Capital: A Critique of Political Economy, Vol. III. The Process of Capitalist Production as a Whole

Karl Marx
Marx, Karl
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Frederick Engels, ed. Ernest Untermann, trans.
First Pub. Date
Chicago: Charles H. Kerr and Co.
Pub. Date
Das Kapital, based on the 1st edition.
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Part V, Chapter XXVII


The general remarks, which the credit system so far elicited from us, were the following:


I. Its necessary development, for the purpose of procuring the compensation of the rate of profit, or the movements of this compensation, upon which the entire capitalist production rests.


II. Reduction of the cost of circulation.

1) One of the principal expenses of the circulation is money itself, so far as its represents value itself. It is economized by credit in three ways.

A. It is entirely eliminated in a large portion of the transactions.

B. The circulation of the circulating medium is accelerated.*86 This coincides partly with the statement to be made under 2). On one hand, the acceleration is technical; that is, with the same number and quantity of actual transfers of commodities for consumption, a smaller quantity of money or tokens of money performs the same service. This is connected with the technique of the banking business. On the other hand, credit accelerates the velocity of the circulation of money.

C. Replacement of gold money by paper.

2) Acceleration, by credit, of the individual phases of circulation or of the metamorphoses of commodities, and with it an acceleration of the process of reproduction in general. (On the other hand credit permits keeping the acts of buying and selling farther apart and thus serves as a basis for speculation.) Contraction of the reserve funds, which may be studied from two sides; on one side as a reduction of the circulating medium, on the other as a reduction of that part of capital, which must always exist in the form of money.*87


III. Formation of stock companies. By means of these:

1) An enormous expansion of the scale of production and enterprises, which were impossible for individual capitals. At the same time such enterprises as were formerly carried on by governments are socialised.
2) Capital, which rests on a socialised mode of production and presupposes a social concentration of means of production and labor-powers, is here directly endowed with the form of social capital (a capital directly associated individuals) as distinguished from private capital, and its enterprises assume the form of social enterprises as distinguished from individual enterprises. It is the abolition of capital as private property within the boundaries of capitalist production itself.
3) Transformation of the actually functioning capitalist into a mere manager, an administrator of other people's capital, and of the owners of capital into mere owners, mere money-capitalists. Even if the dividends, which they receive, include the interest and profits of enterprise, that is, the total profit (for the salary of the manager is, or is supposed to be, a mere wage of a certain kind of skilled labor, the price of which is regulated in the labormarket, like that of any other labor), this total profit is henceforth received only in the form of interest, that is, in the form of a mere compensation of the ownership of capital, which is now separated from its function in the actual process of reproduction in the same way, in which this function, in the person of the manager, is separated from the ownership of capital. The profit now presents itself (and not merely that portion of it, which derives its justification as interest from the profit of the borrower) as a mere appropriation of the surplus-labor of others, arising from the transformation of means of production into capital, that is, from its alienation from its actual producer, from its antagonism as another's property opposed to the individuals actually at work in production, from the manager down to the last day laborer.

In the stock companies the function is separated from the ownership of capital, and labor, of course, is entirely separated from the ownership of means of production and of surplus-labor. This result of the highest development of capitalist production is a necessary transition to the reconversion of capital into the property of the producers, no longer as the private property of individual producers, but as the common property of associates, as social property outright. On the other hand it is a transition to the conversion of all functions in the process of reproduction, which still remain connected with capitalist private property, into mere functions of the associated producers, into social functions.


Before we proceed any further, we call attention to the following fact, which is economically important: Since profit here assumes purely the form of interest, enterprises of this sort may still be successful, if they yield only interest, and this is one of the causes, which stem the fall of the rate of profit, since these enterprises, in which the constant capital is so enormous compared to the variable, do not necessarily come under the regulation of the average rate of profit.


[Since Marx wrote the above, new forms of industrial enterprises have developed, which represent the second and third degree of stock companies. The daily increasing speed, with which production may to-day be intensified on all fields of great industry, is offset on the other hand by the ever increasing slowness, with which the markets for these increased products expand. What the great industries turn out in a few months, can scarcely be absorbed by the markets in years. Add to this the system of protective tariffs, by which every industrial country shuts itself off from all others, particularly from England, and which increases home production still more by artificial means. The results are a chronic overproduction, depressed prices, falling or disappearing profits; in short, the long cherished freedom of competition has reached the end of its tether and is compelled to announce its own palpable bankruptcy. This is shown by the fact, that the great captains of industry of a certain line meet for the joint regulation of production by means of a kartel. A committee determines the quantity to be produced by each establishment and distributes ultimately the incoming orders. In some cases even international kartels were formed temporarily, for instance, one uniting the English and German iron producers. But even this form of socialisation did not suffice. The antagonism of interests between the individual firms broke through the agreement quite frequently and restored competition. This led in some lines, where the scale of production permitted it, to the concentration of the entire production of this line in one great stock company under one joint management. In America this has been accomplished several times; in Europe the greatest illustration is so far the United Alkali Trust, which has brought the entire Alkali production of the British into the hands of one single business firm. The former owners of the individual works, more than thirty, have received the tax value of their entire establishment in shares of stock, totalling about 5 million pounds sterling, which represent the fixed capital of the trust. The technical management remains in the same hands, but the business management is centralised in the hands of the general management. The floating capital, amounting to about one million pounds, was offered to the public for subscription. The total capital is, therefore, 6 million pounds sterling. In this way competition in this line, which forms the basis of the entire chemical industry, has been replaced in England by monopoly, and the future expropriation of this line by the whole of society, the nation, has been well prepared.—F. E.]


This is the abolition of the capitalist mode of production within capitalist production itself, a self-destructive contradiction, which represents on its face a mere phase of transition to a new form of production. It manifests its contradictory nature by its effects. It establishes a monopoly in certain spheres and thereby challenges the interference of the state. It reproduces a new aristocracy of finance, a new sort of parasites in the shape of promoters, speculators and merely nominal directors; a whole system of swindling and cheating by means of corporation juggling, stock jobbing, and stock speculation. It is private production without the control of private property.


IV. Aside from the stock company business, which represents an abolition of capitalist private industry on the basis of the capitalist system itself and destroys private industry in proportion as it expands and seizes new spheres of production, credit offers to the individual capitalist, or to him who is regarded as a capitalist, absolute command of the capital of others and the property of others, within certain limits, and thereby of the labor of others.*88 A command of social capital, not individual capital of his own gives him command of social labor. The capital itself, which a man really owns, or is supposed to own by public opinion, becomes purely a basis for the superstructure of credit. This is true particularly of wholesale commerce, through whose hands the greatest portion of the social product passes. All standards of measurement, all excuses which are more or less justified under capitalist production, disappear here. What the speculating wholesale merchant risks is social property, not his own. Equally stale becomes the phrase concerning the origin of capital from saving, for what he demands is precisely that others shall save for him. [In this way all France saved recently one and a half billion francs for the Panama Canal swindlers. In fact the entire Panama swindle is here correctly described, fully twenty years before it happened.—F. E.] The other phrase of the abstention is slapped in the face by his luxury, which now becomes a means of credit by itself. Conceptions, which still have some meaning on a less developed stage of capitalist production, become quite meaningless here. Both success and failure lead now simultaneously to a centralisation of capital, and thus to an expropriation on the most enormous scale. This expropriation extends here from the direct producers to the smaller and smallest capitalists themselves. It is first the point of departure of the capitalist mode of production; its complete accomplishment is the aim of this production. In the last instance it aims at the expropriation of all individuals from the means of production, which cease with the development of social production to be means of private production and products of private production, and which can henceforth be only means of production in the hands of associated producers, their social property, just as they are social products. However, this expropriation appears under the capitalist system in a contradictory form, as an appropriation of social property by a few; and credit gives to these few more and more the character of pure adventurers. Since property here exists in the form of shares of stock, its movements and transfer become purely a result of gambling at the stock exchange, where the little fish are swallowed by the sharks and the lambs by the wolves. In the stock companies the antagonism against the old form becomes apparent, in which social means of production are private property; but the conversion to the form of shares of stock still remains ensnared in the boundaries of capitalism; hence, instead of overcoming the antagonism between the character of wealth as a social one and as private wealth, the stock companies merely develop it in a new form.


The co-operative factories of the laborers themselves represent within the old form the first beginnings of the new, although they naturally reproduce, and must reproduce, everywhere in their actual organisation all the shortcomings of the prevailing system. But the antagonism between capital and labor is overcome within them, although only in the form of making the associated laborers their own capitalists, that is, enabling them to use the means of production for the employment of their own labor. They show the way, in which a new mode of production may naturally grow out of an old one, when the development of the material forces of production and of the corresponding forms of social production has reached a certain stage. Without the factory system arising out of the capitalist mode of production the co-operative factory could not develop, nor without the credit system arising out of the same mode of production. The credit system is not only the principal basis for the gradual transformation of capitalist private enterprises into capitalist stock companies, but also a means for the gradual extension of co-operative enterprises on a more or less natural scale. The capitalist stock companies as well as the co-operative factories may be considered as forms of transition from the capitalist mode of production to the associated one, with this distinction, that the antagonism is met negatively in the one, positively in the other.


So far we have considered the development of the credit system, and the latent abolition of capitalist property implied by it, mainly with reference to industrial capital. In the following chapters we shall consider credit with reference to interest-bearing capital as such, both the effect of interest on this capital and the form which it assumes thereby; and on this point we shall have to make a few more specific remarks of economic significance.


For the present we have this to say:


The credit system appears as the main lever of overproduction and overspeculation in commerce solely because the process of reproduction, which is elastic in its nature, is here forced to its extreme limits, and is so forced for the reason that a large part of the social capital is employed by people who do not own it and who push things with far less caution than the owner, who carefully weighs the possibilities of his private capital, which he handles himself. This simply demonstrates the fact, that the production of values by capital based on the antagonistic nature of the capitalist system permits an actual, free, development only up to a certain point, so that it constitutes an immanent fetter and barrier of production, which are continually overstepped by the credit system.*89 Hence the credit system accelerates the material development of the forces of production and the establishment of the world market. To bring these material foundations of the new mode of production to a certain degree of perfection, is the historical mission of the capitalist system of production. At the same time credit accelerates the violent eruptions of this antagonism, the crises, and thereby the development of the elements of disintegration of the old mode of production.


Two natures, then, are immanent in the credit system. On one side, it develops the incentive of capitalist production, the accumulation of wealth by the appropriation and exploitation of the labor of others, to the purest and most colossal form of gambling and swindling, and reduces more and more the number of those, who exploit the social wealth. On the other side, it constitutes a transition to a new mode of production . It is this ambiguous nature, which endows the principal spokesmen of credit from Law to Isaac Pereire with the pleasant character of swindlers and prophets.

Notes for this chapter

The average circulation of notes of the Bank of France was 106,538,000 francs in 1812 and 101,205,000 francs in 1818; while the circulation of money, the total amount of all receipts and payments, was 2,837,712,000 francs in 1812 and 9,665,030,000 francs in 1818. The activity of the circulation in France in 1818 compared to that of 1812 was therefore, as 3 to 1. The great regulator of the velocity of the circulation is credit...This explains, why a heavy pressure on the money-market generally coincides with a full circulation." (The Currency Question Reviewed, etc., p. 165.) "Between September, 1833, and September, 1843, nearly 300 banks were established in Great Britain, which issued their own notes, the consequence was a restriction of the circulation of notes by two and a half millions, it was 36,035,244 pounds sterling at the end of September, 1833, and 33,518,544 pounds sterling at the end of September, 1843." (L. c., p. 53.) "The wonderful activity of the Scotch circulation enables it to transact with 100 pounds sterling the same amount of business, which requires 420 pounds sterling in England." (L. c., p. 55. This last statement refers only to the technical side of the operation.)
"Before the establishment of banks the amount of capital required for the function of the circulating medium was always greater than the actual circulation of commodities demanded." Economist, 1845, p. 238.
See for instance, in the Times the list of business failures of a critical year like 1857, and compare the private property of the bankrupts with the amount of their debts. "In truth the purchasing power of people, who have capital and credit, exceeds by far anything conceivable by those who have no practical acquaintance with speculative markets." (Tooke, Inquiry into the Currency Principle, p. 73.) "A man who has the reputation of having enough capital for his regular business, and who enjoys good credit in his line, if he has sanguine ideas concerning the rising constellation of the articles carried by him, and if he is lucky in the beginning and course of his speculation, may make purchases of a truly enormous extent compared to his capital" (Ibidem, p. 136). "The manufacturers, merchants, etc., all carry on transactions which exceed their capital by far...Capital is to-day rather the basis, on which a good credit is built up, than the limit of the transaction of any commercial business." (Economist, 1847, p. 333.)
Th. Chalmers.

Part V, Chapter XXVIII.

End of Notes

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