Get your own Free Home Page Marx’s critique of political economy provided a foundation for analysing the intricacies of the reproduction process of commodity producing society by stripping the veil of mesmerising power off commodities and the market. But some of the premises of Marx’s critique of political economy are problematic, insufficient and could, indeed should, be said to be erroneous. These premises hinder an understanding of the past and the present, and in imagining & making a future. In this text the attempt is to enumerate and describe some of these erroneous premises and to examine their interconnections and implications.
Here we look at :
I. Basic characterisation of capital
II. Extent of domination of the capitalist mode of production
III. Significance of the tendency of the rate of profit to fall
IV. The problem of extended reproduction
V. Monopoly Capitalism and Imperialism
Theories of monopoly capitalism and imperialism, though not constituents of Marx’s work per se (they post-date Marx), are still being dealt here, primarily because they are deeply entrenched within post-Marx marxian and other tendencies.
The basic characteristic of capital was presented by Marx to be a specific mode of circulation of money i.e. M-C-M’ (money commodity more money). This is a continuous process of transformation of money into commodities and the change of commodities back again into money, or buying in order to sell. The circulation of money as capital begins with a purchase and ends with a sale, in contrast to simple circulation of commodities which begins with a sale and ends with a purchase (C-M-C; commodity money different commodity). In the circulation of money as capital the buyer lays out money in order that, as a seller, he may recover more money. Money therefore is not spent, it is merely advanced. More money is withdrawn from circulation at the finish than was thrown into it at the start. The money recovered is the original sum advanced plus an increment. This increment or excess over the original value was termed as surplus value (see Capital vol. I, Part II, Chapter IV ‘The General Formula of Capital’).
The circulation of commodities takes place on the basis of the exchange of equivalents. The creation of surplus value, and therefore the conversion of money into capital, can consequently be explained neither on the assumption that commodities are sold above their value, nor that they are bought below their value (see concept notes b, ‘Value and Equivalents’, pg.35). Circulation or exchange of commodities begets no value. Surplus value cannot arise from within circulation, its source lies in production. The concepts of buying and selling of labour power and its exploitation as the only explanation of surplus value, logically follow the premise of exchange of equivalents. Wage labour was, thus, essential to this characterisation of capital.
If the basic characteristic of capital is stated as M-C-M’, then capital has various types or forms, namely industrial capital, interest bearing capital, merchants’ capital, usurers’ capital etc. and all other visualisable concentrations of wealth which exist on the basis of M-C-M’. However, it was established by Marx that all other forms are derivatives of industrial capital. The definition of capital as M-C-M’ was in this way reconciled with wage-labour being a necessary prerequisite of capital. Capital was equated with M-C-M’ only because the extraction of surplus value through purchase and sale of labour power could also be characterised as M-C-M’.
History, however, poses a problem in the form of usurers’ and merchants’ capital.
Merchants’ capital, in so far as capital is defined as M-C-M’, is older than commodity production based on wage-labour. Since merchants’ capital is penned in the sphere of circulation, and since its function consists exclusively of the exchange of commodities, it requires no other conditions for its existence outside those necessary for the simple circulation of commodities and money (C-M-C). In fact, the simple circulation of commodities and money were the conditions of merchants’ existence. The separation between producers & consumers i.e. the extremes between which merchants act as mediators exists for merchants as given. The only necessary thing is that these extremes should be on hand as buyers and sellers of commodities, regardless of whether production is wholly a production of commodities or whether only the surplus of the self-sufficient producers immediate needs is thrown on the market. Merchants’ capital promotes only the movements of commodities between these extremes which are pre-conditions of its own existence.
Mercantile wealth represents the separation of the circulation process from the producers. Money and commodity circulation can mediate between spheres of production of widely different organisations : wage-labour based commodity production; personal & family labour based commodity production and organisations whose internal structures are still chiefly adjusted to the output of use values. But whatever the social organisation of the spheres of production between which the merchants promote commodity exchange, their wealth exists in the form of money, and their money, it is said, serves as capital. Its form is always M-C-M’. Since the movement of merchants’ capital is M-C-M’, the merchants’ profit is made, first, in acts which occur only within circulation process, hence in the two acts of buying and selling; and secondly, it is realised in the last act, the sale.
Usurers’ profit also springs from circulation, and with a still more irrational form M-M’, that is circulation of money, without any intervening commodity stage. Circulation of money is its only premise.
Merchants’ and usurers’ capital, before the emergence of commodity production based on wage-labour, are the two prominent instances, where capital subverts its own rules, profit emerges without the production of surplus value, without the exploitation of wage-labour, without the existence of wage slavery, totally from within the circulation process. Somewhere, something is wrong in the characterisation of capital. For capital to be capital, the mode of circulation of money, cannot be a sufficient pre-requisite. What is essential is the production of surplus value which can occur only on the basis of production for exchange using wage labourers.
M-C-M’ is not a sufficient criterion for characterising capital. M-C-M’ is a process of concentration of monetary wealth, and its sole necessary premise is the circulation of money and commodities. The commodities might be the products of simple commodity production or capitalist commodity production or simply exotic products or surplus produce of societies primarily structured to the production of use values.
While it is absolutely true that when conceiving of a purely capitalist mode of production, no profit can be made from circulation and the merchants’ profit is a portion of the surplus-value produced in the production process by the wage-workers, it is also true that prior to the emergence of the strong tentacles of the capitalist mode of production, merchants’ profits were made in circulation. This is due to the fact that prior to the ensnaring web of the world market that the development of means of communication made possible far flung social organisations had quite different productivities and thus quite different socially necessary labour times for the production of a thing (see concept notes a, ‘Commodity & Value’, pg.34). And there lay the basis of merchants’ profit within circulation. Since long before the capitalist mode of production, commodity production by artisans and peasants did give usurers and merchants a part of their produce. The wealth that accumulated in the hands of merchants & usuers had nothing to do with capital, notwithstanding the elegance and beauty of terminologies such as ‘formal rule of capital’, ‘real rule of capital’, ‘formal subsumption of labour under capital’ and ‘real subsumption of labour under capital’.
Characterising capital as M-C-M’ forces us to term as capital those production relations that have no relation at all with the capitalist mode of production, and which are, on the contrary, anchored on a totally different mode of production, i.e. simple commodity production. This both confuses and dilutes the rigour of (K)capital as an analytical tool. This acceptance forces us to search for capitalistic relations in the era dominated by merchants, where its very nature precludes any such possibility .
Erroneous analyses and wrong characterisations are an obvious result. Peasants and artisans are many a time termed workers (implied: wage-workers); and various extractors of surplus like usurers and merchants are called capitalists ! The characterisation of capital as M-C-M’ unhinges capital from the mode of production. It obfuscates historical distinctions.
Capital is a social relation, better characterised as wage labour based commodity production, or production for exchange using wage labour. Both production for exchange and wage labour are necessary for a social relation to be described as capital. Money from various sources is pooled to establish or sustain production units. A part of the money is advanced as wages to employ wage-workers. Surplus takes the form of surplus value and ‘necessary’ labour takes the form of wages (see concept notes d, ‘What is surplus value’ pg.37). The surplus value which gets realised is distributed as interest, rent, profit of enterprise, salaries (of managerial staff) and taxes. Capital is thereby differentiated from simple commodity production.
Simple commodity production is also production for exchange but without the use of wage labour. The development of simple commodity economy prepared the basis for the emergence of the capitalist economy. After the emergence of capital, capital and simple commodity production have co- existed. However, capital, because of its competitiveness in exploiting labour vis-à-vis simple commodity production, daily displaces it. Capital defined as wage labour based commodity production does away with ambiguity or obfuscation of historical distinctions. Capitalist commodity production and simple commodity production get distinct identities. Artisans and peasants are not mistaken for wage- workers. The refusal of the peasants and artisans to be coerced into the disciplined grid of wage-work will not be characterised as irrational ‘idiocy’ from which humanity needs to be emancipated. Progress will be associated with the barbaric wiping out of peasants and artisans.
Merchants from 16th to late 18th century were the representatives of a different mode of production. In an ocean of non-commodity production merchants were representatives of production for exchange but without the use of wage labour. This mode of production is termed as simple commodity production. For simple commodity production, value of a commodity is the sum of the value of raw materials and the wear and tear of the means of production incorporated in it and the new value added during production process. The new value created by artisans or peasants can be split into two portions: one part of new value is used for the upkeep of the domestic unit and the other part represents surplus labour (surplus produce). The surplus produce, part of new value, can be broken up further into rent + interest + taxes + levy + merchants’ margin + improved life for the artisans or peasants. It may be pointed out that rent, taxes and interest have existed as modes of extracting surplus produce long before the emergence of the capitalist mode of production. (see concept notes c, `Production units & managers of extraction`, pg.36).
Mercantile activity is originally merely the intervening movement between extremes which it does not control, and between premises which it does not create. The merchants braved the elemental forces and the rude inclemency of nature with starry eyed lust for lucre. They braved the political uncertainties while crossing frontiers of states, they braved the pirates and in doing all these created the world market. Their special profits existed because of their mediation between societies with different value for the same products or transforming use-values and exotica into values (exchange values). And while mercantile activity entangled the different areas of the world into market relations with one another and created a world market, it destroyed its own independent basis of power and wealth. In its operation it subordinated production more and more to exchange value, it encompassed no longer merely a small fraction of the produce, but bit deeper and deeper and forced entire branches of production and regions into the market arena. Existence and development of mercantile activity to a certain extent laid the basis for the emergence of capitalist production. It brought about the concentration of money wealth and a wide commodity market which capitalist mode of production presupposes.
Usurers’ and merchants’ wealth long precedes the capitalist mode of production and was to be found in the most diverse economic formations. Usurers’ wealth broadly corresponds to the predominance of small scale production of peasants and craftsmen. Usury is historically significant, in as much as it is itself a process of pauperising peasants & artisans, and a process of generating both concentrated wealth and wage- workers. Merciless activity of usury leads to bankruptcies of peasants & artisans and feudal lords.
Only later were usury and mercantile activity reduced from their former independent existence to a special phase in the investment of capital and the leveling of profits. They then function as agents of capital. Factory production and industrial revolution provided the basis for the domination of wage-labour based commodity production, where surplus produce took the form of surplus value.
The inability to recognise merchants’ wealth prior to the emergence of capital is linked to the neglect of simple commodity production as a mode of production in the past. This incapacitates the realisation of its significance in the present .
Terminologies like ‘formal’ and ‘real’ rule of capital do not in any way help in understanding the historical process of commodity economy. Simple commodity production can under no circumstances be termed as capital, with or without the prefix ‘formal rule’. Simplistic presentations like ‘capitalism grew in the womb of feudalism and overthrew it’, which go against all historical facts, should be given the decent burial they deserve. The obvious implication, for the present, of such erroneous understanding is the futile search for ‘feudalism’ in areas where wage labour based commodity production is not overwhelmingly dominant. Characterising commodity production in “third world countries” even today as “semi-feudal” should now be laid to rest*. Also discarded must be the verbal jugglery of ‘anti-feudal pro-capital struggles’, ‘tribal self-determination’ etc. while characterising the life and death struggles of simple commodity producers. Terming the rapid establishment and growth of commodity economy in colonies as “protection of feudalism by imperialism” can then be seen as a false front that disguises the expansion of capitalism.
Furthermore, the characterisation of capital as wage-labour based commodity production clarifies the real meaning of the dissolution of capital which can only be seen as global dissolution of all commodity production.
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