a n o rm a l, h a rm o n io u s a n d o rg a n ic ex p ressio n within
the fram ew ork of the d a y 's w ork.
L a b o r w as not looked u p o n a s a n o b lig a tio n im posed from
without, first of all because it w as far less intense, far less
exhausting th a n u n d e r cap ita lism to d ay . It conform ed m ore
closely to the rh y th m s of the h u m a n o rg a n ism as well as to
the rh y th m s of n atu re. The n u m b er of w o rk in g d a y s p er y ear
rarely exceeded 150 to 200, w hereas u n d e r cap italism the
figure is d a n g e ro u s ly close to 3 0 0 a n d som etim es even greater.
F urtherm ore, there w as a u n ity between the p ro d u cer, his
product a n d its c o n sum ption, since he g e n e ra lly p ro d u ced for
his own use o r for those close to him , so th at his w ork p o s
sessed a directly functional aspect. M odern alie n a tio n o rig i
nates b a s ic a lly in the cle a v a g e , between. the_pxoducer a n d his
product, resulting bo th from the d iv isio n of la b o r a n d com
m odity pro d u ctio n . In o th er w ord s, it is the consequence of
w orking for the m ark e t, for u n k n o w n co n su m ers, in stead of
for c o n sum ption b y the p ro d u ce r himself.
The o th er side of the picture is th at a society which o nly
produces use-values, th at is, g o o d s which will be consum ed
directly by their p ro d u ce rs, h a s a lw a y s in the p a st been an
im poverished society. N o t o n ly w as it subject to the h a z a rd s
of n a tu re but it a lso h a d to set v e ry n a rro w lim its to m a n 's
w ants, since these h a d to conform ex actly to its degree of
poverty a n d lim ited v a rie ty of p ro d u cts. N o t all h u m a n w ants
are innate to m an . T here is a c o n sta n t in teractio n between
p ro duction a n d w ants, betw een the developm ent of the p r o
ductive forces a n d the rise of new w ants. O nly in a society
where la b o r p ro d u ctiv ity will be developed to its highest point,
where a n infinite v a rie ty of p ro d u cts will be a v a ila b le , will it
be possible for m a n to experience a co n tin u o u s ex p an sio n
of his w ants, a developm ent of his ow n unlim ited p otential,
an in teg rated developm ent of his h u m an ity .

The Law of Value


One of the consequences of the a p p e a ra n c e a n d p ro g re ssiv e
ge n e ralization of c o m m o d ity p ro d u ctio n is th at la b o r itself
13
b egins to tak e o n r e g u la r a n d m e a su ra b le ch aracteristics; in
o th e r w o rd s, it ceases to be a n activ ity tied to the rh y th m s of
n a tu re a n d a c c o rd in g with m a n 's ow n p h y sio lo g ic a l rh y th m s.
U p to the nineteenth ce n tu ry a n d p o ssib ly even into the
tw entieth, the p e a sa n ts in v a rio u s reg io n s of W estern E u ro p e
d id n o t w o rk in a reg u la te d w ay, th at is to s a y , they did n o t
w o rk with the sa m e intensity e v e ry m o n th of the y ear. T here
were p e rio d s in the w o rk y e a r w hen they w o rk e d v e ry h a rd
a n d o th e r p e rio d s, p a rtic u la rly d u rin g the w inter, w hen all
ac tiv ity v irtu a lly c am e to a ha lt. It w as in the m o st b a c k w a rd
a g ric u ltu ra l a re a s of m o st of the ca p ita list co u n tries th a t
c a p ita list society, in the co u rse of its d evelopm ent, fo u n d a
m o st a ttra c tiv e so u rc e of reserve m a n p o w e r, fo r here w as a
la b o r force a v a ila b le for fo u r to six m o n th s a y e a r at m uch
low er w ages, in view of the fact th a t a p a rt of its subsistence
w as p ro v id e d b y its a g ric u ltu ra l activity.
W hen we lo o k a t the m o re h ig h ly d eveloped a n d p ro sp e ro u s
fa rm s, th o se b o rd e rin g the b ig cities, for ex a m p le , a n d which
a re b a s ic a lly o n the r o a d to beco m in g in d u strialized , we see
th a t w o rk is m uch m o re re g u la r a n d the a m o u n t o f ex p en d ed
la b o r m uch g re a te r, be in g d istrib u te d in a re g u la r w a y th ro u g h
o u t the y e a r, with d e a d se aso n s p ro g re ssiv e ly elim inated.
T his h o ld s true n ot o n ly fo r o u r tim es b u t even as e a rly as
the M iddle A ges, a t least from the twelfth cen tu ry on. The
closer we get to the cities, th a t is to sa y , to the m ark etp lace,
the m o re the p e a s a n t's la b o r becom es la b o r for the m ark e t,
th a t is to sa y , co m m o d ity p ro d u ctio n , a n d the m o re reg u la te d
a n d m o re o r less stab le his la b o r becom es, ju st a s if he were
w o rk in g inside a n in d u stria l enterprise.
E x p re sse d a n o th e r w ay, the m o re g en era lized c o m m o d ity
p ro d u c tio n becom es, the g rea ter the re g u la tio n o f la b o r a n d
the m o re so c ie ty becom es o rg a n iz e d o n the b a sis o f a n ac
co u n tin g sy ste m fo u n d e d on labor.
W hen we e x a m in e the a lre a d y fairly a d v a n c e d d iv isio n of
la b o r w ithin a co m m u n e at the b e g in n in g of com m ercial a n d
craft d evelopm ent in the M iddle Ages, o r the collectives in
such c iv ilizations a s the B yzantine, A ra b , H in d u , Chinese
a n d Ja p a n e s e , c e rta in c o m m o n facto rs em erge. We a re stru ck
b y the fact th at a v e ry a d v a n c e d in te g ratio n o f a g ric u ltu re
a n d v a rio u s c raft techniques exists a n d th at re g u la rity of
la b o r is tru e for the c o u n try sid e a s well a s the city, so th at
14
an accounting system in term s of la b o r, in lab o r-h o u rs, h as
become the force g o v e rn in g all the activity a n d even the very
structure of the collectives. In the c h ap ter on the law of v alue
in m y Treatise on M a rx ist E c o n o m ic s , I give a whole series
of exam ples of this a ccounting system in w o rk -h o u rs. There
are In d ia n villages w here a c ertain caste ho ld s a m o n o p o ly
of the black sm ith craft b ut continues to w o rk the lan d at the
sam e time in o rd e r to feed itself. The rule which h a s been
established is this: when a b lacksm ith is e n g a g ed to m ak e a
tool o r w eapon for a farm , the client supplies the raw m a
terials a n d a lso w orks the b lac k sm ith 's la n d d u rin g the whole
period th at the latter is e n g a g ed in m a k in g the im plem ent.
Here is a v e ry tra n s p a re n t w a y of sta tin g th at exch a n g e is
governed b y a n equivalence in w ork-h o u rs.
In the J a p a n e s e v illages of the M iddle Ages, a n acco u n tin g
system in w o rk -h o u rs, in the literal sense of the term , existed
inside the v illage com m unity. The v illag e acco u n ta n t kept
a kind of g re a t b o o k in w hich he entered the n u m b er of h o u rs
of w ork do ne b y v illa g ers on each o th ers' fields, since a g
riculture w as still m a in ly b a sed o n co o p erativ e lab o r, with
h a rvesting, farm con stru c tio n a n d stock b ree d in g being done
in com m on. T he n u m b er of w o rk -h o u rs fu rn ish ed b y the
m em bers of one h o u se h o ld to the m em b ers of an o th e r w as
very carefully tallied. At the end of the y ear, the exch an g es
h a d to ba la n c e , th at is, the m em b ers of h o u se h o ld B were
required to h a v e given h o u se h o ld A ex actly the sam e n u m b er
of w o rk -h o u rs which m em bers o f h o u se h o ld A h a d g iven h ouse
hold B d u rin g the ye a r. The J a p a n e s e even refined th in g s to
the p o in t a lm o st a th o u sa n d y e a rs ago! w here they took
into account th at children p ro v id e d a s m a lle r q u a n tity of
lab o r th an ad u lts, so th a t a n h o u r of child la b o r w as "worth"
only a h a lf-h o u r of a d u lt la b o r. A w hole system of acco u n t
ing w as set up a lo n g these lines.
There is a n o th e r exa m p le w hich gives u s a direct insight
into this acco u n tin g system b a s e d o n labor-tim e: the c o n v er
sion of feudal rent from one form to a n o th e r. In feudal so
ciety, the a g ric u ltu ra l s u rp lu s p ro d u ct could tak e three dif
ferent form s: rent in the form of la b o r (the corvee), rent in
kind, a n d m o n ey rent.
When a c h a n g e is m ad e from the corvee to rent in kind,
15
o b v io u sly a p ro cess of co n v e rsio n tak es place. In ste a d of
g iv in g the lo rd three d a y s of la b o r p er week, the p e a sa n t now
g ives him a ce rta in q u a n tity of w heat, live-stock, etc., o n a
s e a s o n a l b a s is . A second c o n v e rsio n tak es p lace in the c h a n g e
o v e r from ren t in k in d to m o n ey rent.
T hese two c o n v e rsio n s m u st be b a sed o n a fa irly rig o ro u s
a c c o u n tin g in w o rk -h o u rs if one of the two p a rtie s does no t
c a re to suffer a loss in the process. F o r ex am p le, if at the time
the first c o n v e rs io n w as effected, the p e a sa n t g a v e the lo rd a
q u a n tity of w h e a t w hich req u ired o n ly 76 w o rk -d a y s of la b o r,
w h e re a s p r e v io u s ly he h a d g iv en the lo rd 150 w o rk -d a y s of
la b o r in the sa m e y e a r, then this co n v e rsio n of la b o r-re n t
in to ren t in k in d w o u ld result in the su d d e n im p o v erish m en t
o f the lo rd a n d a r a p id enric h m e n t of the serfs.
T he la n d lo r d s y o u c a n d e pend o n them! w ere careful to
see to it w hen the c o n v e rsio n w as m ad e th at the different
fo rm s of ren t w ere closely eq u iv a le n t. Of co u rse the co n v e r
s io n c o u ld e v e n tu a lly tu rn o u t to be a b a d o ne fo r one of
the p a rtic ip a tin g classes, for exam p le, a g a in s t the lan d lo rd s,
if a s h a rp rise in a g ric u ltu ra l prices o c c u rre d after ren t w as
con v e rte d fro m ren t in k in d to m o n ey rent, b u t such a result
w ould be h isto ric a l in c h a ra c te r a n d n o t directly a ttrib u ta b le
to the c o n v e rs io n p e r se.
T he o rig in of this e c o n o m y b a s e d o n a n ac co u n tin g in
la b o r-tim e is a lso c le a rly a p p a re n t in the d iv isio n of la b o r
w ithin the v illa g e a s it existed betw een a g ric u ltu re a n d the
c rafts. F o r a lo n g tim e the d iv isio n rem a in e d quite ru d im e n
ta ry . A section of the p e a s a n try c o n tin u ed to p ro d u ce p a rt
of its ow n c lo th in g fo r a p ro tra c te d h isto ric a l p erio d , which
in W estern E u ro p e e xtended a lm o st a th o u sa n d y e a rs; th at
is, from the b e g in n in g of the m ed iev al cities rig h t up to the
n ineteenth century. The technique of m a k in g clo th in g w as cer
ta in ly no m y ste ry to the c u ltiv a to r o f the soil.
As s o o n a s a re g u la r system of e x c h an g e betw een the fa r
m er a n d textile c ra fts m a n w as e sta b lish e d , s ta n d a r d e q u iv a
lents w ere likew ise e sta b lish e d fo r exam p le, a n ell of cloth
[a m e a s u re v a ry in g from 27 to 4 8 inches] w o u ld be ex ch an g ed
fo r 10 p o u n d s of butter, n ot for 100 p o u n d s. O b v io u sly the
p e a sa n ts knew , o n the b a s is of their ow n experience, the a p
p ro x im a te la b o r-tim e needed to p ro d u ce a g iven q u a n tity of
16
cloth. H a d there not been a m ore o r less exact equivalence
between the time needed to p rodu ce the cloth a n d the time
needed to p ro d u ce the butter for which it w as exchanged,
there w ould h a v e been a n im m ediate shift in the div isio n of
labor. If cloth p ro d u ctio n were m o re lu crativ e th a n butter
production, the butter p ro d u ce rs w ould switch to p ro d u cin g
cloth. Since society here w as on ly at the th resh o ld of a n ex
treme d ivision of la b o r, th at is to say , it w as still at a point
where the b o u n d a rie s between different techniques were not
clearly m a rk e d , the p a s sa g e from one econom ic activity to
an o th e r w as still possible, p a rtic u la rly when strik in g m a
terial g a in s were p ossible b y m ea n s of such a change.
In the cities of the M iddle Ages a s well, a v ery skillfully
calculated eq u ilib riu m existed between the v a rio u s crafts a n d
was written into the c h a rte rs w hich specified alm o st to the
m inute the a m o u n t of lab o r-tim e n ecessary for the p ro d u ctio n
of different articles. It is inconceiv ab le th at u n d e r such con
ditions a s h o e m a k e r o r b lack sm ith m ight get the sam e am o u n t
of m oney for a p ro d u ct which took h a lf the lab o r-tim e which
a w eaver o r oth er a rtisa n m ight req u ire in o rd e r to get the
sam e a m o u n t of m oney for his p rodu cts.
H ere a g a in we c learly see the m ech an ism of a n acco u n tin g
system in w o rk -h o u rs, a society fun ctio n in g on the b a sis of
an e c onom y of labor-tim e, w hich is g e n e ra lly ch aracteristic
of the w hole p h a se which we call sm all-scale c o m m o d ity p r o
duction. T his is the p h a se interv en in g between a p u rely n a
tu ral econom y, in which o n ly use-values a re pro d u ced , a n d
capitalist society, in w hich co m m o d ity p ro d u ctio n e x p a n d s
w ithout limit.

Determination of the
Ex change-Value of Commodities
Once we h a v e determ ined th a t the p ro d u ctio n a n d ex ch an g e
of com m odities becom es re g u la r a n d gen eralized in a society
based on a n e c o n o m y of labor-tim e, on a n acco u n tin g sy s
tem in w o rk -h o u rs, we can re a d ily u n d e rs ta n d w hy the ex
change of com m odities, in its o rig in s a n d inherent n atu re,
rests on this fu n d am e n ta l b a s is of a n acco u n tin g system in
w ork -h o u rs a n d c o nsequently follows this g e n eral rule: the
exch a n g e-va lu e o f a c o m m o d ity is determ in ed b y the q u a n tity
17
o f la b o r n ecessa ry to p ro d u c e it. The q u a n tity of la b o r is
m e a s u re d b y the length of tim e it tak es to p ro d u ce the com
m odity.
T his g e n e ra l definition of the la b o r th eo ry o f v a lu e is the
b a s is o f bo th c lassical b o u rg e o is po litical eco n o m y fro m the
seventeenth ce n tu ry to the b e g in n in g of the nineteenth cen
tu ry , from W illiam Petty to R icard o ; a n d M a rx ist econom ic
th eo ry , w hich to o k o v e r the th eo ry of la b o r v a lu e a n d p er
fected it. H ow ever, the g e n e ra l definition m u st be qu alified in
se v era l respects.
In the first place, n o t all m en a re endow ed with the sam e
c a p a c ity for w o rk , with the sa m e stren g th o r the sam e degree
of skill a t th eir tra d e . If the e x c h an g e -v a lu e of com m odities
d e p ended o n ly on the q u a n tity of la b o r ex p en d ed in d iv id u a lly,
th a t is, o n the q u a n tity of la b o r e x p en d ed b y each in d iv id u a l
in the p ro d u c tio n of a c o m m o d ity , we w o u ld a rriv e a t this
a b s u rd ity : the lazier o r m o re inco m p eten t the p ro d u ce r, a n d
the la r g e r the n u m b e r of h o u rs he w o u ld sp en d in m a k in g a
p a ir of sh o es, the g re a te r w ou ld be the v a lu e o f the shoes!
T his is o b v io u sly im p o ssib le since e x c h an g e -v a lu e is no t a
m o ra l re w a rd fo r m ere w illingness to w o rk b u t a n objective
b o n d set u p betw een in d ep e n d e n t p ro d u c ers in o rd e r to e q u a l
ize the v a rio u s crafts in a society b a s e d b o th o n a d iv isio n
of la b o r a n d a n e c o n o m y of lab o r-tim e. In such a society
w asted la b o r receives no c o m p e n sa tio n ; o n the c o n tra ry , it
is a u to m a tic a lly penalized. W hoever p u ts m o re tim e into p r o
d u c in g a p a ir of shoes th a n the a v e ra g e n e c essa ry h o u rs
a n a v e ra g e d eterm ined b y the a v e ra g e p ro d u c tiv ity o f la b o r
a n d rec o rd e d in the G uild C h a rte rs, fo r exam ple! such a
p e rs o n h a s w asted h u m a n la b o r, w o rk ed to no a v a il for a
c e rta in n u m b e r of h o u rs. He will receive n o th in g in ex ch an g e
fo r these w asted h o u rs.
E x p re sse d a n o th e r w ay, the e x c h an g e -v a lu e of a co m m o d
ity is not d eterm ined by the q u a n tity o f la b o r ex p ended b y
each in d iv id u a l p ro d u c e r e n g a g ed in the p ro d u c tio n of this
c o m m o d ity b u t b y the q u a n tity of la b o r so c ia lly n ecessa ry
to p ro d u c e it. T he e x p re ssio n "socially necessary" m eans: the
q u a n tity of la b o r n e c essa ry u n d e r the a v e ra g e c o n d itio n s of
la b o r p ro d u c tiv ity e x istin g in a given c o u n try at a given time.
The a b o v e q u a lific a tio n h a s v e ry im p o rta n t a p p lic a tio n s
18
when we exam ine the functioning of cap italist society m ore
closely.
A nother clarify in g statem ent m ust be ad d ed here. Ju st w hat
do we m ean b y a "q u antity of la b o r" ? W orkers differ in their
qualifications. Is there com plete e q u a lity between one p er
son's h o u r of w ork a n d e v e ry b o d y else's, reg a rd le ss of such
differences in skills? Once a g a in the q u estion is no t a m o ra l
one but h a s to do with the in te rn al logic of a society b a sed
on an eq u a lity between skills, a n eq u a lity in the m ark etp lace,
and where a n y d isru p tio n of this e q u a lity w ould im m ediately
destroy the social e q uilibrium .
What w ould h a p p e n , fo r exam ple, if a n h o u r 's w o rk b y a n
unskilled la b o re r w as w orth a s m uch a s a n h o u r 's w ork b y
a skilled c ra ftsm a n , w ho h a d spent fo u r to six y e a rs as a n
apprentice in a c q u irin g his skill? O b viously, n o one w ould
want to becom e skilled. The h o u rs of w o rk spent in lea rn in g
a craft w ould be w asted h o u rs since the c ra ftsm a n w ould not
be com pensated fo r them after becom in g qualified.
In an ec o n o m y founded o n a n acco u n tin g system of w ork-
hours, the y o u n g will desire to becom e skilled o n ly if the time
lost d u rin g their tra in in g p e rio d is su b seq u en tly p a id for. O ur
definition of the exc h an g e -v a lu e of a co m m o d ity m u st therefore
be com pleted a s follows: "An h o u r of la b o r b y a skilled w o rk
er m ust be co n sid ered a s com plex la b o r, a s c o m p o u n d lab o r,
as a m ultiple of a n h o u r of unslcflled la b o r; the coefficient of
m ultiplication o b v io u sly c a n n o t be a n a rb itr a r y o ne b u t m ust
be based on the cost of a c q u irin g a g iv en skill." It sh o u ld
be pointed out, in p a ssin g , th at there w as a lw a y s a certain
fuzziness in the p re v a ilin g e x p la n a tio n of co m p o u n d la b o r in
the Soviet U n io n u n d e r Stalin which h a s p ersisted to this
very d ay. It is claim ed th at c o m p e n sa tio n for w o rk sh o u ld
be b ased on the q u a n tity a n d q u a lity of the w ork, bu t the
concept of q u a lity is no lo n g er u n d e rsto o d in the M arxist
sense of the term , th a t is to sa y , a s a q u a lity m e a su ra b le
q u a ntitatively b y m ea n s of a specific coefficient of m u ltip lica
tion. On the c o n tra ry , the idea of q u a lity is used in the b o u r
geois ideological sense, a c c o rd in g to which the q u a lity of
lab o r is su p p o sed to be determ in ed b y its social usefulness,
and this is used to justify the incom es of m a rs h a ls , b a lle rin a s
and in d u stria l m a n a g e rs, which a re ten tim es h ig h er th an
the incom es of unskilled la b o re rs . Such a th eo ry belo n g s in
19
the d o m a in of a p o logetics despite its w id esp read use to ju s
tify the e n o rm o u s differences in incom e which existed u n d e r
Stalin a n d c ontinue to exist in the Soviet U n io n to d ay , a l
th o u g h to a lesser extent.
The ex c h an g e -v a lu e of a c om m o d ity , then, is determ ined
b y the q u a n tity of la b o r so cially n ecessary for its p ro d u ctio n ,
w ith skilled la b o r being tak en as a m ultiple o f sim ple la b o r
a n d the coefficient of m u ltiplication b ein g a re a s o n a b ly m ea
s u ra b le q u a n tity .
T his is the k ernel of the M arx ist th eo ry of v a lu e a n d the
b a s is fo r all M a rx ist econom ic th eo ry in g e n eral. S im ilarly ,
the th e o ry o f so cial s u rp lu s p ro d u c t a n d s u rp lu s la b o r, which
we d iscussed a t the b e g in n in g of this w o rk , constitutes the
b a s is fo r all M a rx ist so c io lo g y a n d is the b rid g e connecting
M a rx 's so c io lo g ic a l a n d h isto ric a l a n a ly s is, his th eo ry of
c lasses a n d the developm ent of society g en erally , to M arxist
econom ic theo ry , a n d m o re precisely, to the M arx ist a n a ly sis
of all c o m m o d ity -p ro d u c in g societies of a p re-cap italist, c a p i
talist a n d p o st-c a p ita list c h a ra c te r.

What is Socially Necessary L abor?


A s h o rt while b a c k I stated th at the p a rtic u la r definition of
the q u a n tity of s o c ia lly ne c essa ry la b o r for p ro d u cin g a com
m o d ity h a d a v e ry special a n d extrem ely im p o rta n t a p p li
c a tio n in the a n a ly s is of ca p ita list society. I th in k it will be
m o re useful to deal with this p oin t now a lth o u g h lo g ically
it m ight b elo n g to a la te r section of this p resen tatio n .
The to ta lity of all com m odities p ro d u ce d in a c o u n try at a
giv en tim e h a s been p ro d u ce d to satisfy the w an ts of the sum
to ta l of the m em bers o f this society. A n y article which did
n ot sa tisfy s o m e b o d y 's needs, w hich h a d no u se-value for
a n y o n e , w o u ld be a p r io r i u n sa le a b le , w ould h a v e no ex
c h a n g e-v a lu e , w ould not constitute a co m m o d ity bu t sim p ly
a p ro d u c t of c a price o r the idle jest of som e p ro d u ce r. F ro m
a n o th e r an g le , the sum to ta l of b u y in g po w er which exists
in this given society a t a given m o m en t a n d w hich is no t to
be h o a rd e d b u t spent in the m ark e t, m ust be used to b u y the
sum to ta l of com m odities p ro d u ce d , if there is to be econom ic
e q u ilib riu m . T his equ ilib riu m therefore im plies th at the sum
total of so cial p ro d u ctio n , of the a v a ila b le p ro d u ctiv e forces
20
in this society, of its a v a ila b le w o rk -h o u rs, h a s been d istrib
uted a m o n g the v a rio u s sectors of in d u stry in the sam e p ro
p o rtio n s a s consum ers distribute their b u y in g pow er in
satisfying their v a rio u s w ants. When the d istrib u tio n of p r o
ductive forces no lo n g er c o rre sp o n d s to this d iv isio n in w ants,
the econom ic e q u ilibrium is destroyed an d b o th ov er-p ro d u ctio n
a n d u n d e r-p ro d u c tio n a p p e a r side b y side.
Let us give a ra th e r c o m m onplace exam ple: to w a rd the end
of the nineteenth a n d b eg in n in g of the twentieth century, a
city like P a ris h a d a coa ch -b u ild in g in d u stry , which together
with asso c ia te d h a rn e ss tra d e s em ployed th o u sa n d s o r even
tens of th o u sa n d s of w orkers.
In the sa m e p e rio d the a u to m o b ile in d u stry w as em erg in g
a n d a lth o u g h still quite sm a ll it a lre a d y n u m b ere d som e scores
of m a n u fa c tu re rs e m p lo y in g several th o u sa n d s of w orkers.
N ow w h a t is the process ta k in g place d u rin g this p erio d ?
On the one h a n d , the n u m b er of c a rria g e s beg in s to decline
a n d on the other, the n u m b er of a u to m o b iles beg in s to in
crease. The p ro d u c tio n of c a rria g e s a n d c a rria g e equipm ent
therefore show s a trend to w a rd e xceeding so c ia l needs, a s these
a re reflected in the m a n n e r in w hich the in h a b ita n ts of P aris
a re d iv id in g their b u y in g pow er; o n the o th er side of the pic
ture, the p ro d u c tio n of au to m o b ile s is below so cia l needs, for
from the tim e the in d u stry w as lau n c h e d until the a d v e n t of
m ass p ro d u ctio n , a clim ate of sc arc ity existed in this in d u stry .
The su p p ly of au to m o b ile s o n the m ark e t w as never eq u a l
to the d e m a n d .
H ow do we e xpress these p h e n o m e n a in term s of the la b o r
th eo ry of v a lu e ? We can s a y th at in the c a rria g e in d u stry
m ore la b o r is e x p en d e d than is so c ia lly necessary, th a t a
p a rt of the la b o r e xpended b y the sum to ta l of c o m p an ies
in the c a rria g e in d u stry is so c ia lly w asted la b o r, which no
lon g er finds a n eq u iv a le n t o n the m ark e t-p lac e a n d is con
sequently p r o d u c in g u n sa le a b le go o d s. In c a p ita list society,
when g o o d s a re u n sa le a b le it m ea n s th a t a n investm ent of
h u m a n la b o r h a s been m ad e in a specific in d u stria l b ra n c h
which tu rn s o u t to be s o c ia lly u n n e c essa ry labor, th at Is to
sa y , it is la b o r w hich finds no eq u iv a le n t in b u y in g pow er
in the m ark e t-p lac e . L a b o r w hich is n o t so c ia lly n ecessary is
w asted la b o r; it is la b o r w hich p ro d u ce s no valu e. We can
see from this th a t the concept of so c ia lly n e c essa ry la b o r em-
21
b rac e s a w hole series of phe n o m e n a .
F o r the p ro d u c ts of the c a rria g e in d u stry , su p p ly exceeds
d e m a n d , prices fall a n d g o o d s rem a in u n sa le a b le . The re
v erse is tru e in the a u to m o b ile in d u stry w here d e m a n d ex
ceeds s u p p ly , c a u sin g prices to rise a n d u n d e r-p ro d u c tio n to
exist. T o be satisfied with these co m m o n p laces a b o u t su p p ly
a n d d e m a n d , how ever, m ean s sto p p in g at the p sy c h o lo g ic al
a n d in d iv id u a l aspects of the p rob lem . On the o th er h a n d , if
we p ro b e into the deeper social a n d collective side of the
p ro b le m , we b e gin to u n d e rs ta n d w h at lies below the surface
in a society o rg a n iz e d o n the b a s is of a n eco n o m y of la b o r
time.
T he m e a n in g of su p p ly exceeding d e m a n d is th at c a p italist
p ro d u ctio n , w hich is a n a rc h istic, u n p la n n e d a n d u n o rg an iz e d ,
h a s a n a rc h istic a lly invested o r ex p en d ed m o re la b o r h o u rs
in a n in d u stria l b ra n c h th a n a re so cially n ecessary , so th at
a w hole segm ent of la b o r-h o u rs tu rn s o u t to be p u re loss,
so m uch w asted h u m a n la b o r w hich rem a in s u n req u ited b y
society. C onversely, a n in d u stria l sector w here d e m a n d con
tinues to be g re a te r th a n su p p ly c a n be co n sid ered a s a n u n
de rd e v e lo p ed sector in term s of so cial needs; it is therefore
a sector e x p e n d in g fewer h o u rs of la b o r th a n a re so cially
n e c essa ry a n d it receives a b o n u s from society in o rd e r to
stim u la te a n in cre a se in p ro d u ctio n a n d achieve a n e q u ilib riu m
with so cial needs.
T his is o ne aspect of the p ro b le m of so c ia lly necessary
la b o r in the c a p ita list system . The o th er aspect of the p ro b
lem is m o re directly related to ch a n g es in the p ro d u ctiv ity of
la b o r. It is the s a m e th in g bu t m ak e s a n a b s tra c tio n of social
needs, of the "use-value" aspect of p ro d u ctio n .
In c a p ita list society the p ro d u ctiv ity of la b o r is co n sta n tly
c h a n g in g . G en erally sp e ak in g , there a re alw a y s three types
of en terp rises ( o r in d u stria l sectors): those which a re tech
n o lo g ic a lly rig h t a t the so cial a v e ra g e ; those w hich a re b a c k
w a rd , obsolete, on the d o w n g ra d e , below the so cial a v e r
age; a n d those w hich a re tec h n o lo g ic a lly a d v a n c e d a n d ab o v e
a v e ra g e in p ro d u ctiv ity .
W hat do we m ea n w hen we s a y a sector o r a n enterprise
is tec h n o lo g ic a lly b a c k w a rd a n d h a s a p ro d u ctiv ity of la b o r
w hich is below the a v e ra g e ? Such a b ra n c h o r en terp rise is
a n a lo g o u s to o u r p rev io u s ly m entioned laz y sh o e m a k e r, th at
22
is, it is one which takes five h o u rs to p ro d u ce a specific q u a n
tity of g o o d s in a perio d w hen the a v e ra g e social p ro d u ctiv ity
d em an d s th at it be done in three h o u rs. The two e x tra h o u rs
of expended la b o r a re a total loss, a waste of social la b o r.
A p o rtio n of the total a m o u n t of la b o r a v a ila b le to society
h a v in g thus been w asted b y a n enterprise, it will receive n o th
ing from society to com pensate it. C oncretely it m ean s th at
the selling prices in this in d u stry o r enterprise, which is o p
e ra tin g below a v e ra g e p ro d uctivity , a p p ro a c h its p ro d u ctio n
costs o r even fall below them , th at is to sa y , the enterprise
is o p e ra tin g at a v e ry low rate of p ro fit o r even at a loss.
On the o th er h a n d , a n enterprise o r in d u stria l sector with
a n a b o v e a v e ra g e level of p ro d u ctiv ity (like the sh o e m a k e r
who can p ro d u ce two p a irs of shoes in three h o u rs when the
social a v e ra g e is one p a ir per three h o u rs ) eco n o m izes in its
e x p e nditure of social la b o r a n d therefore m ak e s a su rp lu s
profit, th at is to sa y , the difference between its costs a n d selling
prices will be g rea te r th a n the a v e ra g e profit.
The p u rsu it of this su rp lu s p rofit is, of course, the d riv in g
force b ehind the entire ca p ita list econom y. E v e ry c a p italist
enterprise is forced b y com petition to try to get g rea te r p ro
fits, for this is the o n ly w a y it c a n co n sta n tly im p ro v e its
tec h nology a n d la b o r pro d u ctiv ity . C o n seq u en tly all firm s
are forced to tak e this sa m e direction, a n d this of co u rse im
plies th at w h at a t one tim e w as a n a b o v e -a v e ra g e p ro d u c
tivity w inds up a s the new a v e ra g e p ro d u ctiv ity , w h e reu p o n
the s u rp lu s p rofit d isa p p e a rs . All the s tra te g y of cap italist
in d u stry stem s from this desire on the p a rt of ev e ry en terp rise
to achieve a rate of p ro d u ctiv ity s u p e rio r to the n a tio n a l
a v e ra g e a n d th ereb y m ak e a s u rp lu s profit, a n d this in tu rn
p ro v o k e s a m ovem ent which cau ses the su rp lu s p ro fit to
d isa p p e a r, b y v irtue of the trend fo r the a v e ra g e rate of la b o r
p ro d u ctiv ity to rise c o n tin u o u sly . This is the m ech an ism in
the tendency for profit rate s to becom e equalized.

The Origin and N ature of Surplus-Value


A nd now, w h at is su rp lu s-v a lu e ? W hen we co n sid er it from
the view point of the M arx ist th eo ry of v alu e, the a n sw er is
rea d ily found. S u rp lu s-v a lu e is sim p ly the m o n e ta r y fo r m o f
the so cia l su r p lu s p roduct, th a t is to sa y , it is the m o n e ta ry
23
form of th a t p a rt of the w o rk e r's p ro d u ctio n which he s u r
ren d e rs to the ow ner of the m ea n s o f p ro d u ctio n w ithout re
ceiving a n y th in g in return.
How is this su rre n d e r accom plish ed in practice within c a p i
talist society? It takes place th ro u g h the pro cess of exchange,
like all im p o rta n t o p e ra tio n s in cap italist society, which are
a lw a y s rela tio n s of e x change. The cap italist b u y s the lab o r-
pow er of the w o rk e r, a n d in ex c h an g e for this w age, he a p
p ro p ria te s the entire p ro d u ctio n of th at w o rk er, all the newly
p ro d u c e d v a lu e w hich h a s been in c o rp o ra te d into the v alu e
of this p ro d u ctio n .
We c a n therefore s a y from here on th at su rp lu s-v a lu e is
the difference betw een the v a lu e p ro d u ce d by the w o rk er a n d
the v a lu e of his ow n lab o r-p o w e r. W hat is the v a lu e of lab o r-
p ow er? In c a p ita list society, lab o r-p o w e r is a com m o d ity , a n d
like the v a lu e of a n y o th er c om m o d ity , its v a lu e is the q u a n
tity of la b o r so c ia lly n e c essa ry to p ro d u ce a n d rep ro d u ce it,
th at is to s a y , the liv in g costs of the w o rk er in the wide m ea n
in g of the term . The concept of a m in im u m liv in g w age o r
of a n a v e ra g e w age is not a p h y sio lo g ic a lly rigid one but
in c o rp o ra te s w an ts w hich c h a n g e with a d v a n c e s in the p ro
ductiv ity of la b o r. These w an ts tend to in crease p a ra lle l with
the p ro g re s s in technique a n d they a re co n seq u en tly not com
p a ra b le with a n y degree of a c cu ra c y for different periods.
The m in im u m liv in g w age of 1830 c a n n o t be c o m p a re d q u a n
titatively with th at of 1960, a s the th eo retician s of the French
C o m m u n ist p a rty h a v e lea rn e d to their so rro w . T here is no
v a lid w a y of c o m p a rin g the price of a m otorcycle in 1960
with the price of a c ertain n u m b er of k ilo g ra m s of m eat in
1830 in o rd e r to com e up with a co n clusion th at the first
"is w orth" less th a n the second.
H a v in g m ad e this rese rv a tio n , we can now rep eat th at the
liv in g cost of lab o r-p o w e r constitutes its v a lu e a n d th at su rp lu s-
v a lu e is the difference betw een this living cost a n d the v alu e
c reated b y this lab o r-p o w e r.
The v a lu e p ro d u ce d b y la b o r-p o w e r can be m easu red in
a sim ple w a y by the length of tim e it is used. If a w o rk er
w o rk s ten h o u rs, he p ro d u ce s a v a lu e of ten h o u rs of w ork.
It the w o rk e r's liv in g costs, th at is to sa y , the e q u iv alen t of
h is w age, is a lso ten h o u rs of w o rk , then no su rp lu s-v a lu e
24
w ould result. This is on ly a special case of the m ore general
rule: when the sum total of la b o r p ro d u ct is eq u al to the
pro d u ct req u ired to feed a n d m ain tain the p ro d u cer, there is
no social s u rp lu s product.
But in the c ap italist system , the degree of la b o r p ro d u ctiv ity
is such th at the living costs of the w o rk er are a lw ay s less
th a n the q u a n tity of newly created value. This m ean s th at a
w o rk e r w ho la b o rs for ten h o u rs does no t need the e q u iv a
lent of ten h o u rs of la b o r in o rd e r to su p p o rt him self in ac
co rd a n c e with the a v e ra g e needs of the times. H is equiv alen t
w age is alw a y s on ly a fraction of his d a y 's la b o r; e v ery
th ing bey o n d this fraction is su rp lu s-v a lu e , free la b o r su p
plied b y the w o rk e r a n d a p p ro p ria te d b y the cap italist with
out a n e q u ivalent offset. If this difference did not exist, of
course, then no e m p lo y e r w ould hire a n y w o rk er, since such
a p u rc h a se of la b o r-p o w e r w ould b rin g no profit to the b u yer.

The Validity of the L abor Theory of Value


To conclude, we present three tra d itio n a l p ro o fs of the la b o r
th eo ry of value.
The first of these is the a n a lytica l p ro o f, which proceeds
b y b re a k in g dow n the price of a co m m o d ity into its con
stituent elem ents a n d d e m o n s tra tin g th at if the p ro cess is ex
tended fa r e n o u g h , o n ly la b o r will be found.
The price of e very c o m m o d ity can be reduced to a certain
n u m b er of com ponents: the a m o rtiz a tio n of m ac h in e ry a n d
b u ildings, which we call the renew al of fixed c a p ital; the price
of raw m a te ria ls a n d accesso ry p ro d u cts; w ages; a n d f in a lly /
e v e ry th in g w hich is s u rp lu s-v a lu e , such a s profit, rent, taxes,
etc.
So fa r a s the la st two co m p o n en ts a re concerned, w ages
a n d su rp lu s-v a lu e , it h a s a lre a d y been show n th at they a re
la b o r p u re a n d sim ple. With re g a rd to raw m ate ria ls, m o st
of their price is la rg e ly reducible to la b o r; for exam p le, m ore
th a n 60 per cent of the m in in g cost of coal co n sists o f wages.
If we s ta rt b y f r e a k in g dow n the a v e ra g e m a n u fa c tu rin g cost
of com m odities into 40% for w ages, 20% s u rp lu s-v a lu e , 30%
for raw m a te ria ls a n d 10% in fixed c ap ital; a n d if we assu m e
25
th at 60% of the cost of raw m a te ria ls can be reduced to la b o r,
then we a lre a d y h a v e 78% of the to tal cost reduced to lab o r.
The rest of the cost of raw m a te ria ls b re a k s dow n into the cost
of o th er raw m a te ria ls reducible in tu rn to 60% la b o r plus
the cost of a m o rtiz in g m ac h in e ry .
The price of m ac h in e ry consists to a la rg e degree of la b o r
(fo r ex a m p le , 40% ) a n d raw m a te ria ls (fo r exam ple, 40%
a lso ). The s h a re of la b o r in the a v e ra g e cost of all com m odities
th u s p a sse s successively to 83%, 87% , 89.5% , etc. It is o b v io u s
th a t the fu rth e r this b re a k d o w n is ca rrie d , the m o re the entire
cost tends to be reduced to la b o r, a n d to la b o r alone.
The second p ro o f is the logical p ro o f, a n d is the one p re
sented in the b e g in n in g of M a rx 's Capital. It h a s perplexed
quite a few rea d e rs, for it is c e rta in ly n o t the sim plest p e d a
g o g ica l a p p ro a c h to the question.
M arx poses the qu estio n in the follow ing w ay. The n u m b er
of c o m m odities is v e ry g rea t. T hey a re in terch an g eab le, which
m ea n s th a t they m u st h a v e a c o m m o n q u ality , b ecause ev
e ry th in g w hich is in te rch a n g e a b le is c o m p a ra b le a n d e v ery
th in g w hich is c o m p a ra b le m u st h a v e a t least one q u a lity in
com m on. T h in g s w hich h a v e no q u a lity in co m m o n are, by
definition, n o t c o m p a ra b le with each other.
Let us inspect each of these com m odities. W hat qu alities do
they p o ssess? F irs t of all, they h a v e a n infinite set of n a tu ra l
qu alities: w eight, length, density, color, size, m o le c u la r n a
ture; in sh o rt, all their n a tu r a l ph y sic a l, chem ical a n d o th er
qualities. Is there a n y one of the p h y sic a l q u alities which
c a n be the b a s is for c o m p a rin g them as com m odities, for
se rv in g a s the co m m o n m ea su re of their e x ch an g e-v alu e?
C ould it be w eight? O b v io u sly not, since a p o u n d of butter
does n o t h a v e the sa m e v a lu e a s a p o u n d of gold. Is it vo l
um e o r len g th ? E x a m p le s will im m ed iately show th at it is
n o n e of these. In sh o rt, all those th in g s which m ak e up the
n a tu r a l q u a lity of a c om m odity, e v e ry th in g which is a p h y s
ical o r chem ical q u a lity of this com m o d ity , c e rtain ly deter
m ines its use-value, Its relative usefulness, b u t n o t its exchange-
valu e. E x c h a n g e -v a lu e m u st c o n seq u en tly be a b stra cte d from
ev e ry th in g th a t consists of a n a tu r a l p h y sic a l q u a lity in the
co m m o d ity .
A c o m m o n q u a lity m ust be found in all of these co m m o d i
ties w hich is n ot ph y sical. M a rx 's co n clu sio n is th at the o n ly
26
com m on q u a lity in these com m odities which is not physical
is their q u a lity of being the p ro d u cts of h u m a n lab o r, of
a bstract h u m a n lab o r.
H u m a n la b o r can be th o u g h t of in two different w ays. It
can be considered as specific concrete lab o r, such a s the la b o r
of the b a k e r, butcher, sho e m a k e r, w eaver, b lack sm ith , etc.
But so lo n g as it is th o u g h t of as specific concrete w o rk , it
is being viewed in its aspect of la b o r which p ro d u ces o n ly
use-values.
U nder these conditions we a re co n cern in g ou rselv es o nly
with the ph y sic a l qualities of com m odities a n d these a re p re
cisely the qualities which a re n ot c o m p a ra b le . The o n ly th in g
which com m odities h a v e in co m m o n from the view point of
e x c h an g in g them is th at they a re all p ro d u ce d b y a b stra c t
h u m a n la b o r, th at is to say , b y p ro d u ce rs w ho a re related
to each o th er on a b a sis of equiv alen ce a s a result of the
fact th at they a re all p ro d u c in g g o o d s for ex ch an g e. The com
m on q u a lity of com m odities, consequently, resides in the fact
th at they a re the p ro d u cts of a b s tra c t h u m a n la b o r a n d it
is this which supplies the m ea su re of their exch an g e-v alu e,
of their exc h an g e a b ility . It is, co nsequently, the q u a lity of
so cially n e c essa ry la b o r in the p ro d u ctio n o f com m odities
which determ ines their exchange-valu e.
Let us im m ediately a d d th at M a rx 's re a s o n in g here is b oth
a b s tra c t a n d difficult a n d is a t least subject to q u estio n in g ,
a po in t which m a n y o p p o n e n ts of M arx ism h a v e seized u p o n
a n d so u g h t to use, w ithout a n y m a rk e d success, how ever.
Is the fact th at all com m odities a re p ro d u ce d b y a b stra c t
h u m a n la b o r re a lly the o n ly q u a lity which they h a v e in co m
m on, a p a rt from their n a tu r a l qualities? There a re n o t a few
writers w ho th o u g h t they h a d disco v ered others. In g en eral,
how ever, these h a v e alw a y s been reducible either to p h y sical
qualities o r to the fact th at they a re p ro d u cts of a b s tra c t
la b o r.
A th ird a n d final p ro o f of the correctn ess o f the la b o r th eo ry
of va lu e is the p r o o f b y reduction to the ab su rd . It is, m o re
over, the m ost elegant a n d m ost "m odern" of the p roofs.
Im a g in e for a m om ent a society in which liv in g h u m a n la b o r
h a s com pletely d isa p p e a re d , th at is to sa y , a society in which
all p ro d u ctio n h a s been 100 per cent au to m a te d . Of course,
27
so lo n g a s we re m a in in the c u rre n t in term ed iate stage, in
w hich som e la b o r is a lre a d y com pletely au to m a te d , th at is
to sa y , a sta g e in which p la n ts em p lo y in g no w o rk ers exist
a lo n g sid e o th ers in w hich h u m a n la b o r is still utilized, there
is n o special theoretical p ro b le m , since it is m erely a question
of the tra n s fe r of su rp lu s-v a lu e from one en terp rise to a n
other. It is a n illu stra tio n of the law of e q u a liz atio n of the
p rofit rate , w hich will be ex p lo re d late r on.
But let us im a g in e th a t this dev elo p m en t h a s been pu sh ed
to its extrem e a n d h u m a n la b o r h a s been com pletely elim inated
fro m all fo rm s of p ro d u c tio n a n d services. C an v a lu e continue
to exist u n d e r these c o n d itio n s? C a n there be a society where
n o b o d y h a s a n incom e b u t com m o d ities co ntinue to h a v e a
v a lu e a n d to be so ld ? O b v io u sly such a situ a tio n w ould be
a b s u rd . A h u g e m a s s of p ro d u c ts w ould be p ro d u ce d w ith
o u t this p ro d u c tio n c re a tin g a n y incom e, since n o h u m a n
b e in g w ou ld be in v o lv e d in this p ro d u ctio n . But som eone
w o u ld w a n t to "seli" these p ro d u c ts for w hich there were no
l o n g e r a n y buyers!
It is o b v io u s th a t the d istrib u tio n o f p ro d u cts in such a
society w o u ld n o lo n g e r be effected in the fo rm o f a sale of
co m m o d ities a n d a s a m atter of fact selling w o u ld becom e all
the m o re a b s u rd because of the ab u n d a n c e p ro d u ce d b y g en e ra l
a u to m a tio n .
E x p re sse d a n o th e r w a y , a society in which h u m a n la b o r
w o u ld be to ta lly elim in a te d fro m p ro d u ctio n , in the m ost
g e n e ra l sense of the term , with services included, w ould be a
society in w hich ex c h an g e -v a lu e h a d a lso been elim inated.
T his p ro v e s the v a lid ity of the th eo ry , for a t the m om ent
h u m a n la b o r d is a p p e a rs fro m p ro d u ctio n , v a lu e , too, d isa p
p e a rs with it.
II. Capital
and Capitalism

Capital in Precapitalist Society


Between p rim itiv e society fo unded o n a n a tu r a l eco n o m y
in which p ro d u ctio n is lim ited to u se-values destined for self
c o n su m p tio n b y their p ro d u ce rs, a n d ca p ita list society, there
stretches a lo n g p eriod in h u m a n h isto ry , e m b ra c in g essen
tially all h u m a n civilizations, which cam e to a h a lt before
rea c h in g the frontiers of cap italism . M arx ism defines them
a s societies in which sm all-scale c o m m o d ity p ro d u c tio n p re
vailed. A society of this kin d is a lre a d y fa m ilia r with the p ro
duction of com m odities, of g o o d s desig n ed for ex ch an g e o n
the m ark e t a n d n o t for direct c o n su m p tio n b y the p ro d u ce rs,
bu t such c o m m o d ity p ro d u ctio n h a s n o t yet becom e g e n e ra l
ized, as is the case in ca p ita list society.
In a society founded o n sm all-scale c o m m o d ity p ro d u ctio n ,
two kin d s of econom ic o p e ra tio n s a re c a rrie d out. The p e a s
a n ts a n d a rtis a n s w ho b rin g their p ro d u cts to m ark e t w ish
to sell g o o d s w hose use-value they them selves c a n n o t use in
o rd er to o b ta in m oney, m ea n s of ex c h an g e , fo r the ac q u isi
tion -of o th er g o o d s, w hose use-valu e is either n ecessary to
them o r deem ed m o re im p o rta n t th a n the u se-value of the
g o o d s they ow n.
The p e a sa n t b rin g s w heat to the m ark e tp la c e which he sells
for m o n ey ; with this m o n ey he b u y s, let us sa y , cloth. The
a rtis a n b rin g s his cloth to the m ark e t, w hich he sells for
m oney; with this m o n ey he buys, let u s sa y , w heat.
W hat we h a v e here, then, is the o p e ra tio n : selling in o rd er
to buy. C o m m o d ity M o n e y C o m m o d ity , C M C, which
h a s this essential c h a ra c te r: the v a lu e of the two extrem es
in this fo rm u la is, b y definition, e x a ctly the sam e.
But w ithin sm all-scale c o m m o d ity p ro d u ctio n there a p p e ars,
29
a lo n g sid e the a rtis a n a n d sm a ll p e a sa n t, a n o th e r p erso n ag e,
w ho executes a different k in d of econom ic o p e ra tio n . In stead
of selling in o rd e r to b uy, he b u y s in o rd e r to sell. T his type
of p e rs o n goes to m ark e t w ithout a n y com m odities; he is an
o w n er of m oney. M oney c a n n o t be so ld ; b u t it can be used
to b u y , a n d th a t is w h a t he does: b u y s in o rd e r to sell, in
o rd e r to re-sell: M C M .
T here is a fu n d am e n ta l difference betw een the two types of
o p e ra tio n . T he second o p e ra tio n m ak e s n o sense if u p o n its
co m p letio n we a re con fro n ted b y e x actly the sam e v a lu e as
we h a d a t the b e g in n in g . N o o ne b u y s a co m m o d ity in o rd e r
to sell it fo r e x a ctly the sa m e price he p a id fo r it. T he o p e ra
tion "b u y in o r d e r to sell" m ak e s sense o n ly if the sale b rin g s
a s u p p le m e n ta ry v a lu e , a su rp lu s-va lu e. T h a t is w h y we
state here, b y w a y of definition: AT is g re a te r th a n M a n d
is m a d e u p o f M +m; m be in g the s u rp lu s-v a lu e , the a m o u n t
o f in cre a se in the v a lu e of M.
We n ow define c a p ita l a s a v a lu e w hich is increased b y a
su rp lu s-va lu e , w hether this o ccu rs in the c o u rse of co m m o d ity
c irc u la tio n , a s in the e x a m p le ju st giv en , o r in p ro d u ctio n ,
a s is the case in the c a p ita list system . C a p ita l, therefore, is
e v e ry v a lu e w hich is a u g m e n te d b y a su rp lu s-v a lu e ; it there
fore exists n o t o n ly in c a p ita list society b u t in a n y society
fo u n d ed o n sm all-scale c o m m o d ity p ro d u c tio n a s well. F o r
this r e a s o n it is n e c essa ry to d istin g u ish v e ry c le a rly between
the life of ca p ita l a n d th a t of the c a p ita list m o d e o f p ro d u c
tion, o f c a p ita lis t society. C a p ita l is fa r o ld er th a n the cap i
talist m o d e of p ro d u ctio n . T he fo rm er p r o b a b ly goes b ack
so m e 3 ,0 0 0 y e a rs , w h e re a s the latter is b a re ly 2 0 0 y e a rs old.
W hat fo rm does c a p ita l tak e in p rec a p ita list society? It is
b a s ic a lly u s u ry c a p ita l a n d m erc h a n t o r c o m m ercial cap ital.
T he p a s s a g e fro m p re c a p ita lis t society in to c a p ita list society
is c h a ra c te riz e d b y the p e n e tra tio n o f c a p ita l in to the sphere
of p ro d u c tio n . T he c a p ita list m o d e of p ro d u ctio n is the first
m ode of p ro d u c tio n , the first fo rm of so cial o rg a n iz a tio n , in
w hich c a p ita l is n o t lim ited to the sole ro le of a n in te rm e d iary
a n d e x p lo iter of n o n c a p ita list fo rm s of p ro d u ctio n , of sm all-
scale c o m m o d ity p ro d u ctio n . In the c a p ita list m o d e of p ro
d u ction, c a p ita l tak e s o v e r the m ea n s o f p ro d u ctio n a n d pene
tra tes dire c tly in to p ro d u c tio n itself.
30
Origins of the Capitalist Mode of Production
W hat a re the o rig in s of the cap italist m o d e of p ro d u ctio n ?
W hat a re the o rig in s of cap italist society a s it h a s developed
ov e r the p a s t 2 0 0 y e a rs?
T hey lie first of all in the s e p a ra tio n of the p ro d u ce rs from
their m ean s of pro d u ctio n . Subsequently, it is the estab lish
m ent of these m ean s of p ro d u c tio n a s a m o n o p o ly in the
h a n d s of a single social class, the bo u rg eo isie. A n d Anally,
it is the a p p e a ra n c e of a n o th e r so cial class w hich h a s been
s e p a ra te d from its m ean s of p ro d u ctio n a n d therefore h a s no
other resources fo r its subsistence th a n the sale of its la b o r-
p ow er to the c la ss w hich h a s m o n o p o lized the m ea n s of p ro
duction.
Let us consider each of these o rig in s o f the ca p ita list m ode
of p ro d u ctio n , w hich a re a t the sa m e tim e the fu n d am e n ta l
chara c te ristic s of the ca p ita list system as well.
F irs t c h a racteristic: s e p a ra tio n o f the p r o d u c e r fr o m his
m e a n s o f p r o d u c tio n . T his is the fu n d am e n ta l c o n d itio n for
existence of the ca p ita list system b u t it is a lso the one which
is g e n e ra lly the m o st p o o r ly u n d e rsto o d . Let u s use a n ex
am p le w hich m a y seem p a ra d o x ic a l since it is tak en from
the e a rly M iddle Ages, w hich w as ch ara c te rize d b y serfdom .
We k n o w th a t the m a s s of p e a sa n t-p ro d u c e rs were serfs
b o u n d to the soil. B ut w hen we s a y th a t the serf w as b o u n d
to the soil, we im p ly th a t the soil w as a lso "bound" to the serf;
th a t is, he b e lo n g e d to a social class w hich a lw a y s h a d a
b a se fo r s u p p ly in g its needs, e n o u g h la n d to w o rk so th a t
the in d iv id u a l serf could m eet the needs o f a h o u se h o ld even
th o u g h he w o rk e d with the m o st p rim itiv e im plem ents. We
a re n o t view ing people co n d e m n e d to d e a th b y s ta rv a tio n if
they do n o t sell their lab o r-p o w e r. In such a society, there
is no ec o n o m ic c o m p u lsio n to h ire o u t o n e 's a rm s, to sell
o n e 's la b o r-p o w e r to a c a p italist.
We c a n e x p re ss this a n o th e r w a y b y sta tin g th a t the cap i
talist system c a n n o t develop in a society o f this k in d . T his
g e n e ra l tru th a ls o h a s a m o d e rn a p p lic a tio n in the w a y co lo
n ialists in tro d u c ed c a p ita lism into the A frican co u n tries d u rin g
the nineteenth a n d e a rly tw entieth centuries.
Let us lo o k a t the liv in g co n d itio n s of the in h a b ita n ts in
31
all the A frican countries. T hey w ere stock b reed ers a n d cul
tiv a to rs of the soil, o n a m o re o r less p rim itiv e b a sis, de
p e n d in g o n the c h a ra c te r of the reg io n , b u t a lw a y s u n d e r the
c o n d itio n of a relativ e a b u n d a n c e o f lan d . N o t o n ly w as there
n o sc arc ity of la n d in A frica, b u t in term s of the ratio of
p o p u la tio n to the a m o u n t of a v a ila b le la n d , it m a y be sa id
th a t la n d reserves were v irtu a lly unlim ited. It is true, of course,
th a t the yield from these la n d s w as m ediocre becau se o f the
c ru d e a g ric u ltu ra l im plem ents a n d the s ta n d a r d of liv in g w as
v e ry low, etc., b u t there w as no m a te ria l force p u s h in g this
p o p u la tio n to w o rk in the m ines, o n the farm s o r in the fac
to ries of the white c o lo n ia list. W ithout a tra n s fo rm a tio n in
the a d m in istra tio n of la n d in E q u a to ria l A frica, in Black
A frica, there w as no p o ssib ility for in tro d u c in g the ca p ita list
m ode of p ro d u c tio n . F o r that, c o m p u lsio n of a non eco n o m ic
c h a ra c te r h a d to be used, a th o ro u g h g o in g a n d b ru ta l s e p a
r a tio n of the b la c k m asse s from their n o rm a l m ea n s of su b
sistence h a d to be c a rrie d out. A la rg e p a r t of the la n d s h a d
to be tra n s fo rm e d o v e rn ig h t into n a tio n a l d o m ain s, ow ned
b y the co lo n iz in g state, o r into p riv a te p ro p e rty b e lo n g in g
to c a p ita lis t c o rp o ra tio n s . The b lac k p o p u la tio n h a d to be
re-settled in d o m a in s , o r in reserves, a s th ey h a v e been cyni
c a lly called, in la n d a re a s w hich w ere in a d e q u a te fo r su s
ta in in g all their in h a b ita n ts . In a d d itio n , a h e a d -ta x , th a t is
to s a y , a m o n ey tax o n each in h a b ita n t, w as im p o sed as
a n o th e r lever, since prim itiv e a g ric u ltu re yielded n o m o n ey
incom e.
B y these v a rio u s ex tra-eco n o m ic p ressu re s, the c o lo n ialists
created a need fo r the A frican to w o rk for w ages d u rin g
p e rh a p s two o r three m o n th s a y e a r, in o rd e r to e a rn the
m o n ey to p a y his ta x a n d b u y the sm a ll su p p lem en t of food
n e c essa ry fo r his subsistence, since the la n d re m a in in g a t his
d isp o s a l w a s n o lo n g er a d e q u a te fo r a livelihood.
In such co u n tries a s S outh A frica, the R h o d esias, a n d p a rt
of the fo rm e r B elgian C ongo, w here the c a p ita list m o d e of
p ro d u c tio n w a s in tro d u c ed o n a g r a n d scale, these m ethods
were ap p lie d o n the sa m e scale, a n d a la rg e p a r t of the b lac k
p o p u la tio n w a s u p ro o te d , expelled, a n d forced o u t of its tr a
d itio n a l existence a n d m ode o f w ork.
Let u s m ention, in p a s sin g , the id eo lo g ical h y p o c ris y which
32
a ccom panied this m ovem ent, the c o m p lain ts of the capitalist
c o rp o ra tio n s th at the b lack s were lazy since they did no t w ant
to w ork even w hen they h a d a chance to m ak e ten tim es as
m uch in m ines a n d factories a s they did from their tra d i
tional la b o r o n the land. These sam e co m p lain ts h a d been
m ad e a b o u t the In d ia n , C hinese a n d A ra b w o rk ers som e
50 to 70 y e a rs earlier. T hey were a lso m a d e a rath e r g o o d
p ro o f of the b a sic eq u a lity of all the races which m ak e up
h u m a n ity a g a in s t the E u ro p e a n w o rk ers, F ren ch , B elgian,
E nglish, G erm an, in the seventeenth o r eighteenth centuries.
It is sim p ly a function of this co n sta n t fact: n o rm a lly , be
c ause of his ph y sic a l a n d n e rv o u s constitution, no m a n cares
to be confined for 8, 9, 10 o r 12 h o u rs a d a y in a facto ry ,
m ill o r m ine; it rea lly req u ires a m o st a b n o rm a l a n d u n
u s u a l force o r p ressu re to m ak e a m a n e n g a g e in this k in d
of convict la b o r w hen he h a s n ot been accu sto m ed to it.
A second o rig in a n d cha ra c te ristic of the ca p ita list m ode
of p ro d u c tio n is this c oncentration o f the m e a n s o f p ro d u c tio n
in m o n o p o ly f o r m a n d in the h a n d s o f a sin g le so cia l class,
the bourgeoisie. T his c o n c en tratio n is v irtu a lly im possible
u nless a c o n tin u a l rev o lu tio n is ta k in g p lace in the m ean s of
p ro d u ctio n , in which the latter becom e in cre a sin g ly com plex
a n d m o re costly, at least so fa r a s the m in im u m m ean s of
p ro d u ctio n re q u ired for la u n c h in g a b ig b u sin ess (in itia l c a p i
tal ex p e n d itu re s) a re concerned.
In the g u ild s a n d tra d e s of the M iddle Ages, there w as g re a t
sta b ility in the m ea n s of p ro d u ctio n ; the w eav in g -lo o m s were
tra n sm itte d from fath er to son, from g e n e ra tio n to g e n e ra
tion. The v a lu e of these lo o m s w as relativ ely sm all, th at is
to sa y , each jo u rn e y m a n co u ld expect to get b a c k the counter-
va lu e of these lo o m s after a c ertain n u m b er of y e a rs of w ork.
T he p o ssib ility for e s ta b lish in g a m o n o p o ly a rriv e d with the
in d u stria l rev o lu tio n , w hich u n lea sh e d a n u n in te rru p te d de
velopm ent of in c re a sin g ly com plex m ech an ism s a n d concom
itantly, a need for ever g re a te r c a p ita l su m s in o rd e r to s ta rt
a new enterprise.
F ro m this po in t on it m a y be s a id th a t access to the ow n
e rship of the m ea n s of p ro d u c tio n becom es im p o ssib le for the
overw h elm in g m a jo rity of w a g e -e arn e rs a n d sa la rie d p er
sonnel, a n d th a t such o w n e rsh ip b ecam e a m o n o p o ly in the
h a n d s of one so cial class, the c lass w hich p o ssesses cap ita l
33
a n d c a p ita l reserves a n d can o b ta in a d d itio n a l c a p ita l b y
virtue of the single fact th a t it a lre a d y h a s som e o f it. A nd
b y v irtu e o f this sa m e fact, the class w ithout cap ita l is co n
dem ned to re m a in p e rp e tu a lly in the sa m e state of d e p riv a
tion a n d c o n sequently u n d e r the c o n tin u o u s c o m p u lsio n to
la b o r for s o m e b o d y else.
The th ird o rig in a n d c h a ra c te ristic of c a p italism : the a p
p e a ra n ce o f a so cia l class w hich h a s n o p o ssessio n s sa v e
its o w n h a n d s a n d n o m e a n s o f subsistence o th er th a n the
sale o f its labor-pow er, b u t a t the sa m e tim e, is free to sell
this la b o r-p o w e r a n d does so to the ca p ita list o w n ers of the
m ea n s of p ro d u ctio n . This is the a p p e a ra n c e of the m o d e m
proletariat.
We h a v e here three elem ents w hich co m b in e with each other.
The p r o le ta r ia t is the free w ork er; he constitutes b o th a step
a h e a d a n d a step b a c k w a rd s, c o m p a re d with the serf of the
M iddle Ages: a step a h e a d b ecause the serf w as n o t free (the
serf w a s him self a step a h e a d c o m p a re d with the sla v e ) a n d
c o u ld n ot m ove a b o u t freely; a step b a c k w a rd s because, in
c o n tra s t with the serf, the p r o le ta r ia n h a s a ls o been "liberated"
from , th a t is to s a y , d e p riv e d of, all access to the m ea n s of
p ro d u ctio n .

Origins and Definition


of the Modern Proletariat
A m o n g the direct a n c esto rs of the m o d e rn p ro le ta ria t we
m u st include the u p ro o te d p o p u la tio n of the M iddle A ges which
w as no lo n g e r b o u n d to the soil o r in c o rp o ra te d in the trad es,
c o rp o ra tio n s a n d g u ild s of the free tow ns, a n d w as conse
q u e n tly a w a n d e rin g , ro o tless p o p u la tio n , w hich h a d b eg u n
to sell its la b o r b y the d a y o r even b y the h o u r. T here were
quite a few cities in the M iddle Ages, n o ta b ly Florence, Venice
a n d B ruges, w here a "la b o r m arket" a p p e a re d a s e a rly as the
thirteenth, fourteenth, o r fifteenth centuries. These cities h a d a
p lace w here the p o o r w ho did no t b e lo n g to a n y craft, were
n ot jo u rn e y m e n for a n a rtis a n a n d h a d no m ea n s o f su b sis
tence, a ssem b led a n d w aited to be h ired b y som e m erch an t
o r b u s in e s s m a n for a n h o u r, h a lf a d a y , a d a y , etc.
A no th er o rig in of the m o d ern p ro le ta ria t, closer to us in
time, lies in w h a t h a s been called the d isb a n d in g o f the feudal
34
retinues. It therefore co rre sp o n d s with the lo n g a n d slow de
cline of the feudal nobility, which set in d u rin g the thirteenth
a n d fourteenth centuries a n d term in ated with the b o u rg eo is
rev o lu tio n in F ra n ce a t the end of the eighteenth century. In
the rem ote M iddle Ages, there w ere som etim es fifty, six ty to
o v e r a h u n d re d ho u seh o ld s living directly from the feudal
lord. The n u m b er of these in d iv id u a l atte n d a n ts b e g a n to
decline, especially d u rin g the sixteenth century, which w as
m a rk e d b y a s h a rp rise in prices, a n d a s a consequence, a
g re a t im p o v e rish m en t of all those so cial classes with fixed
m o n ey incom es. The feudal lo rd s of W estern E u ro p e were
a lso h a rd hit because m o st of them h a d co nverted ren t in
k in d into m o n ey rent. One of the results of this im p o v e rish
m ent w as a m assiv e d isc h a rg e of a s u b sta n tia l section o f the
feudal retinues. In this w a y th o u sa n d s o f fo rm er valets, ser
v a n ts, a n d clerks to the nobles becam e w a n d e re rs, b e g g a rs,
etc.
A th ird o rig in of the m o d e rn p ro le ta ria t com es fro m the
ex p u lsio n of a p a r t of the p e a s a n try fro m its la n d s a s a re
sult of the tra n s fo rm a tio n of these a g ric u ltu ra l la n d s into
g ra ss-la n d s. The g re a t E n glish U to p ian so cialist T h o m a s
M ore a d v a n c e d this m agnificent fo rm u la as f a r b a c k as the
sixteenth century: "Sheep h a v e eaten men"; in o th er w ords,
the tra n s fo rm a tio n of fields into g ra s s -la n d s fo r g ra z in g sheep,
a s a result of the developm ent o f the w ool in d u stry , threw
th o u sa n d s u p o n th o u sa n d s of E ng lish p e a sa n ts off their la n d s
a n d c o ndem ned them to sta rv a tio n .
There is still a fo u rth o rig in of the m o d ern p ro le ta ria t, one
w hich p la y e d a so m ew h at lesser ro le in W estern E u ro p e bu t
a n e n o rm o u s one in C e ntral a n d E a ste rn E u ro p e, A sia, L atin
A m erica a n d N o rth A frica: it is the destru ctio n of the fo rm er
a rtisa n s in the com petitive s tru g g le betw een the h a n d ic ra fts
a n d m o d e rn in d u stry a s the latter m ad e its w a y into these
u nd er-d ev elo p ed c o untries from the outside.
In s u m m a ry , the c a p ita list m ode of p ro d u ctio n is a regim e
in which the m ea n s of p ro d u ctio n h a v e becom e a m o n o p o ly
in the h a n d s of a so cial class a n d in w hich the p ro d u ce rs,
s e p a ra te d from these m ea n s of pro d u ctio n , a re free b u t are
dep riv e d of all m ea n s of su b sistan c e a n d co n seq u en tly m u st
sell their la b o r-p o w e r to the ow ners of these m ean s of pro-
35
du ctio n in o r d e r to subsist.
W hat is c h a ra c te ristic of the p ro le ta r ia n therefore is not
the level of h is w age, w hether this be h ig h o r low, b u t p ri
m a rily the fact th a t he h a s been cut off fro m his m ean s of
p ro d u ctio n , o r th a t his incom e is insufficient for him to w o rk
fo r his ow n account.
In o r d e r to le a rn w hether the p r o le ta ria n co n d itio n is on
the r o a d to d is a p p e a rin g o r w hether, o n the c o n tra ry , it is
on the r o a d of e x p a n sio n , it is n o t so m uch the a v e ra g e w age
of the w o rk e r o r the a v e ra g e s a la r y o f the clerk which we
m u st ex a m in e , b u t this w age o r s a la r y a s c o m p a re d with
his a v e ra g e co n su m p tio n ; in o th er w o rd s, we m u st lo o k into
his po ssib ilitie s fo r s a v in g s a n d c o m p a re them with the ex
penses o f settin g u p a n in d ep en d en t en terprise. If we deter
m ine th a t each w o rk e r, e ach clerk, can , after ten y e a rs of
woyk, p u t a sid e a pile of s a v in g s w hich w o u ld allow him to
p u rc h a s e a sto re o r sm a ll w o rk sh o p , then we m ig h t s a y th at
the p r o le ta r ia n c o n d itio n is reg ressiv e a n d th a t we live in a
society in w hich p r o p e rty in the m ea n s of p ro d u c tio n is s p re a d
in g a n d b e c o m in g generalized.
If we find, how ever, th a t the ove rw h e lm in g m a jo rity of w o rk
ers, m a n u a l, w hite-collar a n d g o v e rn m e n ta l, re m a in the sam e
p o o r fellows after a life of la b o r th a t they were before, in
o th e r w o rd s with n o s a v in g s o r n o t en o u g h c a p ita l to b u y
m ea n s of p ro d u c tio n , we m a y conclude th a t the p ro le ta ria n
c o n d itio n h a s becom e gene ra liz e d ra th e r th a n co n tracted , a n d
th a t it is f a r m o re p re v a le n t to d a y th a n it w a s 5 0 y e a rs ag o .
W hen we e x a m in e statistics o n the so cial stru c tu re o f the U n i
ted States, fo r ex am p le, we c a n see th a t o v er the p a s t 60
y e a rs, there h a s been a n u n in te rru p te d d ecrease e v ery five
y e a rs in the pe rc e n tag e of the active A m erican p o p u la tio n
w o rk in g fo r its ow n a c co u n t a n d classified a s bu sin essm en
o r w o rk in g in a fam ily bu sin ess, w h ereas the p e rcen tag e of
this sa m e p o p u la tio n w hich is com pelled to sell its la b o r-
po w e r h a s ste a d ily increased.
M oreover, if we e x a m in e the statistics o n the d istrib u tio n
of p riv a te w ealth, we fin d th a t the o v erw h elm in g m a jo rity of
w o rk e rs, we m a y s a y 95 p e r cent, a n d the v e ry g re a t m a jo rity
of w hite-collar w o rk e rs (8 0 o r 85 p er cent) a re n o t even able
to a m a s s p etty sum s, sm a ll ca p ita ls; in o th er w ords, these
36
g ro u p s expend their entire incom es. F o rtu n e s a re in reality
lim ited to a v e ry sm all fraction of the p o p u latio n . In m ost
c a pitalist countries, 1%, 2%, 2.5%, 3.5% o r 5% of the p o p u
latio n possess 40%, 50%, 60% of the p riv a te w ealth of the
country, the b a la n c e being in the h a n d s of 20% o r 25% of
this sam e p o p u latio n . The first c a te g o ry of p o ssesso rs is the
big b ourgeoisie; the second c a te g o ry is the m iddle a n d petty-
bourgeoisie. A nd all those w ho a re ou tsid e these categories
ow n n o th in g b ut co n su m er g o o d s (som etim es in clu d in g their
h o u sin g ).
W hen h o n e stly com piled, statistics o n estate duties a n d in
heritance taxes a re v e ry re v e a lin g o n this subject.
A specific stu d y m ad e b y the B ro o k in g s Institute ( a so u rce
a b o v e a n y su sp icio n of M a rx is m ) for the New Y ork Stock
E x c h a n g e rev e a ls th at o n ly one o r two p er cent of w o rk ers
ow n stocks a n d furth er th at this "ow nership" a v e ra g e s a b o u t
$ 1 ,0 0 0 w orth.
V irtu a lly all c a p ita l is therefore in the h a n d s of the b o u r
geoisie a n d this rev e a ls the self-reproductive c h a ra c te r of the
c a p ita list system : those w ho p o ssess c a p ita l keep o n accu m u
la tin g m o re a n d m ore; those w ho do n o t possess it ra re ly
c an a c q u ire it. In this w a y the d iv isio n in society is p erp etu
ated in a p o ssessin g c lass a n d a class com pelled to sell its
lab o r-p o w e r. T he price fo r this lab o r-p o w er, the w age, is v ir
tu ally co n su m e d in toto, w hereas the p o ssessin g class h a s a
c a p ita l c o n sta n tly in cre a sin g from su rp lu s-v a lu e . Society's
enrichm ent in c a p ita l therefore tak es p lace, so to sp e ak , for
the exclusive p rofit of a single social class, n am ely , the c a p i
talist class.

The Fundam ental Mechanism


of Capitalist Economy
A nd now w h a t is the functio n in g b a s is o f this c ap italist
society?
If you w ere to g o to the Printed C o tto n s E x c h a n g e o n a
certain d a y , y ou w ould n ot kn o w w hether there w as ex actly
e n o u g h , o r too little, o r too m uch p rin te d cottons, m ea su red
a g a in s t the e x istin g needs in F ra n c e a t th a t m om ent. You
w ould o n ly find th a t o u t after a ce rta in time: th a t is to say ,
if there w ere o v e rp ro d u c tio n a n d a p a rt of p ro d u ctio n un-
37
sa leab le, y o u w ould see prices fall. If there were, o n the con
tra r y , a scarcity, yo u w ould see prices rise. T he m ovem ent
of prices is the th erm o m eter telling u s w hether there is a s c a r
city o r p leth o ra. A nd since it is o n ly after the event th a t we
find o u t w hether the q u a n tity of la b o r ex p en d ed in a n in d u s
tria l b ra n c h h a s been ex p en d ed in a so c ia lly n e c essa ry w ay
o r w hether p a r t of it h a s been w asted, it is o n ly after the
e v e n M h a t we a re ab le to determ ine the exact v a lu e of a com
m odity. T his va lu e , therefore, is, if yo u ch oose to call it so,
a n a b s tra c tio n ; b u t it is a real co n sta n t a ro u n d which prices
fluctuate.
W hat c au ses the m o vem ent in these prices a n d consequently,
in lo n g e r term s, the m ovem ent in these v a lu e s, in this la b o r
p ro d u ctiv ity , in this p ro d u c tio n a n d in this o v e ra ll econom ic
life?
W hat m ak e s S a m m y ru n ? W hat cau ses c a p ita list society to
m o v e? C om petition. W ithout com p etitio n there is n o capi
talist society. A society w here com p etitio n is ra d ic a lly o r com
pletely elim in a te d w o u ld n o lo n g e r be c a p ita list to the extent
th a t there w o u ld n o lo n g e r be a m a jo r econom ic m otive for
a c c u m u la tin g c a p ita l a n d co n seq u en tly fo r c a rr y in g o u t nine-
tenths of the econom ic o p e ra tio n s w hich c a p ita lists execute.
A nd w h a t is the b a s is o f com petitio n ? Tw o id ea s a re b a sic
to it b u t these do n o t ne c essa rily o v e rla p . F irs t is the id ea of
the u n lim ite d m a rk e t, the m a rk e t w ith o u t restrictio n s, w ithout
e x act b o u n d a rie s . T hen there is the id ea o f a m u ltip lic ity o f
d ecision centers, a b o v e all in m atters o f investm ent a n d p r o
duction.
If all p ro d u c tio n in a given in d u stria l sector were concen
tra te d in the h a n d s of a single ca p ita list firm , com petition
w ou ld still n o t be elim inated, b ecau se a n unlim ited m ark e t
w ould still exist a n d there w ould still be a com petitive s tru g
gle between this in d u stria l sector a n d o th er sectors to ca p tu re
a s m uch of this m a rk e t a s possible. F u rth e rm o re , there w ould
a lw a y s be a p o ssib ility th a t a foreig n c o m p etito r m ig h t enter
the scene a n d p ro v id e new com petitio n rig h t in the v e ry sam e
sector.
T he reverse is a lso true. If we can conceive a to tally a n d
c om pletely lim ited m ark e t, bu t o ne in which a g re a t n u m b er
of e n terprises a re fig h tin g to c a p tu re a p a rt of this lim ited
38
m arket, then com petition m u st o b v io u sly survive.
T herefore o n ly if these two p h e n o m e n a were to be su ppressed
sim u ltan eo u sly , th a t is to sa y , if there were o n ly one p ro
ducer for all com m odities a n d the m ark e t becam e a b so lu tely
stable, frozen a n d w ithout a n y c a p ac ity for e x p an sio n , could
com petition d isa p p e a r com pletely.
The a p p e a ra n c e of the unlim ited m ark e t d isp la y s all of its
significance w hen c o m p a re d w ith the p e rio d of sm all-scale
c om m odity p ro d u ctio n . A g u ild in the M iddle Ages g en erally
w orked for a m ark e t lim ited to the city a n d its im m ediate
su b u rb s, a n d in a cco rd an ce with fixed a n d specific la b o r tech
niques.
The histo rical p a s sa g e of the lim ited m ark e t to the unlim ited
m ark e t is illu stra te d b y the ex a m p le of the "new clothiers" of
the c o u n try sid e w hich replaced the o ld city clothiers in the
fifteenth century. T here were now cloth m an u fa c tu re rs w ith
o u t gu ild re g u la tio n s, w ithout p ro d u ctio n lim its, therefore
w ithout a n y m ark e t restrictions, w ho tried to infiltrate every
where, seek clients everyw here, a n d n o t o n ly went b e y o n d
the im m ediate a re a of their p ro d u ctio n centers, b u t even tried
to o rg an iz e a n e x p o rt tra d e to v e ry d ista n t countries. On the
o ther h a n d , the g re a t com m ercial rev o lu tio n o f the sixteenth
century stim u la te d a relativ e reductio n in the prices o f a w hole
set of p ro d u cts which h a d been co n sid ered g re a t lu x u ries in
the M iddle A ges a n d were o n ly w ithin the p u rc h a s in g ran g e
of a sm all p a r t of the p o p u la tio n . These p ro d u cts su d d en ly
becam e fa r less expensive, a n d even cam e w ithin the reach of a
significant p a rt of the p o p u latio n . The m o st strik in g ex am p le of
this tren d is s u g a r, which h a s becom e a c o m m o n p lace p ro d
uct to d a y a n d is u n d o u b ted ly to be fo u n d in e v ery w orking-
class h o u se h o ld in F ra n c e o r in E u ro p e; in the fifteenth cen
tury , how ever, it w as still a h ig h ly lu x u rio u s article.
T he a p o lo g is ts for cap ita lism h a v e a lw a y s p o in ted to the
reduction in prices a n d w idened m ark e t for a w hole seit of
p ro d u cts a s the benefits b ro u g h t a b o u t b y this system . This
a rg u m e n t is true. It is one of the aspects of w h at M arx called
"the civilizing m ission of C apital." To be su re we a re concerned
here w ith a dialectical b ut real p h e n o m e n o n w here the v a lu e
of lab o r-p o w e r h a s a tendency to fall b y v irtu e of the fact
th at c a p ita list in d u stry p ro d u ce s the co m m o d ity e q u iv alen t
39
of w ages w ith ever in c re a sin g r a p id ity while it sim u lta n e o u sly
h a s a ten dency to rise b y v irtu e o f the fact th a t this v a lu e of
la b o r-p o w e r p ro g re s s iv e ly tak e s in the v a lu e o f a w hole series
of co m m o d ities w hich h a v e becom e m a s s c o n su m e r g o o d s,
w h ereas fo rm e rly they w ere reserv ed fo r a v e ry sm a ll p a rt
o f the p o p u la tio n .
B asically , the entire h isto r y o f trade betw een the sixteenth
a n d tw entieth c e n tu ry is the h isto r y o f a p ro g r e s s iv e tra n sfo r
m a tio n f r o m trade in lu x u r y g o o d s in to trade in m a s s co n su
m e r g o o d s; into tra d e in g o o d s destined fo r a n ev er in cre a s
in g p o rtio n of the p o p u la tio n . It is o n ly w ith the developm ent
of the r a ilro a d s , of the m ea n s fo r fast n a v ig a tio n , of teleg
r a p h y , etc., th a t it b ecam e p o ssib le fo r the w hole w o rld to
be m a r s h a le d into a rea l po ten tial m a rk e t for each g re a t
c a p ita lis t p ro d u ce r.
T he id ea of a n u n lim ited m a rk e t does not, therefore, m erely
im p ly g e o g ra p h ic e x p a n sio n , b u t econom ic e x p a n sio n , a v a il
a b le p u r c h a s in g pow er, a lso . T o tak e a recent ex am p le: the
e x tr a o r d in a r y rise in the p ro d u c tio n of d u ra b le co n su m er
g o o d s in w o rld c a p ita list p ro d u c tio n d u rin g the p a s t fifteen
y e a rs w a s n o t a t all due to a n y g e o g ra p h ic e x p a n sio n of the
c a p ita lis t m a rk e t; o n the c o n tra ry , it w as ac co m p a n ie d b y a
g e o g ra p h ic re d u c tio n in the c a p ita list m ark e t, since a w hole
series of c o u n tries w ere lost to it d u rin g this perio d . There
a re few, if a n y , au to m o b ile s of F ren ch , Ita lia n , G erm an ,
B ritish, J a p a n e s e o r A m e ric a n m a n u fa c tu re e x p o rte d to the
S oviet U n io n , C h in a, N o rth V ietn am , C u b a , N o rth K o re a ,
o r the c o u n tries of E a st E u ro p e . N evertheless, this e x p a n sio n
did ta k e place, th a n k s to the fact th a t a m u ch g re a te r fra c
tion of the a v a ila b le p u rc h a s in g pow er, w hich h a d in creased
a b so lu te ly a s well, w a s u sed fo r b u y in g these d u ra b le con
su m e r g o o d s.
It is n o accident th a t this e x p a n sio n h a s been acco m p a n ie d
b y a m o re o r less p e rm a n e n t a g ric u ltu ra l crisis in in d u stria lly
a d v a n c e d co u n tries, w here the c o n su m p tio n of a w hole g ro u p
o f a g ric u ltu ra l p ro d u c ts h a s n o t o n ly ceased to in crease o n a
rela tiv e b a s is b u t is even b e g in n in g to show a n ab so lu te de
cline: fo r ex a m p le , the c o n su m p tio n o f b re a d , p o tato es, a n d
o f co m m o n p lac e fruits like ap p le s, p e a rs , etc.
P ro d u c tio n fo r a n unlim ited m a rk e t, u n d e r com petitive con-
40
ditions, results in increased prod u ctio n , fo r a n increase in
p ro d u ctio n perm its a reduction in costs a n d affo rd s the m ean s
for b e a tin g a com petitor b y un d ersellin g him .
If we lo o k a t the long-term c h ang e in the v a lu e o f all com
m odities which a re pro d u ce d on a la rg e scale in the c a p italist
w orld, there c a n be no d o u b t th a t their v a lu e h a s declined
c o n sid e rab ly . A dress, knife, p a ir o f shoes, o r s c h o o lb o y s
n o teb o o k to d a y h a s a va lu e in h o u rs a n d m inutes of la b o r
w hich is far low er th a n it w as fifty o r a h u n d re d y e a rs ag o .
O b viously rea l p ro d u ctio n v alu es m ust be c o m p a re d a n d
n o t sale prices, w hich include either e n o rm o u s d istrib u tio n
a n d sales expenses o r sw olen m o n op o listic super-profits. U sing
g a so lin e a s a n e xam ple, especially the g a so lin e d istrib u ted
in E u ro p e a n d o rig in a tin g in the M iddle E ast, we find th at
its p ro d u ctio n costs a re v e ry low, b a re ly 10 p er cent of the
sale price.
In a n y event, there c a n be no d o u b t a b o u t the fact th at
this d ro p in v a lu e h a s a c tu a lly tak en place. G row th in la b o r
p ro d u ctiv ity m ea n s a reduction in the v a lu e o f g o o d s, since
the latter a re m an u fa c tu re d with a n ev er reduced q u a n tity of
labor-tim e. T herein lies the p ra c tic a l tool w hich c ap italism
possesses for e n la rg in g its m a rk e ts a n d defeating its com
petitors.
W hat p rac tic a l m ethod does the ca p ita list h a v e fo r s h a rp ly
cutting his p ro d u c tio n costs a n d s im u lta n e o u sly s h a rp ly in
c re a sin g his p ro d u ctio n ? It is the d e v elo p m e n t o f m ech a n i
zation, the developm ent of m ea n s of p ro d u ctio n , m ech an ical
in strum ents of la b o r of ever in cre a sin g com plexity, o rig in a lly
pow ered b y steam pow er, then b y g a so lin e o r diesel oil, a n d
finally b y electricity.

The Growth in the Organic


Composition of Capital
All c a p ita list p ro d u ctio n can be represented in v a lu e b y the
fo rm u la: C V* S. The va lu e of e v ery c o m m o d ity consists of
two p a rts : one p a rt represents crysta llized o r co n served va lu e
a n d the o ther n e w ly created value. L a b o r-p o w e r h a s a d u a l
function, a d u a l use-value: th at of p re se rv in g all ex istin g
v alu es in the in stru m en ts of la b o r, m ach in es, b u ild in g s, while
in c o rp o ra tin g a fractio n of this v a lu e into c u rre n t p ro d u ctio n ;
41
a n d th a t o f c re a tin g a new va lu e , w hich c o n ta in s su rp lu s-
v a lu e , profit, a s one of its com pon en ts. A n o th er p a rt o f this
new v a lu e goes to the w orker, a n d rep resen ts the counter-
v a lu e o f his w age. The su rp lu s -v a lu e p o rtio n is a p p ro p ria te d
b y the c a p ita list w ithout a n y counter-v alu e.
We c all the e q u iv a le n t of w ages v a ria b le c a p ita l a n d desig
na te it b y V. W hy is it c a p ita l? B ecause, in effect, the c a p i
talist a d v a n c e s this v a lu e ; it constitutes, therefore, a p a r t of
h is c a p ita l, w hich is expended before the v a lu e o f the co m m o d
ities p ro d u c e d b y the w o rk e rs in qu e stio n c a n be realized.
We c all th a t p a r t o f c a p ita l w hich is tra n s fo rm e d into m a
chines, b u ild in g s, ra w m a te ria ls, etc., w h o se v a lu e is n o t in
c re a se d b y p ro d u c tio n b u t m erely p rese rv e d b y it, c o n sta n t
c a p ita l a n d d e sig n a te it b y C. The p a r t of c a p ita l called v a r i
a b le c a p ita l, V, the p a rt u se d b y the c a p ita list to b u y lab o r-
pow er, is so term ed b ecau se it is the o n ly p a rt o f cap ita l
w hich lets the c a p ita list in cre a se his c a p ita l b y m ean s of a
s u rp lu s-v a lu e .
Since this is the case, w h a t is the eco n o m ic lo g ic o f com
petition, of the d riv e to in crease p ro d u ctiv ity , to in crease
m ec h a n ica l m ea n s, m ac h in e la b o r ? T he lo g ic o f this drive,
th a t is to s a y , the fu n d a m e n ta l tendency o f the ca p ita list sy s
tem , is to in cre a se the w eight of C, the w eight of co n sta n t
c a p ita l, w ith respect to v a ria b le c a p ita l. In the fra c tio n *, C
tends to in crease, th a t is to sa y , the p a r t of to ta l c a p ita l m ad e
u p b y m ac h in e s a n d ra w m a te ria ls , b u t n o t in w ages, tends
to in cre a se w ith the a d v a n c e s in m ec h a n iza tio n a n d w herever
c o m petition com pels c a p ita lism to step u p la b o r p ro d u ctiv ity .
We c all th is fractio n - the o rg a n ic c o m p o sitio n of cap ital:
it is therefore the r a tio betw een c o n sta n t c a p ita l a n d v a ria b le
c a p ita l, a n d we s a y th a t in the c a p ita list system this o rg a n ic
co m p o sitio n h a s a ris in g tendency.
H ow c a n the c a p ita list a c q u ire new m ac h in e s? W hat is the
m e a n in g of the statem ent th a t c o n sta n t c a p ita l keeps o n in
c re a sin g ?
The fu n d a m e n ta l o p e ra tio n of c a p ita list e c o n o m y is the p ro
du c tio n of su rp lu s-v a lu e . But so lo n g a s the su rp lu s-v a lu e
h a s m erely been p ro d u ce d , it re m a in s locked in the c o m m o d i
ties a n d the c a p ita list c a n n o t use it; u n so ld shoes c a n n o t be
tra n s fo rm e d in to new m ac h in e s, in to g re a te r p ro d u ctiv ity . In
42
o rd e r to be a ble to b u y new m achines, the in d u stria list p o s
sessing shoes m ust sell these shoes, a n d a p a rt of the p ro
ceeds of this sale can then serve to p u rch a se new m achines,
a s a su p p le m e n ta ry co n sta n t capital.
E xpressed a n o th e r w ay: realizing su rp lu s-va lu e is the neces
s a r y c o n dition f o r the accu m u la tio n o f capital, a n d cap ital
ac cu m u latio n is sim p ly the ca p ita liz atio n of su rp lu s-v alu e.
R ealizing su rp lu s-v a lu e m ean s the sale of g o o d s b u t also
the sale of such g o o d s u n d e r con d itio n s w here the su rp lu s-
va lu e they c o n ta in can a c tu a lly be realized in the m ark et. All
b usinesses o p e ra tin g at a v e ra g e pro d u ctiv ity in society w hose
to tal p ro d u c tio n therefore c o rre sp o n d s with so cially n ecessary
l a b o r a re su p p o sed to realize the to ta l v a lu e a n d su rp lu s-
v a lu e p ro d u c e d in their p lan ts, neither m o re n o r less, w hen
their g o o d s a re sold. We saw p rev io u sly th a t those enter
prises w hich a re a b o v e the a v e ra g e in their p ro d u ctiv ity will
c a p tu re a p a r t of the s u rp lu s-v a lu e p ro d u ce d in o th er enter
prises, w h ereas those o p e ra tin g a t a low er th a n a v e ra g e p r o
ductivity will no t realize a p a r t of the su rp lu s-v a lu e p ro d u ce d
in their p la n ts b u t m ust s u rre n d e r it to o th er p lan ts which
a re tec h n o lo g ic a lly a h e a d of them . C onsequently, the reali
z a tio n of s u rp lu s-v a lu e m ea n s the sale of g o o d s u n d e r con
ditions in which all of the su rp lu s-v a lu e p ro d u ce d b y the
w o rk e rs in a p la n t m a n u fa c tu rin g com m odities is ac tu a lly
p a id for b y their p u rch a se rs.
As s o o n a s the stock of g o o d s p ro d u ce d in a g iven p erio d
is sold, the c a p ita list is reim b u rse d with a sum of m oney
w hich constitutes the cou n te r-v a lu e of the c o n sta n t cap ita l
expended in ach ie v in g this p ro d u ctio n , th a t is to sa y , the raw
m a te ria ls used together with the fractio n o f the v a lu e o f m a
chines a n d g o o d s am o rtiz e d by this p ro d u ctio n . He h a s a lso
been re im b u rse d with the cou n ter-v alu e o f w ages w hich he
a d v a n c e d in o rd e r to effect this p ro d u ctio n . In a d d itio n , he
is in po ssessio n of the s u rp lu s-v a lu e p ro d u ce d b y his w o rk ers.
W hat h a p p e n s to this su rp lu s-v a lu e ? A p a rt of it is u npro-
d u c tiv e ly c o n s u m e d b y the c a p italist, for the p o o r fellow h a s
to live, h a s to keep his fam ily alive to g eth er with his en
to u ra g e ; a n d e v e ry th in g he spends for these p u rp o se s is com
pletely w ith d ra w n from the process of p ro d u ctio n .
A second p a r t of the s u rp lu s-v a lu e is accu m u lated a n d is
43
utilized b y b e in g tra n s fo rm e d into ca p ita l. A ccu m u lated su rp lu s-
v a lu e is, consequently, th a t entire p a r t of su rp lu s-v a lu e which
is not u n p ro d u c tiv e ly co n su m ed in m eeting the p riv a te needs
of the ru lin g class, a n d w hich is tra n sfo rm ed into cap ital,
either into s u p p le m e n ta ry c o n sta n t c a p ita l, th a t is to sa y , into
a su p p le m e n ta ry q u a n tity (m o re exactly: a v a lu e ) of raw
m a te ria ls , m a c h in e s, bu ild in g s; o r in to s u p p le m e n ta ry v a ri
a ble c a p ita l, th a t is to sa y , m ea n s fo r h irin g m o re w o rk ers.
We now u n d e rs ta n d w h y the accu m u latio n of c a p ita l is the
ca p ita liz a tio n o f s u rp lu s-v a lu e , th a t is to sa y , the tra n s fo rm a
tion of a la rg e p a rt of su rp lu s -v a lu e in to su p p le m e n ta ry c a p i
tal. A nd we a lso u n d e rs ta n d how the p ro cess of g ro w th in
the o rg a n ic c o m p o sitio n of c a p ita l rep resen ts a n u n in te rru p te d
succession of c a p ita liz a tio n processes, th a t is to sa y , of the
p ro d u c tio n of su rp lu s -v a lu e b y w o rk e rs a n d its tra n s fo rm a tio n
b y the c a p ita lists into s u p p le m e n ta ry b u ild in g s, m ach in es,
raw m a te ria ls a n d w o rk e rs.
It is c o n seq u e n tly in a c c u ra te to s a y th a t it is the cap ita list
w ho c reates em p lo y m en t, since it is the w o rk e r w ho p ro d u ce d
the s u rp lu s-v a lu e , w hich w a s ca p ita liz ed b y the cap italist, a n d
used, a m o n g o th er things, for h irin g m o re w o rk ers. In reality,
the entire m a s s o f fixed w ealth we see in the w o rld , the w hole
m a s s of p la n ts, m ach in es, r o a d s , r a ilro a d s , p o rts, h a n g a rs ,
etc., etc., all of this e n o rm o u s m a s s o f w ealth is n o th in g bu t
the m a te ria liz a tio n of a m a s s of s u rp lu s-v a lu e created b y the
w o rk e rs, of n o n re im b u rs e d la b o r w hich w as tra n sfo rm ed in
to p riv a te p ro p e rty , into c a p ita l fo r the c a p ita lists. It is, in
oth er w o rd s, a co lo ssa l p ro o f of the c o n tin u o u s ex p lo itatio n
u n d e rg o n e b y the w o rk in g c la ss since the o rig in of cap ita list
society.
Do all c a p ita lis ts p ro g re s s iv e ly a d d m ach in es, in crease their
c o n sta n t c a p ita l a n d the o rg a n ic c o m p o sitio n of their c a p ital?
N o , the in cre a se in the o rg a n ic co m p o sitio n of cap ita l takes
place a n ta g o n is tic a lly , b y w a y of a com petitive stru g g le g o v
e rn e d b y th a t law w hich the g re a t F lem ish p a in te r, Peter
B reughel, p o r tr a y e d in a n e n g ra v in g : the big fis h ea t the
little.
T he com petitive stru g g le is therefore ac co m p a n ie d b y a
c o n tin u o u s c o n c en tratio n of c a p ita l, b y the disp lacem en t of
a la rg e n u m b e r of b u sin e ssm e n b y a sm a lle r n u m b er, a n d
44
b y the tra n s fo rm a tio n of a certain n u m b er of independent
business people into technicians, m a n a g e rs, forem en, a n d even
sim ple su b o rd in a te office p e rsonnel a n d w orkers.

Competition Leads to
Concentration and Monopoly
The c o n c en tratio n of c a p ita l is a n o th e r p erm a n e n t law of
ca pitalist society a n d is acco m p a n ie d b y the p ro le ta ria n iz a
tion of a p a r t of the b o u rg eo is class, the e x p ro p ria tio n o f a
certain n u m b e r of b o u rg eo is b y a sm a lle r n u m b er of b o u r
geois. T h a t is w hy the C o m m u n ist M anifesto of M arx a n d
Engels e m phasizes the fact th a t cap italism , which claim s to
defend p riv a te p ro p erty , is in rea lity a d e stro y e r of this p ri
vate p ro p erty , a n d c a rrie s o u t a co n sta n t, p e rm a n e n t ex p ro
p ria tio n of a g re a t n u m b e r of p ro p rie to rs b y a relativ ely sm all
n u m b er of p ro p rie to rs . T here a re sev eral in d u stria l b ran c h e s
in which this c o n c en tratio n is p a rtic u la rly strik in g : coal m in in g
h a d h u n d re d s of co m p an ies d u rin g the nineteenth cen tu ry in
a c o u n try like F ra n c e (there were a lm o st two h u n d re d in
B elgium ); the a u to m o b ile in d u stry h a d a h u n d re d o r m ore
firm s a t the b e g in n in g of the c en tu ry in co u n tries like the
U nited States a n d E n g la n d , w hereas to d a y th eir n u m b er h a s
been reduced to four, five o r six such c o m p an ies a t m ost.
Of course, there a re ind u stries w here this co n cen tratio n h a s
not been c a rrie d so far, such a s the textile in d u stry , the food
in d u stry , etc. In gen e ra l, the g re a te r the o rg a n ic co m p o sitio n
of c a p ita l in a n in d u stria l b ra n c h , the g rea te r is the co n cen tra
tion o f c a p ita l, a n d c onversely, the sm a lle r the o rg a n ic c o m p o si
tion of c a p ita l, the s m a lle r is the co n cen tratio n of c ap ital.
W hy? B ecause the sm a lle r the o rg a n ic co m p o sitio n of cap ital,
the less c a p ita l is req u ired a t the b e g in n in g in o rd e r to enter
this b ra n c h a n d e sta b lish a new venture. It is far e asier to
p u t to gether the m illion o r two m illion d o lla rs n ecessary for
b u ild in g a new textile p la n t th a n to assem b le the h u n d red s
of m illions needed to set u p even relativ ely sm all steel w orks.
C ap ita lism w a s b o rn of free com p etitio n a n d is inconceivable
w ithout com petition. But free com petition p ro d u ces concen
tra tio n , a n d c o n c en tratio n p ro d u ce s the o p p o site of free com
petition, n a m e ly , m o n o p o ly . W here there a re few p ro d u ce rs,
they can re a d ily reach agreem ents, a t the expense of the con-
45
sum ers, in d iv id in g u p m a rk e ts a n d p rev e n tin g a n y low ering
of prices.
So in the s p a n of a century, the w hole ca p ita list d y n am ic
a p p e a r s to h a v e c h a n g e d its n a tu re . F irs t we h a v e a m ove
m ent p ro ce e d in g in the direction o f a c o n sta n t fall in prices
because of a c o n sta n t rise in p ro d u c tio n a n d a co n sta n t m ul
tip licatio n of the n u m b e r of enterp rises. At a c ertain point,
the s h a rp e n in g of c o m petition b rin g s with it a co n cen tratio n
of en te rp rise s a n d a red u c tio n in the n u m b e r o f enterprises.
T he re m a in in g c o m p a n ie s a re now a b le to rea c h ag reem en t
on p re v e n tin g fu rth e r price reductio n s a n d such ag reem en t
ca n o n ly be h o n o re d , of course, b y lim itin g p ro d u ctio n . The
e ra of m o n o p o ly c a p ita lism thu s d isp laces the e ra of free
com petitive c a p ita lism a t the b e g in n in g of the la s t q u a rte r
of the nineteenth century.
N a tu ra lly , w hen we sp e a k of m o n o p o ly cap ita lism , we m u st
n o t in the lea st p resu m e a c a p ita lism w hich h a s com pletely
e lim in ated com petition. T here is n o such th in g . We sim p ly
m ea n a c a p ita lism w hose b a sic b e h a v io r h a s ch an g ed , th at
is to s a y , it n o lo n g e r strives fo r a co n sta n t lo w erin g of prices
b y m e a n s o f a c o n s ta n t in cre a se in p ro d u c tio n ; it uses the
technique of d iv id in g u p the m ark e t, o f setting u p m ark e t
q u o ta s . B ut this p ro ce ss w inds u p in a p a ra d o x . W hy do
c a p ita lists w ho b e g a n a s c om petito rs now tu rn to concerted
ac tio n in o rd e r to lim it this com petitio n a n d to lim it p ro d u ctio n
a s well? T he a n sw e r is th a t it is a m eth o d of in cre a sin g their
profits. T h e y o n ly d o so if it b rin g s them m o re profits. Lim it
in g p r o d u c tio n p e rm its in c re a sin g prices, b rin g in g g rea te r
profits a n d c o n seq u e n tly in cre a se d c a p ita l a c cu m u latio n .
T his new c a p ita l c a n no lo n g e r be invested in the sam e
b ra n c h , since this w ould m e a n a n in crease in p ro d u ctiv e
c a p ac ity , resu ltin g in in cre a se d p ro d u ctio n , a n d le a d in g to
a lo w ering o f prices. C a p ita lism h a s been c a u g h t u p in this
c o n tra d ic tio n com m e n c in g with the la st q u a rte r o f the nine
teenth century. It then su d d e n ly a c q u ire d a q u a lity which o n ly
M a rx h a d foreseen a n d w hich w a s n o t g ra s p e d b y eco n o m ists
like R ic a rd o o r A d a m Sm ith; sud d en ly , the cap ita list m ode
of p ro d u c tio n to o k o n a m is s io n a ry role. It b e g a n to sp re a d
th ro u g h o u t the w o rld b y m ea n s of ca p ita l exp o rts, w hich en
a b le d c a p ita list en te rp rise s to be set u p in co u n tries o r sectors
46
where m on o p o lies h a d n o t yet entrenched them selves.
T he consequence of m o n o p o ly in certain b ran c h e s a n d of
the s p re a d of m o n o p o ly c a p italism in certain countries is th at
the ca p ita list m ode of p ro d u ctio n h a s been rep ro d u ced in
b ran c h e s still free from m o n o p o ly c o n tro l a n d in countries
which h a d n o t yet becom e capitalist. T his is how co lonialism
in all its v arieties m a n a g e d , to w a rd the b e g in n in g o f the
twentieth ce n tu ry to s p re a d like a po w d er tra in in the course
of a few decades, s ta rtin g from the sm all p a rt of the w o rld
to which the ca p ita list m ode of p ro d u ctio n w as lim ited, a n d
e v entually e m b ra c in g the w hole w orld. E v ery co u n try o n the
m ap w as thus tra n sfo rm e d into a sp h ere of influence a n d field
of investm ent fo r capital.
Tendency of the Average
Rate of Profit to Decline
We saw p re v io u s ly th at the s u rp lu s-v a lu e p ro d u ce d b y the
w orkers in each fac to ry rem a in e d "locked" in the p ro d u cts,
a n d th a t the q uestion w hether o r n o t this s u rp lu s-v a lu e w ould
be realized b y the c a p ita list fac to ry ow ner w as decided b y
m ark e t c o nditions, th at is to sa y , b y the p o ssib ility for the
factory to sell its p ro d u cts a t a price which w ould allow all
of this su rp lu s-v a lu e to be realized. By a p p ly in g the law of
v alue developed ea rlie r, we c a n set u p the follow ing rule: all
e nterprises w hich a re p ro d u c in g a t the a v e ra g e level of p r o
ductivity will, ro u g h ly sp e ak in g , realize the su rp lu s-v a lu e
p roduced b y their w orkers, th a t is to sa y , they will sell their
p ro d u cts a t a price e q u a l to the v a lu e o f these p ro d u cts.
But this will n o t be the case for two categ o ries of enterprises:
those o p e ra tin g below a n d those o p e ra tin g a b o v e the a v e r
age level of pro d u ctiv ity .
W hat is the c a te g o ry of enterp rises o p e ra tin g below the
a v e ra g e level of p ro d u ctiv ity ? T his is n o th in g bu t a g en e ra li
z ation of the laz y sh o e m a k e r we m entioned p rev io u sly . It is,
for exam ple, a steel m ill w hich p ro d u ce s 5 0 0 ,0 0 0 tons of
steel in 2.2 o r 2 .5 o r 3 m illion m an -h o u rs, when the n a tio n a l
a v e ra g e for this p ro d u c tio n is 2 m illion m an -h o u rs. It is
therefore w a stin g social labor-tim e. The su rp lu s-v a lu e p ro
duced b y the w o rk e rs in this fac to ry will no t be realized in
its entirety b y the ow ners of this plan t; it will w o rk a t a p rofit
below the a v e ra g e rate of profit for all en terp rises in the
country.
47
But the to ta l m a ss of s u rp lu s-v a lu e p ro d u ce d in society is a
fixed m ass, dependent in the last a n a ly s is o n the to tal n u m b er
of la b o r h o u rs su p p lie d b y all w o rk e rs e n g a g ed in p ro d u ctio n .
T his m ea n s th a t if there a re a ce rta in n u m b er of enterprises
w hich do n o t realize all the s u rp lu s-v a lu e p ro d u ce d b y their
w o rk e rs be c au se the e n terp rises a re o p e ra tin g below the a v e r
a g e level of p ro d u c tiv ity a n d h a v e therefore w asted social
la b o r-tim e , then there is a n un e x p e n d ed b a la n c e of su rp lu s-
v a lu e a v a ila b le w hich is c a p tu re d b y the p lan ts o p e ra tin g
a b o v e the a v e ra g e level of p ro d u ctiv ity . H a v in g econom ized
o n so cial lab o r-tim e , the latter a re rew a rd e d b y society.
T his th eoretical e x p la n a tio n is a g e n e ra l d e m o n stra tio n of
the m ec h a n ism d e te rm in in g the m o v em en t of prices in ca p i
talist society. H ow does this m ech an ism o p e ra te in practice?
Let us s a y the a v e ra g e selling price o f a loco m o tiv e is a
m illion d o lla rs. W hat then will be the difference between a
p la n t o p e ra tin g below the a v e ra g e p ro d u ctiv ity of la b o r a n d
o ne o p e ra tin g a b o v e it? T he first will sp en d , let us say ,
$ 9 0 0 ,0 0 0 to p ro d u c e a locom otiv e, a n d its p ro fit will be
$ 1 0 0 ,0 0 0 . On the o th er h a n d , the p la n t p ro d u c in g a b o v e the
a v e ra g e level o f la b o r p ro d u ctiv ity , will sp en d , let us sa y ,
$ 7 5 0 ,0 0 0 a n d will m a k e $ 2 5 0 ,0 0 0 pro fit, th a t is 33 p er cent
o n its c u rre n t p ro d u c tio n , w h e re a s the a v e ra g e rate of profit
is 18 p e r cent a n d en te rp rise s w o rk in g a t this a v e ra g e social
la b o r p ro d u c tiv ity p ro d u c e d locom o tiv es at a cost o f $ 8 5 0 ,0 0 0 ,
rea liz in g $ 1 5 0 ,0 0 0 in profit, th a t is to sa y , 18 p er c e n t.(l)
In o th er w o rd s, c a p ita list c om p etitio n fa v o rs th o se enter
p rises w hich a re te c h n o lo g ic a lly a h e a d ; these en terp rises realize
su p e rp ro fits a s c o m p a re d with the a v e ra g e profit. A v erag e
pro fit is b a s ic a lly a n a b s tra c t idea, e x actly like v alu e. It is
a n a v e ra g e a r o u n d w hich the rea l p ro fit rate s of different
b ra n c h e s a n d en te rp rise s fluctuate. C a p ita l flows to w a rd the
b ra n c h e s w here there a re su p e rp ro fits a n d flows a w a y from
th o se b ra n c h e s in w hich p rofits a re below the a v e ra g e . By
v irtu e o f this e bb a n d flow of c a p ita l from one b ra n c h to
a n o th e r, the ra te s of profit tend to a p p ro x im a te this a v e ra g e ,
w ith o u t ever com pletely re a c h in g it in a n a b so lu te a n d m e
c h a n ic a l w ay.
( 1 ) In r e a lity , th e c a p ita lis ts d o n o t f ig u r e th e ir p r o lit r a te o n th e b a s is
o f c u r r e n t p r o d u c t i o n , b u t o n th e ir in v e s te d c a p ita l; in o r d e r to a v o i d c o m
p lic a t e d c a l c u la t io n s , w e c a n im a g in e th a t th e e n tir e c a p ita l is a b s o r b e d
in th e p r o d u c t i o n o f o n e lo c o m o tiv e .
48
This is the w ay then th at eq u alizatio n of the rates of profit
is effected. There is a v e ry sim ple w ay to determ ine this a b
stract a v e ra g e rate of profit: we take the total m ass of surplus-
value p ro d u ce d b y all w orkers in a given y e a r a n d in a given
country, a n d d raw its ratio to the to ta l m ass of cap ital in
vestm ent in th a t country.
W hat is the fo rm u la for the rate of pro fit? It is the ratio
between su rp lu s-v a lu e a n d to ta l c a p ital. It is therefore c t f -
Still a n o th e r fo rm u la m ust be co n sid ered a s well: ;
this is the rate o f su rp lu s- value, o r better still, the rate o f
exp lo ita tio n o f the w o rk in g class. It specifies the w ay in which
the new ly p ro d u ce d v a lu e is divid ed between w o rk ers a n d
capitalists. If, for instance, f eq u a ls 100 p er cent this m eans
that the new ly p ro d u ce d v a lu e is div id ed into two e q u al p a rts,
one p a rt g o in g to the w o rk e rs in the form of w ages, the other
g o in g to the b o u rg eo is class in the form of profits, interest,
dividends, etc.
When the e x p lo itatio n rate of the w o rk in g class is 100 p er
cent, the 8 -h o u r w o rk in g d a y then consists of two e q u a l p a rts:
4 h o u rs of la b o r in which the w o rk e rs p ro d u ce the counter-
v alue of their w ages, a n d 4 h o u rs in w hich they s u p p ly g r a
tuitous la b o r, la b o r which is n o t p a id fo r b y the c a p italists
a n d its p ro d u c t a p p ro p ria te d b y the latter.
At first sight, it seem s th a t if the o rg a n ic c o m p o sitio n of
c ap ita l $- increases, the p rofit ra te will decline, since
C becom es in cre a sin g ly g re a te r relativ e to V, a n d 5 is a
p ro d u ct of V a n d n o t of C. B ut th ere is a facto r th at can
n eutralize the effect of a n in cre a se in the o rg a n ic c o m p o si
tion of ca p ita l: it is precisely a n in crease in the su rp lu s-v a lu e
rate.
If S o v e r V, the s u rp lu s-v a lu e rate in creases, this m ean s
th at in the fra c tio n bo th the n u m e ra to r a n d d e n o m in a to r
increase, a n d in this case the v a lu e of the fractio n can rem ain
the sam e, u n d e r c o n ditions w here the two in creases occur in
a certain p ro p o rtio n .
In o ther w ords, a n increase in the su rp lu s-v a lu e rate can
neutralize the effects of a n increase in the o rg a n ic com p o sitio n
of c ap ital. Let us a ssu m e th a t the v alu e of p ro d u ctio n C -V * S
goes from 100 O l O O l^ lO O S to 2 0 0 C M 0 0 V - 100S. The o r
g an ic co m p o sitio n of c a p ita l will therefore g o from 100 to 200
per cent, the profit rate will fall from 5 0 to 33 p er cent. But
if at the sam e tim e the s u rp lu s-v a lu e g oes from 100 to 150,
49
th a t is to sa y , the su rp lu s v a lu e ra te goes fro m 100 to 150
p e r cent, then the p rofit rate rem a in s a t 5 0 p e r cent: the
in cre a se in the s u rp lu s-v a lu e rate neu tralizes the effect o f the
in crease in the o rg a n ic c o m p o sitio n o f c ap ital.
C a n these two m ovem ents o ccu r in ex a ctly the n ecessary
p r o p o rtio n s fo r them to n eutralize each o th er? H ere we touch
the b a sic w eakness, the Achilles heel o f the c a p ita list system .
These two m ovem ents c a n n o t develop p r o p o rtio n a lly o v e r
the lo n g ru n . T here is no lim it w h atev er to the in crease in
the o r g a n ic co m p o sitio n of c a p ita l. F o r V there is a theoreti
c al lim it of zero, a s su m in g the a r r iv a l o f to ta l au to m a tio n .
But c a n a lso in crease in a n u n lim ited w ay , w ithout a n y
lim it w h a te v er? N o , fo r in o r d e r to p ro d u ce s u rp lu s-v a lu e it
is n e c essa ry to h a v e w o rk in g w o rk e rs, a n d this b ein g the
case, the fra c tio n of the w o rk d a y in w hich the w o rk e r re p ro
duces his ow n w age c a n n o t fall to zero. It c a n be reduced
from 8 h o u rs to 7, from 7 h o u rs to 6, from 6 h o u rs to 5,
from 5 h o u rs to 4, from 4 h o u r s to 3, from 3 h o u rs to 2,
from 2 h o u rs to 1, from 1 h o u r to 5 0 m inutes. It w ould a l
r e a d y be a fan ta stic p ro d u c tiv ity which w o u ld p erm it the
w o rk e r to p ro d u c e the c o u n te r-v a lu e of his entire w age in
5 0 m inutes. B ut he could never rep ro d u c e the c o u n ter-v alu e
of his w ag e in zero m inutes a n d zero seconds. T here is a
res id u a l w hich c a p ita list e x p lo itatio n c a n nev er su p p ress.
T his m ea n s th a t in the lo n g ru n the fall in the a v e ra g e
rate of pro fit is inevitable, a n d I p e rs o n a lly believe, con
t r a r y to the id ea o f quite a few M a rx ists, th a t this fall is also
d e m o n s tra b le in statistics, th a t is to sa y , th a t the a v e ra g e
rate s of p ro fit to d a y in the b ig c a p ita list c o u n tries a re m uch
low er th a n they w ere 50, 100 o r 150 y e a rs a g o .
Of co u rse, if we e x a m in e s h o rte r p e rio d s, th ere a re flu ctu a
tions up a n d dow n; there a re n u m e ro u s facto rs w hich com e
into p la y (we will discuss them late r, w hen d e a lin g with neo
c a p ita lis m ). But fo r the lo n g ru n , the m o v em en t is v e ry clear,
b o th for interest rate s a n d p rofit rates. We sh o u ld p o in t out,
m o re o v e r, th a t a m o n g all the d ev e lo p m e n ta l tendencies of
c a p ita lism , this w a s the one m ost c le a rly p erceived b y the
theo re tic ia n s of ca p ita lism them selves. R icard o sp e ak s of it;
J o h n S tu a rt Mill stresses it; K eynes is h ig h ly a w a re of it.
T here w as a m ax im in E n g la n d at the end o f the nine
teenth c e n tu ry which w as p ra c tic a lly a p o p u la r sa y in g : capi-
50
talism can w ith stan d a n y th in g except a fall in the av e ra g e
interest rate to 2 p er cent, because th at w ould kill investm ent
incentive.
This m ax im o b v io u sly co n ta in s a certain k in d of e rro r in
its rea so n in g . C a lculations of percentages, of profit rates, h av e
a real value, b ut it is still, after all, a relative one to a cap i
talist. W hat interests him is not exclusively the percentage he
m akes on his cap ita l, b ut a lso the total a m o u n t which he
m akes. A nd if the 2 per cent a p plies no t to $ 1 0 0 ,0 0 0 bu t to
$100 m illion, it still represents $2 m illion, a n d the c a p italist
w ould do a n aw ful lot of th in k in g before he w ould s a y th at
he preferred to let his c a p ita l lie idle ra th e r th a n to accept
the rev olting profit of a m ere $2 m illion a year.
In practice, we see therefore th a t there is no total h a lt in
investm ent a ctiv ity follow ing a fall in the p ro fit a n d interest
rates bu t r a th e r a slow ing dow n p ro p o rtio n a l to the fall in
profit rate in a n in d u stria l b ra n c h . On the o th er h a n d , when
there is m o re ra p id e x p a n sio n a n d a risin g tendency of the
profit rate in certain in d u stria l b ra n c h e s o r in c ertain periods,
then investm ent a c tivity resum es, speeds up, the m ovem ent
then seem s to feed on itself, a n d the e x p a n sio n a p p e a rs to
have no lim its up to the tim e when the tendency reverses once
m ore.

The Fundam ental Contradiction in the


Capitalist System and the Periodic
Crises of Overproduction
C a pitalism h a s the tendency to extend p ro d u ctio n w ithout
limits, to extend its a re n a of activ ity o v e r the w hole w orld,
to view all h u m a n b ein g s a s po ten tial cu stom ers. (P a re n
thetically, there is a pretty c o n tra d ic tio n w o rth stressin g , one
which M arx a lr e a d y m entioned: each c a p ita list a lw a y s likes
to see o th er c a p ita lists in crease the w ages of their w o rk ers,
because the w ages of those w o rk e rs a re p u rc h a s in g pow er for
the g o o d s of the c a p ita list in questio n . But he c a n n o t allow
the w ages of his ow n w o rk e rs to increase, fo r this w ould o b
v iously reduce his ow n p ro fit.)
The w orld is c o n sequently stru c tu re d in a m o st e x tr a o rd in a ry
way, h a v in g becom e a n econom ic u n it with a n interdependence
of its different p a rts w hich is extrem ely sensitive. You know
51
all the cliches w hich h a v e been u sed to depict this: if som eone
sneezes o n the N ew Y ork Stock E x ch an g e, 1 0 ,0 0 0 p e a sa n ts
a re ru in e d in M a la y a .
C a p ita lism p ro d u ce s a n e x tr a o rd in a ry interdependence in
incom es a n d a un ific atio n in tastes for all h u m a n beings. M an
h a s s u d d e n ly becom e co n scio u s of the w ealth o f h u m a n p o s
sibilities, w h e re a s in p rec a p ita list society, he w as enclosed in
the n a rr o w n a tu r a l possibilities of a single reg io n . In the
M iddle Ages, p in ea p p le s were not eaten in E u ro p e, o n ly lo cally
g ro w n fruits, b u t to d a y we e a t fruits w hich m a y h a v e been
p ro d u c e d a n y w h e re in the w o rld a n d a re even b eg in n in g to
e a t fruits fro m C h in a a n d In d ia w hich we were n o t accu sto m ed
to e a tin g p r io r to the second w o rld w ar.
T here a re co n seq u e n tly m u tu a l lin k s b ein g e stab lish ed am o n g
p ro d u c ts a n d a m o n g m en. E x p re sse d in o th er term s, there is
a p r o g r e s s iv e so c ia liza tio n o f a ll eco n o m ic life, which is be
c o m in g a single a sse m b la g e , a single fabric. But this whole
m o v em e n t of interdependence is s im p ly centered in a n in san e
w a y a ro u n d p riv a te p ro p e rty , p riv a te a p p ro p ria tio n , b y a
s m a ll n u m b e r of c a p ita lists w hose p riv a te interests, m o reo v er,
collide m o re a n d m o re with the interests of the b illio n s of
h u m a n b e in g s included in this asse m b la g e .
It is in the eco n o m ic crises th a t the c o n tra d ic tio n between
the p ro g re s s iv e so c ia liz a tio n of p ro d u c tio n a n d the p riv a te
a p p ro p r ia tio n w hich serves a s its d riv in g po w er a n d its su p
p o rt, b re a k s o u t in the m o st e x tr a o rd in a ry w ay. F o r c a p i
talist ec o n o m ic crises a re incredib le p h e n o m e n a like n o th in g
e ver seen before. T h ey a re n o t crises o f scarcity, like all p re
c a p ita lis t crises; they a re crises o f o ve rp ro d u c tio n . The u n
e m p lo y e d die of h u n g e r no t b ecau se there is too little to eat
b u t be c au se there is rela tiv e ly too g re a t a su p p ly of foodstuffs.
At first sig h t the th in g seem s in co m p reh en sib le. H ow can
a n y o n e die b ecau se there is a su rp lu s o f food, b ecau se there
is a s u rp lu s of g o o d s ? But the m ech an ism of the cap italist
system m a k e s this seem ing p a r a d o x u n d e rs ta n d a b le . G oods
w hich do n o t find b u y e rs n ot o n ly do no t realize their su rp lu s-
v a lu e b u t they d o no t even retu rn th eir invested cap ital. The
s lu m p in sa le s therefore forces b u sin essm en to su sp en d their
o p e ra tio n s . T h e y a re therefore forced to la y off their w orkers.
A nd since the laid-off w o rk e rs h a v e n o reserves, since they
52
can subsist o n ly w hen they a re selling their lab o r-p o w er, u n
em ploym ent o b v io u sly condem ns them to the sta rk e st p o v erty
a nd precisely because the relative a b u n d a n ce of g o o d s h a s
resulted in a slum p in sales.
The factor of periodic econom ic crises is inherent in the
capitalist system a n d rem a in s u n su rm o u n tab le . We sh all see
further on th a t this rem a in s e q u a lly tru e in the neo-capitalist
regim e in w hich we a re now living, even if these crises are
now called "recessions." Crises a re the clearest m an ifestatio n
of the fu n d am e n ta l c o n tra d ic tio n in the system a n d a periodic
rem inder th a t it is condem ned to die s o o n e r o r later. But it
will never die a u to m a tic a lly . It will a lw a y s be necessary to
give it a c onscious little p u sh to effect its dem ise, a n d it is
our jo b , the jo b of the w ork in g -class m ovem ent, to do the
pushing.

53
HI. Neo- Capitalism
The Origins of Neo-Capitalism

T he g re a t e c onom ic crisis of 192 9 first c h a n g ed the attitude


o f the b o u rg e o isie a n d its id eolog ists to w a rd the state; su b
seq u en tly it c h a n g e d the attitu d e o f this sam e b o u rg eo isie to
w a rd the future of its ow n system .
Som e y e a rs a g o a n o to rio u s tria l to o k p lace in the U nited
States, the tria l of A lger H iss, w ho h a d been a n a ssista n t in
the State D ep artm en t d u rin g the w ar. At H iss's trial, one of
his m o st intim a te friends, a jo u rn a lis t for the Luce p u b lic a
tio n s n a m e d W hittaker C h a m b e rs, w as the key w itness in his
co n v ic tio n for p e rju ry , a c tu a lly a s a C o m m u n ist w ho h a d
alle g e d ly stolen d o cum ents from the State D ep artm en t a n d
p a sse d them o n to the Soviet U nion . T his C h a m b e rs, who w as
so m e w h at n e urotic, h a d been a C o m m u n ist d u rin g the first
ten y e a rs o f his a d u lt life a n d w o u n d u p a s relig io u s ed ito r
of the w eekly m ag a z in e Time. He w rote a len g th y confes
sio n a l u n d e r the title W itness. In this b o o k there is a p a s sa g e
sta tin g a p p ro x im a te ly the follow ing co n cern in g the 1929-
1939 p e rio d : "In E u ro p e the w o rk e rs a re so cialist a n d the
b o u rg e o is ie a re co n serv a tiv e s; in A m erica, the m iddle classes
a re co n serv a tiv e s, the w o rk e rs a re d em o crats, a n d the b o u r
geoisie a re com m unists."
It is o b v io u sly a b s u rd to presen t th in g s in this o u tra g e o u s
w ay. But there c a n be no d o u b t th at the y e a r 1929 a n d the
p e rio d follow ing the g re a t crisis of 19 2 9 -1 9 3 2 w as a tra u
m atic experience for the A m erican b o u rg eo isie which h a d been
the o n ly o ne in the w hole w orld w id e cap ita list class to be
im bued with a com plete, blin d confidence in the future of the
"free enterprise" system . It suffered a terrib le shock d u rin g
this 1 9 2 9-1932 crisis, a p e rio d which w as in g en eral the
54
equivalent for A m erican society, so far a s b ecom ing conscious
of the social question a n d q u e stio n in g the c a p italist system
a re concerned, to the p e rio d E u ro p e went th ro u g h at the
birth of the socialist w o rk e rs' m ovem ent, the p erio d from
1865 to 1890 in the p a st century.
F o r the b ourgeoisie, this qu estio n in g of the system took
v a rio u s form s o n the w o rld scale. It to o k the form of a n a t
tem pt to con so lid a te c ap italism b y m ean s of fascism a n d other
a u th o rita ria n experim ents in c ertain W estern, C en tral a n d
S outhern E u ro p e a n countries. It to o k a less violent form in
the U nited States, a n d it is this A m erican society of the y e a rs
1932-1940 which fo resh ad o w s w h a t is called n eo -cap italism
today.
W hy is it th at it w as no t a n extended a n d gen eralized fascist
experience w hich g a v e n e o -capitalism its fu n d am e n ta l c h a ra c
teristic b ut r a th e r the e xperim ent of a n "idyllic detente" in
social tensions? The fascist system w as a regim e o / extrem e
social, econom ic a n d p o litical crisis, o f extrem e tensions in
class rela tio n sh ip s, which, in the final a n a ly s is, w a s determ ined
by a lo n g p e rio d of e conom ic sta g n a tio n , in which the m arg in
for d iscussion a n d n e g o tia tio n betw een the w o rk in g class a n d
the b o u rg eo isie w as v irtu a lly reduced to zero. The cap italist
system h a d becom e in co m p a tib le with a n y resid u e of a m ore
o r less independent w o rk in g -c lass m ovem ent.
In the h isto ry of c a p ita lism we c a n d istin g u ish between its
periodic crises which rec u r e v e ry 5, 7, o r 10 y e a rs a n d its
cycles of a lo n g er p eriod, which were first d iscussed b y the
R ussian e conom ist K o n d ra tie f a n d w hich m a y be called lo n g
term cycles of 25 to 30 y e a rs. A lon g -term cycle c h aracterized
b y high g ro w th rate s is often follow ed b y a lo n g -term cycle
c h aracterized b y a low er g ro w th rate. It seem s o b v io u s to m e
th at the p e rio d of 1913 to 1940 w as o ne of these long-term
cycles of s ta g n a tio n in c a p ita list p ro d u ctio n , d u rin g which all
the successive cycles from the crisis of 1913 to th a t of 1920,
from the crisis of 1920 to th at of 1929, were m a rk e d b y p a r
ticu larly severe d e p re ssio n s be c au se of the fact th at the lo n g
term tre n d w a s one of sta g n a tio n .
The long-term cycle w hich b e g a n w ith the second w o rld
w ar, a n d in w hich we still re m a in let u s call it the 1940-
1965 o r 1 9 4 0 -1 9 7 0 c ycle h a s , o n the c o n tra ry , been c h a r
acterized b y e x p a n sio n , a n d becau se o f this e x p a n sio n , the
55
m a r g in for n e g o tia tio n a n d discu ssio n betw een the b o u rg eo isie
a n d the w o rk in g cla ss h a s been e n la rg e d . The p o ssib ility h a s
th u s been cre a ted for stre n g th e n in g the system o n the b a sis
o f g r a n tin g concessions to the w o rk ers, a p o licy w hich is be
in g p racticed on a n in te rn a tio n a l scale in W estern E u ro p e a n d
N o rth A m erica a n d m a y even be extended to sev eral countries
in S o u th e rn E u ro p e in the n e a r future. T his neo-cap italist
p o licy is b a s e d o n r a th e r close c o lla b o ra tio n between a n ex
p a n s iv e b o u rg e o isie a n d the co n serv a tiv e forces of the la b o r
m o v em en t a n d is fu n d a m e n ta lly s u sta in e d b y a risin g tren d
in the s ta n d a r d of liv in g of the w ork ers.
N evertheless, in the b a c k g ro u n d of th is w hole developm ent
re m a in s the q u e stio n m a r k p laced o v e r the system , the d o u b ts
r e g a r d in g the future of the c a p ita list system , a n d o n th a t level
there is no lo n g e r a n y do u b t. In all the decisive lay e rs of
the b o u rg eo isie , the deepest convictio n reig n s th a t the a u to m
atism o f the e c onom y of a n d by itself, the "m arket m echanism "
c a n n o t in su re the s u rv iv a l of the system , th a t it is n o lo n g er
po ssib le to rely o n the a u to m a tic in te rn al fu n ctio n in g of c a p i
talist e c onom y, a n d th a t a c onscio u s a n d e x p a n d in g in ter
vention, m o re a n d m o re re g u la r a n d sy stem atic in ch a ra c te r,
is n e c essa ry in o rd e r to s a v e this system .
T o the extent th a t the b o u rg e o isie itself is n o lo n g er confi
dent th a t the a u to m a tic m echanics of c a p ita list eco n o m y will
su s ta in its rule, a n o th e r force m u st in tervene for a n y lo n g
term s a lv a tio n of the system , a n d this force is the state. N eo
c a p ita lism is a c a p ita lism w hose p reem in en t c h a ra c te ristic is
the g ro w th of interv en tio n b y the state in to econom ic life. F ro m
this p o in t of view a s well, the c u rre n t n eo -cap italist experience
in W estern E u ro p e is o n ly a n e x ten sio n o f the Roosevelt ex
perience in the U nited States.
T o u n d e rs ta n d the o rig in s of p rese n t-d a y n eo -cap italism ,
how ever, we m u st a ls o tak e a seco n d facto r in to a c co u n t to
e x p la in the g ro w in g in te rv en tio n in econom ic life b y the state,
a n d th a t is the c o ld war. M ore g e n e ra lly this c a n be view ed
a s the ch allen g e which the to ta lity of a n tic a p ita list forces h a v e
h u rle d a t w o rld ca p ita lism . T his clim ate of challen g e m ak es
the perspective of a n o th e r se rio u s econom ic crisis of the 1929-
1933 type com pletely in to le ra b le to ca p ita lism . Im a g in e w hat
w ould h a p p e n in G e rm a n y if there were five m illion unem -
56
ployed in West G e rm a n y while a scarcity of la b o r existed in
E ast G erm any. It is e a sy to see how in to lerab le this w ould
be from a political point of view, a n d this is w hy state inter
vention into the econom ic life of the c ap italist co u n tries is
ab o v e all anticyclic, or, if you prefer, anticrisis in ch a ra c te r.

A Permanent Technological Revolution


Let us dwell a m om ent u p o n this p h e n o m e n o n of long-term
exp a n sio n . W ithout this the specific n eo -cap italism we h a v e
w itnessed in W estern E u ro p e for 15 y e a rs is incom prehensible.
This long-term cycle sta rte d in the U nited States with the
second w orld w ar. In o rd e r to u n d e rs ta n d the cau ses of this
p h e nom enon we m ust rem em ber th at in m o st of the o th er
ex p a n d in g cycles in the h isto ry of cap ita lism we find the sam e
c om m on elem ent repeated: techno lo g ical rev o lu tio n s. It is
no accident th a t a cyclical e x p a n sio n o f the sam e k in d p re
ceded the p e rio d of s ta g n a tio n a n d crisis o f 1 9 1 3-1940. The
end of the nineteenth c entury w as a n extrem ely peaceful p e rio d
in the h isto ry of c a p ita lism , d u rin g which there w ere no w ars,
o r p rac tic a lly none, except for co lo n ial w a rs, a n d d u rin g which
a whole series of tec hnological research es a n d discoveries
from the p rev io u s p h a se b e g a n to find their ap p lic a tio n . In
the c u rre n t p e rio d of e x p a n sio n , we a re w itnessing a n accel
erated technical p ro g re s s , a genuin e tech n o lo g ical rev o lu tio n ,
for which the e x p re ssio n "second in d u stria l revolution" o r
"third in d u stria l revolution" h a rd ly seem s ad e q u ate . We find
ourselves, in fact, before a n a lm o st u n in te rru p te d tra n s fo rm a
tion of the techniques of p ro d u ctio n . T his p h e n o m e n o n is v ir
tually a b y -p ro d u c t of the p e rm a n e n t a rm s race, of the cold
w ar in w hich we h a v e been in v o lv e d since the end of the
second w o rld w ar.
In fact, if y ou c a refully e x a m in e the o rig in of 9 9 p er cent
of the tec h nological c h a n g es a p p lie d to p ro d u ctio n , y ou will
see th at they a re m ilita ry ; y ou will see th at these ch a n g es a re
by -p ro d u c ts of new techniques w hich first fo u n d their a p p lic a
tion in the m ilita ry sphere. It is o n ly later, after a lo n g er o r
sh o rte r time la g , th a t they com e into the p u b lic d o m a in to a
certain extent a n d a re a p p lie d in the sp h ere of civ ilian p r o
duction.
So true is this fact th at the a d v o c ate s for a F ren ch s trik in g
57
force (n u c le a r force) a re u sin g it a s a m a jo r a rg u m e n t to d ay .
T hey e x p la in th a t if this strik in g force is n o t developed, the
techniques w hich will determ ine a n im p o rta n t p a rt o f in d u s
tria l p ro d u c tiv e processes in 15 o r 2 0 y e a rs will n o t be kn o w n
in F ra n c e , for they will all be the b y -p ro d u c ts of n u c le a r tech
n iques a n d their allied techniques o n the in d u stria l level.
H ere I do n o t w ish to d eb ate this thesis w hich I consider
u n a c ce p ta b le in o th er respects; I sim p ly w ish to und erlin e
th a t it co n firm s, even in a so m e w h at "extremist" fash io n , th at
m o st of the tech n o lo g ical re v o lu tio n s w hich we a re u n d e rg o
in g in the in d u s tria l d o m a in a n d in p ro d u ctiv e technique gen
e ra lly a re b y -p ro d u c ts of technical rev o lu tio n s in the m ili
ta r y sphere.
T o the d egree th a t we a re in v o lv e d in a p e rm a n e n t cold
w a r, w hich is c h a ra c te rize d b y a p e rm a n e n t se arc h for tech
nical c h a n g e s in the sp h ere of a rm a m e n ts , we h a v e a new
facto r here, a so-to-speak, e x tra-eco n o m ic so u rce, which feeds
c o n tin u o u s c h a n g e s into p ro d u ctiv e technique. In the p ast,
w hen this a u to n o m y in tech n o lo g ical research did n o t exist,
w hen it w a s esse n tia lly a p ro d u c t of in d u stria l co m p an ies,
there w as a m a jo r facto r w hich d eterm in ed the cyclical p ro g
ress of this rese a rch . T he in d u stria lis t w o u ld say : we m ust
slow up in n o v a tio n s now , b ecau se we h a v e extrem ely costly
in sta lla tio n s w hich m u st first be am o rtized . T hey m u st be
com e p ro fita b le , their in sta lla tio n costs m u st be covered, be
fore we c a n s ta r t o u t o n a n o th e r p h a se of tech n o lo g ical change.
T his is so true th at eco n o m ists like Schum peter, for ex
am p le , h a v e used this cyclical rh y th m in technical rev o lu
tions a s the b a sic e x p la n a tio n fo r successive lo n g -term cycles
of e x p a n sio n , o r for long-term cycles of sta g n a tio n .
T o d a y this econom ic m otive does n o t act in the sam e w ay.
On the m ilita ry level, no re a s o n s a re v a lid for p u ttin g an
end to the rese a rch for new w eap o n s. On the c o n tra ry , the
o m n ip re se n t d a n g e r exists th at the en em y will be the first to
find a new w e apon. T here is c o n seq u en tly a real stim ulus
for p e rm a n e n t rese a rch , u n in te rru p te d a n d p rac tic a lly w ithout
a n y econom ic c o n sid e ra tio n (a t least for the United States), so
th a t the riv e r flow s o n with v irtu a lly no o b stru c tio n . This
m ea n s th a t we a re p a s sin g th ro u g h a n e ra o f a lm o st u n in
te rru p te d tech n o lo g ical tra n s fo rm a tio n in the sp h ere of pro-
58
duction. You h a v e o n ly to recall w h at h a s been pro d u ced
d u rin g the last 10-15 years, sta rtin g with the release of n u
c lear en erg y a n d p ro ceeding th ro u g h a u to m a tio n , the devel
opm ent of electronic com puters, m in ia tu riz a tio n , the laser a n d
a w hole series of p h e n o m e n a in o rd e r to g r a s p this tra n s fo r
m ation, this u n in te rru p te d technological rev o lu tio n .
The term "continuous technological revolution" is now ju st
a n o th e r w a y of sa y in g th a t the renew al p e rio d o f fixed capi
tal h a s been shortened. T his e x p la in s the w orldw ide e x p a n
s ion of ca p ita lism . Like e very long-term e x p a n sio n in the
c a pitalist system , the lim its of the present e x p a n sio n are de
term ined by the a m o u n t of fixed investm ents.
T he ra p id renew al of fixed c a p ita l a lso e x p la in s the red u c
tion in length of the b a sic econom ic cycle. This cycle is n o r
m ally determ ined b y the ag e of the fixed cap ital.
To the extent th at this fixed c a p ita l is now renew ed at a
m ore ra p id rate, the length of the cycle is a lso n arro w ed .
We no lo n g e r h a v e crises e very seven o r 10 y e a rs b u t in
ste a d h a v e recessions ev e ry fo u r to five y ears. We h a v e en
tered a far m o re ra p id series of cycles of fa r sh o rte r d u ra tio n
th a n those w hich occ u rre d p r io r to the second w o rld w ar.
F in a lly , to conclude this e x a m in a tio n o f the co n d itio n s un
d er which to d a y 's n eo-capitalism is dev elo p in g , there is a
ra th e r im p o rta n t c h a n g e ta k in g place o n a w o rld scale in
the co n d itio n s u n d e r which cap ita lism exists a n d is developing.
On the one h a n d , there is a n en la rg e m e n t of the so-called
socialist ca m p , a n d on the o ther, the co lo n ia l rev o lu tio n . A nd
while the ba la n c e , so fa r a s a w idening of the "socialist cam p"
is concerned, effectively represents a lo ss from the p o in t of
view of w o rld c a p ita lism loss of raw m ate ria ls, investm ent
op p o rtu n itie s for c a p ita l, m ark e ts, a n d o n all o th er levels
the ba la n c e , so far a s the colo n ia l rev o lu tio n is concerned,
p a ra d o x ic a l a s this m a y seem , h a s no t a s yet resulted in a
s u b s ta n tia l loss to the c a p ita list w orld. On the c o n tra ry , one
of the co n c o m ita n t fac to rs e x p la in in g the scale of econom ic
ex p a n sio n of the im p e ria list c o untries o c c u rrin g in this p h ase,
is the fact th at, in so fa r a s the c o lo n ia l rev o lu tio n rem ain s in
the fra m ew o rk of the c a p ita list w o rld m a rk e t (except where
it gives b irth to o th er so-called so cialist states), it serves as
a stim u lu s to the p ro d u ctio n a n d e x p o rt of in d u stria l equip-
59
m ent, the p ro d u c ts of h e a v y in d u stry in the im p e ria list
countries.
T his m ea n s th a t the in d u stria liz a tio n o f the u n d erd ev elo p ed
c ountries, n e o-colonialism , the dev elo p m en t o f a new b o u r
geoisie in the co lo n ia l countries, all constitute fu rth e r s u p p o rts,
tog eth er with the tech n o lo g ical re v o lu tio n , for the long-term
e x p a n sio n tre n d in the a d v a n c e d ca p ita list countries. Since
these fu n d a m e n ta lly h a v e the sa m e effects, they a lso lea d to
a g ro w th in p ro d u c tio n fo r h e a v y in d u stry a n d fo r the in d u s
tries e n g a g e d in m ec h a n ica l c o n stru c tio n in the m an u fa c tu re
of m a c h in e ry . A p a r t of this m a c h in e ry serves fo r the accel
e ra te d renew al of fixed c a p ita l in the a d v a n c e d c a p ita list co u n
tries; a n o th e r p a r t serves fo r the in d u stria liz a tio n , the m ech
a n iz a tio n of the new ly ind ep en d en t c o lo n ia l co untries.
B y a p p ro a c h in g the subject in this w ay , we a re a b le to g ra s p
the deeper m e a n in g of the n eo -cap italist p h a se w hich we are
now w itnessing, w hich is th a t of a lo n g -term e x p a n sio n of
c a p ita lism , a p e rio d w hich I believe is lim ited in time, ju st
like s im ila r p e rio d s in the p a st. I do n o t in the least believe
th a t this p e rio d of e x p a n sio n will last fo re v e r a n d th a t c a p i
talism h a s now fo u n d the p h ilo s o p h e rs sto n e which will allow
it to a v o id n o t o n ly its cyclical crises b u t a lso its long-term
cycles of successive rela tiv e e x p a n sio n a n d s ta g n a tio n . But
it is this p h a s e of e x p a n sio n w hich now c o n fro n ts the w orking-
c la ss m o v em e n t of W estern E u ro p e with its specific p ro b lem s.
Let u s now tu rn to the fu n d a m e n ta l ch ara c te ristic s o f this
g o v e rn m e n ta l in te rv en tio n into c a p ita list eco n o m y .

The Im portance of Armament Expenditures


T he first objective p h e n o m e n o n w hich is a trem en d o u s fac
to r in fac ilitatin g the g ro w in g g o v e rn m e n ta l in terv en tio n in
the econom ic life of the c a p ita list co u n tries is p recisely this
p e rm a n e n ce of the c old w a r a n d this p erm a n e n ce in the a r
m am e n ts race. T o s a y p e rm a n e n ce o f the cold w a r, p e rm a
nence in the a rm a m e n ts race, pe rm a n e n ce o f a n extrem ely
h ig h m ilita ry bu d g et, is a ls o to s a y state c o n tro l of a n im
p o r ta n t p a r t of the n a tio n a l incom e. If we c o m p a re the eco n o
m ies of all the b ig a d v a n c e d c a p ita list c o u n tries of to d a y
w ith those of all the ca p ita list c o untries p r io r to the first w o rld
w a r, we im m ed iately see the extrem ely im p o rta n t stru c tu ra l
60
change which h a s taken place a n d which is independent of
every theoretical c o n sid e ratio n a n d research. It is a conse
quence of the rise in the m ilita ry budget. W hereas p rio r to
1914 the to ta l state b u dget to o k 5 p er cent, 6 p er cent, 4 per
cent, 7 p e r cent of the n a tio n a l incom e, the b u d g ets of cap italist
states to d a y represent 15 p e r cent, 2 0 p er cent, 25 p er cent
o r even in som e cases 30 p er cent of this incom e.
If for the m om ent we d is re g a rd all co n sid e ratio n s of inter
ventionism , the v e ry fact alo n e of this in crease in p e rm a n e n t
a rm a m e n t expenses signifies th at the state is a lre a d y co n tro l
ling a n im p o rta n t p a rt of the n a tio n a l incom e.
I h a v e stated th at this cold w a r m a y rem a in p e rm a n e n t for
a lo n g perio d . T h a t is m y p e rs o n a l conviction. It is p e rm a
nent because the class co n tra d ic tio n s betw een the two cam p s
c o n fro n tin g each o ther on a w orld scale a re p erm a n e n t. Be
cause there is no logical rea so n for a ssu m in g , w hether for the
sh o rt o r lo n g ru n , th at the in te rn a tio n a l b o u rg eo isie will
v o lu n ta rily d isa rm in the face of its g lo b a l enem ies o r th at
the Soviet U nion a n d the U nited States will reach a n a g re e
m ent which m ig h t p erm it a ra p id red u ctio n in these a rm a m e n t
expenses b y one -h a lf o r tw o-thirds o r three-fourths.
We therefore s ta rt from the po in t th at p e rm a n e n t m ilita ry
expenses will tend to rise in a m o u n t a n d im p o rta n c e relative
to the n a tio n a l incom e, o r to becom e stabilized, th at is to
s a y , increase to the extent th at the n a tio n a l incom e will ex
p a n d d u rin g this p h a se. A nd it is the v e ry fact of this ex
p a n s io n in m ilita ry expenses which creates the im p o rta n t
role p lay e d b y g o v e rn m e n t in econom ic life.
You m a y know the article b y Pierre N a v ille p u b lish ed in
the N o u v e lle R e v u e M arxiste se v era l y e a rs a g o . In it he re
p rinted a set of figures p resented b y the d irecto r of the [French]
b udget in 1956, sho w in g the p rac tic a l im p o rta n c e of m ili
ta r y expenses for a w hole series of in d u stria l b ran c h e s. T here
a re m a n y in d u stria l b ran c h e s, r a n k in g v e ry high in im p o r
tance a n d a m o n g the lea d e rs in tech n o lo g ical developm ent,
which a re w o rk in g m a in ly on c o n tra c ts with the state a n d
which w ould be co n d em n ed to a n e a rly dem ise if these state
c o ntracts d isa p p e a re d : a e ro n a u tic s, electronics, n a v a l c o n
struction, tele com m unications a n d even the en g in eerin g p ro
fession, a n d of course, the n u c le a r in d u stry .
61
In the U nited States the situ a tio n is sim ilar; b u t to the de
gree th a t these le a d in g b ra n c h e s a re m o re h ig h ly developed
a n d th a t A m e ric a n e c o n o m y is o n a la rg e r scale, these b ran c h e s
constitute the econom ic a x is for w hole g e o g ra p h ic regions. It
c a n be s a id th at C a lifo rn ia , w hich is the state u n d e rg o in g
the g rea te st e x p a n sio n , is la rg e ly liv in g off the A m erican
m ilita ry bu d g et. If the c o u n try h a d to d isa rm a n d rem a in
cap ita list, it w o u ld be a c a ta s tro p h e fo r the state of C a lifo rn ia ,
w here the m issle in d u stry , m ilita ry a v ia tio n in d u stry a n d
electronic in d u stry a re all concen trated . It is u n n e c essa ry to
d ra w a picture to illu stra te the po litical effects o f this special
situ a tio n o n the a ttitude of C a lifo rn ia 's b o u rg e o is politicians:
you will h a rd ly find them a t the h e a d o f the stru g g le for dis
a rm a m e n t!
A second p h e n o m e n o n of this e x p a n d in g p h a s e w hich at
first sig h t a p p e a r s to be in c o n tra d ic tio n with the first is the
in cre a se in w h a t m ig h t be called so cial ex p en d itu res, th at is,
e v e ry th in g tied m o re o r less closely to so cial in su ran ce. These
o u tla y s h a v e been c o n s ta n tly in cre a sin g in g o v e rn m e n ta l b u d
gets g e n e ra lly , a n d constitute a sign ifican t p a rt of the n a tio n a l
incom e o v e r the p ast 25 -3 0 y e a rs.

How Crises are "Amortized in a Recession


T his g ro w th in social w elfare ex p e n d itu re s is the result of
se v era l c o n c o m ita n t p h e n o m e n a .
T here is, first of all, the p re s s u re of the w o rk in g -c lass m ove
m ent, which h a s a lw a y s a im e d a t a m e lio ra tin g one of the
m ost distinct c h a ra c te ristic s o f the p ro le ta ria n con d itio n : in
security. Since the v a lu e of lab o r-p o w e r o n ly r o u g h ly covers
the needs of its c u rre n t upkeep, e v e ry in te rru p tio n in the sale
of this la b o r-p o w e r th a t is to sa y , e v e ry accident which in
terferes with the w o rk e r's n o rm a l jo b : u n em p lo y m en t, sickness,
d isa b ility , old ag e casts the p r o le ta ria n in to the depths of
p o v e rty . In the b e g in n in g of the ca p ita list system , there w as
o n ly "charity," p riv a te o r public, to which the jo b less w o rk ers
could tu rn in distress, with o n ly in sig n ifican t m ate ria l re
su lts a n d at the price of a terrib le blow to his h u m a n d ig
nity. Little b y little, the w o rk in g -c lass m ovem ent h a s im p o sed
the p rinciple of so c ia l insurance, first v o lu n ta ry , then com
p u lso ry , a g a in s t these blow s of fate: h ealth in su ra n c e, unem -
62
ploym ent c o m pensation, old-age in su ran ce. A nd the struggle
h a s finally w ound up with the principle of social security,
which w ould theoretically cover the w age a n d s a la r y e a rn e r
a g a in s t all losses of c urre n t e a rn in g s.
Then there is a certain interest o n the p a rt of the state. The
institutions receiving the g re a t a m o u n ts used for fin an cin g
this social security p r o g ra m often h a v e larg e a m o u n ts of
liquid funds. T hey can invest these funds in g o v e rn m e n t o b
ligations, m ak e lo a n s to the state (sh o rt-term o b lig a tio n s, as
a rule). T he N azi regim e ap p lie d this technique a n d it su b
sequently s p re a d to m ost of the cap ita list countries.
The ever m o u n tin g size of these social secu rity funds h as,
m o reover, b ro u g h t a b o u t a special situ atio n , p o sin g a theoreti
cal a n d p rac tic a l pro b lem to the w o rk in g -class m ovem ent.
The latter p ro p e rly considers th at all funds p a id into the
social security fund either b y the e m p lo y ers, o r b y the state,
o r b y w ithh o ld in g s from the w ages of the w o rk ers them
se lv e s sim p ly constitutes a p a rt of w ages, a n "indirect wage,"
o r "deferred wage." This is the o n ly re a s o n a b le p o in t o f view,
a n d one h a rm o n iz in g , m o re o v e r, with the M a rx ist th eo ry of
value, since e v e ry th in g received b y the w o rk e r in e x ch an g e for
his lab o r-p o w e r sh o u ld in effect be co n sid ered the price o f that
labor-pow er, reg a rd le ss of w hether it is p a id him im m ediately
(direct w age), o r later (deferred w ag e). F o r this rea so n , "parity
m anagem ent" (un io n -e m p lo y e r, o r u n io n -state ) of so cial se
c urity funds m ust be co n sid ered a s a v io la tio n of a w o rk e r's
right. Since these funds be lo n g o n ly to the w o rk ers, a n y u n
w a rra n te d interference in their m a n a g e m e n t b y so cial g ro u p s
o ther th a n the tra d e u n io n s m u st be rejected. T he w o rk ers
sh o u ld no m o re allow " p a rity m an ag em en t" of their w ages
th a n the ca p ita lists p erm it " p a rity m an ag em en t" of their b a n k
accounts.
But the m o u n tin g size of these p a y m e n ts into so cial security
h a s m a n a g e d to create a certain "tension" between direct w ages
a n d deferred w ages, since the latter som etim es reach 4 0 per
cent of the to tal w age. M an y tra d e -u n io n centers a re o p p o sed
to fu rth e r in creases in "deferred wages" a n d w an t to concen
trate o n h a v in g ev e ry new g a in in the form of a n im m ediate
g a in in direct p a y m e n ts to the w ork er. It m u st be u n d e rsto o d ,
how ever, th a t u n d e rn e a th the fact o f the "deferred wage" a n d
63
of so cial se cu rity lies the prin cip le o f class so lid a rity. A ctually,
the funds fo r sickness, accidents, etc., a re n o t b a sed o n the
prin c ip le of "in d iv id u al return," (ea c h on e e v e n tu a lly receiving
e v e ry th in g he o r the e m p lo y e r o r the state h a s p a id in for
h is a c co u n t), b u t o n the insu ra n ce principle. T hose w ho do
n o t h a v e accidents p a y so th a t those w ho do m a y be fully
covered. The u n d e rly in g prin c ip le in this p ractice is th at of
class so lid a rity , i.e., the interest of the w o rk e rs in a v o id in g
the creation o f a su b -proletariat, w hich w o u ld n o t o n ly u n d e r
m ine the m ilita n cy of the la b o r in g m asse s (each in d iv id u a l
fe a rin g to be d riv e n into this s u b -p ro le ta ria t s o o n e r o r la te r)
b u t w o u ld a ls o rep resen t a d a n g e r of co m p etitio n for jo b s
a n d its th re a t to w ages. U n d e r these co n d itio n s, in ste a d of
c o m p la in in g a b o u t the "excessive" scale o f the deferred w age,
we s h o u ld d e m o n s tra te its p itifu l in a d eq u a c y , for it b rin g s
a b o u t a terrib le d ro p in the s ta n d a r d of liv in g o f m o st old
w o rk e rs, even in the m o st p ro s p e ro u s c a p ita list countries.
T he effective a n sw e r to the p ro b le m o f the "tension" betw een
direct a n d in d ire ct w ages is the d e m a n d to rep lace the p rin ci
ple of a s o lid a rity lim ited solely to the la b o r in g class b y the
prin c ip le of a s o lid a rity w idened to include a ll citizens, the
tra n s fo r m a tio n of so c ia l secu rity in to n a tio n a l services (of
h e a lth , full em p lo y m en t, o ld a g e ) fin a n c e d b y a p ro g ressive
ta x o n incom es. O nly in this w a y c a n the "deferred wage"
w ind u p a s a ge n u in e ly im p o rta n t in crease in w ages a n d a
g e n u in e red istrib u tio n o f the n a tio n a l in co m e in fa v o r of the
w a g e e a rn e rs .
It m u st be recognized fully th a t u p to now this h a s no t been
a c co m p lish e d o n a g re a t scale u n d e r the ca p ita list system ,
a n d it is even n e c essa ry to pose the q u estio n o f w hether this
c a n be realized w ithout p ro v o k in g a c a p ita list reactio n of
such c h a ra c te r th a t we w ou ld so o n find o u rselv es in a p erio d
of r e v o lu tio n a ry crisis. In p o in t of fact, the m o st interesting
e xperiences w ith so cial security, such a s the one in tro d u c ed
in F ra n c e after 1944 a n d m o re p a rtic u la rly , the N a tio n a l
H ealth Service in G reat B rita in after 1945, w ere financed to
a fa r g re a te r extent b y ta x in g the w o rk e rs th em selves (m a in ly
by in cre a sin g indirect tax es a n d by in creased ta x a tio n o f even
m odest w ages, a s in B elgium for e x a m p le ) th a n b y ta x a tio n of
the bo u rg eo isie . T h a t is w hy we h a v e never seen a genuine a n d
ra d ic a l re d istrib u tio n of the n a tio n a l incom e b y ta x a tio n in
64
the cap ita list system ; it rem a in s one of the g re a t "myths" of
reform ism .
There is a n o th e r aspect to this g ro w in g im p o rta n c e of "de
ferred wages," of social in su ra n c e, to the n a tio n a l incom e of
in dustrialized cap ita list countries: it is their anticyclical char
acteristic. H ere we find a n o th e r rea so n w hy the b o u rg eo is
state, neo-capitalism , is interested in in cre a sin g the vo lu m e
of these "deferred wages." It is because it p la y s the role of a
sh o c k -a b s o rb in g c u shion in p rev e n tin g too su d d en a n d too
violent a d ro p in the n a tio n a l incom e in the event of a crisis.
F o rm e rly w hen a w o rk e r lost his jo b , his incom e fell to zero.
When a fou rth of the la b o r force in a c o u n try w as u n em
ployed, the incom e of w age e a rn e rs a n d s a la rie d w o rk ers a u to
m atica lly decreased b y a fourth. The terrible consequences
of this d ro p in incom e, this d ro p in "total dem an d ," for c a p i
talist e c o n o m y in g en eral h a s freq u en tly been described. It
g a v e the ca p ita list crisis the a p p e a ra n c e of a c h a in reaction,
which kept on g o in g with terrify in g logic a n d inevitability.
Let us a ssu m e th a t the crisis b re a k s o u t in a sector p r o d u
cing m ach in es a n d th at this secto r is com pelled to close its
plan ts a n d d isc h a rg e its w o rk ers. The lo ss of incom e b y the
latter ra d ic a lly reduces their p u rc h a se s of c o n su m e r g o o d s.
B ecause of this, there is v e ry so o n a n o v e rp ro d u c tio n in the
sector m a k in g c o n su m e r g o o d s, which, in its tu rn , is soon
com pelled to close its p la n ts a n d d ism iss so m e o f its p e rso n
nel. A g a in , therefore, there will be a fu rth er d ro p in the sales
of c o n su m e r g o o d s, a n d a n in crease in in v en to ries. At the
sam e tim e, the p la n ts m a n u fa c tu rin g c o n su m e r g o o d s, bein g
h a rd hit, will reduce o r cancel their o rd e rs for m ach in es, which
will b r in g a b o u t the sh u td o w n of m o re firm s e n g a g ed in
h e a v y in d u stry , consequently, the d ism issa l of a n o th e r g ro u p
of w o rk e rs, follow ed b y a new d ro p in b u y in g pow er for
c o n su m e r g o o d s, with a n o th e r c o n seq u en t s h a rp e n in g of the
crisis in the light in d u stria l sector, which will in its tu rn create
new layoffs, etc.
But once a system of effective un e m p lo y m en t in su ra n c e h as
been instituted, these c u m u la tiv e effects o f the crisis are d a m p
ened: the g re a te r the u n e m p lo y m en t c o m p e n sa tio n , the s tro n g
er will be the d a m p e n in g effect on the crisis.
Let us retu rn to the de scrip tio n of the b e g in n in g of the
crisis. T he sector m a n u fa c tu rin g m a c h in e ry experiences an
65
o v e rp ro d u c tio n a n d h a s to la y off som e of its perso n n el. But
w hen the u n e m p lo y m en t c o m p e n sa tio n a m o u n ts to let us s a y
6 0 per cent of his w ages, this lay o ff no lo n g er m ean s a total
lo ss of incom e to the un em p lo y ed , b u t o n ly a red u ctio n of
4 0 per cent in his incgm e. Ten p e r cent u n em p lo y m en t in a
co u n try no lo n g e r m ea n s a n o v e ra ll d ro p in d e m a n d of 10
p e r cent bu t o n ly of fo u r p er cent; 25 p er cent u n em p lo y m en t
now m ea n s no m o re th a n a 10 per cent d ro p in incom e. And
the c u m u la tiv e effect of this redu ctio n (w hich is figured in
acad e m ic econom ic science b y a p p ly in g a m u ltip lier to this
red u c tio n in d e m a n d ) will be c o rre s p o n d in g ly reduced; the
crisis will n ot hit the c o n su m e r g o o d s sector so forcefully; the
latter will therefore la y off f a r fewer w o rk e rs; it will be able
to continue som e of its o rd e rs for m ach in es, etc. In brief, the
crisis does n ot s p re a d o u t in the fo rm of a s p ira l; it is "stop
ped" m id w ay . T hen it b eg in s to be resolved.
W hat we now call a "recession" is n o th in g b u t a classical
c a p ita list crisis w hich h a s been a b a te d , p a rtic u la rly b y m ean s
of social in su ra n c e.
In m y T reatise on M a rx ist E c o n o m ics, I cite d a ta o n the
last A m e ric a n recessions w hich e m p iric a lly confirm this theo
retical a n a ly s is. In fact, a c c o rd in g to these figures, it a p p e a rs
th a t the recessions of 1953 a n d 1957 b e g a n with extrem e
s h a rp n e s s a n d h a d a n am p litu d e c o m p a ra b le in ev ery respect
to the severest crises of c a p ita lism in the p a s t ( 1 9 2 9 a n d
1938). But c o n tr a ry to these pre-seco n d w o rld w a r crises,
the recession of 1953 a n d of 1957 sto p p e d e x p a n d in g after
a ce rta in n u m b e r of m o n th s, w ere co n seq u en tly sto p p e d h alf
w a y , then b e g a n to recede. We now u n d e rs ta n d on e o f the
fu n d a m e n ta l c au ses for this tra n s fo rm a tio n o f crises into re
cessions.
F ro m the sta n d p o in t of the d istrib u tio n of the n a tio n a l in
com e betw een c a p ita l a n d la b o r, the m o u n tin g size of the
m ilita ry b u d g e t h a s a n o p p o site effect to the sim ila r in crease
in "deferred w ages," since in e very case a p a rt o f the "deferred
wage" a lw a y s stem s from s u p p le m e n ta ry p a y m e n ts b y the b o u r
geoisie. But from the s ta n d p o in t of its a n ticyclica l effects, the
m o u n tin g size of the m ilita ry b u d g e t (o f p u b lic expenses gen
e ra lly ) a n d the m o u n tin g size of so cial in su ra n c e p la y identi
cal roles in "a bating" the violence of crises, a n d gives neo
ca p ita lism one of its special aspects.
A ggregate d e m a n d can be divid ed into two categories: the
d e m a n d for co n su m er g o o d s a n d the d e m a n d for p ro d u ce r
g o o d s (m a c h in e s a n d equipm ent). The e x p a n sio n in social
security funds m akes it possible to a v o id a n extrem e d ro p
in expenditures (in d e m a n d ) for c o n su m er g o o d s after the
o u tb re a k of a crisis. The e x p a n sio n in public expenditures
(especially in m ilita ry exp en d itu res), m ak es it po ssib le to
a v o id a n extrem e d ro p in expenditu res (in d e m a n d ) for p ro
ducer g o o d s. T hus, these distinctive tra its of n eo-capitalism
o p erate in both sectors, not in su p p re ssin g the co n tra d ic tio n s
of c apitalism crises b re a k out ju st a s they did before, cap i
talism h a s no t found a m ea n s of in su rin g a m o re o r less
h a rm o n io u s a n d u n in te rru p te d g ro w th b u t in red u cin g their
am p litu d e a n d seriousness, at least tem p o rarily .
The fra m ew o rk for this process m u st be a long-term p erio d
of accelerated g row th bu t at the cost of p e rm a n e n t inflation.

The Tendency to Permanent Inflation


One of the consequences of all the p h e n o m e n a we h a v e ju st
discussed, all of them anticyclic in their effect, is w h at m a y be
called a tendency to p e rm a n e n t in flatio n . This h a s becom e
a n o b v io u s m an ifesta tio n in the ca p ita list w o rld since 1940,
since the b e g in n in g o r eve of the second w o rld w ar.
T he fu n d am e n ta l c ause of this p e rm a n e n t in flatio n is the
im p o rta n c e of the m ilita ry sector, of the a rm a m e n t sector,
in the e c o n o m y of m o st ca p ita list countries. T he p ro d u ctio n
of a rm a m e n ts h a s this special c h aracteristic: it creates p u r
c h a sin g pow er in e x actly the sa m e w a y th at p ro d u ctio n of
c o n su m e r g o o d s o r p ro d u c tio n of p ro d u c e r g o o d s does
w ages a re p a id in p lan ts m a k in g ta n k s o r rockets, ju st as
they a re p a id in p la n ts m a n u fa c tu rin g m ach in es o r textiles,
a n d the c a p ita list ow ners of these p lan ts pocket a p ro fit ju st
like the ca p ita list ow ners of steel m ills o r textile p lan ts but
in e x c h an g e fo r this s u p p le m e n ta ry b u y in g p ow er, there is
no c o rre s p o n d in g s u p p le m e n ta ry m erc h a n d ise placed o n the
m ark et. P a rallel with the cre a tio n of b u y in g p o w er in the two
fu n d am e n ta l sectors of classical eco n o m y , the c o n su m e r g o o d s
sector a n d the p ro d u c e r g o o d s sector, is the a p p e a ra n c e of
a m a s s of m erc h a n d ise o n the m ark e t place, which is c a p ab le
of a b s o rb in g this p u rc h a s in g pow er. In c o n tra st, the c reatio n
67
of p u rc h a s in g pow er in the a rm a m e n t sector h a s n o com pen
s a to r y in crease in the m a s s of m erch an d ise, either co n su m er
g o o d s o r p ro d u c e r g o o d s, w hose sale c a n be a b s o rb e d b y the
p u rc h a s in g p ow er thus created.
The o n ly co n d itio n in w hich m ilita ry expenses w ould no t
be in fla tio n a ry w ould be if they were com pletely p a id b y
taxes, a n d th a t in p ro p o rtio n s w hich w o u ld p erm it a con
tin u a tio n of e x a ctly the s a m e ra tio betw een the b u y in g pow er
of w o rk e rs a n d c a p ita lists o n the o ne h a n d a n d betw een the
v a lu e of c o n su m e r g o o d s a n d p ro d u c e r g o o d s o n the o t h e r .( l )
T h is situ a tio n does n o t exist an y w h ere, no t even in those
co u n tries w here the tax bite is greatest. In the U nited States,
in p a rtic u la r, to ta l m ilita ry expen ses a re n o t a t all covered
b y ta x a tio n , b y a red u c tio n in the su p p le m e n ta ry b u y in g
pow er, so th a t there is a c o rre s p o n d in g ten d en cy to w a rd p er
m a n e n t in flatio n .
T here is a ls o a p h e n o m e n o n of a s tru c tu ra l n a tu re in cap i
talist e c o n o m y in the p e rio d o f m o n o p o ly w hich h a s the sam e
effect, n a m e ly , the rig id ity of prices so fa r a s a n y decline is
concerned.
The fact th a t the g re a t m o n o p o listic tru sts v irtu a lly o r com
pletely c o n tro l a w hole series of m ark e ts, p a rtic u la rly the p r o
ducer g o o d s a n d h a rd c o n su m e r g o o d s m ark e ts, sh o w s up
in a n a bsence of price c om petitio n in the cla ssic a l m ean in g
of the term . W henever su p p ly is less th a n d e m a n d , prices
in crease, w h e re a s w hen s u p p ly exceeds d e m a n d , prices do
n o t fall b u t re m a in sta b le o r fall o n ly slightly. T his is a
p h e n o m e n o n w hich h a s been no ted in h e a v y in d u stry a n d in
the d u ra b le c o n su m e r g o o d s m a rk e ts o v e r p ra c tic a lly 25
y e a rs. It is m o re o v e r a p h e n o m e n o n ten d en tially lin k ed to
the lon g -term cycle p re v io u s ly discussed, fo r it m u st be fra n k ly
ack n o w led g ed th a t we c a n n o t p red ict c h a n g es in the prices
of d u ra b le c o n su m e r g o o d s after the close o f this long-term
p e rio d of e x p a n sio n .
It c a n n o t be excluded th a t w hen the au to m o b ile in d u stry
will in crease its excess p ro d u ctiv e ca p ac ity , this will w ind u p

( 1 ) T h e f o r m u l a is n o t q u ite e x a c t. F o r th e s a k e o f s im p lif ic a tio n , w e


a r e n o t ta k i n g in to a c c o u n t th a t f r a c t io n o f th e p u r c h a s i n g p o w e r o f th e
c a p i t a l i s t s w h ic h is d e s tin e d ( 1 ) f o r th e c o n s u m p tio n o f th e c a p ita lis ts
th e m s e lv e s , a n d ( 2 ) f o r th e c o n s u m p tio n o f th e s u p p l e m e n t a r y w o r k e r s
w h o a r e h ir e d a s a c o n s e q u e n c e o f c a p ita lis t in v e s tm e n ts .
with a new com petitive struggle over prices a n d with spectacu
la r declines. It is possible to defend the thesis th at the fam o u s
au to m o b ile crisis predicted for the second h a lf of this decade
(1 9 6 5 , 1966, 1967), could be a b s o rb e d relatively e asily in
W estern E urope, if the selling price of sm all c a rs w as low ered
b y one half. If the d a y cam e th a t a C itroen 4CV o r a 2CV
w ould sell for 2 0 0 ,0 0 0 o r 2 5 0 ,0 0 0 old francs, there w ould
then be such a n increase in d e m a n d th at this excess c ap acity
w ould m ost likely d isa p p e a r in a n o rm a l w ay. This does no t
a p p e a r po ssib le w ithin the fram ew o rk of presen t agreem ents,
but if we view the m atter in term s of a lo n g p e rio d of five o r
six y e a rs of cut-th ro a t com petition, so m e th in g entirely p o s
sible in the E u ro p e a n a u to m o b ile in d u stry , then the eventu
a lity c a n n o t be excluded.
Let us im m ed iately a d d th at there is a m o re likely eventu
ality, one in w hich excess pro d u ctiv e c a p ac ity is su p p ressed
b y the sh u ttin g dow n a n d d isa p p e a ra n c e of a w hole set of
firm s, in which case the d isa p p e a ra n c e o f this excess ca p ac ity
will prevent a n y im p o rta n t d ro p in prices. T h a t is the n o rm a l
reactio n to such a situ a tio n in the system o f m o n o p o ly c a p i
talism . T he o th e r rea c tio n m u st n o t be com pletely excluded,
b u t up to this tim e we h a v e not w itnessed it in a n y sphere.
In the oil in d u stry , for exa m p le , the p h e n o m e n o n of p o ten tial
o v e rp ro d u c tio n h a s existed for six y e a rs, b u t the lo w erin g of
prices perm itted b y the big tru sts, w hich o p e ra te a t p ro fit rates
of 100 per cent a n d 150 per cent, is a d ro p in the bucket:
the price red u ctio n s a m o u n t to 5 o r 6 p er cent, w h ereas the
tru sts co u ld reduce the price o n g a so lin e b y 5 0 p er cent if
they w a nted to.

"Economic Planning"
The o th er side of the n eo -cap italist coin h a s to d o with the
b o d y of p h e n o m e n a w hich h a s been su m m ed u p in the term s
" m a n a g e d econom y," "econom ic p ro g ra m m in g ," o r still fu r
ther "indicative p lan n in g ." It is a n o th e r fo rm o f co n scio u s in
tervention in the e conom y, c o n tr a ry to the classical sp irit of
ca p ita lism , b u t it is a n in te rvention which is ch ara c te rize d b y
the fact th a t it is no lo n g er m a in ly a g o v e rn m e n ta l act bu t
is m o re a n act of c o lla b o ra tio n , of in te g ratio n , betw een g o v e rn
m ent o n one side a n d ca p ita list g ro u p s o n the other.
H ow c a n we e x p la in this g e n e ra l tendency to "indicative
p lan n in g ," to "econom ic p ro g ra m m in g ," o r to a "m a n a g e d
ec o n o m y "?
We m u st s ta r t from a rea l need of big ca p ita l, a need which
derives from precisely the p h e n o m e n o n which we described
in the first p a rt of o u r discu ssio n . We sp o k e there o f a n accel
e ra tio n in the rh y th m o f the renew al o f m ech an ical in sta lla
tions; o r a m o re o r less p e rm a n e n t tech n o lo g ical revolution.
But w hen we sp e a k of a n acceleratio n in the rh y th m of renew al
of fixed c a p ita l we can o n ly be refe rrin g to the necessity of
a m o rtiz in g c o n tin u o u sly e x p a n d in g investm ent expenses in
p e rio d s of tim e w hich c o n tin u o u sly becom e s h o rte r. C ertain ly
this a m o rtiz a tio n m u st be p la n n e d a n d calcu lated in the m o st
a c c u ra te w a y possible, so a s to p reserv e the e c o n o m y from
sh o rt-te rm flu ctu atio n s, w hich c o n ta in the d a n g e r o f c reatin g
incredible d is o rd e r in en te rp rise s o p e ra tin g with m illio n s of
d o lla rs. T his fu n d a m e n ta l fact is the c au se of cap ita list eco
n o m ic p ro g ra m m in g for its d riv e to w a rd a m a n a g e d econom y.
T o d a y 's c a p ita lism of the g re a t m o n o p o lies assem b les tens
of m illio n s of d o lla rs in investm en ts w hich h a v e to be a m o r
tized speedily. It c a n no lo n g e r affo rd to ru n the risk o f su b
sta n tia l perio d ic fluctuations. It c o n seq u en tly req u ires a g u a r
antee th a t its a m o rtiz a tio n costs will be co v ered a n d a ssu ra n c e
th a t its revenue will continue, a t least fo r a v e ra g e p erio d s of
tim e c o rre s p o n d in g m o re o r less to the a m o rtiz a tio n p erio d
of its fixed c a p ita l, p e rio d s w hich now extend between four
a n d five y e a rs.
M oreo v er, the p h e n o m e n o n h a s em erg ed directly from with
in the c a p ita lis t en te rp rise itself, in w hich the ever in creasin g
co m p lex ity of the p ro d u ctiv e p ro ce ss im plies in cre a sin g ly p re
cise p la n n in g efforts in o rd e r for it to function a s a whole.
C a p ita list p r o g ra m m in g is, in the last a n a ly sis, n o th in g but
the extension, o r m o re exactly, the c o o rd in a tio n on a n a tio n a l
level of w h a t h a s a lr e a d y been h a p p e n in g o n the level of
the la rg e c a p ita list en te rp rise o r cap ita list g ro u p in g s such
as the tru st o r cartel e m b ra c in g a g ro u p of com p an ies.
W hat is the fu n d a m e n ta l cha ra c te ristic of this indicative
p la n n in g ? It is e ssentially different in n a tu re from so cialist
p la n n in g . It is n o t m a in ly concerned with setting up a set
o f o bjectives in p r o d u c tio n fig u r e s a n d in su rin g the attain-
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m ent o f these goals. Its m a jo r concern is with c o o rd in a tin g
the investm ent p la n s a lre a d y d raw n up b y p riv a te firm s a n d
with effecting this necessary c o o rd in a tio n b y p ro p o sin g , at
the v e ry m ost, certain objectives considered to h av e p rio rity
on the g o v e rn m e n ta l level. These are, of course, objectives
c o rre sp o n d in g to the g e neral interest of the b o u rg eo is class.
In a c o u n try like B elgium o r G reat B ritain, the o p e ra tio n
h a s been effected in a pretty crude w ay ; in F ran ce, where e v ery
th in g h a p p e n s on a m uch m ore refined intellectual level, a n d a
g re a t deal of c am o u flag e is used, the class n a tu re of the m ech
anism is less obv io u s. It is nonetheless identical with th at of
the econom ic p ro g ra m m in g of the o th er c ap italist countries.
In essence, the activity of " p la n n in g com m issions," of "p lan
n in g b u rea u s," of "p ro g ra m m in g b u reau s," consists of co n
su ltin g representatives of v a rio u s e m p lo y er g ro u p s, e x a m in
in g their investm ent projects a n d m ark e t forecasts, a n d
"harm onizing" the forecasts of the different sectors with each
other, a n d e n d e a v o rin g to a v o id bottlenecks a n d d u p licatio n s.
G ilbert M athieu pu b lish e d three g o o d articles o n this su b
ject in L e M o n d e (M arch 2, 3 a n d 6, 19 6 2 ), in which he
pointed o u t th at a s a g a in s t 2 8 0 tra d e u n io n ists w ho h a v e
p a rticip a te d in the w ork of the different p la n n in g com m is
sio n s a n d su b c o m m issio n s, there were 1,280 c o m p a n y h e a d s
o r representatives of em p lo y e r a sso c ia tio n s. "In practice, Mr.
F ra n c o is P e rro u x believes, the F ren ch p la n is often set up
a n d p ut into o p e ra tio n u n d e r the p r e p o n d e ra n t influence of
the b ig co m p an ies a n d fin a n c ia l institutions." A n d Le B run,
a lth o u g h one of the m o st m o d era te tra d e -u n io n lead ers, a s
serts th a t F re n ch p la n n in g "is e ssen tially a rr a n g e d between
the h ig h er a g e n ts of c a p ita l a n d the h ig h er civil s e rv a n ts,
the fo rm e r n o rm a lly h a v in g g re a te r w eight th a n the latter."
T his co n fro n tatio n a n d c o o rd in a tio n o f the decisions of
firm s is, m o re o v e r, v e ry useful fo r ca p ita list e n trep ren eu rs;
it constitutes a k in d of so u n d in g ou t of the m a rk e t o n a n a
tio n a l scale a n d o v e r a lo n g term , so m eth in g v e ry difficult to
achieve with p resent techniques. But the b a s is for all these
studies, all these ca lc u latio n s, still rem a in s the figures a d
v a n c ed a s forecasts b y the em ployers.
T here a re c o n sequently two c h a ra c te ristic fu n d am e n ta l a s
pects to this k in d of p ro g ra m m in g o r "indicative p lan n in g ."
On the one h a n d , it is n a rro w ly centered o n the interests
71
of the e m p lo y e rs w hich a re the in itial elem ent in the calc u la
tion. A nd w hen we s a y em p lo y ers, we d o n o t m ea n all em
p lo y ers, b u t ra th e r the d o m in a n t la y e rs o f the b o u rg eo is class,
th a t is to sa y , the m o n o p o lie s a n d tru sts. T o the degree th at
a conflict o f interest betw een v e ry pow erful m o n o p o lies m a y
som etim es a rise (re m em b e r the 1962 conflict in A m erica be
tween the steel p ro d u c e r tru sts a n d the steel co n su m er tru sts
r e g a r d in g steel prices), the g o v e rn m e n t p la y s a c ertain role
a s a rb itra to r betw een c a p ita list g ro u p s. It is, in som e re
spects, a n a d m in istra tiv e council o f the b o u rg e o is class actin g
in b e h a lf o f all s to c k h o ld e rs, of all m em b ers of the b o u r
geois c lass, b u t in the interest of the d o m in a n t g ro u p ra th e r
th a n in the interests of d e m o c ra cy a n d the la r g e r n u m b er.
On the o th e r h a n d , there is a n u n c e rta in ty ly in g a t the base
of all of these c a lc u latio n s, a n u n c e rta in ty a ris in g from the
fact th a t the p r o g ra m m in g is b a s e d p u rely o n fo recasts a n d
fro m the a d d itio n a l fact th a t the g o v e rn m e n t h a s n o m ean s
fo r c a rr y in g o u t such p ro g ra m m in g . As a m atter o f fact,
neither do the p riv a te interests h a v e a n y w a y o f a s su rin g
the fulfillm ent of th eir forecasts.
In 1956-60, the "p ro g ra m m e rs" of the C o m m u n a u te EurO-
peenne du C h a r b o n et de l'A cier [E u ro p e a n C o al a n d Steel
C om m unity] a s well a s those of the B elgian M in istry of Eco
nom ic A ffairs, twice m issed the m a r k b a d ly in their fo recasts
of co al c o n su m p tio n for W estern E u ro p e a n d esp ecially for
Belgium . The first tim e, p r io r to a n d d u rin g the crisis in su p
plies c a u se d b y the Suez events, th ey fo recast a s u b sta n tia l
in crease in c o n su m p tio n for 1960 a n d a co n seq u en t in crease
in co al p ro d u c tio n , with B elgian p ro d u ctio n g o in g from 30
m illion to n s of co al a n n u a lly to 4 0 m illio n tons. In reality ,
it fell from 3 0 to 2 0 m illion tons d u rin g 1960; the " p ro g ra m
m ers" h a d c o n seq u e n tly com m itted a c o m p o u n d e rr o r of ra th e r
sig nificant p r o p o rtio n s . But no so o n e r w as this on e o n rec o rd
w hen they m a d e a n o th e r in the o p p o site direction. While this
d ro p in c o a l c o n su m p tio n w as o c c u rrin g , they predicted th at
the tre n d w o u ld continue a n d d eclared th at it w as a lso neces
s a r y to co n tin u e c losing coal m ines. H ow ever, the c o n tra ry
to o k place betw een 196 0 a n d 1963: B elgian c o n su m p tio n of
coal w ent from 2 0 to 25 m illion to n s a y e a r, with the result
th a t after h a v in g cut dow n B elgian p ro d u ctiv e c a p ac ity in
co a l b y one-th ird , there w as a n acute sc arc ity in co al, p a r-
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ticu larly d u rin g the w inter of 1962-1963, a n d it w as necessary
to im p o rt coal post-haste, even from Vietnam !
This ex am p le gives us a v ivid picture of the technique which
the "p ro g ra m m e rs" m ust reso rt to ninety p er cent of the time
w hen m a k in g their ca lc u latio n s for in d u stria l sectors. It is
sim p ly a pro je c tio n into the future of the p resen t trend, co r
rected a t best b y a factor e x p re ssin g the elasticity in d em an d ,
which in tu rn is b a s e d on forecasts o f g en eral rates of ex
p a n sio n .

The State G uaranty of Profit


A n o th e r aspect of this " m a n a g e d econom y," w hich gives it
a p a rtic u la rly d a n g e ro u s c h a ra c te r vis-a-vis the w orking-
cla ss m ovem ent, is the idea th a t "social p ro g ra m m in g " o r
"incom e policies" is im plicit in the id ea o f "econom ic p r o g ra m
m ing." It is im possible to g u a ra n te e the tru sts' sta b ility in
their expenses a n d incom es for a five-year p erio d , the time
n e c essa ry for a m o rtiz in g their new equ ip m en t, w ithout sim u l
ta n e o u sly g u a ra n te e in g the s ta b ility of their w age ex pendi
tures. It is im possible to "plan costs" if "la b o r costs" ca n n o t
be "planned" a t the sam e time, th at is to sa y , if w age increases
c a n n o t be a n tic ip a te d a n d contained .
The e m p lo y e rs a n d g o v e rn m e n ts h a v e tried to im p o se such
a tendency o n the tra d e u n io n s in all the co u n tries o f W estern
E urope. T he attem pts a re reflected in p r o lo n g a tio n of the
term of con tra c ts; in leg islatio n which m ak e s w o rk sto p p a g e s
m o re difficult o r o u tla w in g w ildcat strikes; a n d in a w hole
p r o p a g a n d a u p r o a r in fa v o r of "incom e policies" which are
a p p a re n tly the "only g u a ra n ty " a g a in s t the "th reat of inflation."
T his idea th a t we m u st o rien t to w a rd "incom e policies," th at
the rate s of w age increases can be calcu lated exactly, a n d th at
we m u st in this w a y a v o id the in cid en tal costs of strik es'
"which b rin g no retu rn to a n y o n e , neither to the w o rk er n o r
to the nation"; this idea is a lso beco m in g w id e sp re a d in F ran ce.
Im plicit in it is the idea of deeply in te g ra tin g the tra d e u n io n s
into the c a p ita list system . F ro m this a n g le, tra d e u n io n ism
b a s ic a lly ceases to be a w e a p o n o f s tru g g le of the w o rk ers
for c h a n g in g the d istrib u tio n of the n a tio n a l incom e. It be
com es a g u a r a n to r of "social peace," a g u a r a n to r to the em
p lo y ers of sta b ility d u rin g a co n tin u o u s a n d u n in te rru p te d
73
process of w o rk a n d the re p ro d u c tio n of c ap ital, a g u a ra n to r
fo r the a m o rtiz a tio n of fixed c a p ita l d u rin g the entire p erio d
of its renew al.
O b v io u sly this is a tra p fo r the w o rk e rs a n d the w o rk ers
m ovem ent. T here a re m a n y re a s o n s w h y this is so a n d I
c a n n o t dwell o n them . But o ne b a sic re a s o n flows from the
v e ry n a tu re of c a p ita list e c onom y , o f m a rk e t eco n o m y g en
e ra lly , a n d Mr. M asse, the p resen t d irecto r o f the F ren ch
p la n , a d m itte d it in a recent speech he m a d e in Brussels.
U n d e r the c a p ita list system , the w age is the price of lab o r-
pow er. T his price v a rie s a ro u n d the v a lu e o f th is lab o r-p o w e r
in a c c o rd a n c e with the law s of su p p ly a n d d e m a n d . W hat,
then, is the n o rm a l d evelopm ent in the re la tio n sh ip of forces,
in the p la y of s u p p ly a n d d e m a n d fo r la b o r, d u rin g the eco
n om ic cycle in c a p ita list ec o n o m y ? D u rin g the p e rio d of re
cession a n d reco v ery , there is un em p lo y m en t, which a d v e rse ly
influences w ages, a n d the w o rk e rs c o n seq u en tly find the s tru g
gle fo r s u b s ta n tia l w ag e in cre a se s a v e ry difficult one.
A nd w h a t is the p h a s e in the cycle w hich is m o st fa v o ra b le
to the s tru g g le fo r w age incre a se s? It is ev id en tly the p h a se
in w hich there is full em p lo y m en t a n d even a sc arc ity of la b o r,
th a t is to sa y , the final b o o m p h a se, the c o n ju n c tu ra l p e a k
o r "b oiling point."
T his is the p h a s e in w hich the strik e fo r w age in creases is
easiest a n d in which the e m p lo y e rs h a v e the g rea te st tendency
to g r a n t w ag e increases even w ith o u t strik es, u n d e r the p res
su re of la b o r scarcity. But e v e ry ca p ita list technician of co n
ju n c tu re s will tell y o u th a t it is precisely d u rin g this p h ase,
from the p o in t of view of "stability," of r e m a in in g w ithin the
lim its re quired b y the cap ita list rate o f p r o fit (fo r th at is a l
w a y s a t the bo tto m of this k in d of r e a s o n in g ! ), th a t it is
m o st "d a ngerous" to call strik es a n d get w age increases. F o r
if y ou in cre a se to ta l d e m a n d w hen there is full e m p lo y m en t
of all the "factors in pro d u ctio n ," then the su p p le m e n ta ry de
m a n d a u to m a tic a lly becom es in fla tio n a ry .
In o th er w o rd s, the entire logic of a m a n a g e d ec o n o m y is
precisely to a v o id strikes a n d attem p ted im p ro v e m e n ts d u rin g
the o n ly p h a s e o f the cycle in w hich the re la tio n sh ip o f class
fo rc e s f a v o r s the w o r k in g class. T his is the o n ly p h a se o f the
cycle, this p h a s e w here the d e m a n d fo r la b o r g re a tly exceeds
74
the supply, in w hich w ages can stag e a n u p w a rd leap a n d
reverse the u n fa v o ra b le tendency in the d istrib u tio n of the
n a tio n a l incom e between w ages a n d profits a t the expense of
w ages.
T his m ea n s th at the "m anagem ent" is aim ed a t p reventing
so-called in fla tio n a ry increases in w ages d u rin g this p a rtic u la r
p h a se o f the cycle a n d sim p ly w inds u p b y reducing the
o v e ra ll ra te of increase in w ages for the w hole cycle. A cycle
is then secured in which the relativ e p o rtio n of w ages in the
n a tio n a l incom e will h a v e a p e rm a n e n t tendency to fall. It
a lre a d y h a s the tendency to fall d u rin g the p erio d of econom ic
rev iv a l, since th a t is a p e rio d of in creased p ro fit rate b y defi
nition (otherw ise there w ould be no rev iv a l!); a n d if the w o rk
ers a re prevented from corre c tin g this tendency d u rin g the
p e a k p eriod, it m ea n s th a t the tre n d to w a rd a d ete rio ra tio n
in the d istrib u tio n of the n a tio n a l incom e will be perp etu ated .
T here is, m o re o v e r, a p rac tic a l d e m o n stra tio n of the con
sequences of a com pletely rig id po licy o n incom es u n d e r state
control with u n io n c o lla b o ra tio n ; it h a s been practiced in
H o lla n d since 1945 a n d the resu lts a re a m atter of record.
T here h a s been a m a rk e d decline in the ra tio o f w ages to
n a tio n a l incom e, which is m atch ed n o w here else in E u ro p e,
not even in West G erm any.
M oreover, there a re two decisive a rg u m e n ts o n a p u rely
"technical" level a g a in s t the p ro p o n e n ts o f a n "incom es policy."
1. If y o u d e m a n d o n "conjunctural" g ro u n d s th at in creases
in w ages s h o u ld no t exceed increases in p ro d u ctiv ity d u rin g
pe rio d s of full em ploym ent, w hy d o n 't y o u d e m a n d even
g rea te r w age increases in p e rio d s of u n e m p lo y m en t? On a
c o n ju n c tu ra l b a s is , such increases w o u ld be justified a t th a t
tim e since they w ould stim u la te the eco n o m y b y in cre a sin g
to ta l d e m a n d . . .
2. H ow c a n a n "incom es policy" be practiced with the slight
est effectiveness if incom es from w ages a re the o n ly incom es
w hich a re re a lly kn o w n ? Does n o t e v e ry "incom es policy
d e m a n d a s a p rereq u isite w o r k e r s co n tro l o f p ro d u ctio n ,
o p e n in g u p o f c o m p a n y b o o ks, a n d the a b o litio n o f b a n k in g
secrets, if fo r no o th er re a s o n th a t to e sta b lish the ex a ct in
com e of the c a p ita lists, a n d the ex a ct in creases in p ro d u ctiv ity ?
Besides, this does n o t a t all m ean th at we m u st accept the
technical a rg u m e n ts of the b o u rg eo is econom ists. It is abso-
75
lutely w ro n g to s a y th a t in cre a sin g w ages b e y o n d the increase
in p ro d u ctiv ity is a u to m a tic a lly in fla tio n a ry in p e rio d s of
full e m ploym ent. T his is true o n ly to the degree th at the profit
rate is left stable a n d intact. If we were to reduce the profit rate
th a n k s to a ty ra n n ic a l in tervention a g a in s t p riv a te p ro p erty ,
a s the C o m m u n is t M anifesto puts it, then there w o u ld be no
in flation w hatever; we w ould sim p ly tak e b u y in g p ow er from
the ca p ita lists a n d give it to the w o rk ers. The o n ly objection
th a t c a n be ra is e d is th a t this ru n s the risk of slo w in g dow n
investm ent. But we c a n tu rn ca p ita list technique a g a in s t its
ow n a u th o rs b y telling them th a t it is n o t such a b a d thing
to reduce investm ent w hen there is a p e rio d o f full em p lo y
m ent a n d a b o o m a t its "boiling p o i n f ; th a t o n the c o n tra ry ,
this red u c tio n in investm ents is a lre a d y on the w a y a t the
v e ry m om ent, a n d th a t from the s ta n d p o in t of anticyclical
policy, it is m o re intelligent to reduce p ro fits a n d increase
w ages. T his w ould perm it the d e m a n d fro m w age w o rk ers,
from c o n su m e rs, to com e to the relief of investm ent in the
interest of m a in ta in in g the co n ju n ctu re a t a h ig h level, a
c o n ju n c tu re w hich is th reatened b y the in ev itab le tendency for
p ro d u ctiv e investm ents to fall off a t a c ertain state.
We c a n d ra w the follow ing con clu sio n from all this: state
inte rv en tio n in econom ic life, m a n a g e d eco n o m y , econom ic
p ro g ra m m in g , in dicative p la n n in g , a re n o t the least bit neu
tra l from the so cial p o in t of view. T h ey a re in stru m en ts of
in te rv en tio n into the e c o n o m y which lie in the h a n d s o f the
b o u rg e o is c la ss o r of the ru lin g g r o u p s in the b o u rg eo is
class, a n d a re in no sense a rb itra to rs betw een the b o u rg eo isie
a n d the p ro le ta ria t. T he o n ly rea l a rb itra tio n which the cap i
talist g o v e rn m e n ts c a rr y on is a n a rb itra tio n between different
c a p ita list g r o u p s w ithin the ca p ita list class.
T he rea l n a tu re of n eo-capitalism , of the g ro w in g in terv en
tion of g o v e rn m e n t in econom ic life, can be su m m a riz e d in
this fo rm u la : m o re a n d m ore, a ca p ita list system left to its
ow n econom ic a u to m a tism ru n s the risk of p e rish in g rap id ly ,
a n d in c re a sin g ly the state becom es the g u a r a n to r o f capitalist
profit, the g u a r a n to r of the profit of the ru lin g m o nopolistic
lay e rs of the bou rg eo isie. It g u a ra n te e s this in the m easu re
th a t it reduces the am p litu d e of cyclical flu ctu atio n s. It g u a r
antees this b y state o rd ers, m ilita ry o r p a ra m ilita ry , of in
c re a sin g im p o rta n c e . It g u a ra n te e s this a lso b y a d h oc tech-
76
niques which m ak e their a p p e a ra n c e precisely w ithin the
fram ew o rk of the m a n a g e d econom y. The "quasi-contracts"
in F ra n ce illu strate this. T hey a re explicit g u a ra n te e s of profit
to correct c ertain diseq u ilib riu m s in developm ent, either re
g io n al in c h a ra c te r o r between b ran c h e s o f in d u stry . The state
tells the c apitalists: "If y ou invest y o u r c a p ita l in such a n d
such region, o r in such a n d such b ra n c h , we will g u a ra n te e
you six per cent o r seven per cent o n y o u r c a p ita l reg a rd le ss
of developm ents, even if y o u r ju n k p ro v es u n sa le a b le , even
if y ou fail." T his is the suprem e a n d clearest form of the state
g u a ra n ty of m o n o p o ly p rofit bu t it is no t the in vention of
the F ren ch p la n n in g technicians, since M essrs. Schacht, F u n k
a n d G oerin g h a d p rev io u sly ap p lie d it w ithin the fram ew o rk
of the N azi a rm a m e n t e c onom y a n d its fo u r-y e a r re a rm a m e n t
p lan .
In the fin al a n a ly s is, this state g u a ra n te e o f profits, like all
of the gen u in ely effective anticyclical techniques in the c a p italist
system , represents a re d istrib u tio n of the n a tio n a l incom e in
f a v o r of the lea d in g m ono p o listic g ro u p s th ro u g h the ag en cy
of the state. It is effected b y the d istrib u tio n of su bsidies, b y
tax red u ctio n s a n d b y g r a n tin g credits a t reduced interest
rates. All of these techniques c ulm in ate in a rise in the rate
of profit, a n d , given the fram ew o rk of a n o rm a lly function
in g ca p ita list econom y, especially in its p h a se o f long-term
e x p a n sio n , this rise in the p rofit rate o b v io u sly stim ulates
investm ent a n d w o rk s o u t a c c o rd in g to the ex p ectatio n s of
the a u th o rs of these projects.
E ither one sta n d s s q u a re ly inside the fra m ew o rk of the
c a p ita list system o n a com pletely lo g ical a n d consistent b asis,
a n d co n seq u en tly accepts the fact th at the o n ly w a y to g u a r
antee a c o n sta n t increase in investm ents a n d the in d u stria l
u p s u rg e b a s e d on such increases in p riv a te investm ents is
th ro u g h in cre a sin g the rate of profit;
O r one refuses, takes a socialist p o sitio n , rejecting the ro a d
of in cre a sin g the rate of profit, a n d ad v o c ate s the o n ly alte r
n ativ e ro a d , which is the developm ent of a pow erful public
sector in in d u stry , a lo n g sid e the p riv a te sector. T his is the
r o a d ou t of the ca p ita list fra m ew o rk a n d its logic, a n d p asses
o v er to the a re n a of w h a t we call s tru c tu ra l an tic a p ita list
reform s.
In the h isto ry o f the B elgian w o rk in g -class m ovem ent in
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recent y e a rs, we h a v e experienced this conflict in o rien tatio n
which aw aits F ra n c e in the c o m in g y e a rs, ju st as so o n a s it
experiences the first rise in unem ploy m en t.
Som e so c ia list lea d e rs w hose p e rs o n a l h o n esty I d o n 't w an t
to qu e stio n h a v e v irtu a lly sa id , a n d in a s b ru ta l a n d cynical
a m a n n e r a s I p ut it ju st a m o m en t ag o : "If yo u w a n t to
re a b s o rb u n e m p lo y m en t in a s h o rt p e rio d w ithin the ex istin g
system , there is no o th er w a y to d o it th a n b y in cre a sin g the
rate of profit." T hey d id n o t a d d , th o u g h it goes w ithout s a y
ing, th a t this im plies a red istrib u tio n of the n a tio n a l incom e
at the expense of the w age e a rn e rs. In o th er w o rd s, unless
you a re o u t to deceive people, y o u c a n n o t serm onize for a
m o re r a p id econom ic e x p a n sio n , w hich u n d e r c a p italism im
plies a n in cre a se in p riv a te investm ents; a n d sim u lta n e o u sly
d e m a n d a red istrib u tio n of the n a tio n a l incom e in fa v o r of
the w age e a rn e r. In the fra m ew o rk of the ca p ita list system ,
these two objectives a re a b s o lu te ly in co m p atib le, a t least for
the s h o rt a n d m id d le ra n g e p eriod.
The w o rk in g -c lass m ovem ent is therefore c o n fro n ted with a
fu n d a m e n ta l choice betw een a po licy of refo rm in the neo
ca pitalist stru c tu re s, w hich im plies a n in te g ratio n of the tra d e
u n io n s in the c a p ita list system so th at they a re tra n sfo rm ed
in to g e n d a rm e s fo r the m a in ten a n c e of so cial peace d u rin g
the a m o rtiz a tio n p h a s e of fixed c a p ita l, a n d a b a s ic a lly a n ti
ca p ita list policy, with a p r o g ra m of sh o rt-term a n tic a p ita list
stru c tu ra l reform s.
The fu n d a m e n ta l g o a l of these refo rm s w ould be to take
a w a y the levers of c o m m a n d in the e c o n o m y fro m the fin an
cial g r o u p s, tru sts a n d m o n o p o lie s a n d place them in the
h a n d s of the n a tio n , to create a public sector o f decisive weight
in credit, in d u stry a n d tra n s p o rta tio n , a n d to b a se all of this
on w o rk e rs' c ontrol. T his w ould m a rk the a p p e a ra n c e of d u al
po w er a t the c o m p a n y level a n d in the w hole eco n o m y a n d
w ould ra p id ly cu lm in ate in a d u a lity of p olitical pow er be
tween the w o rk in g class a n d the ca p ita list rulers.
T his s ta g e in tu rn could usher in the co n q u est of pow er b y
the w o rk e rs a n d the esta b lish m en t of a w o rk in g -class g o v e rn
m ent which c o uld proceed to the co n stru ctio n of a socialist
d e m o c ra c y free of e x p lo itatio n a n d all its evils.

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