Socialist Economics: 5 – Capital
“The lazy men squandered their substance whilst the diligent saved theirs—thus Capital was born from thrift.” This fairy tale has about as much real application to the origins of Capital as Adam’s Rib has to the origins of women. The important point is: how are private fortunes created and how do they grow?
We know that prior to the capitalist system of production the producers owned their means of production, and the primitive accumulation of capital is nothing less than the process of divorcing the producers from their means of production and turning them into capital. When this process is completed historically we arrive at the situation which exists today, where the producers are totally alienated from the social means of production. They are propertyless wage-workers selling their life-activity to their employers, with enough to live on and sometimes not even that.
Capital has not existed from all time. It commenced in Europe out of the ruins of the old Feudal society around the fifteenth and sixteenth centuries. It is a social relation of production, and came into existence with the production of commodities and their circulation. The circulation of commodities means the development of an exchange system which finds its ultimate expression in the introduction of a monetary system. Any stated sum of money is representative of any stated quantity of commodities or Value. Money is the final product of the circulation of commodities, and capital appears in the first instance in that form. But capital can also appear in the form of a sum of commodities (Values); raw materials, instruments of labour, in fact, any sum of Exchange Values. What distinguishes the commodities comprising capital from any other group of commodities is the way in which they are used. The object behind their use must always be to produce a greater Value than that existing. Capital functions solely to produce a Surplus-Value greater than the sum originally advanced, either in the monetary form or in the commodity form, or both.
It is important to differentiate between capital trading transactions and share or stock dealings carried out mainly on the world’s stock exchanges between rival stockholders and investors, each trying to improve his financial position individually, or in a group. These represent transfers of capital between various people and institutions. They do not add to the total wealth, but change the ownership of existing wealth (Value), much in the same way as you can move furniture from one room to the other within the same house. You finish up with the same furniture but in different rooms. One man’s loss is another man’s gain.
The function of capital production is to increase existing wealth. The production of wealth cannot, therefore, depend on trading transactions, neither can it depend on nature or heaven, despite “the Lord’s bounty.” When the parson gives thanks every harvest festival “when all is safely gathered in”, it should never be forgotten that every day is harvest day for the capitalist, sowing capital and reaping Surplus Value.
Raw materials, and even the most sophisticated machinery, or gold bars, do not possess magical powers, and cannot increase their own Value merely by being placed together in any sphere of production. Being inanimate objects they are dependent on men, either to produce them in the first instance, or to maintain or supervise their operation. Living Labour is vital to the whole function of capital. If the machine or the materials cannot change their Value, and if there is an additional or Surplus Value created, then it could only have come from living labour, there being no other possible source. The legendary brilliance of the capitalist, his organizing ability, and other associated fables, have little to do with the social production of wealth and its accumulation. Some are clever, some are industrious, most are ignorant of the source of their wealth, inefficient and self-indulgent. Were they all in the first category it would make no difference, because the fact remains that capital is a social relation of production working independently from personalities clever, stupid, or mediocre.
The social capital mainly consists of the means of production and distribution; factories, industrial complexes, oil wells, mineral workings, means of transport, ships, aeroplanes, railways and road transport systems, agricultural land, plantations, etc. Most of these have been created gradually by workers long since dead. This is the accumulated labour (Value) of the past which provides the basis for the living labourers’ productive activity in the present. The employer (capitalist) allows the worker access to this existing social capital, created by the worker’s predecessors, for the sole and specific purpose of adding a greater Value than that previously existing. This marriage between living labour and capital (past Labour) is a necessary condition for the social extraction of Surplus-Value. But, as has been stated, the element of Surplus-Value, or Profit, cannot come from a fixed quantity of accumulated wealth. If anything, without the fertilization of living labour the accumulated wealth of the past which exists in the objects of social labour—factories, machinery, road systems, industrial centres, shipyards, cultivated land, etc.— would deteriorate and eventually become wasted assets. Living labour serving capital therefore performs two functions: first it produces a Surplus-Value working together with the accumulated labour of the past; and second, and by virtue of its productive activity, it preserves the means of production from decay. Every act of production is, in effect, also an act of reproduction, and it is through this act of reproduction that the means of production remain intact, and are preserved for the capitalist.
The employers, as a class, who own the social capital, buy social labour-power, giving wages in return. The amount of the capital is described by Socialists as Variable capital, because we claim that it alone changes in quantity at the end of the productive process. This is because the workers produce more Value than they receive back in the amount of wages paid to them. The difference is described by us as the rate of Surplus-Value, or exploitation. If a company pays annually the sum of £1 million in wages, and £9 million in raw materials, machinery, etc. (£10 million total), and shows a profit of £1 million, the rate of exploitation is 100 per cent irrespective of the claim of the capitalist that he only earns 10 per cent. The variation upwards in total Value has been entirely due to living labour.
On the other hand, if a capitalist spends £10 million in wages and £1 million on raw materials, fuel, machinery, etc. and shows a profit of £1 million, the rate of exploitation would be 10 per cent.
The rate of exploitation is measured against the amount paid out in the form of wages, and not the total capital. The constant capital vested in machinery, raw materials, fuel, buildings, etc., is constantly replaced, or constantly reproduced by the capitalist adding the Value of these elements to the commodities which he produces. Constant capital cannot add any additional Value to the products, other than that contained within itself. In fact, it is only through the agency of human labour power during the productive process that dead capital (accumulated labour) gives birth to new additional Value.
Capitalism is basically a system of accumulation, and that portion of Surplus-Value which is not consumed by the capitalists on luxury living, is remitted to the fund of accumulated labour, where it can serve as fresh capital to exploit workers again and again, increasing with every phase of circulation. It is indeed the dead hand of the past weighing heavily like an Alp on the living. The greater the fund of accumulated capital the greater the pressure on the workers to serve that capital, to augment it ad infinitum.
It is often stated by supporters of capitalism that capital has opened up new horizons, and that men have access to things and technological discoveries previously undreamed of. But it should be remembered that men, together with their fellow men, live in society and create their own environment. That environment is anti-social, because men’s creative ability is stifled as they do not own or control the means of production. It is hardly an argument to suggest that man is adequately compensated for this social loss by the ownership of TVs, motor cars and central heating. As Marx stated: “Whether his wages be high or low, or whether the chains that bind him be made of gold, the worker is as firmly riveted to capital as was Prometheus to the rock.”
Capital appears to have a separate existence outside the control of man. As a social relation, it Frankenstein-like, dominates all forms of human behaviour, where everything is related to the money principle. The measure of a man is his wealth not his intellect or culture. The ability of a man is determined by his financial power. The big spender has inherited the earth—that is why he is a big spender. Capitalism has created a phoney culture, and has debased man’s intellect to the level of a commodity. Happily we have not all succumbed to its pernicious influence, and we know, and are optimistic enough to believe, that society can be turned the right way up—which means that civilisation can survive and prosper without capital.