Capital: A Critique of Political Economy, Vol. III. The Process of Capitalist Production as a Whole
By Karl Marx
One of Econlib’s aims is to put online the most significant works in the history of economic thought, and there can be no doubting the significance of Marx’s influence on both economic theory in the late 19th century and on the creation of Marxist states in the 20th century. From the time of the emergence of modern socialism in the 1840s (especially in France and Germany), free market economists have criticised socialist theory and it is thus useful to place that criticism in its intellectual context, namely beside the main work of one of its leading theorists,
Karl Marx.In 1848, when Europe was wracked by a series of revolutions in which both liberals and socialists participated and which both lost out to the forces of conservative monarchism or Bonapartism,
John Stuart Mill published his
Principles of Political Economy. The chapter on Property shows how important Mill thought it was to confront the socialist challenge to classical liberal economic theory. In hindsight it might appear that Mill was too accommodating to socialist criticism, but I would argue that in fact he offered a reasonable framework for comparing the two systems of thought, which the events of the late 20th century have finally brought to a conclusion which was not possible in his lifetime. Mill states in
Book II Chapter I “Of Property” that a fair comparison of the free market and socialism would compare both the ideal of liberalism with that of socialism, as well as the practice of liberalism versus the practice of socialism. In 1848 the ideals of both were becoming better known (and there were some aspects of the ideal of socialism which Mill found intriguing) but the practice of each was still not conclusive. Mill correctly observed that in 1848 no European society had yet created a society fully based upon private property and free exchange and any future socialist experiment on a state-wide basis was many decades in the future. After the experiments in Marxist central planning with the Bolshevik Revolution in 1917, the Chinese Communists in 1949, and numerous other Marxist states in the post-1945 period, there can be no doubt that the reservations Mill had about the practicality of fully-functioning socialism were completely borne out by historical events. What Mill could never have imagined, the slaughter of tens of millions of people in an effort to make socialism work, has ended for good any argument concerning the Marxist form of socialism.Econlib now offers online two important defences of the socialist ideal, Karl Marx’s three volume work on
Capital and the
collection of essays on Fabian socialism edited by George Bernard Shaw. These can be read in the light of the criticism they provoked among defenders of individual liberty and the free market: Eugen Richter’s anti-Marxist
Pictures of the Socialistic Future, Thomas Mackay’s
2 volume collection of essays rebutting Fabian socialism,
Ludwig von Mises post-1917 critique of
Socialism. One should not forget that
Frederic Bastiat was active during the rise of socialism in France during the 1840s and that many of his essays are aimed at rebutting the socialists of his day. The same is true for Gustave de Molinari and the other authors of the
Dictionnaire d’economie politique (1852). Several key articles on communism and socialism from the
Dictionnaire are translated and reprinted in Lalor’s
Cyclopedia.For further reading on Marx’s
Capital see David L. Prychitko’s essay
“The Nature and Significance of Marx’s
Capital: A Critique of Political Economy“.For further readings on socialism see the following entries in the
Concise Encyclopedia of Economics:
Poor Law Commissioners’ Report of 1834,
edited by Nassau W. Senior, et al.
March 1, 2004
Frederick Engels, ed. Ernest Untermann, trans.
First Pub. Date
Chicago: Charles H. Kerr and Co.
First published in German. Das Kapital, based on the 1st edition.
The text of this edition is in the public domain. Picture of Marx courtesy of The Warren J. Samuels Portrait Collection at Duke University.
- Preface, by Frederick Engels
- Part I, Chapter 1
- Part I, Chapter 2
- Part I, Chapter 3
- Part I, Chapter 4
- Part I, Chapter 5
- Part I, Chapter 6
- Part I, Chapter 7
- Part II, Chapter 8
- Part II, Chapter 9
- Part II, Chapter 10
- Part II, Chapter 11
- Part II, Chapter 12
- Part III, Chapter 13
- Part III, Chapter 14
- Part III, Chapter 15
- Part IV, Chapter 16
- Part IV, Chapter 17
- Part IV, Chapter 18
- Part IV, Chapter 19
- Part IV, Chapter 20
- Part V, Chapter 21
- Part V, Chapter 22
- Part V, Chapter 23
- Part V, Chapter 24
- Part V, Chapter 25
- Part V, Chapter 26
- Part V, Chapter 27
- Part V, Chapter 28
- Part V, Chapter 29
- Part V, Chapter 30
- Part V, Chapter 31
- Part V, Chapter 32
- Part V, Chapter 33
- Part V, Chapter 34
- Part V, Chapter 35
- Part V, Chapter 36
- Part VI, Chapter 37
- Part VI, Chapter 38
- Part VI, Chapter 39
- Part VI, Chapter 40
- Part VI, Chapter 41
- Part VI, Chapter 42
- Part VI, Chapter 43
- Part VI, Chapter 44
- Part VI, Chapter 45
- Part VI, Chapter 46
- Part VI, Chapter 47
- Part VII, Chapter 48
- Part VII, Chapter 49
- Part VII, Chapter 50
- Part VII, Chapter 51
- Part VII, Chapter 52
THE new value added by the annual new labor—and thus also that portion of the annual product, in which this value is represented and may be drawn out of the total fund and separated from it—is divided into three parts, which assume three different forms of revenue. These forms indicate that one portion of this value belongs, or goes to, the owner of labor-power, another portion to the owner of capital, and a third portion to the owner of land. These, then are forms, or conditions, of distribution, for they express conditions, under which the newly produced total value is distributed among the owners of the different agencies of production.
To the ordinary mind these conditions of distribution appear as natural conditions, as conditions arising from the nature of all social production, from the laws of human production in general. While it cannot be denied that precapitalist societies show other modes of distribution, yet those modes are interpreted as undeveloped, imperfect, disguised,
differently colored modes of these natural conditions of distribution, which have not reached their purest expression and their highest form.
The only correct thing in this conception is this: Assuming some form of social production to exist (for instance, that of the primitive Indian communes, or that of the more artificially developed communism of the Peruvians), a distinction can always be made between that portion of labor, which supplies products directly for the individual consumption of the producers and their families—aside from the part which is productively consumed—and that portion of labor, which produces surplus products, which always serve for the satisfaction of social needs, no matter what may be the mode of distribution of this surplus product, and whoever may perform the function of a representative of these social needs. The identity of the various modes of distribution amounts merely to this, that they are identical, if we leave out of consideration their differences and specific forms and keep in mind only their common features as distinguished from their differences.
A more advanced, more critical mind, however, admits the historically developed character of the condition of distribution,
*153 but clings on the other hand so much more tenaciously to the unaltering character of the conditions of production arising from human nature and thus independent of all historical development.
On the other hand, the scientific analysis of the capitalist mode of production demonstrates that it is a peculiar mode of production, specifically defined by historical development; that it, like any other definite mode of production, is conditioned upon a certain stage of social productivity and upon the historically developed form of the forces of production. This historical prerequisite is itself the historical result and product of a preceding process, from which the new mode of production takes its departure as from its given foundation. The conditions of production corresponding to this specific, historically determined, mode of production have a specific,
historical, passing character, and men enter into them as into their process of social life, the process by which they create their social life. The conditions of distribution are essentially identical with these conditions of production, being their reverse side, so that both conditions share the same historical and passing character.
In the study of conditions of distribution, the start is made from the alleged fact, that the annual product is distributed among wages, profit and rent. But if so expressed, it is a misstatement. The product is assigned on one side to capital, on the other to revenues. One of these revenues, wages, never assumes the form of a revenue, a revenue of the laborer, until it has first faced this laborer in the form of capital. The meeting of the produced requirement of labor and of the general products of labor as capital, in opposition to the direct producers, includes from the outset a definite social character of the material requirements of labor as compared to the laborers, and with it a definite relation, into which they enter in production itself with the owners of the means of production and among themselves. The transformation of these means of production into capital implies on their part the expropriation of the direct producers from the soil, and thus a definite form of property in land.
If one portion of the product were not transformed into capital, the other would not assume the form of wages, profit and rent.
On the other hand, just as the capitalist mode of production is conditioned upon this definite social form of the conditions of production, so it reproduces them continually. It produces not merely the material products, but reproduces continually the conditions of production, in which the others are produced, and with them the corresponding conditions of distribution.
It may indeed be said that capital (and the ownership of land implied by it) is itself conditioned upon a certain mode of distribution, namely the expropriation of the laborers from the means of production, the concentration of these conditions in the hands of a minority of individuals, the exclusive
ownership of land by other individuals, in short, all those conditions, which have been described in the Part dealing with Primitive Accumulation (Volume I. Chapter XXVI). But this distribution differs considerably from the meaning of “conditions of distribution,” provided we invest them with a historical character in opposition to conditions of production. By the first kind of distribution is meant the various titles to that portion of the product, which goes into individual consumption. By conditions of distribution, on the other hand, we mean the foundations of specific social functions performed within the conditions of production themselves by special agents in opposition to the direct producers. They imbue the conditions of production themselves and their representatives with a specific social quality. They determine the entire character and the entire movement of production.
Capitalist production is marked from the outset by two peculiar traits.
1) It produces its products as commodities. The fact that it produces commodities does not distinguish it from other modes of production. Its peculiar mark is that the prevailing and determining character of its products is that of being commodities. This implies, in the first place, that the laborer himself acts in the role of a seller of commodities, as a free wage worker, so that wage labor is the typical character of labor. In view of the foregoing analyses it is not necessary to demonstrate again, that the relation between wage labor and capital determines the entire character of the mode of production. The principal agents of this mode of production itself, the capitalist and the wage worker, are to that extent merely personifications of capital and wage labor. They are definite social characters, assigned to individuals by the process of social production. They are products of these definite social conditions of production.
The character, first of the product as a commodity, secondly of the commodity as a product of capital, implies all conditions of circulation, that is, a definite social process through which the products must pass and in which they assume
definite social forms. It also implies definite relations of the agents in production, by which the formation of value in the product and its reconversion, either into means of subsistence or into means of production, is determined. But aside from this, the two above-named characters of the product as commodities, and of commodities as products of capital, dominate the entire determination of value and the regulation of the whole production by value. In this specific form of value, labor appears on the one hand only as social labor; on the other hand, the distribution of this social labor and the mutual supplementing and circulation of matter in the products, the subordination under the social activity and the entrance into it, are left to the accidental and mutually nullifying initiative of the individual capitalists. Since these meet one another only as owners of commodities, and every one seeks to sell his commodity as dearly as possible (being apparently guided in the regulation of his production by his own arbitrary will), the internal law enforces itself merely by means of their competition, by their mutual pressure upon each other, by means of which the various deviations are balanced. Only as an internal law, and from the point of view of the individual agents as a blind law, does the law of value exert its influence here and maintain the social equilibrium of production in the turmoil of its accidental fluctuations.
Furthermore, the existence of commodities, and still more of commodities as products of capital, implies the externalization of the conditions of social production and the personification of the material foundations of production, which characterize the entire capitalist mode of production.
2) The other specific mark of the capitalist mode of production is the production of surplus-value as the direct aim and determining incentive of production. Capital produces essentially capital, and does so only to the extent that it produces surplus-value. We have seen in our discussion of relative surplus-value, and in the discussion of the transformation of surplus-value into profit, that a mode of production peculiar to the capitalist period is founded upon this. This
is a special form in the development of the productive powers of labor, in such a way that these powers appear as self-dependent powers of capital lording it over labor and standing in direct opposition to the laborer’s own development. Production which has for its incentive value and surplus-value implies, as we have shown in the course of our analyses, the perpetually effective tendency to reduce the labor necessary for the production of a commodity, in other words, to reduce its value, below the prevailing social average. The effort to reduce the cost price to its minimum becomes the strongest lever for the raising of the social productivity of labor, which, however, appears under these conditions as a continual increase of the productive power of capital.
The authority assumed by the capitalist by his personification of capital in the direct process of production, the social function performed by him in his capacity as a manager and ruler of production, is essentially different from the authority exercised upon the basis of production by means of slaves, serfs, etc.
Upon the basis of capitalist production, the social character of their production impresses itself upon the mass of direct producers as a strictly regulating authority and as a social mechanism of the labor process graduated into a complete hierarchy. This authority is vested in its bearers only as a personification of the requirements of labor standing above the laborer. It is not vested in them in their capacity as political or theoretical rulers, in the way that it used to be under former modes of production. Among the bearers of this authority, on the other hand, the capitalists themselves, complete anarchy reigns, since they face each other only as owners of commodities, while the social interrelations of production manifest themselves to these capitalists only as an overwhelming natural law, which curbs their individual license.
It is only because labor is presumed as wage labor, and the means of production in the form of capital, only on account of this specific social form of these two essential agencies in production, that a part of the value (product) presents itself
as surplus-value and this surplus-value as profit (rent), as a gain of the capitalists, as additional available wealth belonging to the capitalist. But only because they present themselves as his profit, do the additional means of production, which are intended for the expansion of reproduction, and which form a part of this profit, present themselves as new additional capital, and only for this reason does the expansion of the process of reproduction present itself as a process of capitalist accumulation.
Although the form of labor, as wage labor, determines the shape of the entire process and the specific mode of production itself, it is not wage labor which determines value. In the determination of value the question turns around social labor time in general, about that quantity of labor, which society in general has at its disposal, and the relative absorption of which by the various products determines, as it were, their respective social weights. The definite form, in which the social labor time enforces itself in the determination of the value of commodities, is indeed connected with the wage form of labor and with the corresponding form of the means of production as capital, inasmuch as the production of commodities becomes the general form of production only upon this basis.
Now let us consider the so-called conditions of distribution themselves. Wages are conditioned upon wage labor, profit upon capital. These definite forms of distribution have for their prerequisites definite social characters on the part of the conditions of production, and definite social relations of the agents in production. The definite condition of distribution, therefore, is merely the expression of the historically determined condition of production.
And now let us take profit. This definite form of surplus-value is a prerequisite for the new creation of means of production by means of capitalist production. It is a relation which dominates reproduction, although it seems to the individual capitalist as though he could consume his entire profit as his revenue. But he meets barriers which hamper him even in the form of insurance and reserve funds, laws of competition,
etc. These demonstrate to him by practice that profit is not a mere category in the distribution of the product for individual consumption. Furthermore, the entire process of capitalist production is regulated by the prices of products. But the regulating prices of production are in their turn regulated by the equalization of the rate of profit and by the distribution of capital among the various social spheres of production in correspondence with this equalization. Profit, then, appears here as the main factor, not of the distribution of products, but of their production itself, as a part in the distribution of capitals and of labor among the various spheres of production. The division of profit into profit of enterprise and interest appears as the distribution of the same revenue. But it arises primarily from the development of capital in its capacity as a self-expanding value, creating surplus-value, it arises from this definite social form of the prevailing process of production. It develops credit and credit institutions out of itself, and with them the shape of production. In interest, etc., the alleged forms of distribution enter as determining elements of production into the price.
Ground-rent might seem to be a mere form of distribution, because private land as such does not perform any, or at least no normal, function in the process of production itself. But the fact that, first, rent is limited to the excess above the average profit, and, secondly, that the landlord is depressed by the ruler and manager of the process of production and of the entire social life’s process to the position of a mere holder of land for rent, a usurer in land and collector of rent, is a specific historical result of the capitalist mode of production. The fact that the earth received the form of private property is a historical requirement for this mode of production. The fact that private ownership of land assumes forms, which permit the capitalist mode of production in agriculture, is a product of the specific character of this mode of production. The income of the landlord may be called rent, even under other forms of society. But it differs essentially from the rent as it appears under the capitalist mode of production.
The so-called conditions of distribution, then, correspond to
and arise from historically defined and specifically social forms of the process of production and of conditions, into which human beings enter in the process by which they reproduce their lives. The historical character of these conditions of distribution is the same as that of the conditions of production, one side of which they express. Capitalist distribution differs from those forms of distribution, which arise from other modes of production, and every mode of distribution disappears with the peculiar mode of production, from which it arose and to which it belongs.
The conception, which regards only the conditions of distribution historically, but not the conditions of production, is, on the one hand, merely an idea begotten by the incipient, but still handicapped, critique of bourgeois economy. On the other hand it rests upon a misconception, an identification of the process of social production with the simple labor process, such as might be performed by any abnormally situated human being without any social assistance. To the extent that the labor process is a simple process between man and nature, its simple elements remain the same in all social forms of development. But every definite historical form of this process develops more and more its material foundations and social forms. Whenever a certain maturity is reached, one definite social form is discarded and displaced by a higher one. The time for the coming of such a crisis is announced by the depth and breadth of the contradictions and antagonisms, which separate the conditions of distribution, and with them the definite historical form of the corresponding conditions of production, from the productive forces, the productivity, and development of their agencies. A conflict then arises between the material development of production and its social form.
Some Unsettled Questions in Political Economy, London, 1884.
Part VII, Chapter LII.