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Rereading Das Kapital in the 21st Century

Vamsi Vakulabharanam (vamsi@umass.edu) is with the Department of Economics, University of Massachusetts Amherst, US.

Marx’s Capital (three volumes) offers a unified framework to make sense of some of the most troubling issues facing humanity today, in particular, rising economic inequality, deepening economic instability, and growing unsustainability of human–nature interactions, signifying a looming planetary crisis. To the extent that the text throws light on capitalism in the abstract that transcends the unique features of the English or European context, it offers us various insights and critiques about how to understand and intervene in societies beyond Europe.

I acknowledge the comments of Sripad Motiram on an earlier draft. 

Marx’s Capital (Volumes 1, 2 and 3) is still perhaps the most compelling analytical text that both illuminates and offers the most radical critique of the structure and dynamics of the capitalist economic system. Different people have found different aspects of Capital interesting, and worth exploring further. For me, it is foremost a text (along with other insights of Marx, and Marxists) that offers a unified framework to make sense of some of the most troubling issues facing us today. In particular, three issues have acquired paramount importance over the last three to four decades—rising economic inequality (class divide), deepening economic instability (crises), and growing unsustainability of human–nature interactions (metabolic rift), signifying a looming planetary crisis.

These three issues (inequality, instability and unsustainability) can be understood through the framework that Marx outlined in this text that took more than three decades of thinking and writing about capitalism (though the text ultimately remained incomplete going by Marx’s own outline of it in the Grundrisse). Marx’s primary argument is that these three issues cannot be addressed simply by reforming the system but that they are endemic to the way the capitalist system works. It then follows that an enduring solution to these issues cannot be found within capitalism, making an anti-capitalist political agenda absolutely imperative.

Capital provides a framework and analytical structure to think about each of the three issues discussed above. In relation to inequality, there are two key ideas developed by Marx in Capital. First, the logic of primitive accumulation that is about the use of non-economic forces (political) in creating a fundamental kind of capitalist economic inequality—the division of society into propertied (of a productive kind) and property-less classes. Second, fundamental to the continuation of capitalist inequalities is the process of exploitation, in which one class extracts unpaid labour (or its equivalent value) from another class. In relation to instability, Marx focuses on various kinds of interruptions and deep disturbances that the system experiences in its regular functioning. He emphasises two kinds of crises (among several that he discusses at various places in Capital) that are central to the capitalist system—profitability crises, and underconsumption (effective demand) crises. In the context of unsustainability, Marx discusses the idea of a metabolic rift in the deep division between town and countryside that capitalism creates, and renders the system unsustainable in the long run. I focus mainly on the issues surrounding inequality in this article.

Marx is able to show in Capital both the unprecedented dynamism and wealth that characterise the capitalist system, as well as the contradictions, crises and rifts (also unparalleled in history) that arise from these same dynamics that destabilise and threaten the continued sustenance of a majority of humankind. The whole text is a continuous engagement with political economists (and even poets and writers of literary works) before and during Marx’s time. Marx posits certain structural features, regularities, and countervailing tendencies to these regularities in capitalist economies, ultimately concluding that the system is not tenable and should therefore be replaced with another that is less exploitative and alienating. In this article, I focus on some of the ideas that I consider central to the text (focusing mainly on Volume 1).1

1 Four Sets of Ideas in Capital

1.1  Marx’s Method in Capital: Ascending from the Abstract to the Concrete

Marx does not explicitly discuss his method in Capital. He presents a brief outline of his method in Grundrisse [1858 (1993)], in a section titled “The Method of Political Economy.” There are two important ideas that he lays out in this section. The first one is where he distances himself from influential philosophers like Hegel. Marx argues that human endeavours to produce knowledge can proceed in two ways. The first approach is one in which ideas and concepts themselves develop into more concentrated forms, standing in for the real world (in other words, the concrete-real is nothing but the concrete-in-thought). The other is one in which concepts are derived from observations of the social world and simple conceptions, and through the application of these concepts the researcher ascends to the concrete (in thought) that is nothing but the “concentration of multiple determinations or unity of the diverse.” It is this ascent from simple abstractions to the concrete social totality, which itself is expressed in thought, that Marx identifies as his method of social enquiry. He states that through this entire exercise of arriving at the thought-concrete, the concrete-real (social totality) is always a presupposition for the social theorist. As thought-concrete advances, there is both a deeper appropriation of the concrete-real, and the positing of more general and valid abstractions (such as Adam Smith’s abstraction of labour-in-general or Marx’s abstract labour being at the root of all capitalist wealth).

As I discuss further in the next subsection, in Capital, Marx starts his analysis of the capitalist economic system with commodities2 and labour at a very general level of abstraction, and ascends to a reconstruction of the social relations, economic processes and the edifice of the entire capitalist economy, which he considers the most advanced and complex historic form of production (not necessarily in other social aspects) that humankind has witnessed. As history advances, Marx argues that there is a movement towards a higher concrete through discontinuities and the decaying of earlier concrete formations (the same applies to capitalism too). There is a notion of continuous progress or development that he posits here that may be open to the critique of historicism.

A second idea from Grundrisse is crucial to Marx’s method. A more concretely developed form of production (such as the capitalist economy) contains the key to understanding less concretely developed forms, which in turn show the steps through which the present has been created. All history, in the latter sense, is a history of the present. However, Marx distances himself from those economists and thinkers, who see capitalist relations and categories in all the previous social formations or epochs. Each social formation has its own internal ordering and sequencing of social relations, economic processes, and theoretical categories. For instance, in the phase of settled agriculture up to the onset of modern capitalism, it makes sense to start with landed property to analyse how its presence dominates the entire society. In the phase of modern capitalism, it is capital that dominates the entire being of the social formation, and it is only after a careful understanding of capital is arrived at that landed property (ground rent) can be studied along with their interrelations.

A third idea related to method that one can glean from reading Capital is the way Marx works with the idea of a contradiction, and how it is central to the way societies change over time. Starting with the seemingly neutral world of commodities, Marx ascends to the concrete totality by describing the contradictory nature of the entire society, not merely in the social relations that define the system (that could give rise to class struggle from time to time) but also by pointing to the structural contradictions that define the system (that give rise to tendencies toward economic crises and eruptions). The entire text of Capital can be read as a collection of multiple contradictions in the functioning of capitalism.

1.2 Capitalist Inequality: Moment of Origin and Its Perpetuation

Primitive accumulation: If we take a snapshot of the incipient stages of a capitalist economy, it is already discernible that very few individuals own productive assets, while large masses of people either do not own any productive assets or are on the verge of losing them. How did this deep inequality come into being? Is it simply that the rich are hard-working and smart and thereby acquired their wealth deservingly? Marx, taking the example of England, offers some stark insights into this moment of origin of inequality that completely overturns the logic of the capitalist rich deserving their prosperity.

What is relevant to us at the present moment, from Marx’s description, is the following. Creation of productive asset inequality in most capitalist economies is not a market-driven process (although heightening of this inequality is certainly aided by markets). It is a process that is driven by non-economic forces—use of brute force in the forcible expropriation/eviction of people from their productive assets. There are two key aspects to the logic of primitive accumulation—(i) accumulation of capital/property in a few hands; (ii) the creation of a class of workers who do not own/possess productive assets and, therefore, are dependent for their livelihoods upon those that own them.

Marx has a rich historical description towards the end of Volume 1 of Capital of how these aspects came into being. To recount a few of these processes: the first enclosure movement in England that evicted farmers/peasants from their lands, the expropriation of the productive artisans, the plunder of public and commonly owned properties by influential groups of people, and the transfer/plunder of capital from the colonies to England in the form of tribute. He also describes the associated process of dispossessed petty producers being disciplined by the state into becoming the modern working class. Paying close attention to Marx’s narrative reveals that he does not see the emergence of modern industrial capitalism as inevitable, but that it was based on a series of contingent outcomes that led to the prospering of a class of wealthy tenant-farmers first in the English countryside, and then merchants turning into industrial capitalists in the newly created cities like Manchester.

While Marx’s narrative certainly offers a useful insight into the birth of modern industrial capitalism in England, later Marxists have argued that the processes that Marx describes for England can sometimes be applied to the origins of capitalism in other parts of the world but also that these processes continue alongside other means of accumulation (described below). In this sense, “primitive” accumulation is not entirely an appropriate term because in reality, these processes happen, frequently with the aid of the state, alongside other accumulation processes. During the neo-liberal era over the last four decades, capitalist classes have plundered commons, publicly-owned properties, and properties that belong to petty producers. David Harvey uses a more appropriate phrase to capture the contemporaneous nature of this process—accumulation by dispossession.

Logic of Structural Concealment and Mystification

To the latter [producers], therefore, the relations connecting the labour of one individual connecting with that of the rest appear, not as direct social relations between individuals at work, but as what they really are, material relations between persons and social relations between things.

—Volume 1 of Capital, p 78 (chapter on “Commodities”)

There it is a definite social relation between men, that assumes, in their eyes, the fantastic form of a relation between things.

—Volume 1 of Capital, p 77 (chapter on “Commodities”)

Marx starts his analysis with “commodities” in Capital, Volume 1. He justifies his starting point by pointing out that the wealth of a nation is measured in terms of the total value of commodities that are produced in that nation. So, how does the commodity acquire exchange value in a society that has already witnessed generalised commodity production? Marx’s answer (somewhat different from those of Smith or Ricardo, but also similar)3 is that the common element in all the commodities is their embodied socially necessary abstract labour (labour-in-general, as opposed to particular/concrete forms of labour). This is what makes them comparable, so the exchange value of a commodity is the socially necessary abstract labour (measured in terms of time) that is embodied in it. This is true not merely of the various goods and services but also the commodity of labour power (or the ability to perform labour). With advanced development of money (as a commodity), the circle is complete. Different commodities exchange at their values (including money commodity), and are paid for in terms of the universal equivalent of value, that is, money. This sets up one set of relations that are self-contained—the social relations among things that seem to possess unique “magical” properties that allow them to exchange for one another.

On the other hand, people relate to one another through the commodities that they possess. In the labour market, a worker sells the commodity of labour power (or the ability to perform labour) and the capitalist pays for it through another commodity—money. Workers buy goods and services in the product market by giving money in exchange. The sellers (traders) sell goods and services and get the money commodity in return. This completes the second circle—a second set of relations that are self-contained.

Between these two sets of circles (material relations among people, and social relations among things) something vital in the social process gets concealed. The social nature of production or social relations of production go out of vision in this set-up (concealing deep capitalist inequalities). This concealment, therefore, is structural and built deep into the capitalist system. Capitalist or non-capitalist relations that helped produce the commodities through the expenditure of human labour power become invisible. This has a mystifying effect that bestows seemingly inherent magical properties to the produced commodities. Marx, therefore, starts with the task of demystifying this process, making visible the labour process, and the exploitative social relations that underlie the production of commodities.

Source of capitalist profits—the four routes to the extraction of surplus labour: Having demystified the “autonomous” world of commodities, Marx delves into what he calls as the “hidden abode of production.” Unlike the great political economists who influenced him (like Adam Smith and David Ricardo), Marx sets up a central puzzle for the capitalist system. He accepts at face value the claim that in the world of markets, equal exchange occurs (in terms of money or commodities). In other words, the capitalist buys raw materials at their value. Machinery and other productive paraphernalia are also bought at their value. The workers are paid the equivalent value for what they sell in the market—labour power. Once production occurs, the final good is sold at its value. However, if this is true, where do capitalist profits come from? He argues that profits cannot, therefore, come from the realm of circulation, that is, from within the world of markets.

He proceeds to analyse the realm of production, and finds his answer in the way labouring activity is structured. Like all commodities, the commodity that the worker possesses, that is, labour power, is also produced by the socially necessary labour time that goes into its creation. These are the commodities (and non-commodities) that the worker consumes in order to be able to possess the ability and skills to appear on the labour market with the commodity that she/he can sell. The capitalist pays its equivalent value (on a timely, for example, daily, weekly, monthly or an annual basis) in the form of wages/salaries and proceeds to put it to use. Here lies the secret to the world of capitalist profits. In the use of labour power, the capitalist extracts labour from the workers in the production process. However, labour itself is value producing, as we noted above.

The distinction between labour and labour power is the key to understanding the source of profits in the capitalist system. The main condition for profits to exist is that the value created by workers has to exceed the value paid to the workers. This difference is what Marx terms as surplus value. This is the difference that has been at the root of anti-capitalist politics and revolutions because if the capitalist extracts more value from the workers than what he pays them, it clearly amounts to exploitation/theft on the part of the capitalist. Here the logic of equal exchange breaks down, and this is the most important source of continuing inequality under capitalism. However, the existence of surplus value is not predetermined, and not always true. So, the class of capitalists tries to ensure that the above-mentioned condition is satisfied, and gear the whole system (including the state) to achieve this end. There are four ways that Marx discusses in Volumes 1 and 2 of Capital (that I present below) through which the capitalist ensures that this condition is satisfied, while trying to maximise surplus value.

In Volume 1, Marx starts the analysis of the capitalist extraction of surplus with what he terms as absolute surplus value (or the working day). Each working day can be split into two parts. The first part is the one in which the worker creates the value equivalent to the value of his/her labour power. Marx calls this necessary labour. The second part of the working day is one in which the worker creates value over and above the necessary component. This is surplus labour and its equivalent value is surplus value.

As long as the capitalist succeeds in making the worker work more than the necessary time, profits are assured in the system provided that the final goods are sold. One of the fundamental class struggles in capitalism is, therefore, over the duration of the working day. The capitalist has an interest in lengthening the working day as much as possible, while the worker would resist this to protect her/his own leisure time. It follows that class struggles over the duration of the working day determine inequality levels between the workers, capitalists and other classes who derive their existence from surplus value.

Relative Surplus Value

A second route to extracting surplus labour is what Marx calls as relative surplus value. If the working day is fixed in its duration, for instance, due to some legislation won through class struggle, the capitalist can increase the extraction of surplus value only by reducing the quantum of necessary labour in the fixed duration of a working day. This can be achieved if the reproduction of labour power (equivalent to necessary labour time) is made cheaper, that is, wage goods become cheaper. As long as there is productivity enhancing technological growth in the system, the values (in terms of labour time) of commodities would show a continuous decline. However, there is no reason why producers of wage goods would reduce their values deliberately to benefit the rest of the capitalist class. There has to be system-wide imperative.

Marx shows that every capitalist indeed has an incentive to innovate so that he/she can produce a commodity in less than the socially necessary labour time, and therefore pocket the difference between the market value and the costs incurred by the innovating capitalist. This is what Marx calls as the quest for “super-normal” profits. Those that cannot compete go extinct in this race for super-normal profits.

This drive for super-normal profits produces three phenomena. First, it creates tremendous technological dynamism in the system (what Schumpeter later called “creative destruction”). Second, it allows the capitalist class to achieve a general reduction in values of commodities that then reduces the necessary component of the working day, and thereby creates avenues for relative surplus-value extraction. Third, paradoxically, as the other capitalists in the industry (where the innovation occurred) catch up, there is also an overall reduction in the profit rate (causing instability—see the next section).

Marx identifies a third route. If the working day is fixed, and technological growth is not forthcoming, the capitalist will try to increase the intensity of labour performed by the workers in any given time. More labour is extracted in every hour of labour that the worker performs. The adoption of “Scientific Management,” assembly-line production, or strict supervision, or the imposition of stringent deadlines for projects undertaken by workers, all of these fall into this category (some of these occurring after Marx’s time). Of course, all the above-mentioned routes can be pursued simultaneously when there are no imposed restrictions, as it sometimes happens in the real capitalist world.

In Volume 2 of Capital (published posthumously by Engels in 1894), Marx identifies a fourth route. This can be termed as the reduction of turnover time, primarily through the annihilation or continuous restructuring/production of space. Turnover time is the total time that the capitalist takes from the time he/she makes the capital advance/investment to the time he/she is able to realise the returns from that investment. This involves the time taken for the procurement of machinery and raw materials, labour power, time taken for the actual production, and the time taken to sell the final product.

There is a constant drive in the system to reduce this turnover time for the following reason. If the capitalist is able to realise the original capital advanced (for example,₹100) and profits (for example,₹20) in say, a one-year cycle (turnover time), then the reduction of turnover time to six months means that the capitalist can double the profits (₹40) during the same one year. This reduction happens through innovations in transportation and communication technologies, choosing the location of production optimally, and intervening in particular markets across space. The capitalist class is able to constantly annihilate space as capitalism advances, or use space innovatively to garner greater surplus. This provides clues to the twin phenomena of how space seems to get more and more compressed over time in capitalism (for example, time taken to move between continents) as well as about how geographies are radically shaped and reshaped at a frantic pace.

All these four routes help the capitalist convert the initial possession of money into accumulated capital. Capital is nothing but the self-expansion of value. However, what Marx shows us is that this happens through the exploitation of workers (capital as a social relation). These four routes of surplus extraction also have a direct impact on income inequality in capitalism. Class struggle impacts inequality by altering the rates of exploitation (surplus value/value of labour power). As profits get accumulated and are converted into further capital, this also has a direct effect on wealth inequality levels (especially of productive assets, but also of consumptive assets like housing) in capitalism. It is not difficult to see that capitalist classes across the world have effectively channelled all these four routes over the last four decades to vastly increase income and wealth inequalities.

In Volume 3 of Capital, Marx also shows how the extracted surplus value (through the four routes discussed above) is distributed among different groups such as landlords (rent), merchants (commercial profit), moneylenders/banks (interest), and by extension, groups like the state (taxes) and executives (salaries/compensation) in firms. These various groups provide various conditions of existence of the productive capital (directly engaged in the production of surplus value). Of these groups, finance capital, trading firms, landlords, and executives have made tremendous gains during the last four decades vis-à-vis workers as well as productive capital both through pocketing higher amounts of surplus value but also through excessive speculation. Marx, in Volume 3, lays out the theory of how when there is excessive speculation over the future distributions of surplus value, there is a possibility of great instability in the system, a phenomenon that became visible to the world with the onset of the Global Crisis of the 2008, the reverberations of which are shaking the political edifice of various democracies in the world even today.

Theory of the firm: Marx also offered one of the earliest and most coherent theories of why capitalist firms exist4 in the first place. When Marx enters the hidden abode of production to discover the source of capitalist profit, he also engages in the exercise of trying to make sense of a different kind of capitalist inequality. While markets exist in the realm of overall equality (of exchange),5 capitalist firms are repositories of great inequality. There is hierarchy everywhere in the organisational structure, and the principle of laissez-faire that is so dear to the advocates of capitalism is nowhere visible in the way firms operate. Instead there is careful planning of every aspect of organisational functioning, and firms represent multiple islands of command economies in a sea of markets. Why do two completely incongruous principles seemingly come together in making the capitalist system work?

Marx answers this in two ways. On the one hand, he follows his great predecessors (like Smith and Ricardo) in the domain of political economy to argue that firms allow for greater cooperation among workers, more minute division of labour and also, given the structure of these organisations, allow for the introduction of new technologies and machinery. This would result in much greater productivity of workers, and higher output levels in the whole economy. On the other hand, Marx also offers his own insights on how firms also allow for greater control of workers, and a more efficient way of extracting labour through direct control and supervision.

So, Marx’s unique contribution to this whole issue is that firms allow for a more efficient extraction of surplus value from workers and this provides a rationale for setting up the hidden abode of production according to principles that are completely different from the way markets are organised and set up.6 Marx concludes that while productivity levels certainly show an impressive improvement from the way capitalist production is organised, there is also increased alienation that workers undergo, and the increased surplus goes in the coffers of the capitalist class. The contributors (workers) to the increases in productivity are left in a much worse shape with the advance of the organisational form of capitalist production while the wealth of nations advances like never before. This too, therefore, is a way of heightening inequality in the system.

1.3 Tendencies towards Perpetual Instability

Various writers have elaborated upon Marx’s crisis theory (for example, Wright 1978; Harvey 2006) in great detail that it would take a separate essay (or several essays) to delve into a detailed presentation of the material. Here, I confine myself to discussing two of the crisis tendencies that are always inherent in capitalism that Marx alludes to at various places in Capital but mainly in Volume 3. These two are profitability crises and underconsumption (effective demand) crises.

Profitability crises are those that occur when the rate of extraction of surplus value on the capital advanced declines for one reason or another. There are two variants of this in Marx. First, he presents a secular tendency for the rate of profit to fall over time. Marx was not the first to make this argument. Ricardo made this argument much earlier, although he linked it to the phenomenon of the drive in modern capitalism to cultivate less and less fertile lands, which consequently leads to a continuous increase in the share of total surplus that goes to landlords. This, in turn, results in a tendency for the profit rate of the capitalists to decline. Marx borrowed this idea from Ricardo, but put it on a much broader basis, without confining the cause to agriculture. Second, there is a tendency for a profit squeeze from time to time in the way capitalism works. Both these tendencies are closely intertwined with the processes that are described above that affect inequality.

The tendency for the rate of profit to fall is one that is directly derived from the quest for super-normal profits. Every capitalist is trying to outcompete every other capitalist. In this process, they are trying (that is, when they are pursuing legitimate means) to innovate constantly, and get a productivity advantage over the others. The ones that succeed in innovating do get a short-term advantage in obtaining super-normal profits. But eventually, other capitalists catch up. This leads to the erosion of super-normal profits, but it also causes a permanent reduction in the value of the commodity (measured in socially necessary labour time).

There are two outcomes. Innovation increases the investment in fixed capital that shows a secular rise over time. There is also an increase in the rate of exploitation of workers (ratio of surplus value/total value paid out to workers). Since the rate of profit is nothing but the ratio of profits over total capital advanced, as long as the rate of increase of the ratio7 of constant capital (fixed capital + inputs) to variable capital (value paid out to workers) increases faster than the rate of exploitation, there is a tendency in the system for the profit rate to decline. There are also counter-tendencies to this within capitalism—the rate of exploitation could rise even more, inputs can be obtained more cheaply and so forth. Whether the falling rate of profit dominates over the counter-tendencies continuously or not as capitalism advances has been a great matter of debate among Marxists, but that this happens during certain phases of intense capitalist competition has been established beyond doubt.

The profit squeeze crisis occurs during phases of intense class struggle between capitalists and workers when technological growth slows down. As workers succeed in bargaining for better wages, and productivity growth does not match the growth in wages, this will lead to an erosion of the profit rate of capitalists. Economists (for example, Boddy and Crotty 1976) have argued that this was the case in the early 1970s, when the system went through a deep crisis and as a result of the consequent restructuring, we see the birth of neo-liberalism or globalisation of recent vintage that we are still part of.

The other major crisis is the tendency in capitalism to be unable to realise the surplus value extracted from workers that can be termed underconsumption crisis or effective demand crisis. While surplus is embodied in the commodities in the four routes described above, it is realised only when the final commodities are sold in the market. This is contingent upon the fact that there is enough demand in the market. The multiple sources of demand in capitalism are consumption demand from workers (wage goods), consumption demand from capitalists (luxury goods), and investment demand from capitalists (capital goods). If for some reason, these three sources of demand are not adequate to purchase the produced goods, then the system moves towards a crisis.

In Volume 1 of Capital, Marx takes on a French economist called Jean Baptiste Say, whose idea that supply creates its own demand has been widely accepted by the mainstream in the economics profession. Basically, demand-related problems hardly ever arise in a system-threatening way. However, Marx argued that this is not a foregone conclusion and that there are a number of instances in capitalism where the produced goods do not find adequate demand outlets. There could be counter-tendencies to this too—searching for new markets, conquering new peoples and territories and converting those into colonies, being forced by class struggle to pay the workers better, and so forth. The most famous example for this sort of a crisis occurred in 1929 (the Great Depression) that required the unorthodox and brilliant mind of Keynes and his associates (the famous Cambridge Circus) and a lesser-known (at that time) Polish Marxist economist (Michal Kalecki) to formulate the causes of the Great Depression in illuminating ways. Of course, Keynes went on to propose reform packages that addressed this crisis and its aftermath after the 1930s.

These two classes of crises—profitability crises and effective demand crises—that Marx identified in Capital have been perpetual in the way capitalism has advanced since the 19th century. In fact, if we analyse the deep crises that the system has undergone after the publication of Capital, there have been four such moments (Vakulabharanam 2014). The first one is the long depression (1873–96). This has been widely acknowledged to be a profitability crisis brought upon by intense capitalist competition just at the time when Marx was writing Capital. The second deep crisis is the Great Depression (1929–39) that has been understood to be an effective demand crisis brought about by vastly increased inequalities and reckless speculation by financial capital and forces that control real estate. The third crisis is the stagflationary crisis (1973–80) that is widely understood to be a profitability crisis brought about by the tendencies of profit squeeze. The fourth deep crisis is the Global Crisis of 2008 brought about by a latent effective demand crisis (postponed by excessive borrowing and asset bubbles) caused mainly by increased inequalities and financial speculation.

It would seem that there is an oscillation between profitability and effective demand crises as capitalism advances. Each crisis produces a restructuring of the capitalist system with the introduction of new institutions that address the immediate crisis. But addressing profitability issues seems to cause an increase in inequality, and result in excess capitalist accumulation that then leads to widespread speculation. Addressing an effective demand crisis seems to cause a profitability crisis when technological growth slows down or the capitalist classes are not able to control wage increases. Where institutional restructuring takes time, like in the present (almost a decade since the outbreak of the Global Crisis of 2008), political crises seem to take deep root, with the political system swerving between left and extreme right (as we can see in much of the democratic world today).

1.4 Capitalism and Nature: Metabolic Rift

We see, then, that labour is not the only source of wealth, of use values produced by labour. As William Petty puts it, labour is its father, and the earth its mother.

Capital, Volume 1, p 50 (Chapter 1, “Commodities”)

Moreover, all progress in capitalistic agriculture is a progress in the art, not only of robbing the labourer, but of robbing the soil; all progress in increasing the fertility of the soil for a given time, is a progress towards ruining the lasting sources of that fertility... Capitalist production, therefore, develops technology, and the combining together of various processes into a social whole, only by sapping the original sources of all wealth—the soil and the labourer.

Capital, Volume 1, p 475

(Chapter 25, “Machinery and Modern Industry”)

Marx has been sharply criticised for not focusing on nature adequately enough in his writings. There are two aspects to these critiques. First, when he theorised exchange value of commodities and put labour at the centre of all value, he neglected the role of nature. Second, he was not sufficiently critical of the degradation of nature that capitalism perpetrates, and thereby his theory of metabolic rift is not adequate to the present times, where climate change as a phenomenon threatens to snowball into a planetary crisis in the next few decades. Both critiques need to be taken seriously, although there have been attempts from within the Marxian tradition to respond to them.

The first critique is that although Marx realised the significance of nature in the determination of use values (as we can see from the first quote at the beginning of this section), he did not incorporate this in the determination of exchange value.8 There have been attempts to address this issue in the Marxian tradition (for example, Moore 2015; Walker 2016). These attempts have tried to incorporate a unified labour–nature time as opposed to labour time alone. However, there are ways in which some of this work can progress further so that nature is put at the very heart of value theory—the fundamental building block of Marxism.

The second critique has also been addressed by Marxist thinkers, most notably Foster (2013). Marx had a theory of dialectical interaction between humans and nature that was mediated through the labour process. Human subjects exist in a larger “universal metabolism” of nature but neither humans nor nature are subsumed by one another. It is in this context that Marx and Engels argued that the deepening of the separation of town and countryside deprives the agricultural soil of its nutrients, while the town treats what would have been the nutrients to the agricultural soil as waste, and worries about its disposal. This is the metabolic rift that Marx articulated, learning from the natural scientists of his time.

Globalised commodity flows (including food) and resource flows that come from the quest for cheap raw materials have compelled Marxist ecological thinking to extend this analysis of metabolic rift to much larger ecological rifts that have happened since the 19th century. Foster argues that the basic insight of Marx that there used to be a stable metabolism between humans and nature that later undergoes a rift at various spatial scales—local, regional, and global—has now been extended to multiple domains of ecological research and knowledge production. More progress certainly can be made in achieving a higher critical awareness of this, and a more concrete understanding of how this can be overcome in a post-capitalist universe can be striven for. This would certainly involve moving beyond the exchange value obsession of the capitalist system to a more use-value oriented, sustainable model of production.

2 Marx–God or Craftsman?

Teodor Shanin, in an important essay written in 1983 titled “Late Marx: Gods and Craftsmen” argues that after the publication of Capital, Volume 1, Marx was deeply invested during the 1872–83 period in the Russian case while rethinking some of his formulations in Capital, especially about the unilinear path of history (capitalism–socialism) for all societies. Marx was then engaged with the Russian populist revolutionaries (Narodniks) about the question of whether the Russian peasantry needed to go through a phase of capitalism or if their communes could become part of a post-revolution Russia. He changed his unilinear position in this context to concur with the Russian populists that the Russian commune could indeed be a vehicle for social regeneration. Shanin concludes that unlike how several Marxists view Marx’s work (especially Capital) as “divine or God-like,” Marx was above-all a craftsman, who paid attention to the contextual particularities, and was willing to change his mind to accommodate a change of views as long as they were consistent with his deeper project of creating a more just order. I present some of the critical issues that have come up repeatedly against some of the material presented in Capital.

2.1 Framework and Stark Predictions

Along with the constantly diminishing number of the magnates of capital, who usurp and monopolise all advantages of this process of transformation, grows the mass of misery, oppression, slavery, degradation, exploitation; but with this too grows the revolt of the working class, a class always increasing in numbers, and disciplined, united, organised by the very mechanism of the process of capitalist production itself.

Capital, Volume 1, p 715

Above all, Marx presents us with a framework to analyse and critique capitalism. The framework is broad enough to make a range of predictions, but Marx, in a very short chapter towards the end of Capital, Volume 1 titled “Historical Tendency of Capitalist Accumulation,” makes several sharp predictions as we can see from the above quote. For instance: (i) the prediction about the extreme polarisation between the fundamental classes in capitalism, viz, capitalists and workers; (ii) workers in advanced capitalist societies will stage an anti-capitalist revolution before their counterparts in less advanced societies. Since the predictions did not come true, is the framework presented in Capital wrong?

About the first prediction mentioned above, under certain assumptions in the framework that he offers us, polarisation is a definite outcome. The key assumption that Marx makes is that the state is unwilling or unable to intervene on behalf of the workers, and therefore does not engage in any direct redistribution of incomes. In this situation, the possessors of wealth would improve their relative position, while the property-less would witness deterioration in their living standards. If we examine the history of capitalism, especially in the developed world, there are several such episodes. The most recent episode of capitalism after the 1970s (neo-liberalism) witnessed tendencies of extreme polarisation, apart from the phenomenon of rising inequality across different countries. That Marx chose to highlight the possibility of polarisation and not the emergence of a “middle class” working population (as happened in post-World War II years), is probably a way of crafting his text for various possible reasons, notably a political agenda. This does not and cannot refute the deeper framework that he offers us to make sense of a capitalist economic system.

About the second prediction, it is now evident that the first revolutions in Marx’s name did not occur in the most developed societies. Majorities of workers for the most part in these societies have been content to organise themselves into trade unions at best to bargain for better wages and working conditions. Marx was probably too optimistic about the ability and willingness of working people and the political parties that came up representing them, to stage radical, successful struggles. This, once again, does not refute the framework that he offers us in Capital.

2.2 Non-European Societies

Several critics (both internal to and outside the Marxist tradition) have raised the question of how relevant Marx’s Capital is for non-European societies that did not witness an organic evolution of the kind of capitalism that Marx describes, but were subjected to it through colonialism or other forcible means. This is a serious critique that has produced a vast amount of literature, and this essay is not the right place to engage with this literature. However, I have a few reflections from my own engagement with the Indian and Chinese economies.

Marx’s Capital is without doubt set in England and more broadly Western Europe, although it is also an attempt to transcend these contexts to make more general claims about capitalism. That the rest of the world would follow the same trajectory or go through stages similar to Europe is patently false. Marx was probably wrong in his expectation that the more developed societies hold a mirror to the future of developing societies. There is considerable diversity in the histories of non-Western European societies that they cannot all be arranged in a unilinear historical pattern. These societies cannot also be construed as perennially waiting for a transition to a European kind of capitalism. However, to the extent that capitalism has either been imposed on these societies or that they have been brought into it through the sway of markets, I believe that Marx’s insights in Capital are still relevant for making sense of the particular capitalisms that these societies have witnessed over time.

Early capitalist accumulation in these societies may not have come about through the same processes of primitive accumulation that England went through, but primitive accumulation-like processes got accelerated during phases like neo-liberal globalisation of the previous four decades. In general, two points need to be made in this context. First, most of these societies now have some version of a capital/non-capital dialectic that is active. Capitalist development in these societies clearly has dimensions that are very different from the European case. These need to be theorised, and to the extent that capitalist elements are present, Marx’s insights and ideas will always be of partial use. Second, the post-capitalist futures that these societies fight for will have different trajectories too, and these cannot be predetermined to one kind of future society that works for the whole world. Shanin’s observations about the Late Marx suggest that Marx himself may not be in disagreement with these two points.

There are several observations and insights of Marx in Capital that are also especially insightful in understanding the current trajectories of non-European societies. I mention one such observation here. First, Marx has a careful discussion of the kind of technological change capitalists are biased towards as the capitalist system advances, that is, whether it is labour-saving or capital-saving. From his observations in England, he veered to the position that capitalists tend to prefer labour-saving technological change. While this may not always be true, it would seem that several developing capitalist societies, including India after 1991, China after 1992, have become more biased towards introducing labour-saving technological change.

What this implies is that given the vast reserves of labour power in these countries, there is a serious crisis of employment. Marx also offers a detailed discussion of what happens to the unemployed by discussing different kinds of labour reserves in the context of England in the 19th century. He identifies four kinds—the floating reserve (those that are in and out of the capitalist-sector employment), the stagnant reserve (those that do not get integrated), the latent reserves (agricultural populations that migrate to the urban areas seeking employment), and the destitute (who are abandoned, and not employable). These categories make absolute sense in analysing the Chinese and Indian spurts of growth in recent times. Both countries are growing partly based on the incorporation of latent reserves into their advancing capitalist economies.

There is now a vast accumulation of the stagnant reserves (given labour-saving technological change) that has been given multiple names, most notably the informal sector. It would seem that even in England of the 19th century, a vast labouring population was incorporated into the informal sector from Marx’s descriptions in Capital. However, England had the luxury of exporting its labour reserves to the colonies. It seems certain that countries like China and India will witness capitalisms that will have serious problems integrating these reserves into the capitalist workforce. The capital/non-capital dialectic will be a permanent fixture in these capitalisms.

3 Conclusions

As I argued above, Marx’s Capital is still absolutely relevant, and is in fact, indispensable in making sense of the diverse capitalisms that have come about across the world, both in European and non-European societies. To the extent that Marx tried to theorise capitalism in the abstract that transcends the unique features of the English or European context, he offers us various insights and critiques about how to understand and intervene in societies beyond Europe. However, like any text, Capital is also a partial account of the social world. This is true in a spatial sense (Europe versus non-Europe) but also along multiple social dimensions.

While the class dimension of societies and the class aspects of non-class dimensions such as gender, race and caste are explored brilliantly in this text, the non-class dimensions themselves need separate attention both at an analytical and a political level. Social change or transformation has to be envisioned and executed from a continued dialogue between thinkers focusing on these different dimensions and the ecological one. While a framework that can speak to all the social dimensions is desirable, it is not clear to me that it is feasible to develop a single framework that can address all the different nuances of social change. To the extent that capitalist processes are unmistakably part of a vast majority of societies across the world, Marx’s Capital will speak to them more or less eloquently, limited only by the creativity of the thinkers and activists engaged in the project of social change.

NOTES

1 Although my focus is on Volume 1 (given the occasion of its 150th anniversary), wherever necessary, I draw upon other works of Marx. It is not just Volume 1, but the entire corpus of Marx’s work that provides deep insights into the capitalist system and is relevant today.

2 Marx starts his discussion of commodities with their values (as socially embodied labour) in Volume 1 of Capital, and then proceeds to transform these values to prices in Volume 3 of Capital. There is more than a century-old controversy about how Marx tried to transform values into prices (“The Transformation Problem”), and whether his method was flawed. Given the limitations of space, I do not go into this issue.

3 Marx adds the phrase “socially necessary” to the embodied labor time here. This can be interpreted in multiple ways, including the sense that the entire society has a bearing on what is socially necessary in the embodied time.

4 There has been a proliferation of literature in the 20th century in the mainstream of the economics profession about why firms exist. Several of these economists have also been awarded a Nobel Prize in economics for their work. Economists like Ronald Coase, Oliver Williamson, Armen Alchian, and Harold Demsetz have written extensively on these issues.

5 Markets can also be the sites of unequal exchange, however, Marx rhetorically concedes this claim to the advocates of markets, to make his deeper point.

6 Marx learnt a great deal on this theme by observing the new kinds of firms that came up in Manchester and also from his co-author, Engels’ own careful understanding of these processes from his own factory in Manchester.

7 This is one of the ratios that Marx calls the organic composition of capital.

8 Dipesh Chakrabarty argues in Provincializing Europe: Post-Colonial Thought and Historical Difference that this move by Marx in taking abstract labour as the basis of value is in order to both describe and critique capital. He is here simply relying on the attempt of capital itself to create such a world of abstract labour.

References

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Foster, John Bellamy (2013): “Marx and the Universal Metabolism of Nature,” Monthly Review, Vol 65(7).

Harvey, David (2006): “Overaccumulation, Devaluation, and the ‘First-Cut’ Theory of Crisis,” The Limits to Capital, second edition, Brooklyn: Verso, pp 190–203.

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— (1867, 1973): Capital: A Critique of Political Economy, Vol I, New York: International Publishers.

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Wright, Erik O (1978): “Historical Transformations of Capitalist Crisis Tendencies,” Class, Crisis and the State, Brooklyn: Verso.

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