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    FS-2-Marxist Economics

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    Shivani Shyam Narayan

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    bal “TAS Ia" Labour, Value, Exploitation PART IV The Critique of Capitalism Marxist Economics 12 Contesting,Capitalism eh 13. The Mode of Production “<. 15 Capital Accumulation 16 Reproduction, Growth, Change 47 Economic Crises Contesting Capitalism Are ilarxist ideas relevant today? What are the origins of the Marxist critique of capitalism? What is distinctive about the Marxist method of analysis? Many different structures have been built on the foundations laid by classical political economy. The neoclassical economists developed their analysis in a conservative direction, ‘maintaining the focus onthe beneficial effects of markets, but narrowing the range of social ‘concerns and purging the theory of its explicitly ethical aspects. We look at their wotk and its influence alittle later. Chronologically prior isthe contribution of Karl Marx, providing a thorough critique ofthe capitalist aystem. Tt needs careful consideration because of its controversial character and continuing challenges, Why study Marx? ‘Theresa common view that Marais dead—not just the man, buthisldeas and ther relevance twourlives today. Itisa view based largely on the problem of constructing aviablelternative tocapitalism in practice.’ he problem with this negative view that itignoves Marrs cental concerns: interpreting the workings of a capitalist economy, understanding economic change, and considering the principles on which alternatives to capitalism might be based. ‘These aspects of Marxism are neither negligible nar passé: they are central to politcal economy. ‘There are three reasons to study Marxist political economy. Ft, st hat a key place in the history of economic thought. Marx developed his eas from classical political economy. ‘The development of subsequent schools of thought in the economics discipline can be interpreted, in iarge measure, as either extensions of Marx’s analysis or reactions againt Orthodox economist Panl Samuelson once denigrated Marx asa ‘minor pot-Ricadian.* Its ‘more sensible to see Marx standing centre stage, with the other actors in the drama either CHAPTER 32: CONTESTING CAPITALISM challenging him or tiptocing around pretending he is not there. An understanding ofthe development of economic ideas would be markedly deficent without some introduction to Marxand Marsism, Second, Marxist political economy provides a framework for understanding capitalism ‘today. The institutional features ofthe economy are differen in varius waysfromtthe economy Marxanalysed inthe nineteenth century Yet modern Maraists contend that there are elements of continuity in the fundamental nature of the system: the relationship between capital and ‘our, the process of capital accumulation, and the contradictions that periodically cause ‘economic crises. These claims warrant careful consideration.’ Does Marxism indeed have the ‘capacity to explain the pecsistence of poverty ami ffinence and the continuing piobleme of economic inequality, underdevelopment, and recessione? How can the basic Marxist tenets be ‘updated and revised for this purpose? ‘Third, Marxism demands attention because ithas had such a grea influence inthe word. ‘thas inspired numerous liberation struggles. Manw’s insistence that it is people who make Distory—albeit in circumstances not oftheir choosing—has given this curent of political ‘economic thought an essentially activist element. This is where many ofthe problems with {interpreting socialism and communism in practice begin, forall sorts of political acts have ‘been caried out in the name of Maraisn. Our concern here is with the Marxist analysis of ‘capitalism and, for this purpose, we can argely set aide the experience of trying to construct ‘on-capitalist economies, By concentrating onthe analyic of capitalism, we can situate Marx's analysis in elation tothe classical political economy that preceded it and the developments in orthodox economies since. Narx sought to understand capitalism in its entirety: its emergence from feudalism, its {internal dynamics and contradictions and the type of economic system that might follow it. He developed. view ofthe political economic process asrestes, evolutionary, and potentially ‘evolutionary. Mar, in effect, tried to emulate Charles Darwin, whose ideas about biological evolution were so influential. He was Looting for the forces that drove economic, social, and political change, He was doing soatatimewhen dramatic changes were taking place in Britain and Europe, when capitalism was evolving and reshaping society init own image, Ker! Manx is surely the most contrversil figure in the history of political economy. His ‘nalysis of capitalism, and his advocacy of @ socialietatoratve, has hed enormous lnfluence Marxwes bor Tren whats row Germany. A university he etucied lw and mixed with group of radical intelectual called the Young Hegelians, who were followers of the philosophy of G. WF. Hegel (1770-1832), Mans increasingly eltcal social and politcal 100 PART IV: THE CRITIQUE OF CAPITALISM laws found xaression in articles he wrote for newspapers, His growing reputation ase dissident eventual led te the closure ofthe journal he edited. He took refuge in France and than Belgium, where the ‘authors els found his presence unwelcome In Galeaits words, ‘Germany, Francs and Belgium would all unite the view that Manx wos an excellant resident of some other OUR. Mark ventualy Settled in London with his we and family. They lived poorly, dopendent on the small come ‘enersted by Marx’ writing for newspapers and on the financial suppert of fiends, perteuiory Piedich Engle, ‘th whombe wrote The Communist Manifesto, ‘Marx scent great deal of time in the reding room of the Britsh Museum, Inmarsing himsel inthe works ofthe say that the method of Marxism is historical means that the principal focus is on 'istrical processes, on change ove tine. The obvious point of contrast is with the focus in orthodox economic theory on equilibrium conditions ata particular point in time, a we wit se in Fart V ofthis book. The Marxian focus on history follows fom the concern to study the evolution of economic systems ‘To say that the method of Marxism i materialist requtes a rather fuller explanation. tn ‘te philosophical context, materialist the oppotite of idealist It denotes a primary focus ‘9n material conditions, such as the prevailing economic structure, as the key facto shaping society. The German philosopher Hegel, whose ideas strongly Snluenced Marx in his youth, ‘propounded an idealist phitosphy that saw the totality of natural, historical, and spiritual [CHAPTER 12. CONTESTING CAPITALISM ‘aspects of the worl represented as a process of constant transformation’ Marx is said to ‘have “stood Hegel on his head by emphasising the primary importance of material conditions ‘ater than ideas.’ n his own words, "tis not the consciousness of men that determines their existence, on the contrary, their social existence determines their consciousness.» That ‘material and ideological conditions interact is widely accepted, The distinctive feature ofthe ‘materialist postion isto regard the material conditions asthe leading factor dziving social change. Paling the historia and materialist aspects of Marist methodpogy together produces istorical materialism: this the view that material factors, especially economic conditions, rive social change. This is what is sometimes know asthe materialist conception of history, ‘When Marx hit on this concept he knew he was onto something really big Tis the ciaim that ‘the broad sweep ofhistory snot series ofrandom orindependent events, butratheraprocess ‘that has a structure shaped by economic conditions. Ths is one ofthe most controversial claims in the whole of socal science, The third element in the Marxist method—integrated with the historical materialist erspective—is dlalectcs. To saythat the method of Maraismis dialectical means that the focus {son the conflicts and contradictions, intemal tothe economic system, that propel change, ‘As Marx and Engels wot atthe very beginning of the Manifesto of the Communist Party, The history of all hitherto existing society isthe history of class struggles. This puts the focus ‘on the confict of interests; fr example, conflict between employers and employees over the ‘organisation of work and its remuneration, It emphasises that tis the contradictory elements within an economic system that create progress. It thereby emphasises the progressive character of cass struggle. It has given participants in countless anti-apitlist political activities and Uberation movements the dignity of representing ahistorical imperative ‘The activist element brings inthe final element of the Marnst method: praxis, Marxism lainstobenotmerelyamethod forthe anaysisofcapitalisn;italsoclaimstobe simultaneously 8 tool for transforming it into socialism. This integration of theory and political practice lifferentiates Marxism from more detached scholarly activities, Marx himself was a scholar, ‘studying the work ofthe classical political economists and developing detaiedertiques, but ‘ways with apolitical purpose, rani equires that scholarship be blended with activism. ‘There are some interesting tensions in all this If tis material conditions, rather than ‘ideas, that propel social and potitical change, why bother withthe construction af a theory about capitalism? 1s not theorising inherently idealist? And, ifthe structural conflicts and contradictions within capitalism are destined to usher in socialism, why bother to organise ‘revolutionary movement? Why not just await the inevitable? These seem to be paradozicel ‘aspects of historical and dialectical materialism, considered in the context of Marsst politics, ‘The notion of praxis provides the reconciliation. By emphasising the importance of material ‘interests and ideas—the unity of action and theory~it indicates the holistic character ofthe ‘Marxist method, As the inscription on Marx's tombstone 85, “the philosophers have only {interpreted the word in various ways the point however isto change it, 408° PARTIV.THE CRITIQUE OF CAPITALISM Conclusion Marxism provides te basis for a comprehensive critique of capitalism, Tn his own time, Karl. Marx addressed the problems of a rapidly industrilising society in which exploitation and tas conic were increasingly Blatant. The spe ofthe analysis he and Engels developed was ea aurea The Mode of Production ‘Does the economy shape the society? What is distinctive about capitalism as a mode of production? How are class relationships structured in such an economy? In grappling with a broad aray cf social, economic, and political concems, a systematic and sequential approach is needed. The Marxian inclination isto begin with the study of ‘how production is organised and how wealth is thereby generated. Understanding the characteristics of society as a whole, including its political institutions, then follows. The analysis thereby moves from te study of the economic base to the study ofthe socal Superstructure. na famous passage, Marx sald: The economic structure of society [is] the eal foundation on which ris legal and politcal superstructures and to which corespond definite forms of socal consciousness." Thes Marx began, as Russian revolutionary Lenin put it, by ‘selecting fom all the social relations the production relations as being the basic and prime ‘elations that determine all other relations’? Does the eccnomic base haps the social uperstructure?A direct lnk ofthis kind isnot herd to viouslise, Take educate institutions, for example, Schools, techicalcallages, and unverstos re an important sspect of tho modern sola superstructure. Thee form 's to considerable exten, shaped bythe needs of the economy. These needs sre partly 'deological—for 2 workforce incucated with values conducivo to the ecceptance of ‘uthorty structures in the workplace. The neds ae also practical—for certain number of shod technician, for a cartan rumbor of semiskiled process workers, labourers, and s0 on. Schools, technicelcellges, and unveratles are structured in such 9 way that they produce these ‘outputs’ in mare or less the required proportions, Indes, in recent Years there have been meny cals from political leaders fr this Ink to be an even mare 806 9% PARTIv- THE CRITIQUE OF CAPITALISM ‘ermohatic policy objective. Rhetoric sbout the need for the education system to ploy @ ‘more direct role in fostering the developmaont of ‘clever country or e'knowledge nation: ‘or example, has a clearly instrumental characte, It implies thatthe education systorn shouldbe reshaped to moet national economic needs, rst ae foremost, rather than cater ‘or the personel development or cuturl ervichment ofthe poople invlved. The groater ‘erophasioon university courses in business and management, elatve to more tedtonal ‘rons of study in arts ond sciences is symptomatic. The epplcaton of economic eitria In evaluting the effectiveness of the education system Is also more pervasive. The ‘educational institutions themselves have become more entrepreneurial Iv thal cur behaviour, especialy as the politicians cale for better economic outputs have not boon ‘matched by the necessary public funding? Overall, these superstructure Institutions lar being shaped and remoulded to serve the economic requirements of contemporary buy i tbour power—the capacity to workbut their task is to make sure that the maximum ‘amount of abour—actual work—is undertaken. Box 14.1 below summarises some managerial strategies employed for this purpose. From a Marast perspective, exploitation is not something imposed by paticuasly nasty ‘employers, but rather a condition forthe normal functioning ofthe capitalist economy. Its a systemic characteristic, not an aberration. Part ofthe value produced by workers is taken ‘by capitalist employers indeed, there would be no point, from an employers perspective, in ‘employing the workers otherwise, Capitalism needs exploitation for its nomal functioning. Some political economists argue that positing this connection Bétween profits, surplus ‘about, and exploitation does not require a formal bassin value theory” The we ofthe labour ‘theory of value reflects the inftuence on Marx of the classical political economists. What is of continuing interest, though, isthe link that the theory provides between the analysis of ‘Production and the analysis of distribution. This ink concerns the cass relat invalved in ‘roducing commodities and the different incomes that thor classes receive. MANAGERIAL STRATEGIES FOR INCREASING THE INTENSITY OF LABOUR Many werkers take a pride in thor jobs and thei ow productivity. Some veluntaly perform ‘emp overtime, The bel in dong’ fair day's work fr a flr do's pay is widespread, In various way, these personal, ethical, and socal commitments influence how work 's performed. But the bese fact remans: under capitalism, werk is done for wegee, 60 ‘the material Benefits of harder or faster work usualy accrue, n the frst stance, to the ‘ernpoyer rather than the employes In is infantil beok, Labor and Monopoly Capita, Harry Braverman described how “omployersin the twentieth century sought toraise the intensity of ebour by asing sletific ‘meregoment Scientific management is also knonn a8 Talrim, ater itspanaor Frederick ‘Taylor (1856-19271, This approach to mansgemant, which emphesleed maragerie contol ‘over each and evry stage of workers! productive activites, changed the nature of work in many industries snd eccupations.* Other poticsl economists have pointed cut more dverse moans by wich employers have increased the intensity of labour in practice. Richard Edwardo, for example, lstinguishes betweon three strategies: simple contr, technical contro, and buresucatie CcontroL® Simple control accurs whon bosses irecty exert their personal authority oor ‘workers. Work harder or youll be free is the characteristic message, Techical control Involves tho use of technology as a means of increasing the intensity of labour. Sting the pace of work by setting the pace of machinery is conrronplace in many routine ‘actor jobs, Bureaucratic contrl is the mare sophisticated strate, entbedcing wore incentives inthe socisl-organisational aspocts ofthe enterprise, its hallmaks are earser laders, bonus payments, and the encouragement of each workers perzonalidntifcston ith corporate goals. x23 se PART IV: THE CRITIQUE OF CAPITALISM Plical economists also distinguish between ean production’ and team production the crganisetiog of werk The former, 28a modern form of Taylors requires centraliad control over the werkforce, usualy with en eye to cutting out unnecessary labour. The latter ‘entails mere decentralised dacision meking, giving some dogroe of autonery to groups of workers. Team production is often more conducive to productivity, but managers tend to be cautious about its introduction, faring thet the empowerment of workers may threaten ‘menagetal prerogatives. “Modern manages als tend tobe coy about explicitly editing tothe primary concer ‘of extrecting more work fom the werkers. Humen resources management HRM) isthe mare ‘acceptable face of capitalist businesses today. I corrprehencively extends the process of ‘bureaucratic conta troughout the workolace while encouraging worker comeliance, The ‘central economic gos! remainsahigher intensity of labour and 8 corresponding increase in spl value. es Conclusion ‘The twists and turns in the development of Marxist value theory have a dual purpose: to ‘explain the market prices of commodities and to explain the relationship between labour and capital. There is an obvious connection. Because labour power is itself a commodity, its price is determined in the matket. The diference between that price andthe total value of commodities produced shapes the overall amount of profit that capitalist firms make, “Employers and employees havea conflict of interest over the relative sie ofthese wage and profit shares (and a more fundamental conflict of interest about a system that generates such ‘pervasive conflict) This theory explains both the origin of profit inthe exploitation oflabour and the economic drivers of class struggle. Maraist political economy also éraws attention tothe struggle over the economic surplus. ‘All economic systems need some sort of surplus. That surplus is the excess of the value of ‘what the workers produce over what is returned to them inthe form of wages. Tat surplus is needed to replace womout machinery, to pay fornew infrastructure, and to fund innovation, ‘What is distinctive about eapitalism—by comparison with the socialist system that Mazxits have always advocated—is not the existence ofa surplus, but the control ofthat surplus bya particular clas, In this respec, capitalism does indeed have some continuity with slave and, feudal modes of production, The size and disposition of the surplus reflect the exercise ofthe Dower ofthe dominant class in each cae. Under socialism, Marx anticipated, the size and Aisposition ofthe surplus would bea matter for collective determination by the socety as a whole. KEY POINTS CHAPTER 1 LABOUR, VALUE, EXPLOMATION Capital Accumulation What drives the capitalist economy? Is economic growth inexorable? How does the economic system change as it rows? Previous chapters have shown how capitalism canbe understood as amode of production, and how its functioning depends crucially on the character ofthe relationship between capital, and labour. But the economy does not stand stil while tis being studied, I reproduces itself Tt grows. It changes as it grows. A central concern of Marxist analysis sto understand the process of capital accumulation that shapes these dynamics, Economic growth and capital accumulation ‘The great historical achievement of capitalism is the increase in productive capacity: the ability toproduce vast quantities of gods and services Anoted in Chaptr5, i would be simple to assume a necesary connection beeen this achievement and the inreaze of man ‘happiness. Some of the things produced are of dubious merit. Some are destructive. And the distribution of the goods and services has commonly been so inequitable that more than two cemurie of economic growth has not radiated poverty, even within aunt nations. Sl, noowthstandlng these recervaton, the overall expansion of production and consumption "under capitan hasbeen spectacular in comparison with anything that came before. The proces continue, at new production technclogies and new products ae dewoped, and consumerism becomes an evermore deplyenizenched culture. The diving force of growth in a capitalist economy is the ccunulaton of capa Business enterprises sek prof and, if successful they usally invest atleast ome of tn expanding their output and markt she Its by increasing the amount of capital under thelr control that individual buinszs grow. Sots for the economy asa whole: the overallrate of economic gronth depends on the rapidity ofthe capital accumulation proces ‘CHAPTER 15: CAPITAL ACCUMULATION ‘hat conditions are conducive to the accumulation of capital? The classical political ‘economists pondered this question, as noted in Chapter 10, Marzistpoltcal economy develops «rather different two-pronged response. One involves the use of a formal analysis of the roces of reproduction and growth, based ona two-sector model of the economy, The other {nvolres an examination ofthe capital accumulation proces, emphasising how the system changes ait grows overtime. We emphasise the ater here. ‘he capital accumulation process involves quantitative change, increasing inthe volume of productive capacity and the size ofthe economic surplus. It also involves qualitative change, processes of institutional adaptation that make further eeSnomic growth possible. ‘rom Marxian perspective thre aspects of qualitative change are particularly significant: * the changing form oflabour's reserve army "the concentration and centralisation of capital + theprocess of imperialism, Labour and its reserve army Capital acunlation pial generates an increase inthe demand for labour Lage outpits of goods and services usually require mere workers to make then. Whether the rate of ‘nereae in the demand for labours egivalent to the inease in ouput, or proportionately les, depends on whether peducton labour intensive or apa trv, Either wy, any Sncenein the demand forlabour may cast rising wage ates From a capt peropecave, ary sch wage recreates the unweleome posit that wil ut nt url value ane ther eee pois, ‘What can prevent this fom happening? Mathis famously daimed hat population sronth would do so. The growth in the supply of abou he thet, would continually ust the demand fr labour, forcing the prevaling wage rate back to a mere ubsstence level The “stable sts ofthe mate’ woul hereby prevent wages enroching onthe economic surps, Mar called this abel on the Haman face! What kepe wages in check, ‘he argeed is something internal to capitalism tel the continual reeaion of a eseve armyotlabour. 1 general terms ths reserve army of labour comprises thase member ofthe working tes wo ae unemployed or intermterti exploye.' the existence ofthis lative rpg Population, Marx claimed, keeps wages a ubsistence level f the member ofthe reserve my ae willing to work for roekbotiom wages, employed woikerscannat easly sein sigicnt wage rises because capitalist employers can alway da from the rsere any ‘oeplce ther existing employees. S, the existence of the esr ay Legs wages down and pots op Hern esa paradox. Leaving people unemployed isnot an altogether rational state ofatfae for apis: ule people a wor, anenploed people ae not creating surlas ‘luo farther employers. The Mars arguments thatthe unemployed may make ot equally a PART IV: THE CRITIQUE OF CAPITALISM {important contribution to capitalist interests—by keeping the brake on other workers’ wage ‘ses, No permanent balance exists. A rapid burst of capital accumulation may result from a ‘ew technological innovation or from the opening up of a new market. On those occasions, the reserve army is diminished, and wages may indeed rise at the expense of surplus value. However, as Marx pointed out, ‘As soon as this diminution touches the point at which the surplus labour that nourishes capita sno longer supplied in normal quantity, a reaction sets ‘in: a smaller part of the revenue i capitalised. accumulation lags and the movement of tise ‘in wages receives a check, Capitalists in general would prefer this not to happen, because it ‘means thatthe reserve army is replenished atthe expense of economic growth. They would refer the reduction in the number of unemployed people because of economic growth to be offset by new sources of potential workers replenishing the reserve army. Jn Marx’s own time, the principal sources of the reserve army were peasants displaced fom their traditional livelihood onthe land and artzans displaced by mechanisation. These ‘eople—victims of what we would now rather politely call structural economic change—swelled ‘the growing ranks of the potential working class. Desperate for employment, they nsually ‘moved from rural areas tothe growing industrial towns. ‘Such social upheavals continue in the poorer developing nations today, as people move ‘rom rua areas tothe burgeoning cites in quest of whatever work they can find. However, in ‘the more advanced capitalist nations, the potential sources ofa reserve amy have changed. overthelasthalfcentury. Women, previously excluded from many aeas ofemmployment and told ‘that their proper place’ was.n the home, have inereasngly participated in pid work. Indeed, ‘aid work has become the nom, although women’s employment remains disproportionately concentrated in casual and part-time jobs, often without enployment security, These are Aistinctive reserve army characteristics, ‘The spectacular growth in the numbers of immigrant workers can be interpreted in similar ‘terms, In Europe, millions of ‘quest workers’ have swelled the workforce, while inthe USA, rillionsofillegal immigrants from Cental America work for much lower wages than those paid toAmerican citizens. The internationalistion of capital has ben accompanied by a significant {interationalisation of labour suppl, notwithstanding the border controls that individual nation states seek to enforce. As a consequence, the reserve army function hasbeen displaced significantly to immigrants” The employment experiences of many young people today also have significant ‘eserve army characteristics. Working on casual eontracts—or sometimes directly for cash-in-hand. Dayments—in businesses like fast-food outlets, cafes, and bars gives litle continuity nor security of tenure. The boss calls you in, sometimes at quite short notice, when your labours ‘needed butprovidesno guarantee ofreqularworkinthe longer term. Itisa fexibleemployment arrangement, with fexbity usualy on the employers terms. Young people, seldom backed by membership ofa trade union and with litle bargaining power, are offered this work on ‘take itor leave i basis by employers who know that there are often plenty of alternative Candidates, For students expecting eventually to move on to moze secure employment (CHAPTER 15: CAPITAL ACCUMULATION situations, this may well be a tolerable, if sometimes stressful, phase in their working Lives; but for those who have no other long-term options, it isa consignment to an ongoing reserve amyoflabour. So, while its character and composition have changed overtime, the eserveazmy oflabour has enduring relevance in moder capitalism, The emphasis on workforce flexibility in modern ‘capitalist businesses accentuates economic insecurity for many workers. n order to maintain ‘onthe employment nan increasingly insecure economic environment, theyareefectiely fovced into competition. The resuting downward pressure on wages helps businesses keep ‘their production costs down, ’ Concentration and centralisation of capital ‘The accumulation of capital is also accompanied by changes in the organisation of capital, Individual capitalist businesses generally grow larger and seek to increase their scale of Droduction, a process that Marx called the concentration of capital. Concurrently, firms often combine through mergers and takeovers, a process that Marx termed the centration of ‘capital. These are important qualitative changes that accompany the quantitative growth Process. They have significant consequences forthe nature of work the rate of technological change, and the growth of monopoly power. ‘The consequential changes in the nature of work are partly « matter of scale. Being ‘employed in big factories rather than small workshops, or in big rather than small offices, often significantly changes working conditions, Big business does not necessarily mean big ‘workforces in big workplaces: many capitalist enterprises divide their operations between ‘all sites and some continue to have only a handful of employees. The fundamental point ‘is the rationalisation of the labour process itself, This isnot simply a matter of having a more complex division oflabour, asin Adam Smith’ famous example ofthe pin factory. ts, in Marx's ‘own words, ‘the progressive transformation of isolated processes of production carried on in accustomed ways into socially combined and sclentiically managed processes of production # ‘ae adoption of scientific management and of systems of technical and bureaucratic control (esnoted in Box 141) are twentieth-century examples. These practices have tended to change ‘he nature of employment experiences and to enhance the capacity of employers to extrart surplus value. The concentration and centralisation of capital also tends to accelerate technological ange. To quote Marx again, ‘Centralisation, by thus accelerating and intensifying the effects of accumulation, extends atthe same time the revolution inthe technical composition of capital which increases its constant part at the expense ofits variable part and thereby xeduoes the relative demand for labour.” This process isnot inexorable; experience shows ‘hat smaller firms are sometimes more technologically progressive than larger ones. However, ‘he centraisation of capital does generate the resources that make major investments in ‘innovation possible. Historicaly, the tends towards rapid technologieal change and the ‘concentration and centralisation of capital have run in tandem. PART IV: THE CRITIQUE OF CAPITALISM ‘The growth of monopoly power has been a predictable accompaniment. The larger firms ‘usually have more contol over the prices of their products because the size oftheir market ‘share makes them less vulnerable to competitive pressures, Sometimes the larger firms collude ‘with one another for these purposes. Their economic power an also be used politically to ressure governments to change busines regulations or tax rates in orderto give an advantage ‘to particular corporate interests. Thus, the concentration and centralisation of captal has ‘enormous politcal economic significance. It tends to change the balance of power between capitalist business enterprises answerable to thelr financial backers and the institutions of government supposedly embodying democratic principles. ‘Some Marzsts use theterm ‘monopoly capitalism’ to draw attention to these tends.*They contend that the process of capital accumulation hus fundamentally transformed capitalism fom an economic system based on competition to one in which the use and abuse of monopoly Power is its most pervasive and distinctive characteristic, Others argue the contrary, that slobal expansion has been astociated with the breakdown of lcal monopolies, leading to greater competition etween capitalist enterprises ona word scale."Tt sa fascinating debate in which Marxist scholars enjoin with other contemporary analysts arguing from different political economic postions. All agree that the capital accumulation process has wrought «qualitative change nthe institutional character ofthe capitalist economy. Imperialism ‘The process of capital accumulation sgnicantly shapes the nature of the intrrationl economy oe Capital accumulation can take place within locality ox within a natin, bt in practiceit tens to break down those patil constraints on economic atv In that sense isa lbaising proces. opti usineses now serch the wr forthe cheapest avaable labour or aw materia. They lok for new markets in other regions or nations to provide ott for ther growing production of goods and services. They may also sek to minimise the taxes on ther pros by nding the countries withthe lowest tax rates so tat they cn locate thei actetes there—or test make sppear tha the rf are generated there. Shopping aroun forthe locations withthe least esti environmental regulations has 8 sins corporate logic Having alobl each thereby increases the range ofbsines options. Noteupricingy a tendency towards geographical expansions one ofthe iret eatues of the apa economy. History, this roesofinternaticnal expansion as been aseciated with pera. Relationships of domination and dependency have been imposed by he rlng clases in the stronger nations onthe poorer people ofthe periphery. Tetra conquest and cloiah, cmlotaton have been the historical hana of inperiatsn. Interestingly, the empire bers themselves were sometimes not tall oy about this. Cel Rhodes, fr example, a loner of tish ingestion in Aca duing the nineteenth century, stated the goals of imperialism as cer as any Marist might Ini wm wor: ‘West Hind new lands frm which we can easy obtain raw materials anda thesametine expllt ‘the cheap slave labour that is avaiable fom the natives in the colonies; the colonies wou also (CHAPTER 18: CAPITAL ACCUMULATION Provide a dumping ground for the surplus goods produced in our arteries; the Emp, at Thave las sud sa bread and butter question f we want to avoid lass strugole athe UE, we must becomeinpariits. Lenin, the father of the Russian revolution, wrote of imperialism as ‘the highest stage of ‘capitalism’.” He saw itas a process shaped bya numberof interconnected features: "several advanced capitalist nations competing for world markets ‘* monopoly capital being the dominant organisational form of capital * considerable exporting of capital, not just trading n goods and strvices * severe rivalry occurring in world markets, leading alterately to cut-throat competition, and the development of international monopoly combines + the world economy being teritorally divided. ‘Tris ast feature was particularly pronounced atthe time Lenin was writing, By the start ofthe twentieth century, the British, French, Dutch, Spaniards, Portuguese, and Belgians had ‘carved up much of the world among themselves. Afica, less than 10 per cent of which had ‘been under external domination in 1875, was almost completely partitioned by the European nations over the next quarter of a century. Such imperialist processes were accompanied by ‘rthless forms of oppression and militarism, Itwas this situation about which Lenin wrote ‘There are continuities and discontinuities between the situation then and now. The USA effectively took over from the European states as the leading imperialist power in ‘the second half of the twentieth century, but the USA has usually based its dominance, particulary in Latin America, on having compliant satellite states rather than on colonies."* There are also significant differences between the classical form of imperialism described by Lenin and:its characteristic modem forms, Instead of the poorer nations being dominated by Individual advanced capitalist nations, the contemporary face of imperialism is of transnationalised domination by global institutions, Transnational corporations, supported ‘by international agencies such as the IMF and the World Bank, play a dominant role in the ‘economies of the poorer nations in particular, strongly influencing their possibilities of ‘economic development. So, here too we can see that the accumulation of capital has given rise ‘o quatizative change—-trom classical imperialism to its modern form as “imperialism without colonies’ Conclusion Marais economic analysis emphasises that growth is integral to capitalism. It isnot simply ‘ matter of the economy becoming quantitatively laxger: the capital accumulation process also drives qualitative change. Some of the most important ofthese historical changes have ‘been in the reserve army of labour the concentration and centralisation of capital, and the character ofimperaiem, ‘The growth process opens up more and more opportunities for profit. As Australian bistocian Humphrey McQueen puts it, ‘The essence of capitalism s capital's need to expand’. PART IV: THE CRITIQUE OF CAPITALISM However, capital accumtlation i not unproblematic for capitalist businesses, The necessary conditions for the achievement of coordinated expansion can be quite elusive. There is a permanent tension between capitalists’ desire for immediate enjoyment and the drive for long-term sel-enrichment-manifest in the choice that they have to make between luxury consumption and productive investment.» Whether the economic system rides out such ‘problems depends substantially on its capacity to meet the requirements for the continued circulation of capital. tis with these matters thatthe next chapteris concerned. KEY POINTS Etre Pee Tome aan eee eh easier eine Ptiessie eee cence Reproduction, Growth, Change What is the circuit of capital? What political economic conditions underpin this circuit of capital? How has capitalism adapted in practice to meet these conditions? ‘The task of understanding the economy requires locking beyond surface appearances inorder to discern the broader forces shaping its development. We need to see how the various parts ofthe capitalist economic system fit together and how they relate tothe social and political ‘institutions, A Marsan theory of the creuit of capital an be adapted fo: this purpose. This ‘chapter presents a simple version ofthis model to show how capitalism worksin its entirety 26 an integrated system. The circuit of capital ‘Think of @ young person setting up a small firm (to make surboaris, glove puppets, or Jewellery, for example). This person would normally begin with capital in maney form (perhaps ‘the result ot past savings, ora loan from family or a bank). That money can be used to rent ‘business premises, buy raw materials, and hire labour. Production can then be undertaken, at which stage the capital takes the form of some as yet unsold commodities, If all goes wel, ‘hose commodities are then sold, thereby transforming the capital back nto a monetary form as sales revenue. ifthat final amount of capital is greater than the intial capital, the business has made a profit. ‘Successfully completing this sequence makes it possible forthe business to undertake ‘another round of production. Indeed, the next round of production can be on a lager scale, {fthe person is able to hire the necessary additional means of production and labou: power, manage the expanded production process, and find markets for the inceased number of ‘commodities produced. That being so, the business has reproduced itse and created the otentilforfurther growth. Thecireuitof capital has been completed and cpitalaccurulation can proceed. PART IV: THE CRITIQUE OF CAPITAL'SIA ‘Looking at the capitalist economy as a whole, as i t were a single fim writ large, we can observe a similar process. The steps involved in the circuit of capital are formally represented in Box 16.1 below. This way of setting up the issue enables us to see how the necessary conditions for capital accumulation are met in practice. It ea means of drawing together various themes fiom preceding chapters in order to illuminate the working of the economy as an integrated system. denotes the iti capital ina manetary frm. CC denotes capital the form of commodities use for preducing commodities. Pie istour power Pie the maans of production. P is production, CC denotes captain the frm ofthe produced commodities. JM donotos cpitalina monetary frm after the sle ofthe produced commodities, ‘Thedachesrepeasent the movement of capita: thoy are not minus sions. ‘The point ofthis models to show how capitel expands as result of the successful corrletion ofthe verous stages in the production process. The amount of expansion (M'> Mis oauivalent othe surplus value gonerated curing production, as desribedin the preceding chapter. The process becomes 3 ‘cut’ when the expanded capital WM) feeds back into new sequence on a bigger scale: more cept, more output move sal, more profits. Ss ‘This model cau be used to deny he dive necessary condtfons for capital accumulation, asfollows: + minimising costs (inthe M-Cstage ofthe sequence above) + producing surplus value (in the...P1..c" stage) + realising surplus value (inthe CH" stage) ‘rapid circulation of capital (the dashes between M,C, and M' above) * economic and social reproduction (underpinning the whole process of capital accumulation). “We consider each intur, ‘CHAPTER 18: REPRODUCTION, GROWTH, CHANGE Minimising production costs ‘As every business manager knows, it is important to keep costs of production down. This is ‘est done by finding the cheapest labour, raw materials, and equipment appropriate for the ‘articular task at hand, The last phrase here isan important reminder that minimising costs 4s always relative toa given quality and quantity of output So, tis not necessarily a matter of buying cheap at ve expense of product quality (although this is common) but of avoiding ‘unnecessary costs and waste, Hows this tobe done? ‘Extending the geographical area from which resources axe drawh is one means. If firms fan shop around the globe for labour, machinery and raw materials, this ean help them to ‘minimise their costs (although it may simultaneously impose other costs onthe comunity). ‘Ther capacity to shop around may also intensify the competitive character ofthe economic ‘environment, causing suppliers to drive their prices downward. The cst of transportation Units this processto someextent, as there maybe atrade-offhetweenlowerresourcecostsand igher transport costs. However, in general, nternationalsation of production is conducive to ‘minimising the overall costs of production for cpitlist businesses, ims may also reduce the costs of labour through hizing people from pastislar social sroups a lower wage rates, f women can be employed moze cheaply than men todo similar work, if black people can be employed more cheaply than white, oi young workers can be hired at lower wages than adults, it is in the immediate interest ofthe firms to exploit those ‘inequalities, Historically, racial and sexual discrimination in labour markets has been a sgnifcantimeans of keeping wage costs own although, in more recent decades, governments have inereasinly implemented regulations to Unit such practices, ‘The presence of unemployment is also conducive to keeping costs to a minimum. tn the absence ofstrong trade unions or government regulations, competition among workers forjobs ‘tends to drive wage levels downwards, Wheve there are significant levels of unemployment, ‘his tendency may be accentuated, In this respect, as noted in the preceding chapter, the {nteress of capitalist employers are served by having a reserve army of abou. Therein ies a significant social and economic waste, Generating surplus value Firms need to organise their production processes to create propitious conditions for extracting surplus value. Surplus valu i the souce of profit. How are firms to ensure it 4ept ata high level? Pushing production costs down helps. Businesses are, understandably, ‘concerned to ensure that notall the value created by producing goods and services is retumed ‘their workers as wages. Its equally important for capitalist firms to ensure a high volume and value of goods and services produced. The rate of surplus value—the total curptas ‘value divided by total wages the Indicator oftheir success in this aspect of the capital accumulation process 195 PART IV: THE CRITIQUE OF CAPITALISM Raising the productivity of labour is one means by which capitalist businesses can ensure a high rate of surplus value, so long as the labour productivity gains are not matched by corresponding wage rises. Employers havea collective interest in traning workers with this goal in mind. However, because there is always the posibility of workers moving to other ‘employers, this collective interes snot always perceived and acted on byindividual employers They may preferto poach skilled workers from elsewhere rather than undertake the long-term conmitmentoftraning. Asa esut, governments often act on behalfofthe collective interests of capitalist employers, providing the education and taining facie from which capitalists aswellas workers collectively benefit. Policies to raise the intensity of labour have an even more direct effect onthe rate of surplus valu. Prevailing upon workers to work harder, faster, or smarter ea key concera for capitalist employers. It may be achieved through vatious types of management strategies, as summarised in Box 16.1. Mechanistion of the production process may also contribute to a higher surplus value, “Equipping workers with more technologically advanced means of production usually raises the volume ahd/or value of output. Whether it actually raises the rate of surplas value depends ‘on the cost of the machinery and on whether higher wage rates have tobe pai to ease the acceptance ofthe more mechanised production. Mechanisation tends to reduce the relative Jmportance of direct labour in the production process, Therein Ues a potential contradiction because, from a Marxian perspective, labour is the eouzee of value from which surplus value

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