Contradictions in capital

Following on from the methodological essay “Hegel on Cognition and the One,” I shall point to the following observations by Marx on the nature of capitalism to illustrate the principles outlined above and a series of transformation in capital which have occurred since Marx’s death.

(1) The exchange of commodities, C-M-C

Before elucidating the dynamics of capital, Marx had to clarify the concept of value. He observed in the opening lines of Capital:

The wealth of those societies in which the capitalist mode of production prevails, presents itself as “an immense accumulation of commodities,” its unit being a single commodity. Our investigation must therefore begin with the analysis of a commodity.

Value is realized in the act of exchanging a commodity. By identifying value in the simple act of commodity exchange, he cut through the mystique of money which is mediating the exchange. Analysis showed the internal contradiction in value as both exchange value (reflecting the quantity of abstract labour embodied in the commodity) and use-value (reflecting the quality of concrete labour represented in the commodity). This ‘overdetermination’ of the value of every commodity underlies the distribution of commodities and the movement of labour and capital between different industries.

This insight was a necessary preliminary to the analysis of capital, but commodity exchange is almost as old as humanity. The exchange of products and the mediation of commodity exchange by money dates back to antiquity. The infinite chain of C-M-C-M-... creates a mystified image of the process of production and exchange of commodities, appearing as the circulation of money. Nonetheless, insofar as human needs are met directly or cooperatively and not exchanged, then value and capital have no place.

(2) The capitalist firm, M-C-M’

The title and subject matter of the book is Capital, not Commodity or Money. In Chapter 4 of Capital Marx shows that the circulation of money in commodity exchange opens the way for a new unit, M-C-M’, the activity of buying in order to sell at a profit, the capitalist firm. It is this unit which distinguishes the accumulation of capital from the circulation of commodities.

The contradiction which Marx identified within the activity of capital accumulation is the contradiction between the rate of profit and the rate of surplus value, each understood as a percentage of capital invested. The capital market forces an equalization of the rate of profit between firms, which, with the differing organic composition of capital between capitalist firms, produces a different rate of surplus value. The rate of surplus value, on the other hand, is equalised by the labour market. Thus the rate of surplus value and the rate of profit overdetermine one another driving the movement of capital so as to equalise the rate of profit across industries and creating the illusion of capital as value-generating. The struggle to increase labor productivity simultaneously drives down the rate of profit as a result of increasing the organic composition of capital.

This insight further determines the epoch of capitalism, since it is only insofar as products can be sold at a profit that capital accumulation is possible. Nonetheless, merchant capital is at least a thousand years old and periodic war and economic crisis ensured at least the cyclical conditions for capital accumulation.

(3) Labour and Labour power

In Chapter 6 of Capital, Marx examines the contradiction which arises in the character of labour when labour power is bought and sold as wage-labour. When a capitalist uses a worker’s labour power for an hour, an hour’s labour time is added to the value of the product, but one day of a worker’s labour power can be produced in less than a day. That is, labour is worth more to someone who uses it in production than it does to someone who produces it for sale in exchange for wages.

Thus Marx revealed the mystery of surplus value: how a capitalist can systematically profit by buying and selling products at their value – one of those products, labour power, creates value when it is used in social production. It also proved to the workers that there was no reason why they couldn’t increase their real wages by forming labour cartels to push up their overall standard of living.

The creativity of wage-labour generated a demand for labour power whose product be sold for more than it costs to buy, but where can you find labourers prepared to sell their labour for wages when they could earn more by selling the product of their own labour?

(4) Absolute and Relative Surplus Value

How does a capitalist extract more surplus value from a given quantity of labour power? How does the capitalist get the worker to continue working after they have already produced an equivalent of their wages, assuming that they pay the worker only the bare minimum needed to reproduce themselves?

There are two choices. Either the capitalist can make the worker work longer hours (absolute surplus value), or increase the productivity of labour (relative surplus value). Increasing the productivity of labour implies producing the same product in fewer hours and therefore the equivalent of the worker’s wages in fewer hours, and if this increased productivity is across the economy, wages can be reduced.

The individual capitalist does not see any distinction between absolute and relative surplus value; both strategies increase the amount of product produced by the same worker, but the implications for the general conditions for labour and capital accumulation are profound.

This contradiction means that in order to increase labour productivity, the capitalist must invest in more constant capital (materials and labour saving machinery) per unit of labour, but this causes the rate of profit to fall. On the other hand, workers fight to resist the extension of the working day.

(5) The Historical Tendency of Capitalist Accumulation

In Chapter 32 of Volume One of Capital Marx examines the historical tendency of capitalist accumulation. Capital accumulation depends on: “the dissolution of private property based on the labour of its owner.” The accumulation of capital had begun with “primitive accumulation” – the expropriation of the peasantry in the Enclosures, and this process had created the mass of poor labourers gathered in the towns, and lacking any means of labour, a precondition for capital accumulation. However, simply stealing means of production off the producers is not a means of accumulating capital that lasts more than a single cycle of appropriation. If capital is to be a living entity which can renew itself after every cycle of production, then it must reproduce the conditions of existence after every cycle of production. This is achieved not by robbing but by employing the labourers, accumulating the surplus value created by their employment and paying them just enough for them to be able to report for work again next time, lacking the capacity to purchase their own tools and sell product on the market.

Thus capitalism proper begins not with the Enclosures but with the subsumption of industrial labour under capital; not just with robbing the labourer of his means of production but of forcing him to use means of production which are someone else’s private property. The generation and regeneration of a mass of impoverished workers on one side and obscenely wealthy capitalists on the other is the basis for the continued existence of capitalism as a living system of production and reproduction.

It was Marx’s insight into how capital recreated the conditions for its own existence with every cycle of production which was key to understanding how capitalism made itself into an historical system of social reproduction.

Nevertheless, it is not hard to see how this practice of systematic impoverishment and the creation of a vast mass of proletarians all living and working in the same inhuman conditions and the rate of profit declining notwithstanding with the working day extended to the maximum extent, would soon lead to the demise of capitalism. To avoid the expropriation of capital by an ever increasing mass of organised proletarians, a series of transformations in its basic formulae were necessary.

Marx died in 1883, but capitalism did not cease developing. The proletarian masses embraced industrial unionism in the 1880s and built mass political parties with the expropriation of capital written into their manifestoes. Capital had to do something.

The Development of Modern Capitalism

(6) Taylorism

Looked at from today, Marx’s representation of capital seems unrealistic, but this was how the capitalists of his times figured: acquire the most efficient machinery, buy lots of raw material at the cheapest possible price, buy wage labour at the cheapest possible price and make them work as long as possible every day, then sell the product at the market value. One of the doctrines of the capitalists of his time was that only ‘coal face’ workers were productive, and all other labour constituted a deduction from profit, as opposed to ‘productive labour’ which generated profit. Linked to this prejudice was the apologetic theory that profits were the ‘wages of supervision’. Marx debunked this theory in Chapter 23 of Volume 3 of Capital. The labour of supervision must be counted like any other type of skilled labour along with the labour of the worker. Capitalists counted the costs of supervision as a deduction from surplus, because they wrongly cast profit as “the wages of supervision” by conflating the exploitation of labour with the supervision of labour. The use of labour power is something quite distinct from the supervision of labour, work which can purchased on the market like any other kind of labour-power.

On the very year of Marx’s death, Fred Taylor reorganised Bethlehem Steel. Taylor questioning this principle that only workers actually producing product are productive while supervisory employees are unproductive.

Taylor promoted 25% of the workers at Bethlehem Steel into supervisory positions with a 30% wage increase, and by this means, increased productivity by a factor of 10. The result was to split the industrial working class itself into numerous strata, the upper layer of which saw the labour process to some extent through the eyes of the bosses. By increasing the rate of profit, his “scientific management” ensured that it would rapidly spread across the economy, temporarily relieving the crisis arising from the fall in the rate of profit but more importantly, overcoming the tendency of capital to organise its own gravediggers in the form of a homogeneous concentrated mass of skilled but impoverished proletarians.

Taylor’s insight was one of the contradictions, already disclosed in Capital which had been obscured by the capitalists’ desire to justify their own existence.

(7) Fordism

Henry Ford took Taylor’s insight one step further. In 1914, Ford turned on its head the truism that the manufacturer made a profit by keeping hours as long as possible and wages as low as possible. Ford bought the loyalty of a workforce needed to his mechanised production line by cutting 1 hour from the working day and doubling wages. This created a corporatist layer of skilled workers within the industrial working class which would secure the capitalist against the danger of a proletarian uprising, even while the vast mass of the working class would be pushed further into poverty.

Both Taylor and Ford aimed to break the unions with these policies which created hierarchies within the working class. Alas for them, trade unions soon eventually established themselves in these factories which were so vulnerable to industrial action. But robots don’t buy cars.

The result however was endemic underconsumption. Capital can only be expanded to the extent that costs of production can be recovered by the sale of its products and if the capitalists are too successful in extracting surplus value and concentrating profits in the hands of a small number of wealthy industrialists, then capital falls into an irreversible crisis of underconsumption which wipes out capital economically. Capital only functions as capital if it can be put into circulation and withdrawn again at a profit.

Taylor and Ford had made their innovation in microeconomics, that is, in the techniques of management of individual firms, but their methods generated macroeconomic effects which could only be solved by macroeconomic methods.

(8) Aggregate Demand

For centuries, the capitalist economy had endured cycles of boom and bust but in the 1930s slipped into deep depression. A basic principle of capitalist political economy was to minimise taxes and keep the state out of activity which could be the source of profitable business. John Maynard Keynes turned this on its head, observing that state activity (which could be providing services to capital as well as fostering the development of labour power) contributed to demand (as well as taking a share of profit) and thereby provided a way out of the crisis of underconsumption. This was the first moment in which a macro-economic solution was devised for the crisis of capitalism. From the standpoint of capital as a whole rather individuals firms, it can be seen that the taxes paid by capital came back to capital in the form of aggregate demand. When business declined, instead of cutting back on government spending, public spending should be increased.

Keynesianism gave us the welfare state, and what remains to this day the core of the organised working class in the old capitalist countries, in service sectors – health and education, and building and maintaining infrastructure – apparently spending and not creating surplus value, but organised, increasingly feminised and socialist-minded nonetheless.

The second world war destroyed capital on a massive scale, except in the USA which was already experiencing a war boom on top of Roosevelt’s New Deal. From 1944 on, capitalism embraced Keynesian macroeconomics as a collective solution to this crisis. With most of the world’s surviving industrial capacity and gold reserves concentrated in its hands, the US generated an unlimited supply of paper dollars to generate a postwar boom based on nation-building projects led by governments and financed by paper dollars.

(9) Women’s Labour

Employers (overwhelmingly male) and men selling their labour power had made a pact to keep women out of the paid labour force, especially skilled work, and utilise cheap female domestic labour to produce labour power. This was a pact which had been in existence for a millennium, and it is called the patriarchy. The advanced level of mechanisation achieved by the 1950s, however, created the conditions for a social rather than a merely political women’s liberation movement. There were now unlimited opportunities for women in industry while machines and manufactured food had made it feasible for women to free themselves from domestic servitude. The cost of production and reproduction of labour power was thereby dramatically reduced and a vast pool of new resources of labour power drawn into the labour market. Thus began the long march of the socialisation of women’s labour and the gradual erosion of the gender division of labour. The led to a reduction in “necessary labour time” and a huge increase in the rate of surplus value as a result.

This is a contradiction in capitalist ideology which had been overlooked by Marx, and its consequences are still to be fully unfolded.

(10) Monetarism

Having failed to resolve the underlying problem of profitability, aggravated by a highly organised and militant labour movement, Keynesianism had led capital into a dead end. The Bretton Woods Arrangements which had stabilised capitalism and fuelled a prolonged boom by the continual creation of fictitious capital in the form of paper dollars reached its limits, and public spending could no longer maintain stimulus and hyperinflation combined with rising unemployment in the phenomenon of Stagflation. The class confrontation had merely been postponed. A new macroeconomic dogma replaced Keynesianism – Monetarism, in which closing off of the money supply was used to break the back of the workers’ movement through mass unemployment and decimation of state welfare. In the advanced capitalist economies, real wages never again increased despite continuous increase in labour productivity.

To some extent, Monetarism marked a return to the conditions of labour of the 19th century. Real wages in the USA have stagnated ever since the election of the Reagan administration with its monetarist and union-busting policies.

(11) Toyota

The upshot of the monetarist policies led by Thatcher and Reagan was devastation. Stability was restored but only at the cost of permanent decline. Macroeconomic policies could not solve the problem of profitability, and thus macroeconomic reform gave way to microeconomic reform. Japanese manufacturers, led by Toyota, turned Taylorism inside out, passing the supervision of labour back to the shop floor and bringing the market inside of the capitalist enterprise itself. At the same time as a corporate layer of the working class was elevated into a privileged situation, the mass of the working class was relegated to a ‘precariat’ whose labour could be used as and when required. For the mass of the workers: shorter working hours rather than the length of the working day was now the mantra. For the core of full-time employees, hours worked was less important than the efficient and uninterrupted operation of automated plant.

This development was made possible both by the progress of monetarism and ‘neo-liberalism’ in breaking the unions and the high level of education of the workforce, thanks in part to the now beleaguered welfare state.

At the same time, both capital and actual manufacturing activity were exported to the former colonies, leaving the majority of the domestic working class in service industries, distributing the massive surplus extracted from hyper-efficient industries and overseas investments.

(12) Heteromation

Now we have Google & Facebook who employ a small crew of so-called symbolic analysts to cream the profits off the unpaid labour of the users of their product. Meanwhile, most of what looks like industrial labour is being done in countries where the labour process and the working class still look much like it did in Europe in Marx’s lifetime.

At the same time we have seen the rise in precarity by means of which real wages are kept as low as possible by minimising working hours for each worker, such that each job is done by multiple workers and each worker does multiple jobs.


Each of these transformations in the ideology and practice of capital which took place after Marx’s death involves the inversion of what was hitherto a truism of capitalism. Marx was able to demonstrate such inversions as internal contradictions in long-established relations of capital, but these later contradictions manifested themselves in innovations which disclosed a hitherto unseen contradiction these same concepts and the capitalists’ doctrines were duly transformed.

(13) The public and private spheres

Capitalism inherited the private sphere from its bourgeois progenitors who first carved out a private sphere from feudal right a thousand years ago, while conversely a public sphere emerged in the towns which would gradually roll back the divine rights of the nobility to control public life. The commons were largely privatised but initially, the activity of merchants and artisanal workshops had little impact on the wider natural environment. Apprentices and journeymen alike owned the tools of their trade as their private property just as the master owned the workshop. However, once the tools of the trade were giant machines, the monopoly of a wealthy class of industrialists, the contradiction between public and private spheres became a great injustice.

The capitalist mode of appropriation, the result of the capitalist mode of production, produces capitalist private property. This is the first negation of individual private property, as founded on the labour of the proprietor. But capitalist production begets, with the inexorability of a law of Nature, its own negation. It is the negation of negation. This does not re-establish private property for the producer, but gives him individual property based on the acquisition of the capitalist era: i.e., on cooperation and the possession in common of the land and of the means of production. (Capital, volume 1, Ch. 32)

The activities which took place in these privately owned enterprises had profound indirect impact on the natural environment – the atmosphere, the waterways and oceans, the wildlife, deserts, jungles and even the polar ice caps.

Currently, the contradiction faced by capitalism is that the biosphere is finite. But this is not the same old question of the escalating cost of extracting ever-scarcer resources, but of the stability of the entire biosphere. Marx observed this possibility in his reflections on the history of past civilizations, but in his day the limits of biosphere as a whole were still not manifested. Modern industry has now reached the limits of the exploitation of Nature, particularly in regard to the waste products of energy generation, but also the waste products of consumption and production generally, the destruction of the conditions for stability of the biosphere, and the escalating danger of pandemics.

“Green economics” falsely believes that this can resolved by “redefining” value. The driving force of capital accumulation is the striving of each individual capitalist firm to subsume the maximum proportion of the total social labour under its command and successively renewed in circulation. The definition of value is of no concern to capital. Of course, placing real, monetary taxes on the exploitation of natural resources or other forms of ‘externalisation’ of the costs of production would indeed have an impact of corporate behaviour. More effective would be criminal penalties and other ‘despotic inroads’ into the sovereignty of capital.

The simple fact is that in order to survive capital must stop the emission of carbon dioxide and methane into the atmosphere just as 30 years ago they had to stop putting chlorine, fluorine and bromine into the atmosphere to avoid creating “holes in the ozone layer.” That change in industrial practices was achieved in remarkably short order, and although the financial impact differed from industry to industry the overall impact on capitalism was stimulatory – just as the y2k problem had proved to be a stimulus to the computer industry.

The greening of capital, were it to succeed, would be an entirely profitable exercise, but in the meantime, because of its differential impact on different sections of capital and of labour, a considerable period of crisis, with no guarantee of success, is inevitable. There is in fact no indication that attempts to regulate our interaction with Nature will rein in our destructive practices sufficiently quickly and the collapse of the biosphere is entirely possible.

The dynamics of how this process has unfolded has been instructive. Generally speaking, representative politics has failed dismally to deliver the necessary state regulation. Those changes in consciousness which have been achieved, have been produced almost exclusively by the collaboration of the green social movement and scientific institutions. Surprisingly, it has been shareholders and boardrooms which have been the first economic actors to respond significantly to this emergency, and the hegemonic position of finance capital has been able to use its weight to bully the fossil fuel industries out of exclusive control of the discourse. The organised working class has played little role in making the necessary changes. The media have proved as much an impediment as the representative political institutions perhaps because both rest on public opinion, which has largely lagged behind the demands of the emergency.

However successful the transformation of industry is in averting the collapse of the biosphere, there must be a profound transformation in the labour process and consequently a profound transformation in the nature of the working class.

The overriding fact of the environmental issue is that quite simply we all share the same biosphere, the same climate system. Never has there been an epoch more conducive to collectivism and more unconducive to libertarianism.

It is not just the line drawn between between human activity and Nature which is called into question by this crisis. More importantly it is the line drawn between the private sphere and the public sphere. So long as the biosphere can be undermined by private activity, there can be no avoiding a collapse of the biosphere. Whether it’s Jeff Bezos joyriding which puts 300 tonnes of CO2 into the atmosphere with every jaunt, or methane leaked from privately owned gas plants in Western Australia exceeding the emissions of an entire middling European country, these are criminal acts against the global commons.

All this time, a division between the public sphere which leaves social production – including both the industry and the production of labour power – in the private sphere, has been taken for granted. This situation leaves it to the state to intervene in the private sphere by way of regulation to protect the biosphere from supposedly private activity. But a private sphere in which the state freely and continuously intervenes is a private sphere in name only.

Andy Blunden, December 2021