Capitalist mode of production
Encyclopedia
In Marx's critique of political economy, the capitalist mode of production is the production system of capitalist
societies, which began in Europe in the 16th century, grew rapidly in Western Europe from the end of the 18th century, and later extended to most of the world. It is characterised by: the predominance of private ownership
of the means of production
and exploitation of wage labour
; distribution and exchange in a mainly market economy
(commodity production); and capital accumulation
(production for profit).
A "mode of production
" (in German: Produktionsweise) means simply "the distinctive way of producing", which could be defined in terms of how it is socially organized and what kinds of technologies and tools are used. Under the capitalist mode of production
The capitalist mode of production
may exist within societies with differing state systems (e.g. liberal democracy
, Social democracy
, fascism
, Communist state
, Czarism), and different social structures such as tribalism
, the caste system, peasant society, and urban industrial society
. Although capitalism has existed in the form of merchant activity, banking, renting land, and small-scale manufactures in previous stages of history, it was usually a relatively minor activity and secondary to the dominant forms of social organization and production; the prevailing property system kept commerce within clear limits.
/production. It is centered on the step M, "making money" and the exchange of value that occurs at that point. For this reason, Capitalism is "production for exchange" driven by the desire for personal accumulation and response to market needs, as opposed to, "production for use
," which is driven by individual desires.
“Capitalism” as this money-making activity has existed in the shape of merchants and money-lenders who acted as intermediaries between consumers and producers engaging in simple commodity production
(hence the reference to “merchant capitalism
”) since the beginnings of civilization. What is specific about the “capitalist mode of production” is that most of the inputs and outputs of production
are supplied through the market (i.e. they are commodities
) and essentially all production is in this mode. For example, in flourishing Feudalism, most or all of the factors of production including labor are owned by the feudal ruling class outright and the products may also be consumed without a market of any kind, it is production for use within the feudal social unit and for limited trade.
This has the important consequence that the whole organization of the production process is reshaped and reorganized to conform with economic rationality as bounded
by capitalism, which is expressed in price relationships between inputs and outputs (wages, non-labor factor costs, sales, profits) rather than the larger rational context faced by society overall. That is, the whole process is organized and reshaped in order to conform to “commercial logic”. Another way of saying this is that capital accumulation
defines economic rationality in capitalist production. In the flourishing period of capitalism these are not operating at cross purposes and thus Capitalism acts as a progressive force (e.g. against Feudalism). In the final stages
, Capitalism, as a mode of production, achieves complete domination on a planetary basis and has nothing to overcome but itself, the final (for it, Capitalism, viewed as a Hegelian process, not for historical development per se) negating of the negation posited by Orthodox Marxism
.
In this context, Marx refers to a transition from the “formal subsumption” of production under the power of capital to the “real subsumption” of production under the power of capital. In what he calls the “specifically capitalist mode of production”, both the technology
worked with and the social organization
of labour have been completely refashioned and reshaped in a commercial
(profit
and market
-oriented) way; the “old ways of producing” (for example, crafts and cottage industries) had been completely displaced by the then new industrialism.
existed incipiently on a small scale for centuries, in the form of merchant, renting and lending activities, and occasionally also as small-scale industry with some wage labour (Marx was also well aware that wage labour existed for centuries on a modest scale before the advent of capitalist industry). Simple commodity
exchange, and consequently simple commodity production
, which form the initial basis for the growth of capital from trade, have a very long history. The "capitalistic era" according to Marx dates from the 16th century, i.e. it began with merchant capitalism
and relatively small urban workshops.
For the capitalist mode of production to emerge as a distinctive mode of production dominating the whole production process of society, many different social, economic, cultural, technical and legal-political conditions had to come together.
For most of human history, these did not come together. Capital existed, commercial trade existed, but it did not lead to industrialisation and large-scale capitalist industry. That required a whole series of new conditions, namely specific technologies of mass production, the ability to independently and privately own and trade in means of production, a class of workers compelled to sell their labor power
for a living, a legal framework promoting commerce
, a physical infrastructure making the circulation of goods on a large scale possible, security for private accumulation, and so on. In many Third World
countries, many of these conditions do not exist even today, even although there is plenty capital and labour available; the obstacles for the development of capitalist markets are less a technical matter and more a social, cultural and political problem.
A society
, region or nation
is “capitalist” if the predominant source of incomes and products being distributed is capitalist activity; even so, this does not yet mean necessarily that the capitalist mode of production
is dominant in that society.
In a sense, Das Kapital
as a whole provides his “definition”. Nevertheless, it is possible to summarise the essential defining characteristics of the capitalist mode of production as follows:
In examining particular manifestations of the capitalist mode of production
in particular regions and epochs, it is of course possible to find exceptions to these main defining criteria. But the exceptions prove the rule, in the sense that over time, the exceptional circumstances tend to disappear.
Supporters of theories of state capitalism
such as the International Socialists
reject the definition of the capitalist mode of production given above. In their view, claimed to be more revolutionary (in that true liberation from capitalism must be the self-emancipation of the working class - "socialism from below"), what really defines the capitalist mode of production is:
If true, then ownership
relations generally and private ownership in particular are irrelevant to the definition of capitalism. The existence of commercial
relations and commodity production are also irrelevant.
Many of the state capitalist theories, (which actually originated in Germany, where they were already criticised by Frederick Engels), define "capital" only as a social relation
of power
and exploitation
.
This idea is based on some passages from Marx, where Marx emphasized that capital cannot exist except within a power
-relationship between social classes which governs the extraction of surplus-labour. It is this power-relationship that is most important for the proponents of theories of state capitalism; everything else is secondary.
The underlying argument is that:
This does not mean, according to the Marxist critics, that state capitalism
cannot exist; of course it can, if the state plays a very big role in an otherwise capitalist society, or monopolizes a strategic resource of major economic importance. Examples might be Myanmar, Suriname, Egypt or Libya. But it does mean that the concept of the capitalist mode of production
shouldn't be used indiscriminately, as, it is claimed, "state-cap" theorists do.
Thus, the political debate has been mainly from a Western point of view, and based on secondary sources, rather than being based directly on the experiences of people living in "actually existing socialist countries." And that debate has typically counterposed a socialist ideal to a badly understood reality.
In turn, this has led to the accusation that Marxists cannot satisfactorily specify what capitalism and socialism really are, nor how to get from one to the other - quite apart from failing to explain satisfactorily why socialist revolutions failed to produce the desirable kind of socialism. Behind this problem, it is argued, are:
None of these stratagems, it is argued, are either warranted by the facts or scientifically sound, and the result is that many socialists have abandoned the rigid constraints of Marxist orthodoxy, in order to analyse capitalist and non-capitalist societies in a new way.
Capitalism
Capitalism is an economic system that became dominant in the Western world following the demise of feudalism. There is no consensus on the precise definition nor on how the term should be used as a historical category...
societies, which began in Europe in the 16th century, grew rapidly in Western Europe from the end of the 18th century, and later extended to most of the world. It is characterised by: the predominance of private ownership
Private property
Private property is the right of persons and firms to obtain, own, control, employ, dispose of, and bequeath land, capital, and other forms of property. Private property is distinguishable from public property, which refers to assets owned by a state, community or government rather than by...
of the means of production
Means of production
Means of production refers to physical, non-human inputs used in production—the factories, machines, and tools used to produce wealth — along with both infrastructural capital and natural capital. This includes the classical factors of production minus financial capital and minus human capital...
and exploitation of wage labour
Wage labour
Wage labour is the socioeconomic relationship between a worker and an employer, where the worker sells their labour under a formal or informal employment contract. These transactions usually occur in a labour market where wages are market determined...
; distribution and exchange in a mainly market economy
Market economy
A market economy is an economy in which the prices of goods and services are determined in a free price system. This is often contrasted with a state-directed or planned economy. Market economies can range from hypothetically pure laissez-faire variants to an assortment of real-world mixed...
(commodity production); and capital accumulation
Capital accumulation
The accumulation of capital refers to the gathering or amassing of objects of value; the increase in wealth through concentration; or the creation of wealth. Capital is money or a financial asset invested for the purpose of making more money...
(production for profit).
A "mode of production
Mode of production
In the writings of Karl Marx and the Marxist theory of historical materialism, a mode of production is a specific combination of:...
" (in German: Produktionsweise) means simply "the distinctive way of producing", which could be defined in terms of how it is socially organized and what kinds of technologies and tools are used. Under the capitalist mode of production
- both the inputs and outputs of production are mainly privately owned, priced goods and services purchased in the market.
- production is carried out for exchange and circulation in the market, aiming to obtain a net profit income from it.
- the owners of the means of productionMeans of productionMeans of production refers to physical, non-human inputs used in production—the factories, machines, and tools used to produce wealth — along with both infrastructural capital and natural capital. This includes the classical factors of production minus financial capital and minus human capital...
(capitalists) are the dominant class (bourgeoisieBourgeoisieIn sociology and political science, bourgeoisie describes a range of groups across history. In the Western world, between the late 18th century and the present day, the bourgeoisie is a social class "characterized by their ownership of capital and their related culture." A member of the...
) who derive their income from the surplus product produced by the workers and appropriated freely by the capitalists. - A defining feature of capitalism is the dependency on wage-labor for a large segment of the population; specifically, the working class (proletariatProletariatThe proletariat is a term used to identify a lower social class, usually the working class; a member of such a class is proletarian...
) do not own capital and must live by selling their labour power in exchange for a wage.
The capitalist mode of production
Mode of production
In the writings of Karl Marx and the Marxist theory of historical materialism, a mode of production is a specific combination of:...
may exist within societies with differing state systems (e.g. liberal democracy
Liberal democracy
Liberal democracy, also known as constitutional democracy, is a common form of representative democracy. According to the principles of liberal democracy, elections should be free and fair, and the political process should be competitive...
, Social democracy
Social democracy
Social democracy is a political ideology of the center-left on the political spectrum. Social democracy is officially a form of evolutionary reformist socialism. It supports class collaboration as the course to achieve socialism...
, fascism
Fascism
Fascism is a radical authoritarian nationalist political ideology. Fascists seek to rejuvenate their nation based on commitment to the national community as an organic entity, in which individuals are bound together in national identity by suprapersonal connections of ancestry, culture, and blood...
, Communist state
Communist state
A communist state is a state with a form of government characterized by single-party rule or dominant-party rule of a communist party and a professed allegiance to a Leninist or Marxist-Leninist communist ideology as the guiding principle of the state...
, Czarism), and different social structures such as tribalism
Tribalism
The social structure of a tribe can vary greatly from case to case, but, due to the small size of tribes, it is always a relatively simple role structure, with few significant social distinctions between individuals....
, the caste system, peasant society, and urban industrial society
Industrial society
In sociology, industrial society refers to a society driven by the use of technology to enable mass production, supporting a large population with a high capacity for division of labour. Such a structure developed in the west in the period of time following the Industrial Revolution, and replaced...
. Although capitalism has existed in the form of merchant activity, banking, renting land, and small-scale manufactures in previous stages of history, it was usually a relatively minor activity and secondary to the dominant forms of social organization and production; the prevailing property system kept commerce within clear limits.
Differentia Specifica
Capitalist society is epitomized by the so-called circuit of commodity production, C-M-C' and by renting money for that purpose where the aggregate of market actors determine the prices of C, the input labor and commodities, M, the market price, and C' the cost of factors embodied in M, the produced market product or service, in the next cycle of accumulationCapital accumulation
The accumulation of capital refers to the gathering or amassing of objects of value; the increase in wealth through concentration; or the creation of wealth. Capital is money or a financial asset invested for the purpose of making more money...
/production. It is centered on the step M, "making money" and the exchange of value that occurs at that point. For this reason, Capitalism is "production for exchange" driven by the desire for personal accumulation and response to market needs, as opposed to, "production for use
Production for use
Production for use is a defining criterion of a socialist economy and distinguishes socialism from capitalism...
," which is driven by individual desires.
“Capitalism” as this money-making activity has existed in the shape of merchants and money-lenders who acted as intermediaries between consumers and producers engaging in simple commodity production
Simple commodity production
Simple commodity production is a term coined by Frederick Engels to describe productive activities under the conditions of what Marx had called the "simple exchange" of commodities, where independent producers trade their own products...
(hence the reference to “merchant capitalism
Merchant capitalism
Merchant capitalism is a term used by economic historians to refer to the earliest phase in the development of capitalism as an economic and social system. Early forms of merchant capitalism were developed in the medieval Islamic world from the 9th century, and in medieval Europe from the 12th...
”) since the beginnings of civilization. What is specific about the “capitalist mode of production” is that most of the inputs and outputs of production
Production, costs, and pricing
The following outline is provided as an overview of and topical guide to industrial organization:Industrial organization – describes the behavior of firms in the marketplace with regard to production, pricing, employment and other decisions...
are supplied through the market (i.e. they are commodities
Commodity (Marxism)
In classical political economy and especially Karl Marx's critique of political economy, a commodity is any good or service produced by human labour and offered as a product for general sale on the market. Some other priced goods are also treated as commodities, e.g...
) and essentially all production is in this mode. For example, in flourishing Feudalism, most or all of the factors of production including labor are owned by the feudal ruling class outright and the products may also be consumed without a market of any kind, it is production for use within the feudal social unit and for limited trade.
This has the important consequence that the whole organization of the production process is reshaped and reorganized to conform with economic rationality as bounded
Bounded rationality
Bounded rationality is the idea that in decision making, rationality of individuals is limited by the information they have, the cognitive limitations of their minds, and the finite amount of time they have to make a decision...
by capitalism, which is expressed in price relationships between inputs and outputs (wages, non-labor factor costs, sales, profits) rather than the larger rational context faced by society overall. That is, the whole process is organized and reshaped in order to conform to “commercial logic”. Another way of saying this is that capital accumulation
Capital accumulation
The accumulation of capital refers to the gathering or amassing of objects of value; the increase in wealth through concentration; or the creation of wealth. Capital is money or a financial asset invested for the purpose of making more money...
defines economic rationality in capitalist production. In the flourishing period of capitalism these are not operating at cross purposes and thus Capitalism acts as a progressive force (e.g. against Feudalism). In the final stages
Late capitalism
"Late capitalism" is a term used by neo-Marxists to refer to capitalism from about 1945 onwards, with the implication that it is a historically limited stage rather than an eternal feature of all future human society. Postwar German sociologists needed a term to describe contemporary society...
, Capitalism, as a mode of production, achieves complete domination on a planetary basis and has nothing to overcome but itself, the final (for it, Capitalism, viewed as a Hegelian process, not for historical development per se) negating of the negation posited by Orthodox Marxism
Orthodox Marxism
Orthodox Marxism is the term used to describe the version of Marxism which emerged after the death of Karl Marx and acted as the official philosophy of the Second International up to the First World War and of the Third International thereafter...
.
In this context, Marx refers to a transition from the “formal subsumption” of production under the power of capital to the “real subsumption” of production under the power of capital. In what he calls the “specifically capitalist mode of production”, both the technology
Technology
Technology is the making, usage, and knowledge of tools, machines, techniques, crafts, systems or methods of organization in order to solve a problem or perform a specific function. It can also refer to the collection of such tools, machinery, and procedures. The word technology comes ;...
worked with and the social organization
Organization
An organization is a social group which distributes tasks for a collective goal. The word itself is derived from the Greek word organon, itself derived from the better-known word ergon - as we know `organ` - and it means a compartment for a particular job.There are a variety of legal types of...
of labour have been completely refashioned and reshaped in a commercial
Commerce
While business refers to the value-creating activities of an organization for profit, commerce means the whole system of an economy that constitutes an environment for business. The system includes legal, economic, political, social, cultural, and technological systems that are in operation in any...
(profit
Profit (economics)
In economics, the term profit has two related but distinct meanings. Normal profit represents the total opportunity costs of a venture to an entrepreneur or investor, whilst economic profit In economics, the term profit has two related but distinct meanings. Normal profit represents the total...
and market
Market
A market is one of many varieties of systems, institutions, procedures, social relations and infrastructures whereby parties engage in exchange. While parties may exchange goods and services by barter, most markets rely on sellers offering their goods or services in exchange for money from buyers...
-oriented) way; the “old ways of producing” (for example, crafts and cottage industries) had been completely displaced by the then new industrialism.
Summary of Basic Distinctions
In general, capitalism as an economic system and mode of production can be summarized by the following:- Capital accumulationCapital accumulationThe accumulation of capital refers to the gathering or amassing of objects of value; the increase in wealth through concentration; or the creation of wealth. Capital is money or a financial asset invested for the purpose of making more money...
: Production for profit and accumulation as the implicit purpose of all or most of production, constriction or elimination of production formerly carried out on a common social or private household basis. - Commodity productionCommodity productionCommodity production is the production of wares for sale. It is a type of production in which products are produced not for direct consumption by the producers, as in subsistence production, but are surplus to their own requirements and are produced instead specifically with the intention of sale...
: Production for exchange on a market; to maximize exchange-value instead of use-value. - Private ownership of the means of production: Ownership of the means of production by a class of capital owners, either individually, collectively (see: CorporationCorporationA corporation is created under the laws of a state as a separate legal entity that has privileges and liabilities that are distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter...
) or through a state that serves the interests of the capitalist class (see: State capitalismState capitalismThe term State capitalism has various meanings, but is usually described as commercial economic activity undertaken by the state with management of the productive forces in a capitalist manner, even if the state is nominally socialist. State capitalism is usually characterized by the dominance or...
). - Primacy of wage labor: Near universality of wage labor, whether so-called or not, with coerced workWage slaveryWage slavery refers to a situation where a person's livelihood depends on wages, especially when the dependence is total and immediate. It is a negatively connoted term used to draw an analogy between slavery and wage labor, and to highlight similarities between owning and employing a person...
for the masses in excess of what they would need to sustain themselves and a complete saturation of bourgeois values at all levelsBase and superstructureIn Marxist theory, human society consists of two parts: the base and superstructure; the base comprehends the forces and relations of production — employer-employee work conditions, the technical division of labour, and property relations — into which people enter to produce the necessities and...
of societySocietyA society, or a human society, is a group of people related to each other through persistent relations, or a large social grouping sharing the same geographical or virtual territory, subject to the same political authority and dominant cultural expectations...
from the base reshaping and reorganization described above .
Origins
Marx argued that capitalCapital (economics)
In economics, capital, capital goods, or real capital refers to already-produced durable goods used in production of goods or services. The capital goods are not significantly consumed, though they may depreciate in the production process...
existed incipiently on a small scale for centuries, in the form of merchant, renting and lending activities, and occasionally also as small-scale industry with some wage labour (Marx was also well aware that wage labour existed for centuries on a modest scale before the advent of capitalist industry). Simple commodity
Commodity (Marxism)
In classical political economy and especially Karl Marx's critique of political economy, a commodity is any good or service produced by human labour and offered as a product for general sale on the market. Some other priced goods are also treated as commodities, e.g...
exchange, and consequently simple commodity production
Simple commodity production
Simple commodity production is a term coined by Frederick Engels to describe productive activities under the conditions of what Marx had called the "simple exchange" of commodities, where independent producers trade their own products...
, which form the initial basis for the growth of capital from trade, have a very long history. The "capitalistic era" according to Marx dates from the 16th century, i.e. it began with merchant capitalism
Merchant capitalism
Merchant capitalism is a term used by economic historians to refer to the earliest phase in the development of capitalism as an economic and social system. Early forms of merchant capitalism were developed in the medieval Islamic world from the 9th century, and in medieval Europe from the 12th...
and relatively small urban workshops.
For the capitalist mode of production to emerge as a distinctive mode of production dominating the whole production process of society, many different social, economic, cultural, technical and legal-political conditions had to come together.
For most of human history, these did not come together. Capital existed, commercial trade existed, but it did not lead to industrialisation and large-scale capitalist industry. That required a whole series of new conditions, namely specific technologies of mass production, the ability to independently and privately own and trade in means of production, a class of workers compelled to sell their labor power
Labor power
Labour power is a crucial concept used by Karl Marx in his critique of capitalist political economy. He regarded labour power as the most important of the productive forces of human beings. Labour power can be simply defined as work-capacity, the ability to do work...
for a living, a legal framework promoting commerce
Commerce
While business refers to the value-creating activities of an organization for profit, commerce means the whole system of an economy that constitutes an environment for business. The system includes legal, economic, political, social, cultural, and technological systems that are in operation in any...
, a physical infrastructure making the circulation of goods on a large scale possible, security for private accumulation, and so on. In many Third World
Third World
The term Third World arose during the Cold War to define countries that remained non-aligned with either capitalism and NATO , or communism and the Soviet Union...
countries, many of these conditions do not exist even today, even although there is plenty capital and labour available; the obstacles for the development of capitalist markets are less a technical matter and more a social, cultural and political problem.
A society
Society
A society, or a human society, is a group of people related to each other through persistent relations, or a large social grouping sharing the same geographical or virtual territory, subject to the same political authority and dominant cultural expectations...
, region or nation
Nation
A nation may refer to a community of people who share a common language, culture, ethnicity, descent, and/or history. In this definition, a nation has no physical borders. However, it can also refer to people who share a common territory and government irrespective of their ethnic make-up...
is “capitalist” if the predominant source of incomes and products being distributed is capitalist activity; even so, this does not yet mean necessarily that the capitalist mode of production
Mode of production
In the writings of Karl Marx and the Marxist theory of historical materialism, a mode of production is a specific combination of:...
is dominant in that society.
Defining structural criteria
Marx never provided a complete definition of the capitalist mode of production as a short summary, although in his manuscripts he sometimes attempted one.In a sense, Das Kapital
Das Kapital
Das Kapital, Kritik der politischen Ökonomie , by Karl Marx, is a critical analysis of capitalism as political economy, meant to reveal the economic laws of the capitalist mode of production, and how it was the precursor of the socialist mode of production.- Themes :In Capital: Critique of...
as a whole provides his “definition”. Nevertheless, it is possible to summarise the essential defining characteristics of the capitalist mode of production as follows:
- The means of production (or capital goods) and the means of consumption (or consumer goods) are mainly produced for market sale; output is produced with the intention of sale in an open market; only through sale of output, can the owner of capital claim part of the surplus-product of human labour, and realize profits. Equally, the inputs of production are supplied through the market, as commodities. The prices of both inputs and outputs are mainly governed by the market laws of supply and demand (and ultimately by the law of valueLaw of value-General:The law of value is a central concept in Karl Marx's critique of political economy, first expounded in his polemic The Poverty of Philosophy against Pierre-Joseph Proudhon, with reference to David Ricardo's economics...
). In short, a capitalist must use money to fuel both the means of production and labor in order to make commodities. These commodities are then sold to the market for a profit. The profit once again becomes part of a larger amount of capital which the capitalist reinvests to make more commodities and ultimately more and more capital.
- Private ownership of the means of production ("private enterprise") as effective private control and/or legally enforced ownership, with the consequence that investment and management decisions are made by private owners of capital who act autonomously from each other and, because of business secrecy and the constraints of competition, do not co-ordinate their activities according to collective, conscious planning. Enterprises are able to set their own output prices within the framework of the forces of supply and demand manifested through the market, and the development of production technology is guided by profitability criteria.
- The corollary of that is wage labourWage labourWage labour is the socioeconomic relationship between a worker and an employer, where the worker sells their labour under a formal or informal employment contract. These transactions usually occur in a labour market where wages are market determined...
(“employment”) by the direct producers, who are compelled to sell their labour powerLabor powerLabour power is a crucial concept used by Karl Marx in his critique of capitalist political economy. He regarded labour power as the most important of the productive forces of human beings. Labour power can be simply defined as work-capacity, the ability to do work...
because they lack access to alternative means of subsistence (other than being self-employed or employers of labour, if only they could acquire sufficient funds) and can obtain means of consumption only through market transactions. These wage earners are mostly "free" in a double sense: they are “freed” from ownership of productive assets, and they are free to choose their employer.
- Being carried out for market on the basis of a proliferation of fragmented decision-making processes by owners and managers of private capital, social production is mediated by competition for asset-ownership, political or economic influence, costs, sales, prices, and profits. CompetitionCompetitionCompetition is a contest between individuals, groups, animals, etc. for territory, a niche, or a location of resources. It arises whenever two and only two strive for a goal which cannot be shared. Competition occurs naturally between living organisms which co-exist in the same environment. For...
occurs between owners of capital for profits, assets and markets; between owners of capital and workers over wages and conditions; and between workers themselves over employment opportunities and civil rights.
- The overall aim of capitalist production, under competitive pressure, is (a) to maximise net profitProfit (economics)In economics, the term profit has two related but distinct meanings. Normal profit represents the total opportunity costs of a venture to an entrepreneur or investor, whilst economic profit In economics, the term profit has two related but distinct meanings. Normal profit represents the total...
income (or realise a net superprofitSuperprofitSuperprofit , is a concept in Karl Marx's critique of political economy, subsequently elaborated by Lenin and other Marxist thinkers.-The origin of the concept in Marx's Capital:...
) as much as possible, through cutting production costs, increasing salesSalesA sale is the act of selling a product or service in return for money or other compensation. It is an act of completion of a commercial activity....
, and monopolisation of markets and supply, (b) capital accumulationCapital accumulationThe accumulation of capital refers to the gathering or amassing of objects of value; the increase in wealth through concentration; or the creation of wealth. Capital is money or a financial asset invested for the purpose of making more money...
, to acquire productive and non-productive assets, and (c) to privatize both the supply of goods and services and their consumption. The larger portion of the surplus productSurplus productSurplus product is a concept explicitly theorised by Karl Marx in his critique of political economy. Marx first began to work out his idea of surplus product in his 1844 notes on James Mill's Elements of political economy...
of labor must usually be reinvested in production, since output growth and accumulation of capital mutually depend on each other.
- Out of preceding characteristics of the capitalist mode of production, the basic class structure of this mode of production society emerges: a class of owners and managers of private capital assets in industries and on the land, a class of wage and salary earners, a permanent reserve army of labourReserve army of labourReserve army of labour is a concept in Karl Marx's critique of political economy. It refers basically to the unemployed in capitalist society. It is synonymous with "industrial reserve army" or "relative surplus population", except that the unemployed can be defined as those actually looking for...
consisting of unemployed people, and various intermediate classes such as the self-employed (small business and farmers) and the “new middle classes” (educated or skilled professionals on higher salaries).
- The finance of the capitalist stateState (polity)A state is an organized political community, living under a government. States may be sovereign and may enjoy a monopoly on the legal initiation of force and are not dependent on, or subject to any other power or state. Many states are federated states which participate in a federal union...
is heavily dependent on levying taxes from the population and on credit; that is, the capitalist state normally lacks any autonomous economic basis (such as state-owned industries or landholdings) that would guarantee sufficient income to sustain state activities. The capitalist state defines a legal framework for commerce, civil society and politics, which specifies public and private rights and duties, as well as legitimate property relations.
- Capitalist development, occurring on private initiative in a socially unco-ordinated and unplanned way, features periodic crises of over-production (or excess capacity). This means that a critical fraction of output cannot be sold at all, or cannot be sold at prices realising the previously ruling rate of profit. The other side of over-production is the over-accumulation of productive capital: more capital is invested in production than can obtain a normal profit. The consequence is a recession (a reduced economic growth rate) or in severe cases, a depressionDepression (economics)In economics, a depression is a sustained, long-term downturn in economic activity in one or more economies. It is a more severe downturn than a recession, which is seen by some economists as part of the modern business cycle....
(negative real growth, i.e. an absolute decline in output). As a corollary, mass unemploymentUnemploymentUnemployment , as defined by the International Labour Organization, occurs when people are without jobs and they have actively sought work within the past four weeks...
occurs. In the history of capitalist development since 1820, there have been more than 20 of such crises; nowadays the under-utilisation of installed productive capacity is a permanent characteristic of capitalist production (average capacity utilisation rates nowadays normally range from about 60% to 85%).
In examining particular manifestations of the capitalist mode of production
Mode of production
In the writings of Karl Marx and the Marxist theory of historical materialism, a mode of production is a specific combination of:...
in particular regions and epochs, it is of course possible to find exceptions to these main defining criteria. But the exceptions prove the rule, in the sense that over time, the exceptional circumstances tend to disappear.
State capitalist interpretation
As mentioned, Marx never explicitly summarised his definition of capitalism, beyond some suggestive comments in manuscripts which he did not publish himself. This has led to controversies among Marxists about how to evaluate the "capitalist" nature of society in particular countries.Supporters of theories of state capitalism
State capitalism
The term State capitalism has various meanings, but is usually described as commercial economic activity undertaken by the state with management of the productive forces in a capitalist manner, even if the state is nominally socialist. State capitalism is usually characterized by the dominance or...
such as the International Socialists
International Socialists
International Socialists is the name of a number of Trotskyist organizations.Most organisations using this name are in the International Socialist Tendency...
reject the definition of the capitalist mode of production given above. In their view, claimed to be more revolutionary (in that true liberation from capitalism must be the self-emancipation of the working class - "socialism from below"), what really defines the capitalist mode of production is:
- means of production which dominate the direct producers as an alien power;
- the existence of a wage-earning working classWorking classWorking class is a term used in the social sciences and in ordinary conversation to describe those employed in lower tier jobs , often extending to those in unemployment or otherwise possessing below-average incomes...
which doesn't hold or have power; - the existence of an elite or ruling class which controls the country, exploiting the working population in the technical Marxist sense.
If true, then ownership
Ownership
Ownership is the state or fact of exclusive rights and control over property, which may be an object, land/real estate or intellectual property. Ownership involves multiple rights, collectively referred to as title, which may be separated and held by different parties. The concept of ownership has...
relations generally and private ownership in particular are irrelevant to the definition of capitalism. The existence of commercial
Commerce
While business refers to the value-creating activities of an organization for profit, commerce means the whole system of an economy that constitutes an environment for business. The system includes legal, economic, political, social, cultural, and technological systems that are in operation in any...
relations and commodity production are also irrelevant.
Many of the state capitalist theories, (which actually originated in Germany, where they were already criticised by Frederick Engels), define "capital" only as a social relation
Social relation
In social science, a social relation or social interaction refers to a relationship between two , three or more individuals . Social relations, derived from individual agency, form the basis of the social structure. To this extent social relations are always the basic object of analysis for social...
of power
Power (sociology)
Power is a measurement of an entity's ability to control its environment, including the behavior of other entities. The term authority is often used for power perceived as legitimate by the social structure. Power can be seen as evil or unjust, but the exercise of power is accepted as endemic to...
and exploitation
Exploitation
This article discusses the term exploitation in the meaning of using something in an unjust or cruel manner.- As unjust benefit :In political economy, economics, and sociology, exploitation involves a persistent social relationship in which certain persons are being mistreated or unfairly used for...
.
This idea is based on some passages from Marx, where Marx emphasized that capital cannot exist except within a power
Power (sociology)
Power is a measurement of an entity's ability to control its environment, including the behavior of other entities. The term authority is often used for power perceived as legitimate by the social structure. Power can be seen as evil or unjust, but the exercise of power is accepted as endemic to...
-relationship between social classes which governs the extraction of surplus-labour. It is this power-relationship that is most important for the proponents of theories of state capitalism; everything else is secondary.
The underlying argument is that:
- Calling societies such as the USSR, ChinaChinaChinese civilization may refer to:* China for more general discussion of the country.* Chinese culture* Greater China, the transnational community of ethnic Chinese.* History of China* Sinosphere, the area historically affected by Chinese culture...
, CubaCubaThe Republic of Cuba is an island nation in the Caribbean. The nation of Cuba consists of the main island of Cuba, the Isla de la Juventud, and several archipelagos. Havana is the largest city in Cuba and the country's capital. Santiago de Cuba is the second largest city...
and VietnamVietnamVietnam – sometimes spelled Viet Nam , officially the Socialist Republic of Vietnam – is the easternmost country on the Indochina Peninsula in Southeast Asia. It is bordered by China to the north, Laos to the northwest, Cambodia to the southwest, and the South China Sea –...
etc. genuinely "socialist" or "communist" makes no sense and is confusing - because those societies have been just as oppressive and exploitative as capitalist societies. - True socialism would mean workers' power, which would consist precisely in eliminating the exploitation and oppression of workers, and is impossible without workers' democracy.
- Trotskyist attempts to explain their oppressive nature by viewing them as "degenerated" or "deformed" workers' states are rejected for various reasons. For example, the spread of the same system to Eastern Europe without an indigenous "organic" revolution "from below" (except Yugoslavia), and the continuity of many of the same people in power before and after the collapse of the USSR and its satellite regimes, are said to prove that one variety of state capitalism just led to another.
- Other Marxist explanations that posit a new mode of productionMode of productionIn the writings of Karl Marx and the Marxist theory of historical materialism, a mode of production is a specific combination of:...
in Soviet-type societies, neither true socialism nor capitalism, such as "bureaucratic collectivismBureaucratic collectivismBureaucratic collectivism is a theory of class society. It is used by some Trotskyists to describe the nature of the Soviet Union under Joseph Stalin, and other similar states in Central and Eastern Europe and elsewhere .- Theory :...
", are rejected as implausible. - It is claimed that despite their autarkic policies, these countries of "actually existing socialism" effectively competed in the international (capitalist-dominated) market anyway through the arms race, as well as limited direct international trade, and thus were still subject to capitalist pressures, even although most of the weaponry was not commercially traded. This international competition it is claimed, forced them to function much like giant corporations, and so, it is argued, they shared key characteristics of capitalism anyway.
- Therefore, the USSR, China, Cuba, Vietnam etc. must be state capitalist, just as much as Western "state capitalisms."
Criticism of the state-capitalist interpretation
The "state cap" interpretation of the capitalist mode of production, however, has been held only by a minority of socialists. Its Marxist and socialist critics argue that:- For the Western and Oriental bourgeoisieBourgeoisieIn sociology and political science, bourgeoisie describes a range of groups across history. In the Western world, between the late 18th century and the present day, the bourgeoisie is a social class "characterized by their ownership of capital and their related culture." A member of the...
or capitalist class, capitalismCapitalismCapitalism is an economic system that became dominant in the Western world following the demise of feudalism. There is no consensus on the precise definition nor on how the term should be used as a historical category...
is fundamentally about private enterprise based on private propertyPrivate propertyPrivate property is the right of persons and firms to obtain, own, control, employ, dispose of, and bequeath land, capital, and other forms of property. Private property is distinguishable from public property, which refers to assets owned by a state, community or government rather than by...
and freedom for commercial trade on private initiative. - The majority of Russian, Chinese, Cuban etc. people have viewed their own societies as being some kind of socialismSocialismSocialism is an economic system characterized by social ownership of the means of production and cooperative management of the economy; or a political philosophy advocating such a system. "Social ownership" may refer to any one of, or a combination of, the following: cooperative enterprises,...
. Why can there be only "one true socialism"? Why can there not be many different kinds of socialism? - "State-cap" interpretations cannot in truth be reconciled with Marx's own texts. They are very selective interpretations of those texts, which try to find analogies between particular quotes from Marx and particular features of Soviet-type societies. This, it is argued, is essentially a theological interpretation, not a scientific analysis. Because of that, there is nothing that could refute or falsify it, the interpretation is an article of faith.
- "State-cap" theorists make their interpretation true by definition, by running together characteristics from very different historical epochs and forms of society. By the same token, they fail to identify what is specific about the socio-economic structure of different societies. The implication is that any society which is not socialist must be capitalist, and if not capitalist in Marx's own sense, then state-capitalist, i.e. just a "different kind" of capitalism than Marx envisaged.
- The "state-cap" interpretation makes it difficult to understand how a transition from capitalism to socialism could possibly occur, beyond general rhetoric about "workers power" and the danger of bureaucracyBureaucracyA bureaucracy is an organization of non-elected officials of a governmental or organization who implement the rules, laws, and functions of their institution, and are occasionally characterized by officialism and red tape.-Weberian bureaucracy:...
. There is no real economic analysis, only a statement about who holds power. - The "state-cap" interpretation is essentially a moral-political condemnation of Soviet-type societies, but not a serious objective explanation of the real functioning of those societies and the real progress they made.
- The "state-cap" interpretation fails to distinguish between different kinds of markets, functioning in a very different way, and benefiting different groups and social classes.
- The supporters of a "state cap" interpretation fail to appreciate the difference between a state apparatus which has an autonomous economic base (because it owns the means of production) and a state apparatus which depends mainly on taxes and credit to finance its activities.
- The supporters of the "state-cap" interpretation keep changing their arguments about why Soviet-type societies are state capitalist, making their case true by definition. Initially, it was argued that state capitalism in Russia was a more advanced stage of capitalism, later that viewpoint was revised.
This does not mean, according to the Marxist critics, that state capitalism
State capitalism
The term State capitalism has various meanings, but is usually described as commercial economic activity undertaken by the state with management of the productive forces in a capitalist manner, even if the state is nominally socialist. State capitalism is usually characterized by the dominance or...
cannot exist; of course it can, if the state plays a very big role in an otherwise capitalist society, or monopolizes a strategic resource of major economic importance. Examples might be Myanmar, Suriname, Egypt or Libya. But it does mean that the concept of the capitalist mode of production
Mode of production
In the writings of Karl Marx and the Marxist theory of historical materialism, a mode of production is a specific combination of:...
shouldn't be used indiscriminately, as, it is claimed, "state-cap" theorists do.
Post-Marxist views
The difficulties in this Marxist debate have been both that most participants did not speak Russian, East European languages, Vietnamese, Korean or Chinese, and that dissident Russian or Chinese Marxists seeking to analyse their own country independently were typically silenced in one way or another by the regime.Thus, the political debate has been mainly from a Western point of view, and based on secondary sources, rather than being based directly on the experiences of people living in "actually existing socialist countries." And that debate has typically counterposed a socialist ideal to a badly understood reality.
In turn, this has led to the accusation that Marxists cannot satisfactorily specify what capitalism and socialism really are, nor how to get from one to the other - quite apart from failing to explain satisfactorily why socialist revolutions failed to produce the desirable kind of socialism. Behind this problem, it is argued, are:
- a kind of historicismHistoricismHistoricism is a mode of thinking that assigns a central and basic significance to a specific context, such as historical period, geographical place and local culture. As such it is in contrast to individualist theories of knowledges such as empiricism and rationalism, which neglect the role of...
according to which Marxists have a privileged insight into the "march of history"; the doctrine is thought to provide the truth, in advance of real research and experience. Evidence contrary to the doctrine is rejected or overlooked. - a uni-linear view of history, according to which feudalism leads to capitalism, and capitalism to socialism.
- an attempt to fit the histories of different societies into this schema of history, on the basis that if they are not socialist, they must be capitalist (or vice versa), or, if they are neither, that they must be in transition from one to the other.
None of these stratagems, it is argued, are either warranted by the facts or scientifically sound, and the result is that many socialists have abandoned the rigid constraints of Marxist orthodoxy, in order to analyse capitalist and non-capitalist societies in a new way.
See also
|
Socialism (Marxism) In Marxist theory, socialism, or the socialist mode of production, refers to a specific historical phase of economic development and its corresponding set of social relations that eventually supersede capitalism... State capitalism The term State capitalism has various meanings, but is usually described as commercial economic activity undertaken by the state with management of the productive forces in a capitalist manner, even if the state is nominally socialist. State capitalism is usually characterized by the dominance or... State monopoly capitalism The theory of state monopoly capitalism was initially a Marxist doctrine popularised after World War II. Lenin had claimed in 1916 that World War I had transformed laissez-faire capitalism into monopoly capitalism, but he did not publish any extensive theory about the topic... Surplus labour Surplus labour is a concept used by Karl Marx in his critique of political economy. It means labour performed in excess of the labour necessary to produce the means of livelihood of the worker . According to Marxian economics, surplus labour is usually "unpaid labour"... Relations of production Relations of production is a concept frequently used by Karl Marx and Friedrich Engels in their theory of historical materialism, and in Das Kapital... Wage labour Wage labour is the socioeconomic relationship between a worker and an employer, where the worker sells their labour under a formal or informal employment contract. These transactions usually occur in a labour market where wages are market determined... Wage slavery Wage slavery refers to a situation where a person's livelihood depends on wages, especially when the dependence is total and immediate. It is a negatively connoted term used to draw an analogy between slavery and wage labor, and to highlight similarities between owning and employing a person... |
Further reading
- Karl Marx, Das KapitalDas KapitalDas Kapital, Kritik der politischen Ökonomie , by Karl Marx, is a critical analysis of capitalism as political economy, meant to reveal the economic laws of the capitalist mode of production, and how it was the precursor of the socialist mode of production.- Themes :In Capital: Critique of...
- Karl Marx, Grundrisse.
- Alex Callinicos, "Wage Labour and State Capitalism - A reply to Peter Binns and Mike Haynes", International Socialism, second series, 12, Spring 1979.
- Erich Farl, "The Genealogy of State Capitalism", in: International (London, IMG), Vol. 2, No. 1, 1973.
- Anwar Shaikh, "Capital as a Social Relation" (New Palgrave article)
- Marcel van der Linden, Western Marxism and the Soviet Union. New York: Brill Publishers, 2007.
- Fernand Braudel, Civilization and Capitalism.
External links
- The Marxist System Charles Sackrey & Geoff Schneider Being an Introduction To Certain of The Ideas of Karl Marx Designed Especially For Those To Whom It Has Been Suggested That Marx Has Nothing To Say To Them About The World In Which They Live.