By Karl Marx – 1867
Reviewed by Steve Halpern
Many of us are confounded by a barrage of events we see on a regular basis. There was the twenty-year war against Afghanistan. That war, paid for with trillions of dollars, caused a tremendous loss of life, and now has subjected the people of that nation to a brutal regime. Yet we never read in the media how using a small percentage of that huge amount of money could have funded basic improvements in the standard of living in that country.
Then, there is the fact that the government in this country knew that sooner or later there would be a world-wide pandemic. Yet when COVID-19 became a worldwide threat, there were shortages of facemasks, respirators, and protective equipment for hospital workers.
In school, teachers asked us to “pledge allegiance to the flag” that they claimed represents “liberty and justice for all.” Yet today there are three individuals in this country who have over 300 billion dollars in assets, while about 42 million people don’t have enough food to eat. Clearly, I could go on and on, but I think you get the idea.
So, why do I think that a book written by Karl Marx over 150 years ago gives insight to the enormous problems we face today? In this book, Marx didn’t just attempt to solve one or another of the problems of his day. Marx looked at the political economic system of capitalism to see how and why it functions. From that analysis, Marx concluded that the problems we face are the necessary outcomes of this system that supplies a tiny minority of the population with obscene wealth, while subjecting masses of people to abject poverty.
To get an idea of how Marx looked at capitalism, we might compare a doctor to a banker. Bankers receive salaries because they make investments where there is a significant return on those investments. Clearly bankers understand that the money they manage is only a means of exchange used to purchase commodities. However, the banker is primarily concerned with money, and not the story of how and why the bank receives interest on its investments.
When most of us look at people, we see their outward appearance. Doctors look beneath the surface to understand the many organs in the body that need to function together for us to survive. If there is a problem with any of those organs, our lives might be at risk. So, while the banker looks at the outer workings of the economic system, doctors examine the continuous flow of interactions in the entire body.
The first sentence of Capital is: “The wealth of societies in which the capitalist mode of production prevails appears as an immense collection of commodities.” The key phrase in this sentence is, “appears as.” So, just as doctors look inside the body to understand it, Marx looked inside the capitalist system to go beyond its appearance and examine its core.
Marx started his analysis with a look at commodities and what they all have in common. He argued that the exchange value of all commodities comes from constant capital, plus variable capital, plus surplus capital. When we add these capital expenditures together, we get the average price of commodities.
Constant Capital represents the investments in all the materials needed for production. These include buildings, machinery, and materials.
Variable Capital represents the wages paid to workers who are directly employed in the manufacture of a given commodity.
Surplus Capital represents the excess derived from the sale of commodities. One part of this excess goes to the capitalist in profits. Then, there is money that goes to reinvest in the company that manufactures the commodity. Then, there is money that goes to the necessary services of health care and education. Finally, the excess funds go towards taxes, interest to banks, insurance, advertising, corporate law, and other service centered enterprises.
Now we can ask the question: Why does Marx use these terms to describe the manufacture and sale of virtually all commodities?
Constant capital is constant because the capitalist needs to pay for machinery, buildings, and materials at given prices. Clearly those prices will fluctuate, but once these commodities are purchased, the price of those commodities needs to be paid in full.
So, why does Marx view wages of workers as variable capital? When technology automates certain jobs, the capitalist pays more for machinery and less for labor. When there is less of a demand for a commodity, capitalists can eliminate jobs and their labor costs go down. When a capitalist demands that workers intensify their work and do more, the overall costs of labor effectively go down. For these reasons, Marx viewed wages paid to workers as variable capital because there are many circumstances that will cause the overall cost of labor to go down. However, Marx was also aware that when workers go on strike, wages can also increase.
Marx viewed much of the money represented by Surplus capital to be unnecessary to the costs of production. Certainly, money needs to be reinvested to maintain the work environment. Money also needs to be invested for health care and education, but while these services are necessary, they are continually under the threat of cutbacks. However, money that goes towards profits, interest, insurance, advertising, corporate law, as well as thousands of atomic bombs, in no way enhances the value of commodities. So, here we begin to see a serious problem.
Then, Marx wrote about how the life of workers is completely different from the life of capitalists. Workers go to work, produce a commodity, get paid for their work, then purchase commodities with their salary. This is a C-M-C relationship.
Capitalists start with money and invest that money to pay workers to manufacture commodities. Then, the capitalist derives a profit from the sale of commodities. So, the capitalist has an M-C-M relationship. Here we see how the capitalist does absolutely no work to create the commodity he or she derives a profit from. We also see how the capitalist system has a continuous flow. Marx identified the many areas where that flow of capital can break down and cause a crisis.
So, here we see how all profits are derived from labor. Marx polemicized against Adam Smith and David Ricardo who also looked at the workings of the capitalist system. Both Smith and Ricardo found nothing wrong with this system and believed that it benefitted both the capitalist and the worker. However, Smith and Ricardo acknowledged that workers were the ones who created all wealth.
The problem is that because capitalists control the money, they have power over workers. Because labor creates all wealth, Marx argued that this wealth comes from socially necessary labor time. This is where the conflict begins.
Because the capitalist pays for the worker in wages, capitalists feel that they literally own workers during the time we spend on the job. They believe they have the absolute right to tell us what to do, when to do it, and how to do the jobs they pay us for.
There is a saying, “Time is money.” Well, for capitalists the time of workers is their money. So, they have an interest in intensifying the work environment so employees will produce more and more. In Marx’s day capitalists routinely worked men, women, and children twelve-hour days, demanding that they work incessantly.
Today, the Amazon Corporation demands that workers toil incessantly for twelve-hour shifts. When workers need to use a rest room, Amazon requires them to punch out and punch in when they return. This is called the Time-Off-Task (TNT) part of the workday. When workers take too long for TNT three times, they will be terminated.
So, just as in Karl Marx’s day, capitalists continue to be obsessed with the time of workers who create all wealth. Clearly the former CEO of Amazon, Jeffrey Bezos, never needed to punch out when he went to the bathroom. When we think of Bezos’ obscene compensation from Amazon, in effect, he might have received thousands of dollars for each of his bathroom visits.
So, here we might notice that there have been enormous technological advances in the world since the 19th century. However, with all these advances, capitalists continue to be obsessed with the time of workers.
John Stewart Mill was no Marxist, but Marx quoted Mill who observed that improved technology in no way improved the standard of living for workers. Marx agreed with Mill but argued that the reason for this state of affairs has to do with the antagonism between the interests of workers and capitalists.
When technology automates jobs, or simplifies work, the status of workers becomes weaker with respect to their employment. On the other hand, as capitalists amass more wealth, they invest in more technologically improved constant capital, and can hire fewer workers who will do the same redundant task repeatedly for long hours.
In recent years we’ve seen capitalists invest in nations where wages are between $1 and $10 per day. Because wages are so low in these countries, capitalists oftentimes find it cheaper to hire large numbers of workers, rather than invest in expensive machinery.
So, we see how capitalists pay increasing amounts of money on constant capital. They also need to deal with competition, as well as the need to continually grow, and deal with the instability of capitalism. For all these reasons they need to amass more and more money. We see this in the drive for stock market prices to continually increase. However, the increase in stock market prices does very little to aid the 42 million people in this country who don’t have enough food to eat.
As we see in the case of Amazon, this basic relationship has not changed in 150 years, even with the inventions of computers and cell phones. When we look at this reality, we see how the essence of the capitalist system is the antagonistic relationship between capital and labor.
So, now that we see the basic contradiction between capital and labor, we might ask the question: Why did workers ever submit to the horrendous conditions of the factory system?
The Genesis of Capital
Marx answers this question in detail by reporting on a history most historians make a determined effort to ignore. Marx began this analysis with the feudal system that consisted of lords, peasants, and craft workers.
On the one hand, feudalism was a brutal system where royal families had absolute power. Serfs worked the land for the lord of the manor. Most serfs didn’t even have permission to travel to neighboring towns.
The other side of feudalism was that serfs had their own homes and plots of land that they could cultivate. They also had cattle that grazed on communal lands.
With the advent of capitalism many lords became indebted to merchants or money lenders who charged usurious interest rates. Then, the lords lost their manors and the ruling powers forced serfs off the land. This was a theft of vast areas of land since the serfs effectively paid for their homes, land, and cattle with their work over several centuries.
This reality provided individuals with large amounts of money they could invest. However, that money had little value unless there were workers who were willing to toil in horrendous conditions. The lenders also needed a way of forcing debtors to pay back loans. Here is where they made use of the state that Marx viewed as an indispensable support committee for the flow of capital.
Faced with no way of sustaining themselves, many of the former serfs became what was called “vagabonds.” The initial punishment for being a vagabond was several years of slavery. Then, the ruling powers would cut off part of the ear of a vagabond. The authorities also tied vagabonds to a wheel where they were whipped. If all those incentives failed to force the vagabond to work in horrendous conditions, they would be executed.
So, here we see how Marx defined the word freedom in the capitalist system. When the authorities forced serfs off the land, they became “free” of all possessions. This so-called “freedom” was a necessary precondition for capitalist accumulation. Since former serfs were free of their possessions, they became totally dependent on capitalists for their survival. Marx called the wages of workers, “a bundle of life-sustaining commodities.”
One of the early so-called British “investment opportunities” in its early years consisted of their colonies in the Americas. However, there was a problem with these investments. Many early settlers established homesteads that were self-sustaining. These homesteaders also brought their produce to market and became competitors with capitalist investors.
So, for the British bankers, this was a nightmare. Their investments in the colonies resulted in self sustaining homesteaders. Since they had no need for that “bundle of life sustaining commodities,” they were not dependent on capitalists for work. While capitalists need to grow, those pesky settlers became competitors of the investors, and obstacles to capitalist centralized growth.
The answer to this problem for the investors was to rely on their friends in the government. The punishment for petty crimes became indentured servitude in the colonies. However, eventually those indentured servants or slaves became free and started setting up their own homesteads. This is what led to the horrendous slave trade from Africa.
We might also ask: Where did all that money come from to finance this horror show?
The origin of capitalist wealth
The Spanish came to the Americas for three things: God, Gold, and Glory. The Native Americans didn’t understand why these Europeans were so determined to get gold. For them, gold was just used for ornamentation. Their priorities were about obtaining the means to live that included food, clothing, housing, and health care.
However, the Spanish built their empire on the gold and silver found in the Americas. The Spanish silver mines in the Bolivian town of Potosi became a center for the extraction of wealth from the Americas. Marx wrote about the Native American slaves who mined these precious metals, creating much of the initial wealth of the capitalist world.
A problem was that in those years, the Spanish never developed manufacturing enterprises. So, they traded their gold and silver for commodities manufactured in Britain, France, and even China. As a result, the British currency of the pound was based on its value in relation to a pound of sterling silver.
The British also accumulated more silver by trading opium to China. When the Chinese outlawed the sale of opium, the British countered by increasing their opium sales. Those policies set the stage for the Opium Wars aimed at forcing China to import opium, so Britain could accumulate more silver.
These events led Marx to argue that, “If money comes into the world with a congenital blood-stain on one cheek, capital comes dripping from head to toe, from every pore, dripping with blood.”
The recent drive for capitalist accumulation by dispossession
I happen to have worked in the auto industry for twenty-one years. We can see how the history of this industry progressed exactly the way Marx outlined in Capital.
Initially a manager by the name of Frederick Taylor pioneered pro-capitalist methods of intensifying the time workers spent on the job. Taylor established the optimum conditions to maximize productivity in a machine shop. Taylor fired managers who failed to enforce his methods.
Henry Ford used Taylor’s methods to organize the assembly line. This meant that the relatively skilled occupation of putting together an automobile became a strenuous, repetitive, and dangerous job.
As a result, many workers didn’t want to work in Ford’s assembly plant. So, Ford actively recruited Black workers to do those jobs. The jobs at the Ford Motor Company became some of the most lucrative jobs Black workers could get in this country. There were also many Black workers who took those jobs after escaping from the horrendous conditions of Jim Crow segregation. This explains why the United Auto Workers Union would need to demonstrate that the union stood against racist discrimination.
Then, the General Motors Corporation took much of the market from Ford by producing a wider variety of cars rather than the Ford Model T. General Motors eventually took over fifty percent of the automotive sales market in this country.
However, today we see that there were problems the auto industry managers weren’t concerned with. One problem was that the quality of the autos manufactured in this country used to be poor. Ford had the reputation of “Fix Or Repair Daily”, or “Found On the Road Dead.”
The other problem was that most vehicles had V-8 engines that were gas guzzlers. This didn’t appear to be a problem when the price of gasoline was thirty cents per gallon.
So, W. Edwards Deming came up with a method to improve the quality of cars using methods of statistical process control. Because the U.S. corporations were making tons of money, they weren’t interested in Deming’s ideas.
However, the Japanese made significant improvements in their economy since the Second World War. They used Deming’s ideas at a time when the price of gasoline was skyrocketing. The result was that the Japanese initially took over about twenty-five percent of the automotive market. As Marx effectively argued, the wealth created by the Japanese auto industry came with a steep price for workers.
Satoshi Kamata was a journalist who worked in a Japanese auto plant and wrote the book Japan in the Passing Lane about his experiences. The Japanese title for this book is Factory in Hell. Kamata reported on a worker who passed out on the line from moving heavy axles all day long. When the worker regained his consciousness, his foreman asked him if he wanted to resign.
These were some of the conditions that allowed Toyota became the largest automotive corporation in the world. However, even this development had its limitations.
Today, the Korean corporations of Hyundai and Kia are taking market share from the larger corporations. The Korean corporations of Samsung and LG are also taking a large market share of electronics and appliance sales. Those corporations became profitable by subjecting Korean workers to horrendous conditions.
Yet, today China produces more automobiles than the rest of the world combined. China sells most of those cars to its domestic market.
General Motors went from selling cars, to selling loans to purchase cars, to leasing cars. President Trump chastised General Motors for having more employees in China than in this country. Trump might have benefitted from reading Marx before he made that statement.
Marx argued that the government is merely a support for corporate power. China is a major source of investment in the capitalist world. The former President Trump has about as much power in preventing capitalists from investing in China as a newborn baby.
This story has gone full circle. The Netflix film American Factory is the story of a closed auto manufacturing plant in Ohio that was purchased by a Chinese capitalist. Now that factory manufactures automotive windshields. In the entrance to this new plant is the red flag of China side by side with the flag of this country.
Initially, many workers celebrated the reopening of this factory, even though they would be paid five dollars per hour less than in their old jobs. Then, the Chinese capitalist owner of the factory was disappointed because his new factory wasn’t making a profit. So, he instructed his manager to fire the older workers and hire young workers who would be more productive. Marx called this the intensification of labor, as well as the variability of the labor force. As a result, the younger work force intensified the pace of work and made this factory profitable.
This story also underscores Marx’s observation of how in the capitalist system there tends to be a decline in the percent of profit on investments. This means that capitalists need to continually sell more and more commodities, while developing an obsession with cutting costs.
When I worked in the auto industry, management demanded that we increase production and improve quality. We did this, and they closed the factories I worked in anyway. Yet, every year capitalists pay about $200 billion for advertising in an attempt to convince us to purchase commodities we might not need or want.
Alienation
While the feudal system was oppressive in many ways, during those years people lived in the same area and there was a sense of community. With the advent of capital, there was a general loss of community and workers toiled for money that allowed them to survive. So, in a sense, the idea of being a part of a collective community was replaced by an individual’s drive to attain money. Because capitalists profit from the labor of workers, this system is the root cause of alienation. This reality explains why drug addiction has become an epidemic.
We might think about all the horrors of capitalism: people living in prison, millions going to bed hungry, and the need to follow the dictates of a boss so we might make a living. Then, we might think about the opulence of capitalists. Bill Gates, the former CEO of Microsoft has a home worth about $150 million with 24 bathrooms.
Then, we might think about what might happen if a workers government took power. Food, clothing, housing, health care, and education would become lifetime rights for everyone. Humanity would no longer need to support capitalists, or banks, or insurance companies, or advertising agencies, or corporate law firms. As a result, people would only need to spend a relatively short part of our lives working to contribute to the wealth of the world.
In that kind a society, all enterprises would do their best to work in harmony with nature and begin to reverse the immense damage capitalism has done to the environment. People would begin to live in harmony with trees, plants, animals, birds, and insects.
However, to create that kind of world, we need to understand that the working class has a tremendous potential to carry out a tenacious struggle to transform the world. When we look at the revolutions in Russia and Cuba, as well as the history of the labor and civil rights movement in this country, we can see that this is indeed possible.
Karl Marx wrote his book Capital to teach us that we will never be fully liberated while living in the confines of the capitalist system. Ultimately the capitalist system will teach us why Marx made his argument: “Workers of the world unite. You have nothing to lose but your chains.”
