Mаrxіsm іn wоrld hіstоry

Soon the economists who supported capital were pronouncing the labour theory of value to be a load of nonsense. But if you kick truth out the front door, it has a habit of creeping in the back.

Turn on the radio. Listen to it long enough and you will hear some pundit or other claim that what is wrong with the British economy is that `people do not work hard enough' or, another way of saying the same thing, `productivity is too low'. Forget for a minute whether the argument is correct or not. Instead look closely at the way it is put. They never say `machines do not work hard enough'. No, it is always people, the workers.

They claim that if only the workers worked harder, more wealth would be created, and that this would make possible more investment in new machinery. The people who use this argument may not know it, but they are saying that more work will create more capital. Work, labour, is the source of wealth.

Say I have a ?5 note in my pocket. Why is that of use to me? After all, it's only a piece of printed oaper. Its value to me lies in the fact that I can get, in exchange for it, something useful that has been made by someone else's labour. The ?5 note, in fact, is nothing more than an entitlement to the products of so much labour. Two ?5 notes are an entitlement to the products of twice as much labour, and so on.

When we measure wealth we are really measuring the laboul that has been expended in creating it.

Of course, not everyone produces as much with their labour in a given time as everyone else. If I set out, for instance, to make a table, I might take five or six times as long as a skilled carpenter. But no one in their right mind would regard what I had made as five or six times as valuable as a table made by a skilled carpenter. They would estimate its value according to how much of the carpenter's labour would be needed to make it, not mine.

Say it would take a carpenter an hour to make a table, then they would say that the value of the table to them was the equivalent of one hour's labour. That would be the labour time necessary to make it, given the usual level of technique and skill in present society.

For this reason, Marx insisted that the measure of the value of something was not simply the time it took an individual to make it, but the time it would take an individual working with the average level of technology and the average level of skill - he called this average level of labour needed `the socially necessary labour time'. The point is important because under capitalism advances in technology are always taking place, which means that it takes less and less labour to produce goods.

For example, when radios were made with thermionic valves they were very expensive items, because it took a great deal of labour to make the valves, to wire them together and so on. Then the transistor was invented, which could be made and wired together with much less labour. Suddenly, all the workers in the factories still making valve radios found that the value of what they were producing slumped, for the value of radios was no longer determined by the labour time needed to make them from valves, but instead by the time needed to make them with transistors.

One final point. Prices of some goods fluctuate wildly - on a day-to-day or a week-to-week basis. These changes can be caused by many other things besides changes in the amount of labour needed to make them.

When the frost in Brazil killed all the coffee plants the price of coffee shot up, because there was a shortage throughout the world and people were prepared to pay more. If tomorrow some natural catastrophe was to destroy all the televisions in Britain, there is no doubt the price of televisions would shoot up in the same way. What economists call `supply and demand' continually causes such fluctuations in price.

For this reason, many pro-capitalist economists say that the labour theory of value is nonsense. They say that only supply and demand matter. But that is nonsense. For this argument forgets that when things fluctuate they usually fluctuate around an average level. The sea goes up and down because of tides, but that doesn't mean we cannot talk of a fixed point around which it moves, which we call `sea level'.

Similarly, the fact that prices go up and down from day to day does not mean that there are not fixed values around which they fluctuate. For instance, if all the televisions were destroyed, the first new ones to be produced would be very much in demand and fetch a high price. But it would not be long before more and more were on the market, competing with each other until the price was forced down close to their value in terms of the labour time needed to make them.

Competition and accumulation

There was a time when capitalism did seem like a dynamic and progressive system. For most of human history, the lives of most men and women have been dominated by drudgery and exploitation. Industrial capitalism did not change this when it made its appearance in the 18th and 19th centuries.

But it did seem to put this drudgery and exploitation to some useful purpose. Instead of wasting vast amounts of wealth on luxury for a few parasitic aristocrats or in building luxury tombs for dead monarchs or in futile wars over which son of an emperor should rule some God forsaken hole, it used wealth to build up the means of creating more wealth. The rise of capitalism was a period of growth in industry, cities, means of transportation - on a scale undreamt of in previous human history.

Strange as it may seem today, places such as Oldham, Halifax and Bingley were the home of miracles. Humanity had never before seen so much raw cotton and wool turned so quickly into cloth to clothe millions. This did not happen because of any special virtues possessed by the capitalists. They were always rather noxious people, obsessed only with getting wealth into their own hands by paying as little as possible for the labour they used.

Many previous ruling classes had been like them in this respect without building up industry. But the capitalists were different in two important respects.

The first we have dealt with - that they did not own workers, instead paying them by the hour for their ability to work, their labour power. They used wage slaves, not slaves. Secondly, they did not themselves consume the goods their workers produced. The feudal landlord lived directly from the meat, bread, cheese and wine produced by his serfs. But the capitalist lived by selling to other people the goods produced by workers.

This gave the individual capitalist less freedom to behave as he pleased than the individual slave owner or feudal lord had. To sell goods, the capitalist had to produce them as cheaply as possible. The capitalist owned the factory and was all-powerful within it. But he could not use his power as he wished. He had to bow down before the demands of competition with other factories.

Let's go back to our favourite capitalist. Sir Browning Browne. Assume that a certain quantity of the cotton cloth produced in his factory took ten hours of workers' time to turn out, but that some other factory could produce the same amount in five hours of workers' time. Sir Browning would not be able to charge the price for it equivalent to ten hours of labour. No one in their right mind would pay this price when there was cheaper cloth just down the road.

Any capitalist who wanted to survive in business had to ensure that his workers worked as fast as possible. But that was not all. He also had to make sure that his workers were working with the most up to date machinery, so that their labour produced as many goods in an hour as did the labour of those working for other capitalists. The capitalist who wanted to stay in business had to make sure he owned ever greater amounts of means of production - or, as Marx put it, to accumulate capital!

The competition between capitalists produced a power, the market system, that had each and every one of them in its grip. It compelled them to speed up the work process all the time and to invest as much as they could afford in new machinery. And they could only afford the new machinery (and, of course, have their own luxuries on the side) if they kept workers' wages as low as they could.

Marx writes in his major work. Capital, that the capitalist is like a miser, obsessed with getting more and more wealth. But:

What in the miser is mere idiosyncracy is, in the capitalist, the effect of a social mechanism in which he is but one of the wheels … The development of capitalist production makes it constantly necessary to keep increasing the amount of capital laid out in a given industrial undertaking, and competition makes the immanent laws of capitalist production to be felt by each individual capitalist as external coercive laws. It compels him to keep constantly extending his capital in order to preserve it. But extend it he cannot, except by means of progressive accumulation.

Accumulate, accumulate! That is Moses and the prophets!

Production does not take place to satisfy human need - even the human needs of the capitalist class - but in order to enable one capitalist to survive in competition with another capitalist. The workers employed by each capitalist find their lives dominated by the drive of their employers to accumulate faster than their rivals.

As Marx's The Communist Manifesto put it:

In bourgeois society living labour is but a means to accumulate dead labour … Capital is independent and has individuality, while the living person is dependent and has no individuality.

The compulsive drive for capitalists to accumulate in competition with one another explains the great rush forward of industry in the early years of the system. But something else resulted a well - repeated economic crisis. Crisis is not new. It is as old as the system itself.

6. Economic crisis

The accumulation of wealth on the one hand, of poverty on the other.

That was how Marx summed up the trend of capitalism. Every capitalist fears competition from every other, so he works his employees as hard as possible, paying wages as low as he can get away with.

The result is a disproportion between the massive growth of means of production on the one hand, and the limited growth in wages and the number of workers employed on the other. This, Marx insisted, was the basic cause of economic crisis.

The easiest way to look at this is to ask: who buys the greatly expanding quantity of goods? The low wages of the workers mean they cannot afford the goods produced by their own labour. And the capitalists cannot increase wages, because that would be to destroy profit, the driving force of the system.

But if firms cannot sell the goods they produce, they have to shutdown factories and sack workers. The total amount of wages then falls still more, and yet more firms cannot sell their goods. A `crisis of overproduction' sets in, with goods piling up throughout the economy that people cannot afford to buy.

This has been a recurrent feature of capitalist society for the past 160 years.

But any quick-witted apologist for the system will soon point out that there should be an easy way out of the crisis. All that's needed is that capitalists invest their profit in new factories and machines. That will provide jobs for workers, who in turn will then be able to buy the unsold goods. This means that as long as there's new investment all the goods produced can be sold and the system can provide full employment.

Marx was no fool and recognised this. Indeed, as we've seen, he realised that the competitive pressure on capitalists to invest was central to the system. But, he asked, does this mean the capitalists will invest all their profits, all the time?

The capitalist will only invest if he thinks he is guaranteed a `reasonable' profit.

If he doesn't think there is such a profit to be made, he won't risk his money in investment. He'll put it in the bank and leave it there.

Whether the capitalist invests or not depends on how he assesses the economic situation. When it looks right, the capitalists all rush to invest at the same time, falling over each other searching for construction sites, buying up machines, scouring the earth for raw materials, paying over the odds for skilled labour.

This is usually called the `boom'.

But the frenzied competition for land, raw materials and skilled labour forces up the prices of these things. And suddenly a point is reached where some firms discover their costs have risen so much that all their profits have disappeared.

The investment boom all at once gives way to an investment `slump'. No one wants new factories - construction workers are sacked. No one wants new machines - the machine tool industry goes into crisis. No one wants all the iron and steel that is being produced - the steel industry is suddenly working `below capacity' and becomes `unprofitable'. Closures and shutdowns spread from industry to industry, destroying jobs - and with them the ability of workers to buy the goods of other industries.

The history of capitalism is a history of such periodic lurches into crisis, into the insanity of unemployed workers going hungry outside empty factories, while stocks of `unwanted' goods rot.

Capitalism creates these crises of overproduction periodically because there is no planning, so there's no way to stop the stampede of capital into and out of investment all at once.

People used to think that the state could stop this. By intervening in the economy, increasing state investment when private investment was low, then reducing it when private investment caught up, the state would keep production on an even keel. But nowadays state investment too is part of the lunacy.

Look at British Steel. Some years ago, when the firm was still nationalised, steel workers were told their jobs were being scrapped to make way for vast modern automatic furnaces designed to produce more steel more cheaply. Now they are being told that yet more workers must lose their jobs - because Britain was not the only country to embark on these massive investment plans. France, Germany, the United States, Brazil, Eastern Europe, even South Korea, all did the same. Now there's a world surplus of steel - a crisis of overproduction. State investment is being cut.

Steel workers, of course, suffer both ways. This is the price humanity is still paying for an economic system where the production of massive wealth is controlled by a small privileged group interested only in profit. It does not matter whether these small privileged groups own industry directly, or control it indirectly through their control of the state (as with British Steel). While they use this control to compete with each other for the largest share of the profits, whether nationally or internationally, it is the workers who suffer.

The final lunacy of the system is that the `crisis of overproduction' is not overproduction at all. All that `surplus' steel, for instance, could help solve world hunger. Peasants around the world have to plough the land with wooden ploughshares - steel ploughshares would increase food production. But the peasants have no money anyway, so the capitalist system isn't interested - there's no profit to be made.

Why crises tend to get worse

Crises do not just take place with monotonous regularity. Marx also predicted they would get worse as time went on.

Even if investment took place at an even rate, without fits and starts, it could not stop the overall trend towards crisis. This is because the competition between capitalists (and capitalist nations) forces them to invest in labour saving equipment.

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