Afterthoughts on Piketty’s Capital
By David Harvey
Retrieved 05/17/14 from http://davidharvey.org/2014/05/afterthoughts-pikettys-capital/
Thomas Piketty has written a book called Capital that has caused quite a stir. He advocates progressive taxation and a global wealth tax as the only way to counter the trend towards the creation of a “patrimonial” form of capitalism marked by what he dubs “terrifying” inequalities of wealth and income. He also documents in excruciating and hard to rebut detail how social inequality of both wealth and income has evolved over the last two centuries, with particular emphasis on the role of wealth. He demolishes the widely-held view that free market capitalism spreads the wealth around and that it is the great bulwark for the defense of individual liberties and freedoms. Free-market capitalism, in the absence of any major redistributive interventions on the part of the state, Piketty shows, produces anti-democratic oligarchies. This demonstration has given sustenance to liberal outrage as it drives the Wall Street Journal apoplectic.
The book has often been presented as a twenty-first century substitute for Karl Marx’s nineteenth century work of the same title. Piketty actually denies this was his intention, which is just as well since his is not a book about capital at all. It does not tell us why the crash of 2008 occurred and why it is taking so long for so many people to get out from under the dual burdens of prolonged unemployment and millions of houses lost to foreclosure. It does not help us understand why growth is currently so sluggish in the US as opposed to China and why Europe is locked down in a politics of austerity and an economy of stagnation. What Piketty does show statistically (and we should be indebted to him and his colleagues for this) is that capital has tended throughout its history to produce ever-greater levels of inequality. This is, for many of us, hardly news. It was, moreover, exactly Marx’s theoretical conclusion in Volume One of his version of Capital. Piketty fails to note this, which is not surprising since he has since claimed, in the face of accusations in the right wing press that he is a Marxist in disguise, not to have read Marx’s Capital.
Piketty assembles a lot of data to support his arguments. His account of the differences between income and wealth is persuasive and helpful. And he gives a thoughtful defense of inheritance taxes, progressive taxation and a global wealth tax as possible (though almost certainly not politically viable) antidotes to the further concentration of wealth and power.
But why does this trend towards greater inequality over time occur? From his data (spiced up with some neat literary allusions to Jane Austen and Balzac) he derives a mathematical law to explain what happens: the ever-increasing accumulation of wealth on the part of the famous one percent (a term popularized thanks of course to the “Occupy” movement) is due to the simple fact that the rate of return on capital (r) always exceeds the rate of growth of income (g). This, says Piketty, is and always has been “the central contradiction” of capital.
But a statistical regularity of this sort hardly constitutes an adequate explanation let alone a law. So what forces produce and sustain such a contradiction? Piketty does not say. The law is the law and that is that. Marx would obviously have attributed the existence of such a law to the imbalance of power between capital and labor. And that explanation still holds water. The steady decline in labor’s share of national income since the 1970s derived from the declining political and economic power of labor as capital mobilized technologies, unemployment, off-shoring and anti-labor politics (such as those of Margaret Thatcher and Ronald Reagan) to crush all opposition. As Alan Budd, an economic advisor to Margaret Thatcher confessed in an unguarded moment, anti-inflation policies of the 1980s turned out to be “a very good way to raise unemployment, and raising unemployment was an extremely desirable way of reducing the strength of the working classes…what was engineered there in Marxist terms was a crisis of capitalism which recreated a reserve army of labour and has allowed capitalists to make high profits ever since.” The disparity in remuneration between average workers and CEO’s stood at around thirty to one in 1970. It now is well above three hundred to one and in the case of MacDonalds about 1200 to one.
But in Volume 2 of Marx’s Capital (which Piketty also has not read even as he cheerfully dismisses it) Marx pointed out that capital’s penchant for driving wages down would at some point restrict the capacity of the market to absorb capital’s product. Henry Ford recognized this dilemma long ago when he mandated the $5 eight-hour day for his workers in order, he said, to boost consumer demand. Many thought that lack of effective demand underpinned the Great Depression of the 1930s. This inspired Keynesian expansionary policies after World War Two and resulted in some reductions in inequalities of incomes (though not so much of wealth) in the midst of strong demand led growth. But this solution rested on the relative empowerment of labor and the construction of the “social state” (Piketty’s term) funded by progressive taxation. “All told,” he writes, “over the period 1932-1980, nearly half a century, the top federal income tax in the United States averaged 81 percent.” And this did not in any way dampen growth (another piece of Piketty’s evidence that rebuts right wing beliefs).
By the end of the 1960s it became clear to many capitalists that they needed to do something about the excessive power of labor. Hence the demotion of Keynes from the pantheon of respectable economists, the switch to the supply side thinking of Milton Friedman, the crusade to stabilize if not reduce taxation, to deconstruct the social state and to discipline the forces of labor. After 1980 top tax rates came down and capital gains – a major source of income for the ultra-wealthy – were taxed at a much lower rate in the US, hugely boosting the flow of wealth to the top one percent. But the impact on growth, Piketty shows, was negligible. So “trickle down” of benefits from the rich to the rest (another right wing favorite belief) does not work. None of this was dictated by any mathematical law. It was all about politics.
But then the wheel turned full circle and the more pressing question became: where is the demand? Piketty systematically ignores this question. The 1990s fudged the answer by a vast expansion of credit, including the extension of mortgage finance into sub-prime markets. But the resultant asset bubble was bound to go pop as it did in 2007-8 bringing down Lehman Brothers and the credit system with it. However, profit rates and the further concentration of private wealth recovered very quickly after 2009 while everything and everyone else did badly. Profit rates of businesses are now as high as they have ever been in the US. Businesses are sitting on oodles of cash and refuse to spend it because market conditions are not robust.
Piketty’s formulation of the mathematical law disguises more than it reveals about the class politics involved. As Warren Buffett has noted, “sure there is class war, and it is my class, the rich, who are making it and we are winning.” One key measure of their victory is the growing disparities in wealth and income of the top one percent relative to everyone else.
There is, however, a central difficulty with Piketty’s argument. It rests on a mistaken definition of capital. Capital is a process not a thing. It is a process of circulation in which money is used to make more money often, but not exclusively through the exploitation of labor power. Piketty defines capital as the stock of all assets held by private individuals, corporations and governments that can be traded in the market no matter whether these assets are being used or not. This includes land, real estate and intellectual property rights as well as my art and jewelry collection. How to determine the value of all of these things is a difficult technical problem that has no agreed upon solution. In order to calculate a meaningful rate of return, r, we have to have some way of valuing the initial capital. Unfortunately there is no way to value it independently of the value of the goods and services it is used to produce or how much it can be sold for in the market. The whole of neo-classical economic thought (which is the basis of Piketty’s thinking) is founded on a tautology. The rate of return on capital depends crucially on the rate of growth because capital is valued by way of that which it produces and not by what went into its production. Its value is heavily influenced by speculative conditions and can be seriously warped by the famous “irrational exuberance” that Greenspan spotted as characteristic of stock and housing markets. If we subtract housing and real estate – to say nothing of the value of the art collections of the hedge funders – from the definition of capital (and the rationale for their inclusion is rather weak) then Piketty’s explanation for increasing disparities in wealth and income would fall flat on its face, though his descriptions of the state of past and present inequalities would still stand.
Money, land, real estate and plant and equipment that are not being used productively are not capital. If the rate of return on the capital that is being used is high then this is because a part of capital is withdrawn from circulation and in effect goes on strike. Restricting the supply of capital to new investment (a phenomena we are now witnessing) ensures a high rate of return on that capital which is in circulation. The creation of such artificial scarcity is not only what the oil companies do to ensure their high rate of return: it is what all capital does when given the chance. This is what underpins the tendency for the rate of return on capital (no matter how it is defined and measured) to always exceed the rate of growth of income. This is how capital ensures its own reproduction, no matter how uncomfortable the consequences are for the rest of us. And this is how the capitalist class lives.
There is much that is valuable in Piketty’s data sets. But his explanation as to why the inequalities and oligarchic tendencies arise is seriously flawed. His proposals as to the remedies for the inequalities are naïve if not utopian. And he has certainly not produced a working model for capital of the twenty-first century. For that we still need Marx or his modern-day equivalent.
David Harvey is a Distinguished Professor at the Graduate Center of the City University of New York. His most recent book is Seventeen Contradictions and the End of Capitalism, published by Profile Press in London and Oxford University Press in New York.
With “Political Economy of Secularization,” we refer to the analysis of the underlying economic processes embedded in the tendency of religiosity to decline across the world. The building blocks for this analysis are mainly found in Karl Marx’s understanding of religion. While contemporary secularization theory mainly rests upon Weber and Durkheim’s ideas on this subject, we argue that in Marx’s writings on the subject we also find important insights. The objective of this paper is to sketch a theory of secularization within a Marxian Political Economy framework, and support it with the most recent data on development and religiosity across the world. We argue this approach fills important theoretical voids in traditional secularization theory and contributes toward responding to the challenge of explaining the rise in religiosity in the world as a whole.
Religion as Human Estrangement
One of Marx’s earliest remarks on religion is found in a letter to Arnold Ruge, a German writer with whom he briefly co-edited a journal titled “The German-French Yearbooks.” In 1842, when he was 24 years old, Marx wrote that “religion in itself is without content, it owes its being not to heaven but to earth, and with the abolition of distorted reality of which it is the theory, it will collapse of itself” (1975). In this brief statement, we find Marx’s central thesis on religion and secularization. Religion is but the reflection of a distorted reality, or as he later on develops, of a society where humanity is alienated, or estranged. With the transition to a society free of alienation, religion will eventually collapse. In 1843, he continued expanding on this idea in his Critique of Hegel’s Philosophy of Right. There he argued that religion is “the self-consciousness and self-esteem of man who has either not yet won through to himself, or has lost himself again” (2008, p. 41) At this point, he writes one of his most memorable quotes on religion:
“Religious suffering is, at one and the same time, the expression of real suffering and a protest against real suffering. Religion is the sigh of the oppressed creature, the heart of a heartless world, and the soul of soulless conditions. It is the opium of the people. The abolition of religion as the illusory happiness of the people is the demand for their real happiness. To call on them to give up their illusions about their condition is to call on them to give up a condition that requires illusions” (2008, p. 42).
“Real suffering,” may be of a mainly physiological nature, or a mainly psychological nature. Physiologically, human beings may suffer from hunger, disease, inadequate shelter or clothing, natural disasters, etc.; which all may lead to religious attitudes as explanatory or coping mechanisms. This is similar to Norris and Inglehart’s (2011) “existential security theory.” These authors sustain that “as societies transition from agrarian to industrial economies, and then develop into postindustrial societies, the conditions of growing security that usually accompany this process tend to reduce the importance of religious values. The main reason, [they] believe, is that the need for religious reassurance becomes less pressing under conditions of greater security” (2011, p. 18). On the other hand, Norris and Inglehart recognize that economic development, or greater “existential security,” do not necessarily ensure lower religiosity. We wish to stress this point even further, as it is crucial in Marx’s understanding of religiosity. As a result of what Marx called human estrangement, even people that are not living in the poorest conditions within their countries, and truly live in conditions of human security, might still find themselves in conditions that require sources of illusionary happiness. Therefore, to understand Marx’s theory of secularization, it is crucial to understand what he means with human estrangement, or the alienation of human labor. The objective in this section is not to provide a comprehensive analysis of the concept, but a brief introduction focusing on what is most pertinent to the subject of secularization. According to Marx, the source of alienation is found in the development of private property; that is, the transition from ancient communal modes of production toward modes characterized by private property over the means of production and the exploitation of human labor. Therefore, his concept of alienation is fundamentally related to the act of labor. As Erich Fromm (1992, p. 47) explained, work is “the active relatedness of man to nature, the creation of a new world, including the creation of man himself.” To illustrate Marx’s concept of alienation, it is best to juxtapose human labor in ancient communal modes of production, with labor within capitalism. In the first case, work was the expression of men and women’s power. The product of human labor, although primitive, was fundamentally linked to those who directly produced it, always based on their will and planning. In capitalism, workers are degraded into mere appendages of machines, destroying, as Marx described in Capital, every remnant of charm in work, and turning it into a hated toil. Aptly describing the work conditions of most laborers around the world today, Marx concluded that workers under capitalism find their work unfulfilling, miserable, and physically and mentally exhausting. Therefore, their work is experienced as something alien, and the worker becomes alienated from his or herself as a worker, as well as from the product of his or her work. For Marx, capitalism is the highest expression of alienated work since the origins of private property. Thus, alienated society fuels religion by creating diverse forms of suffering, ranging from physically brutal working conditions to menial and degrading work.
However, religiosity is also linked to our scientific knowledge. Taking this into account, we may conclude religion is a reflection of the relationship between human beings and nature in two distinct forms: how we transform nature and ourselves through labor, and our technical understanding of nature. Marx (2008, p. 36) argued that when the development of the productive power of labor is in a low stage, and the relations of humanity with itself and with nature are correspondingly constricted, this is “reflected in the ancient worship of nature, and in the other elements of the popular religions.” Similarly, Engels argued that as advances in natural sciences progress, “the more will men not only feel but also know their oneness with nature, and the more impossible will become the senseless and unnatural idea of a contrast between mind and matter, man and nature, soul and body” (2008, p. 188). Human religiosity therefore has inherent contradictory tendencies. While the development of our understanding and mastery over nature tends to undermine the belief in supernatural beings, the increasing alienation linked with this development enables religion. In contemporary terms, the latter translates into an issue of psychological or mental health. Under capitalism, scientific knowledge has exponentially grown to an extent arguably enough to have completely debunked religion. However, the negative effects on mental health brought upon by capitalism help religion persist.
In sum, Marxian secularization theory argues that religion is immersed in various processes that can both enable and disable it. First, the scientific and technical developments of human society tend to undermine religiosity through two processes: 1) an increasing understanding of nature eliminates the need of religion as an explanatory mechanism, while 2) increasing standards of living eliminate the need of religion as a coping mechanism. There has been a historic tendency of development in science and technology, which therefore translates into a historic tendency towards secularization. However, this same development in science and technology has gone hand in hand with the development of modes of production characterized by exploitation and alienation. This last process tends to serve as fuel for human religiosity. As we will show below, we understand that the most recent statistics on religion and human development support this theory.
We may now see a fundamental difference between the secularization theories of Marx and other 19th century thinkers such as Weber or Durkheim. While the latter argued that capitalism would ultimately destroy religion, Marx was clear that because capitalist industrialization represented a historical peak in human estrangement, it would do nothing of the sort. Humanity would have to transition to a post-capitalist mode of production, where men and women are self-realized and emancipated from alienation, in order for religion to disappear. Nonetheless, various processes could surely counteract alienation even within capitalism. Healthy workers, with access to education, and high living standards within egalitarian societies, will probably have less negative effects from estranged labor than workers with lower standards of living, lack of access to health and education, and living within highly unequal societies.
In other words, alienation is undermined by what recent theorists have termed human development. Human development generally refers to broadening the scope from strictly economic growth, so as to include elements such as education, health, and equality, which more aptly represent the conditions in which a population is living. Most Marxists would argue that although human development might be achieved in certain areas of the world economy, capitalism would ultimately undermine human development in the world as a whole. To discuss if global human development is achievable within capitalism would go beyond the scope of this paper. For our current objectives, it suffices to say that where human development is achieved, we should expect to find higher degrees of secularization, as it serves as a counteracting force to human estrangement. Thus, as Norris and Inglehart (2011, pp. 14-16) have also argued, developed countries should tend to show degrees of religiosity and secularization more proportional to human development rather than mere economic growth.
Lack of Secularization in the Third World
In the case of developing countries, their population growth rates and religious cultures have translated into a net rise in world religiosity that undermine the idea that religion will steadily decline. However, there is a tendency toward secularization, not an iron law of secularization. We argue that with all other things being held constant, religion would disappear as a result of economic and human development. Nonetheless, things are never constant, and sufficiently strong counteracting tendencies may undermine others. Two aspects contribute in explaining higher degrees of religiosity in the Third World: intense and highly exploitative working conditions, as well as problems related with hunger, sickness, and violence. In other words, processes related to alienation as well as low existential security plague developing countries. “Real suffering” in physiological and psychological terms translates into more people yearning for illusionary sources of happiness. As developing countries “catch up” to developed countries, increasing existential security enforces the tendency toward secularization. If their economic development were accompanied with human development, the tendency toward secularization would be reinforced even further. Capitalism tends to develop the forces of production on a global scale. In other words, it should tend to develop the “backward” regions of the world, developing countries should be catching up, and secularization should be rising. However, as stated above, sufficiently strong counteracting forces can nullify this tendency.
Many Marxian economists, such as Andre Gunder Frank (1978) and Samir Amin (1976), have studied why most poor developing countries remained poor during the 20th century. World capitalism took a particular imperialist character, dividing the world into two fundamental groups: core capitalist countries (the First World) and peripheral countries (the Third World). Their relation hampered the development of peripheral countries through a vast array of political and economic institutions and processes. While there is debate on the mechanisms, and the ways they may or may not be undermined, there is agreement on the fact that the relation between core countries and peripheral countries obstructed growth and development in the latter. Even when accounting for the so-called “emerging markets,” it is clear that growth and development are still difficult feats for most developing countries, and in great part because of their past and current relation with advanced developed countries. In other words, the tendency toward global secularization has been undermined by a particular counteracting force: economic imperialism and global inequality. This does not mean secularization theory is fundamentally flawed. On the contrary, with the analytical tools of Marxian Political Economy, we have a clearer understanding on why the tendency toward secularization was hampered, and the steps that may be taken in order to enable it.
Recent Statistics on Secularization
This understanding of secularization may be evidenced using recent statistics on development and secularization. In theory, secularization should not only rise with economic development, but it should rise at a higher rate where it is accompanied by human development. The utility of the proposed framework becomes evident when we focus on the United States. Previous assessments of secularization worldwide categorized the United States as an outlier, as it possessed both a highly religious population as well as high levels of development. However, when taking into account that US citizens have less access to health and education, and live within a more unequal society than most of their European counterparts, we actually expect to find higher degrees of religiosity. This idea is supported with Norris and Inglehart’s (2011, pp. 106-108) analysis of frequency of prayer and economic inequality in advanced capitalist countries. In addition, the United Nations Development Program (UNDP) has recently introduced a new measure, the Inequality-Adjusted Human Development Index (IHDI), that, as we will show below, shows that the United States is not an outlier, but actually fits our theory.
Using the 2005-2008 wave of The World Values Survey we may analyze the relation between human development and religiosity. Specifically, we may observe the relationship between the Inequality-Adjusted Human Development Index (IHDI) and the percentage of people in each country that consider religion is not important in their lives and the percentage of people who declare themselves as not religious or convinced atheist. In Figure 1 we may observe that the relationship between the percentage of convinced atheists in the population and the IHDI is not linear. Instead, we find a polynomial relation where the number of atheists begins to rise most significantly after the IHDI has surpassed a value of approximately 0.6. The UNDP categorizes countries as representing Very High Human Development (0.8<HDI), High Human Development (0.7<HDI<0.8), Medium Human Development (0.535<HDI<0.7), and Low Human Development (HDI<0.535). In other words, when countries enter a stage of Medium Human Development, the number of atheists begins to rise, and the rate at which they rise increases as they continue on to stages of High or Very High Human Development. The only outliers were South Korea, France, Germany, and Sweden. However, they showed percentages of atheists above what was expected, so they do not undermine our main thesis of increasing secularization. Another important aspect is the case of the United States. As previously mentioned, most studies found the United States as an outlier, with unexplainable high levels of religiosity given its stage of development. In our data, the United States is below the trend line, but it is nowhere near of being an outlier that undermines our thesis. Its levels of religiosity are explained with our theory and data as a result of lower human development and higher inequality.
This particular question in the World Values Survey provided three possible answers where those being surveyed should classify themselves: Religious Person, Not a Religious Person, Convinced Atheist. In theory, it is possible for the ‘Not a Religious Person’ group to be decreasing enough as to nullify the increase in atheists, so it is best to add the last two groups. This combined group of people that responded as not religious or atheists may be called the total of irreligious people. In Figure 2, we see the same trend observed in the case of atheists by themselves. As countries enter levels of Medium Human Development, the percentage of irreligious people begins to climb faster, and increasing even more in higher stages of human development. In this case, a new particular outlier stands out: Thailand. Even though this country has a very religious population of the Buddhist tradition, more than 60% of those surveyed answered they are not religious. This is probably a result of translation issues in phrasing the question, particularities of the branch of Buddhism and how it conceives itself as a religion, or a combination of both. In the case of the United States, once again, although below the trend line, it is not an outlier and does not contradict our theory.
Secularization may also be reflected in religion losing its importance in people’s lives, even though they are not necessarily outspokenly labeling themselves as irreligious. Thus, we also analyze the question in the survey where people state how important religious is in their lives (very, rather, not very, or not at all important). As in the previous exercise, first we will focus on those who answered not at all important, and then on the sum of those who answered not very and not at all important. In Figure 3, we find that the relation between the percent of the population that consider religion is not at all important in their lives and the IHDI follows the same trend as in the previous cases. The only outliers reflect higher secularization than expected, and the United States is not a problematic outlier. Finally, in Figure 4, we do the same exercise but with the sum of those who answered religion was not very and not at all important in their lives, and also find the same pattern.
What’s probably most interesting of this analysis is that, according to our theory and findings, if the world as a whole were to arrive at a level of human development and equality similar to that of Sweden or Norway, we would expect to find that religion stopped being of importance for more than half of the population, and openly irreligious people would be rapidly approaching becoming half of the population. In Marxian terms, our findings support the idea that as countries develop in terms of science and technology, secularization rises; but it increases most when human development and equality counteract the effects of alienation.
Marx (2008, p. 42) stated “It is the immediate task of philosophy, which is in the service of history, to unmask self-estrangement in its unholy forms once the holy form of human self-estrangement has been unmasked. Thus, the criticism of Heaven turns into the criticism of Earth, the criticism of religion into the criticism of law, and the criticism of theology into the criticism of politics.” This idea resonates with the discussion on secularization and development in the Third World. If we operate under the assumption that secularization is desirable because it translates into sexual liberalization, women’s equality, LGBT rights, etc.; then achieving economic and human development in the Third World becomes even more of an imperative. The criticism of rising religious extremism today must turn into the criticism of the vast array of political and economic processes that hinder development in the Third World. In other words, the criticism of religion today is fundamentally linked with the criticism of political and economic imperialism and global inequality. For Marx (2008, p. 136), humanity will never fully strip its veil of mysticism and vanquish its religious reflex, until production takes place through the free association of men and women, “it is consciously regulated by them in a settled plan,” and “the practical relations of every-day life offer to man none but perfectly intelligible and reasonable relations with regard to his fellowmen and to nature.” The disappearance of religion is therefore a very long run process. Nonetheless, Marx’s theory provides insight into how we may undermine the negative effects of religiosity in the short and medium run as well.
Amin, S. (1976). Unequal Development: An Essay on the Social Formations of Peripheral Capitalism. New York: Monthly Review Press.
Engels, F. (2008). Dialectics of Nature. Karl Marx and Friedrich Engels On Religion (pp. 152-193). Mineola: Dover Publications.
Frank, A. G. (1978). Dependent Accumulation and Underdevelopment. New York: Monthly Review Press.
Fromm, E. (1992). Marx’s Concept of Man. New York: Continuum Publications.
Marx, K. (1975). Letter from Marx to Arnold Ruge In Dresden. Karl Marx, Frederick Engels: Collected Works V.1 (pp. 393-395). New York: International Publishers.
Marx, K. (2008). Contribution to the Critique of Hegel’s Philosophy of Right. Karl Marx and Friedrich Engels On Religion (pp. 41-58). Mineola: Dover Publications.
Marx, K. (2008). Capital (Extracts). Karl Marx and Friedrich Engels On Religion (pp. 135-141). Mineola: Dover Publications.
Norris, P., & Inglehart, R. (2011). Sacred and secular: Religion and Politics Worldwide. Cambridge, UK: Cambridge University Press.
World Values Survey Association. (2013). World Values Survey 2005-2008. Retrieved from http://www.wvsevsdb.com/wvs
United Nations Development Program. (2013). 2013 Human Development Report.
Retrieved from http://hdr.undp.org/en/reports/global/hdr2013/
In this pdf, you will find the readings Prologue to Tempest in the Andes, The Indigenous Question in Latin America, The Latin American Socialist Revolution, and The Anti-Imperialist Point of View by José Carlos Mariátegui. They were retrieved from an anthology titled Marxism in Latin America 1909 to the Present edited by Michael Lowy. Click here to download the pdf file
“José Carlos Mariátegui La Chira (14 June 1894 – 16 April 1930) was a Peruvian journalist, political philosopher, and activist. A prolific writer before his early death at age 35, he is considered one of the most influential Latin American socialists of the 20th century. Mariátegui’s most famous work, Seven Interpretive Essays on Peruvian Reality (1928), is still widely read in South America. An avowed, self-taught Marxist, he insisted that a socialist revolution should evolve organically in Latin America on the basis of local conditions and practices, not the result of mechanically applying a European formula.” (Wikipedia)
One of the many ideological barriers that undermine efforts to understand the origins of profits, or to understand the nature of the relationship between the capitalist and the worker, is the bourgeois ideal of commodity production and exchange as the universal and natural form of human economic life. The late American economist Paul Sweezy argued this point early on in his discussion of value theory in his classical text The Theory of Capitalist Development. Quoting Smith, he sums it up as the idea that the propensity to exchange is peculiar to humans, and thus is one of the pillars, along with the division of labor, of human civilization. However, the analytical tools of historical materialism shed light to the fact that this not the case. In Sweezy’s words, commodity production “is not the universal and inevitable from of economic life. It is rather one possible form of economic life… a historically conditioned form which can in no sense claim to be a direct manifestation of human nature.” Therefore, continuing with Sweezy’s argument, we must direct our attention to “the character of the social relations which underlie the commodity form.”
For example, the view of commodity production as our universal and natural economic form, would lead many to simply disregard capitalist profits as a result of exchange, and the overpricing of final products above the sum of the prices of its inputs. Marx’s analysis clearly demonstrates that this, once again, is not the case. One of the clearest examples on this issue can be found in his discussion on the contradictions in the circuit of capital, where he explains that if an individual with £40 value worth in wine, exchanges them for £50 value worth in corn, the total amount of value continues being £90. Therefore, “if equivalents are exchanged, no surplus-value results, and if non-equivalents are exchanged, still no surplus value. Circulation, or the exchange of commodities, begets no value.” Another of Marx’s important points on the matter is summarized by Sweezy, arguing that if every capitalist “were to attempt to reap a profit by raising the price, let us say by 10 per cent, what each gained as a seller he would lose as a buyer, and the only result would be higher prices all around from which no one would benefit.” At this point, it is clear to us that labor-power must be the source from which the capitalist is extracting profits, or more precisely, surplus value.
As Marx explains, capitalists “must be so lucky as to find, within the sphere of circulation, in the market, a commodity, whose, use-value possesses the peculiar property of being a source of value, whose actual consumption, therefore, is itself an embodiment of labor, and, consequently, a creation of value.” In order to find this commodity, Marx mentions two prerequisites. The individual who possesses labor-power must be the “untrammeled owner of his capacity of labor,” and also must not be “in the position to sell commodities in which his labor is incorporated,” he should “be obliged to offer for sale as a commodity that very labor-power, which exists only in his living self.” As Michael Lebowitz explains, “Marx proposed, workers first must be free in a double sense. They must be free to sell their labor-power… and they must be “free” of means of production.”
Once these conditions are satisfied, the capitalist can buy labor-power and use it to produce use-values. The value of these use-values would be equal to the socially necessary abstract labor time required to produce them. However, if the capitalist were to sell these commodities at a value equal to the sum of the value of labor-power and the value of the means of production required to produce them, he would make no profits. Nevertheless, if the laborer were to continue working, after having worked the amount of hours equal to the value of his labor-power, he would be adding value that would result in profits for the capitalist. Sweezy summarizes this process explaining, “In a day’s work the laborer produces more than a day’s means of subsistence. Consequently the working day can be divided into two parts, necessary labor and surplus labor…” where “the product of surplus labor is appropriated by the capitalist in the form of surplus value.”
This appropriation, for Marx, meant that the working class is being exploited. This leads us to the question, why would the working class voluntarily participate in a process that results in their exploitation? Is it merely an ideological apparatus that perpetuates a false consciousness, allowing the capitalist to exploit the worker with no need for coercion? Surely ideology has a role, but it is in the particular stage of the development of the forces and relations of production that we find the underlying process that explains this phenomenon. As mentioned above, it is with the tools of historical materialism that we can comprehend how the capitalist can extract surplus value from workers in what appears to be a voluntary agreement. Specifically, it is related to the “double freeing” of the worker.
In the transition from feudalism to capitalism, the two conditions of the free laborer were ensured. First, the decay of the feudal system meant the disintegration of the bonds between the serfs and the lords; setting the conditions for a mass of people that are “untrammeled owners of their capacity of labor.” Meanwhile, the enclosure movement ensured the second condition. As Ernest Mandel summarizes, “The economic changes which, between the sixteenth and eighteenth centuries, created a mass of producers separated from their means of production in the towns, were thus accompanied by changes which in practice deprived part of the peasantry of land as a means of producing their means of life. In this way the modern proletariat appeared… In other words, the separation of the producers from their means of production creates a class of proletarians who cannot live otherwise than by hiring out their strength, that is, by selling their labor-power, to the owners of capital, which enables the latter to secure for themselves the surplus-value produced by these producers.”
This leads to what I consider a fundamental question, is the labor process truly free of coercion toward the worker? Surely, legal processes such as indentured and bonded labor or peonage, which were common practice in late feudalism and early capitalism across different geographical areas, are no longer in place to ensure coercive rights to capitalists. However, the absence of official, state condoned, coercive mechanisms, does not imply there is a total absence of coercion. As Lebowitz argues, the buying and selling of labor-power “looks like a free transaction;” however, the workers are being “compelled to sell their power to produce in order to get the things they need… They can sell it to whomever they choose, but they cannot choose whether or not to sell their power to perform labor (if they are to survive).” I would argue that in addition, most areas in the capitalist world economy in reality offer very limited choices in terms of to whom workers can sell their labor-power, but the main point is this: workers must sell their labor-power or starve to death. This is the fundamental reality of the modern proletariat, and this can hardly be classified as a free and voluntary choice.
Modern capitalism obviously generates exceptions or alterations to this fundamental reality. Most advanced capitalist nations possess welfare systems or safety nets that would prevent the worker from actually starving to death. However, this does not change the main point. In this particular case, workers must sell their labor-power or instead live practically in poverty, in conditions that profoundly hamper the development of the individual’s potential or capabilities. Once again, it is hardly a choice free of coercive elements. Would the average individual willingly desire to live in such conditions? Others would surely argue that the modern proletariat actually has choices. He can choose to become self-employed or to become an employer instead of selling his labor-power. However, these practices are the exception, not the rule. These exceptions no doubt help promote the idea that capitalism is a system of voluntary and free choices. Nonetheless, the fact is that a variety of political, cultural, and economic mechanisms block most of the proletariat from following these alternate paths. As Marx says, “Men make their own history, but they do not make it as they please; they do not make it under self-selected circumstances, but under circumstances existing already, given and transmitted from the past.” In practice, the mass of dispossessed workers, or free workers from the bourgeois perspective, are in fact forced to sell their labor-power by the processes we have so far discussed.
In addition, once these social relations of production are set, ideological elements develop that secure their continuous operation. This particular process exemplifies the relevance of value theory along with historical materialism. The pertinence of these perspectives, among other reasons, stems from the fact that they are profoundly useful analytical tools to debunk the myths that surround the origin of capitalist profits or the overall workings of the capitalist economy.
Sweezy’s closing remarks on the transformation problem coincide with this point: “Under capitalist conditions, a part of this social output is appropriated by that group and community which owns the means of production. This is not an ethical judgment, but a method of describing the really basic economic relation between social groups. It finds its most clear theoretical formulation in the theory of surplus value. As long as we retain value calculation, there can be no obscuring of the origin and nature of profits as a deduction from the product of total social labor… In short, value calculation makes it possible to look beneath the surface phenomena of money and commodities to the underlying relations between people and classes.” For this reason, value theory and historical materialism are not only useful analytical or theoretical tools; they are fundamental and key tools for activists seeking to organize and recruit workers for the struggle toward a socialist society.
Lebowitz, M. A. (2006). Build it now: Socialism for the Twenty-first century. New York: Monthly Review Press.
Mandel, E. (1968). Marxist Economic Theory Volume One. London: Merlin Press.
Marx, K. (1967). Capital, Volume I. New York: International Publishers.
Marx, K., Engels, F., & Tucker, R. C. (1978). The Eighteenth Brumaire of Louis Bonaparte. The Marx-Engels Reader (pp. 594-617). New York: Norton. (Original work published 1972)
Sweezy, P. M. (1942). The Theory of Capitalist Development: Principles of Marxian Political Economy. New York: Oxford University Press.
The Second International’s Marxism, proletarian-and-European-centered, shared with the dominant ideology of that period a linear view of history—a view according to which all societies had first to pass through a stage of capitalist development (a stage whose seeds were being planted by colonialism which, by that very fact, was “historically positive”) before being able to aspire to socialism. The idea that the “development” of some (the dominating centers) and the “underdevelopment” of others (the dominated peripheries) were as inseparable as the two faces of a single coin, both being immanent outcomes of capitalism’s worldwide expansion, was completely alien to it.
But the polarization inherent to capitalist globalization—a major fact because of its worldwide social and political importance—challenges whatever vision we may have of how to surpass capitalism. This polarization is at the origin of the possibility for large portions of the working classes and above all of the middle classes of the dominant countries (whose development is itself favored by the position of the centers in the world system) to go over to social-colonialism. At the same time it transforms the peripheries into “storm zones” (according to the Chinese expression) in natural and permanent rebellion against the world capitalist order. Certainly, rebellion is not synonymous to revolution—only to the possibility of the latter. Meanwhile, reasons to reject the capitalist model in the center of the system are not lacking either, as 1968, among other things, has shown. To be sure, the formulation of the challenge advanced at a certain time by the Chinese Communist Party—“the countryside encircles the cities”— is by that very fact too extreme to be useful. A global strategy for transition beyond capitalism toward global socialism has to define the interrelationship between struggles in the centers and the peripheries of the system
At first, Lenin distanced himself somewhat from the dominant theory of the Second International and successfully led the revolution in the “weak link” (Russia), but always believing that this revolution would be followed by a wave of socialist revolutions in Europe. This hope was disappointed; Lenin then moved toward a view that gave more importance to the transformation of Eastern rebellions into revolutions. But it was up to the Chinese Communist Party and Mao to systematize that new perspective.
The Russian Revolution had been led by a Party well rooted in the working class and the radical intelligentsia. Its alliance with the peasantry in uniform (first represented by the Socialist Revolutionary Party) ensued naturally. The consequent radical agrarian reform finally fulfilled the old dream of the Russian peasants: to become landowners. But this historic compromise carried within itself the seeds of its own limits: the “market” was, by its own nature, fated, as always, to produce a growing differentiation within the peasantry (the well-known phenomenon of “kulakization”).
The Chinese Revolution, from its origin (or at least from the 1930′s), unfolded from other bases guaranteeing a solid alliance with the poor and middle peasantry. Meanwhile its national dimension—the war of resistance against Japanese aggression—likewise allowed the front led by the Communists to recruit broadly among the bourgeois classes disappointed by the weaknesses and betrayals of the Kuomintang. The Chinese revolution thus produced a new situation differing from that of post-revolutionary Russia. The radical peasant revolution suppressed the very idea of private property in farmland, and replaced it with a guarantee to all peasants of equal access to farmland. To this very day that decisive advantage, shared by no other country beside Vietnam, constitutes the major obstacle to a devastating expansion of agrarian capitalism. The current discussions in China largely center on this question. I refer the reader to the chapter on China in my book Pour un Monde Multipolaire (Paris, 2005) and my article “Théorie et pratique du projet chinois de socialisme de marché” (Alternatives Sud, vol VIII, N· 1, 2001). But in other respects the going-over of many bourgeois nationalists to the Communist Party would necessarily exert an ideological influence favorable to the support of the deviations of those who Mao termed partisans of the capitalist path (“capitalist-roaders”).
The post-revolutionary regime in China does not merely have to its credit many more-than-significant political, cultural, material and economic accomplishments (industrialization of the country, radicalization of its modern political culture, etc.). Maoist China solved the “peasant problem” that was at the heart of the tragic decline of the Central Empire over two decisive centuries (1750-1950).
I refer here to my book L’avenir du maoïsme (1981), p. 57. What is more, Maoist China reached these results while avoiding the most tragic deviations of the Soviet Union: collectivization was not imposed by murderous violence as was the case with Stalinism, oppositions within the Party did not give rise to the establishment of a Terror (Deng was put aside, he returned…). The aim of an unparalleled relative equality in income distribution both between the peasants and the workers and within each of those classes and between both and the ruling strata was pursued—of course with highs and lows—tenaciously, and was formalized by choices of development strategy contrasting to those of the U.S.S.R. (these choices were formulated in the “ten great relationships” at the start of the 1960′s). It is these successes that account for the later developmental successes of post-Maoist China since 1980. The contrast with India, precisely because India had no revolution, thus has the greatest significance not only in accounting for their different trajectories during the decades from 1950 to 1980 but still for those characterizing diverse probable (and/or possible) perspectives for the future. These successes are the explanation for why post-Maoist China, committing its development thenceforward to its “opening” within the new capitalist globalization, was able to avoid destructive shocks similar to those that followed the collapse if the U.S.S.R.
Just the same, Maoism’s successes did not settle “definitively” (in an “irreversible” fashion) whether China’s long-term perspectives would work out in a way favorable to socialism. First of all, because the development strategy of the 1950-1980 period had exhausted its potential so that, among other things, an opening (even though a controlled one) was indispensable (cf.L’avenir du maoïsme, pp 59-60), an opening which involved, as what ensued showed, the risk of reinforcing tendencies evolving toward capitalism. But also because China’s Maoist system combined contradictory tendencies—toward both the strengthening and weakening of socialist choices.
Aware of this contradiction, Mao tried to bend the stick in favor of socialism by means of a “Cultural Revolution” (from 1966 to 1974). “Bombard the Headquarters” (the Party’s Central Committee), seat of the bourgeois aspirations of the political class holding the dominant positions. Mao thought that, in order to carry out his course correction, he could base himself on the “Youth” (which, in part, broadly inspired the 1968 events in Europe—consider Godard’s movie La Chinoise). The course of events showed the error of this judgment. Once the Cultural Revolution had been left behind, the partisans of the capitalist path were encouraged to go over to the offensive.
The combat between the long and difficult socialist path and the capitalist choice now in operation is certainly not “definitively outlived.” As elsewhere in the world, the conflict between the pursuit of capitalist unfolding and the socialist perspective constitutes the true civilizational conflict of our epoch. But in this conflict the Chinese people hold several major assets inherited from the Revolution and from Maoism. These assets are at work in various domains of social life; they show up forcefully, for instance, in the peasantry’s defense of state property in farmland and of the guarantee that all should have access to farmland.
Maoism has contributed in decisive fashion to ascertaining exactly the stakes in and the challenge represented by globalized capitalist/imperialist expansion. It has allowed us to place in the center of our analysis of this challenge the center/peripheries contrast integral to the expansion, imperialist and polarizing by its very nature, of “really existing” capitalism; and from this to learn all the lessons that this implies for socialist combat both in the dominating centers and the dominated peripheries. These conclusions have been summed up in a fine “Chinese-style” formula: “States want independence, Nations want liberation, and Peoples want revolution.” States—that is, the ruling classes (of all countries in the world whenever they are something other than lackeys, transmission belts for external forces) try to expand their room for manoeuvre in the (capitalist) world system and to lift themselves from the position of passive objects (fated to submit to unilateral adjustment whenever demanded by a dominant imperialism) to that of active subjects participating in the formation of the world order. Nations—that is, historical blocs of potentially progressive classes—want liberation, meaning “development” and “modernization.” Peoples—that is, the dominated and exploited popular classes—aspire to socialism. This formula allows an understanding of the real world in all its complexity, and consequently, the formulation of effective strategies for action. Its place is in a perspective of a long—very long—global transition from capitalism to socialism. As such it breaks with the “short transition” conception of the Third International.
Essays in this series…
- Capitalism, the Absurd System: A View from the United States (June 1, 2010)
by John Bellamy Foster and Robert W. McChesney
- South Africa’s Bubble Meets Boiling Urban Social Protest (June 1, 2010)
by Patrick Bond
- Political Reawakening in Zimbabwe (April 1, 1999)
by Patrick Bond
- April 1999, Volume 50, Number 11 (April 1, 1999)
by The Editors
- The Financial Power Elite (May 1, 2010)
by John Bellamy Foster and Hannah Holleman
- July-August 2010, Volume 62, Number 3 (July 1, 2010)
by The Editors
- Foreword to the Summer Issue (July 1, 2010)
by John Bellamy Foster
- Awakening in Oaxaca: Stirrings of the People’s Giant (June 1, 2010)
by Robert Joe Stout
- Time to Pay the Piper (June 1, 2010)
by Rebecca Clausen
- Sartre: Conversations with a “Bourgeois Revolutionary” (June 1, 2010)
by Joseph L. Walsh
|From Two Essays on Imperialism, New York 1966.
Transcribed by Joseph Auciello.
|Appeared originally in: Mandel, E., Revolutionary Marxism and social reality in the 20th century: collected essays, ed. and with an introd. by Steve Bloom, Atlantic Highlands, NJ: Humanities Press, 1994, pp. 179-206|