A few brief and partial observations on the economic laws and the contradictions of capitalism




Jan Makandal

December 2014

The proletarian theory of capitalism is the concentration of all revolutionary innovations, with contributions by many, and Marx at the center pole. It is in constant development. Even Marx recognized his work as unfinished. In Das Kapital, he did not completely elaborate on a series of capitalism’s economic laws, but presented them as presuppositions, theorems or consequences of the production of surplus value and of the reproduction of social capital.

For example, the law of value is generally stated as a law of exchange of goods to their value, which corresponds to the socially necessary quantity of labor time required for their production. This formulation is based on the principle that the objective determination of the value of goods is realized by the labor time necessary for their production.

This formulation is not entirely correct; it is inexact, and it is the same argued by bourgeois economists, who have all been (like Marx) unable to scientifically develop it. So attempts have been made to explain value using other principles. One of these was by putting the problem into the context of mercantile circulation and basing the argument (an empirical argument to say the least) on a consequence of the mercantile circulation: competition. This leads to the theory of the tendency of the rate of profit to fall, from which some draw the erroneous conclusion that the demise of capitalism is inevitable.

This limited argument is linked:

  • To the absence of an analysis of surplus value and of the mechanism of its production as a source of “transformed forms” of interest, of profit.
  • To the error of bourgeois economists, who insist on ignoring the constant capital from previous cycles of production that is transferred from one capitalist to another. Instead, they connect the value of all merchandise to wages and profits, meaning that they only see and understand variable capital.

In other words, the arguments of these economists come from their incapacity to appropriate the fact that capitalist production is the production of goods, which crystalize the unique form of value that is surplus value. They don’t grasp the role played by the material means of production (constant capital) in the production process. Capital appropriation permanently reproduces all the conditions to produce value by adding “live” labor to “dead” (already capitalized) labor.

A clarification is needed at this time about Marx’s analysis of value. He demonstrated the two radically opposite notions of merchandise:

  1. Use value describes the social utility of goods for production or consumption. This sends us directly to the concrete characteristics of labor that produces and transforms them.
  2. Exchange value sends us directly and uniquely to abstract labor, meaning the quantity of spent labor power in the production process, and as such interchangeable and homogenous.

Marx also distinguished the quantity of value of goods from the form of value, and described how in the practice of exchange, a given quantity of goods represents the quantity of value of another set of goods. This distinction allows us to appropriate the genesis of successive development of forms of value. This leads to the theory of money, a universal equivalent of all other goods, in which the value is materialized “normally” or by convention.

This distinction between value and the form of value can allow us to understand why the price of merchandise can differ from its value. But this is only a formal definition; it really doesn’t answer the question of why and how the value of merchandise determines its price. For that, it is important to consider precisely that all goods are products of capital.

Marx did show a trend of a general rate of profit, which is the same for all capitals but bound to conjunctural fluctuations. Indeed, different capitals invested in different spheres of production do generally have different organic compositions; and since variable capital is the sole producer of surplus value, in different specific conditions of exploitation of labor power, very unequal profits would be obtained if all these goods were sold at their “exact” value. This unequal trend is realized by competition between capitals, which produces in turn the trend toward the equalization of the rate of profit, the tendency of monopolization, and the fixation of a mean or a “middle” general rate of profit.

The goods are sold, then, according to each individual evaluation of the market, not based on their real value, but by computing their cost of production [means of production, wages] plus the middle rate of profit. It goes without saying that any movement of price depends directly on the conditions in which capitals are competing—conditions, by the way, which are constantly transformed by the history of capitalism [class struggle]. At the level of the society as a whole, the sum of value is strictly equal to the cost of production.

This is the basis for the appropriation of the theory of value. The tendency of the falling rate of profit is intimately linked to it, based on capital accumulation, which tends to increase. Now even if capital unceasingly accumulates by enlarging the scale of production and the mass of wage earners, and by destroying all preceding forms of economies, it tends also to reduce the relative importance of surplus value in proportion to the total invested capital.

The different means applied by capital to thwart this tendency are to enlarge the field of exploitation, by intensifying it, by compensating for the relative diminution of the rate of surplus value by the elevation of its mass. All these are realized by the aggravation and the generalization of class struggle.

The economic laws stated by Marx would have two important characteristics:

  1. On the one hand, these laws are deducted through the fundamental mechanism of production, and are not models of variable economic practices defined in the field of circulation of goods and capitals.
  1. On the other hand, these laws are trends, and their effects are consequently thwarted by the relations of production [class struggle] that they come from, and they lead to contradictions. In their realization, they depend on the historic development of capitalist accumulation. The accumulation of capital, and competition between capitals, take different forms based on the weight of the level of concentration, in the context of the unequal development of the international market.

The contradictions of capitalism

We can distinguish two types of contradictions:

  1. The contradictions that characterize the functioning of capitalist production, and confer on it a permanent open or larval allure of crises… which has currently reached the level of structural crisis. It is a series of crises involving:
  • Surplus,
  • The apparent impossibility of controlling, at a social scale, the process of reproduction and development of the productive forces,
  • The unequal development of capitals in which competition is ruining sections or entire spheres of production; and
  • Cyclical alternation of prosperity and depression.

These contradictions depend on the historical conditions in which individual capital is devoted to the production of surplus value. Marx panoramically identifies this as anarchy in mercantile production. It is a grave political mistake to identify [as some do] these contradictions as one of the motions of a fundamental contradiction. Such identification can only lead to the reform of the capitalist system, by achieving an upgrade of the functioning of capitalism.

  1. The fundamental contradiction of the capitalist mode of production that historically constitutes capitalism, and at the same time implies its demise, is the contradiction between antagonistic social classes: capital and labor. IN THE FINAL ANALYSIS, all the contradictions in the capitalist mode of production, including the contradictions of the development of the productive forces, can be explained by the necessity of capital to extort surplus value and surplus.

And regarding the consequence of the aggravation of class antagonism between capital and labor, it is never capital that pays for the contradictions it created. Au contraire, the capitalist mode of production is able to set aside all obstacles created by its crises, by making the masses pay not only for the crises themselves, but also for their (temporary) resolution.

The functioning of capitalism perpetuates class struggle, and only the forces that capitalism produces can be the instruments of its demise.