The Critique of Political Economy
By: Twilight'S Library
Tags: Capitalism, Marxism, Economics

Writen to help people interested in Marxism to learn.

Summary

The Marxist Method. Critique of Merchantilist Society. Critique of Capitalist Society. Books Mentioned.

The Marxist Method

Hegelian Philosophy

As many may know, the method of Karl Marx has its origin in the one of Hegel; many people are conscious of this fact but most of them aren’t conscious of the relation between their philosophies. The approach to Marx’s method must necessarily start with an approach to Hegel.

Hegelian philosophy is a revolutionary philosophy and the only way to understand it is understanding its revolutionary character.

As Karl Korsch says, the Hegelian philosophy “1) Originated historically from a revolutionary movement. 2) Fulfilled the task of giving to that movement its conceptual expression.” [1]

The sublation [Aufheben] of the form of the proposition must not only take place in an immediate manner through the mere content of the proposition. Rather, this oppositional movement must be given expression. It must not only be the internal impediment to thought, but rather this return into itself on the part of the concept must be shown. This movement, which constitutes what otherwise would have to be accomplished by proof, is the dialectical movement of the proposition itself. [2]

The Hegelian philosophy was revolutionary by the introduction of dialectical thought and the philosophy of history, breaking with the division of the external and internal world, stablished since the Ancient Greece and reforced by the philosophy of Immanuel Kant.

Knowledge of the Idea of the absolute ethical order depends entirely on the establishment of perfect adequacy between intuition and concept, because the Idea itself is nothing other than the identity of the two.

It must be said that Hegel reduced the truth to the historical truth. He didn’t deny that there’s a truth, that we can, for example, define a concept; but the definition in Hegelian philosophy can only be the unity formed by countless other concepts which interact in a movement of sublation [Aufheben], a contradictory movement which ends up with the Werden, the creation of a new and autonomous concept by the unity of these opposites into a single totality, the becoming.

Being the Hegelian philosophy a thought produced by a revolutionary situation, the criticism of Hegelian philosophy, where Marxism arises, can only be explained by the explanation of the revolutionary moment of Hegelian philosophy.

Hegelian philosophy arises from the bourgeois revolutions of the 17th and 18th centuries. In the same way that the Hegelin philosophy is revolutionary by breaking with all the immediately given reality, by the opposition to the Kantian division of noumena and phenoumena; it becomes a reactionary philosophy, results in the creation of new glorified existing conditions, it becomes a immediately given reality.

The Hegelian philosophy is the philosophy of the bourgeois revolution, but not the philosophy of the process of that revolution, it’s the philosophy of its result. “This historical thought is as yet only the consciousness which always arrives too late, and which pronounces the justification after the fact. Thus it has gone beyond separation only in thought. […] Even as a philosophy of the bourgeois revolution, it does not express the entire process of this revolution, but only its final conclusion.” [3]

Hegel reduced all the truth to the historical truth as he reduced all reality to history, but mantained the position of external to history; Hegel was still an idealist, and by being an idealist he reduced his philosophy to what he criticized. The Marxist method comes from the demonstration of this error:

When reality is depicted, philosophy as an independent branch of knowledge loses its medium of existence. At the best its place can only be taken by a summing-up of the most general results, abstractions which arise from the observation of the historical development of men. Viewed apart from real history, these abstractions have in themselves no value whatsoever. They can only serve to facilitate the arrangement of historical material, to indicate the sequence of its separate strata. But they by no means afford a recipe or schema, as does philosophy, for neatly trimming the epochs of history. On the contrary, our difficulties begin only when we set about the observation and the arrangement — the real depiction — of our historical material, whether of a past epoch or of the present. The removal of these difficulties is governed by premises which it is quite impossible to state here, but which only the study of the actual life-process and the activity of the individuals of each epoch will make evident. [4]

This is, basically, the basis of all Marxist philosophy, which begins with the conditions of history instead of ideas as independent knowledge.

For a more detailed description of dialectical thought, the book History and Class Consciousness from Georg Lukács is recommended. The book approachs the origins of Hegelian philosophy from Ancient Greek Philosophy to German Idealism.

Conditions of History

In “History: Fundamental Conditions”; Marx describes the “4 moments” or “4 aspects of the primary historical relationships” [4], history has the following conditions:

Obviously, the first conditions for humans to “make history” is to attend an entire system of needs, physiological, mental and social needs. These needs are attended through material elements created by a process, namenly the labor. Thus, the first historical act is the creation of production, the totality of the labor processes. The second condition of history is the creation of new needs through the attendment of needs; which is connected with the necessity of organizing the production, turning it also the first historical act. If the second condition of history is the reproduction of production, the third condition of history is the reproduction of humans. In other words, it’s the organized production of humans, in its first and most primitive form, the family. The fourth condition of history, and the most important one, is the creation of social relations and the conection of these social relations with the production. As Marx says in Wage Labor & Capital:

[…] The social relations within which individuals produce, the social relations of production, are altered, transformed, with the change and development of the material means of production, of the forces of production. The relations of production in their totality constitute what is called the social relations, society, and, moreover, a society at a definite stage of historical development, a society with peculiar, distinctive characteristics. Ancient society, feudal society, bourgeois (or capitalist) society, are such totalities of relations of production, each of which denotes a particular stage of development in the history of mankind. [5]

This is one of the most important points of Marxist theory which will further become the critique of British political economy. Marx further explains the development of consciousness according to materiality; but this is not the goal of this article, it pretends to cover only the critique of political economy.

Another thing that should be mentioned is the movement of “abstraction, concrete, return to abstraction” that Marx mentions in the introduction of Grundrisse, which is the same critique with other words.

Thus, if I were to begin with the population, this would be a chaotic conception [Vorstellung] of the whole, and I would then, by means of further determination, move analytically towards ever more simple concepts [Begriff], from the imagined concrete towards ever thinner abstractions until I had arrived at the simplest determinations. From there the journey would have to be retraced until I had finally arrived at the population again, but this time not as the chaotic conception of a whole, but as a rich totality of many determinations and relations. The former is the path historically followed by economics at the time of its origins. The economists of the seventeenth century, e.g., always begin with the living whole, with population, nation, state, several states, etc.; but they always conclude by discovering through analysis a small number of determinant, abstract, general relations such as division of labour, money, value, etc. [6]

In essence, Marx is repeating his view where economic categories are totalities of social relations and confirmating the Hegelian basis of his philosophy with the rejection of the immediate knowledge by its dialectical development.

Critique of Merchantilist Society

The Commodity Economy

As said before, economic systems are dialectical systesis of production and distribution, or of technical relations and social relations. Thus, the exposition will proceed the following way: production, distribution, and the economy.

A commodity is, abstractly, a form of use values inside of an economic system. Human beings need to satisfy their material necessities through products of labor. These products of labor with the capacity to satisfy a human need are called use values.

In the commodity economy, as a consequence of the growth of the division of labor, production is divided between individual micro-producers. Each individual produces a specific form of use value and, as a consequence of this form of production, the products of labor take the form of commodities; exchange is the specific process in which the individual producers connect (or, in better words, distribute) the product of their labors. Exchange is the form that distribution takes as a result of the form of production, and the form of production is conditioned by the development of the means of production.

As a general rule, articles of utility become commodities, only because they are products of the labour of private individuals or groups of individuals who carry on their work independently of each other. The sum total of the labour of all these private individuals forms the aggregate labour of society. Since the producers do not come into social contact with each other until they exchange their products, the specific social character of each producer’s labour does not show itself except in the act of exchange. In other words, the labour of the individual asserts itself as a part of the labour of society, only by means of the relations which the act of exchange establishes directly between the products, and indirectly, through them, between the producers. [7]

The distribution is not exclusively conditioned by the production, it does also exercise an indirect influence over production. With the arrival of the process of exchange, the commodity gets an exchange value, a proportion between two different use values in which they are exchanged. Considering the exchange value, we easily see that production needs to adapt to the distribution because of the market price, with the market price being also determined by the production previously. Further, we will see that these two elements become, as Rubin says, a “closed-system” [8], almost excluding the productive forces.

In his enterprise each commodity producer is formally free to produce, at will, any product that pleases him and by any means he chooses. But when he takes the final product of his labor to the market to exchange it, he is not free to determine the proportions of the exchange, but must submit to the conditions (the fluctuations) of the market, which are common to all producers of the given product. Thus, already in the process of direct production, he is forced to adapt his working activity (in advance) to the expected conditions of the market. The fact that the producer depends on the market means that his productive activity depends on the productive activity of all other members of society. [8]

These relations between production and distribution can be used to explain the division of Marx’s magnum opus Capital in 3 parts, as Marx explains:

In Book I we analysed the phenomena which constitute the process of capitalist production as such, as the immediate productive process, with no regard for any of the secondary effects of outside influences. But this immediate process of production does not exhaust the life span of capital. It is supplemented in the actual world by the process of circulation, which was the object of study in Book II. In the latter, namely in Part III, which treated the process of circulation as a medium for the process of social reproduction, it developed that the capitalist process of production taken as a whole represents a synthesis of the processes of production and circulation. [9]

The synthesis created by production and distribution is a new process called reproduction. The process of reproduction is not only the reproduction of things, of products, but the reproduction of things inside the system of reproduction, it’s the reproduction of social relations.

We have seen that the capitalist process of production is a historically determined form of the social process of production in general. The latter is as much a production process of material conditions of human life as a process taking place under specific historical and economic production relations, producing and reproducing these production relations themselves, and thereby also the bearers of this process, their material conditions of existence and their mutual relations, i.e., their particular socio-economic form. [9]

Then it comes the Marxist view of crisis: the relations of production and the relations of distribution (i.e. exchange) may not coincide; the sale of a product and the circulation of money represent the coincidence of production with the necessities of society, and it depends on the subjectivity of the owners of money and can simply not happen; these little errors of reproduction are generally present at acceptable extents in normal times, but in times of crisis are generalized. In merchantilist societies there are 2 forms of crisis: the one where production is not headed according to the market (especulation) and the one where production is not enough to attend the market (crisis of under-production). Further, in capitalism, there will also be the crisis of over-production.

The sale and the purchase constitute one identical act, an exchange between a commodity-owner and an owner of money, between two persons as opposed to each other as the two poles of a magnet. They form two distinct acts, of polar and opposite characters, when performed by one single person. Hence the identity of sale and purchase implies that the commodity is useless, if, on being thrown into the alchemistical retort of circulation, it does not come out again in the shape of money; if, in other words, it cannot be sold by its owner, and therefore be bought by the owner of the money. That identity further implies that the exchange, if it does take place, constitutes a period of rest, an interval, long or short, in the life of the commodity. Since the first metamorphosis of a commodity is at once a sale and a purchase, it is also an independent process in itself. The purchaser has the commodity, the seller has the money, i.e., a commodity ready to go into circulation at any time. No one can sell unless some one else purchases. But no one is forthwith bound to purchase, because he has just sold. Circulation bursts through all restrictions as to time, place, and individuals, imposed by direct barter, and this it effects by splitting up, into the antithesis of a sale and a purchase, the direct identity that in barter does exist between the alienation of one’s own and the acquisition of some other man’s product. To say that these two independent and antithetical acts have an intrinsic unity, are essentially one, is the same as to say that this intrinsic oneness expresses itself in an external antithesis. If the interval in time between the two complementary phases of the complete metamorphosis of a commodity become too great, if the split between the sale and the purchase become too pronounced, the intimate connexion between them, their oneness, asserts itself by producing — a crisis. [7]

There are not many interesting things about the merchantilist society, the only things that will be approached here are the critique of commodity fetishism and the law of value.

The Commodity Fetishism and The Law of Value

I would like to start this chapter with the words of Issak Illich Rubin:

Marx’s theory of commodity fetishism has not occupied the place which is proper to it in the Marxist economic system. The fact is that Marxists and opponents of Marxism have praised the theory, recognizing it as one of the most daring and ingenious of Marx’s generalizations. Many opponents of Marx’s theory of value have high regard for the theory of fetishism (Tugan-Baranovskii, Frank, and even Struve with qualifications). Some writers do not accept the theory of fetishism in the context of political economy. They see it as a brilliant sociological generalization, a theory and critique of all contemporary culture based on the reification of human relations (Hammacher). But proponents as well as opponents of Marxism have dealt with the theory of fetishism mainly as an independent and separate entity, internally hardly related to Marx’s economic theory. They present it as a supplement to the theory of value, as an interesting literary-cultural digression which accompanies Marx’s basic text. One reason for such an interpretation is given by Marx himself, by the formal structure of the first chapter of Capital, where the theory of fetishism is given a separate heading. This formal structure, however, does not correspond to the internal structure and the connections of Marx’s ideas. The theory of fetishism is, per se, the basis of Marx’s entire economic system, and in particular of his theory of value. [8]

As said above, the process of exchange is the process in which producers connect the products of their labor, it’s a relation of human beings where the use value is the end of their relation, the reason why they are related; exchange is a social relation mediated by commodities.

However, the producer of a commodity does not appear in market as the productor of a commodity, but as the proprietor of a commodity; to the eyes of humans, exchange appears as a relation between things instead of a relation between producers. This is, in short words, the critique of fetishism. At this point, the economic system shows itself in human’s mind as a natural relation and something necessary to the realization of production, and then becomes an alien and independent entity with society being wholely dominated by it. In short words, the economic system becomes “an actual entity — a being with a mind of its own that operates independently from us. […] a “real” god, and not an imaginary god.” [10]

The theory of commodity fetishism is not only a critique to the classical economists who approached capitalism as a natural form of production and paid attention only to the distribution, or realisation of capital, when developing their theories; it’s a theory about how humanity is loses the control they had over the production of their materiality, over the course of their lifes.

This is where the theory of value comes, different of the previous economists who tried to explain value by material properties of commodities, Marx analysis of value explains value as a social relation between alienated producers of different use values.

As a result of the fact that humans have different and countless needs, and these needs are attended by different and countless products produced by different and countless useful labors, society needs to somehow allocate the social labor according to the use values required. This necessity of allocating social labor is unavoidable, every single society has this necessity and none can get rid of it; however, the way this allocation happens can variate according to the mode of production, in the case of merchantilist and capitalist societies, it realizes through exchange, more precisely, through exchange value. This necessity is also how Marx derivates his theory of value.

Every child knows that a nation which ceased to work, I will not say for a year, but even for a few weeks, would perish. Every child knows, too, that the masses of products corresponding to the different needs require different and quantitatively determined masses of the total labor of society. That this necessity of the distribution of social labor in definite proportions cannot possibly be done away with by a particular form of social production but can only change the form in which it appears, is self-evident. No natural laws can be done away with. What can change, in historically different circumstances, is only the form in which these laws operate. And the form in which this proportional distribution of labor operates, in a state of society where the interconnection of social labor is manifested in the private exchange of the individual products of labor, is precisely the exchange value of these products. [11]

In the merchantilist society, with production divided between many individual producers according to the division of labor, where “each producer of a commodity is bound to produce a use-value, to satisfy a particular social want” [7], and where these branches of production are conected only by means of exchange, it’s inevitable that some deviations in the distribution of social labor happen. In a commodity economy, the social labor is inevitably spent on things that don’t correspond to the social needs, production constantly deviates from the proportion of equilibrium of their values, from the perfect distribution of social labor (addendum: considering the difference between value and price, or of real value and market value). These deviations are also corresponded by minor corrections (these are not necessary but only possible, there’s also the possibility of these deviations developing uninterruptedly and resulting in a crisis).

This is, basically, the Marxist theory of value. It does not correspond, but explains the variation of market price. As Marx said:

The possibility, therefore, of quantitative incongruity between price and magnitude of value, or the deviation of the former from the latter, is inherent in the price form itself. This is no defect, but, on the contrary, admirably adapts the price-form to a mode of production whose inherent laws impose themselves only as the mean of apparently lawless irregularities that compensate one another. [7]

Value to Marx is a regulator of the economy, not a metaphisical property that regulates the exchange of commodities.

Critique of Capitalist Society

What’s Capitalism?

Capitalism is the commodity economy extended to the absolute alienation of society. We must define capital as previously made, as a synthesis between the capitalist mode of production and the capitalist mode of distribution.

Capital, as said above, appears firstly in the form of money, a money that assumes a certain form of circulation (circulation is a synonymous of reproduction). Different of the previous form of reproduction, where money was in the middle of the exchange of commodities (C-M-C) and the money realised the commodity, in capitalism, the commodity is in the middle (M-C-M) and it realises the money. Instead of “produce to consume”, there we have “consume to produce”. The sale and the purchase are inverted in the process of circulation (or reproduction).

This form of circulation is, at first, contradictory. The first questions that comes to mind is: why would any holder of money spend their money in that stupid way? Then we deduce the category of profit (M-C-M’ with M’ > M).

But the process of exchange doesn’t represent a change in value, it’s only a metamorphosis of value, the same value is represented under different use values, but it remains the same. The market price, that doesn’t correspond to the value but variates according to it, may change during the purchase of the commodity, but we empirically see that it isn’t the way how capital valuates itself. To increase its own value, capital buys a commodity that creates value, that is, labor. Labor taking the form of wage-labor is thus not only a necessity of capitalism but the specific form that labor takes in capitalism.

This is basically the whole second section of Capital I.

The Composition of Capital

In his critique of capitalist society, Marx begins with the whole capitalist system abstractly (following his method as described in Grundrisse) in the section 2 of Capital I and dedicates all the rest of the book to describe the capitalist mode of production (with the last 2 sections dedicated to the reproduction/accumulation).

The capitalist process of production is the process of producing value, or surplus value. The analysis of the production of surplus value must therefore be an analysis of the composition of the value of the commodity after the process of production, the composition of capital.

The first distinction that Marx establishes in the composition of capital is the constant and variable capital. Constant capital is, as the name suggests, the capital whose value is constant, doesn’t change; it reffers to the raw resources and machinery (the “means of production”) necessary to the work and will form the material holder of value, the final commodity. Variable capital is the opposite, the part of capital that has its value changed through the process of production, the part of value added by the labor force. The constant capital is subdivided between means of production and raw material, but this distinction doesn’t interest us.

In addiction to these, the value effectively added to capital by the labor force is the surplus value, subdivided in relative and absolute. The relative surplus value is the surplus value generated by the reduction of necessary working time, while the absolute is generated by the extension of the working time (not for each worker individually, the increase in the number of workers also counts as an increase of working time). The surplus value is generated by this part of the working time that exceeds the necessary time to pay every expenditure involved in the production of the commodity, this part of the working time can be raised by these two ways.

These distinction in the composition of capital may be something useless and a mere formality at first, but they are really useful when explaining the distribution and reproduction under capitalism.

The Accumulation of Capital

The circulation (or reproduction/accumulation) of capital begins with the process of production, and then goes to the sale of the final commodity with the addition of surplus value. After this sale, the profit is used to buy new means of production to produce more commodities, and so on. The realisation of capital is, therefore, represented by the sale of the final commodity.

Initially, there’s no meaninful difference between the reproduction in merchantilist and capitalist societies, the only change is that commodity reproduction is the reproduction of merchantilist relations while capitalist reproduction is the reproduction of capitalist relations. But the big difference between their modes of production also implies a big difference between their modes of reproduction.

Different of the previous society, crisis in capitalism are a necessity due to the composition of capital. Marx explains this in the chapter 25 of Capital I, there are two ways to the capitalist to spend his profit on the creation of more capital: the extension of relative surplus or of absolute surplus; the latter mostly by means of increasing working population, as working days have physiological limitations.

The first process is the most favorable to the worker. In this process, as Adam Smith highlights, the rise of wages comes as a natural consequence of the extension of absolute surplus, it’s something necessary to the accumulation. This process of accumulation also eventually colapses in that point where the wage labor is too high and it reduces drastically the rate of surplus, destroying the accumulation (something that, as Marx points, never happens, as the accumulation is the absolute end of the alienated society).

The law of capitalist production, that is at the bottom of the pretended “natural law of population,” reduces itself simply to this: The correlation between accumulation of capital and rate of wages is nothing else than the correlation between the unpaid labour transformed into capital, and the additional paid labour necessary for the setting in motion of this additional capital. It is therefore in no way a relation between two magnitudes, independent one of the other: on the one hand, the magnitude of the capital; on the other, the number of the labouring population; it is rather, at bottom, only the relation between the unpaid and the paid labour of the same labouring population. If the quantity of unpaid labour supplied by the working class, and accumulated by the capitalist class, increases so rapidly that its conversion into capital requires an extraordinary addition of paid labour, then wages rise, and, all other circumstances remaining equal, the unpaid labour diminishes in proportion. But as soon as this diminution touches the point at which the surplus labour that nourishes capital is no longer supplied in normal quantity, a reaction sets in: a smaller part of revenue is capitalised, accumulation lags, and the movement of rise in wages receives a check. The rise of wages therefore is confined within limits that not only leave intact the foundations of the capitalistic system, but also secure its reproduction on a progressive scale. [7]

In the second process, there’s an alteration in the composition of capital itself, not only the extent of capital employed. With the extension of relative surplus value, the constant capital rises, since more means of production are employed at the same time as a result of the rise in the productivity of labor. As a result, the proportional share of variable capital and surplus value in the composition of capital decreases, decreasing the rate of surplus value and then the rate of profit, causing an investment to have less return over time.

The mass of the means of production which he thus transforms, increases with the productiveness of his labour. But those means of production play a double part. The increase of some is a consequence, that of the others a condition of the increasing productivity of labour. E.g., with the division of labour in manufacture, and with the use of machinery, more raw material is worked up in the same time, and, therefore, a greater mass of raw material and auxiliary substances enter into the labour process. That is the consequence of the increasing productivity of labour. On the other hand, the mass of machinery, beasts of burden, mineral manures, drain-pipes, &c., is a condition of the increasing productivity of labour. So also is it with the means of production concentrated in buildings, furnaces, means of transport, &c. But whether condition or consequence, the growing extent of the means of production, as compared with the labour power incorporated with them, is an expression of the growing productiveness of labour. The increase of the latter appears, therefore, in the diminution of the mass of labour in proportion to the mass of means of production moved by it, or in the diminution of the subjective factor of the labour process as compared with the objective factor. [7]

This is how Marx explains the concentration of capital as a natural part of the process of accumulation. In the free market, with each individual capitalist trying to realise their production as capital and contribute to the accumulation, those who can’t reproduce capital get out of the market and are replaced by those who reproduce capital better (the expropriation of capitalists by capitalists). With the growth of constant capital in comparison to variable capital, a bigger amount of money is necessary to attend the needs of accumulation, closing the entrance for new capitalists. The concentration of capital in the hands of lesser people is a necessity of capital accumulation, monopoly and competition to Marx are not contradictory, but complementary. Not only that, but the process of capital centralisation and capital accumulation are identical.

It’s also through this process that capital creates the Industrial Reserve Army, a naturally unemployed population. With the growth of the productivity of labor and the amount of value repaid to the worker being somehow determined by the amount of labor force available, capital can reproduce itself better with a reserve of workers to increase the amount of surplus value produced by each employed worker. This reserve army is expanded or consumed according to the needs of capital accumulation.

And finally, the process of accumulation through the production of relative surplus value causes the cyclical crises of capitalism. Now, the question of production is not only a question of dividing labor between branches of production, this process proportionates capital an endless growth, resulting in the production of excessive commodities in relation to the effective demmand, and resulting in many of these commodities not realising as capital. This is the capitalist crisis of over-production.

There are many things about Marx’s theory that weren’t approached here, like the critique of colonialism, the primitive accumulation of capital and the split of capital (specially between industrial and financial capital) according to centralisation. The goal of this article is to provide a guide to study all this to the reader, not to comprise everything Marx wrote.

Books Mentioned

[1] https://www.marxists.org/archive/korsch/1946/non-dogmatic.htm

[2] https://www.marxists.org/reference/archive/hegel/phindex.htm

[3] https://www.marxists.org/reference/archive/debord/society.htm

[4] https://www.marxists.org/archive/marx/works/1845/german-ideology/ch01.htm

[5] https://www.marxists.org/archive/marx/works/1847/wage-labour/index.htm

[6] https://www.marxists.org/archive/marx/works/1857/grundrisse/

[7] https://www.marxists.org/archive/marx/works/1867-c1/

[8] https://www.marxists.org/archive/rubin/value/

[9] https://wikirouge.net/texts/en/Capital,_Volume_III

[10] https://ianwrightsite.wordpress.com/2020/09/03/marx-on-capital-as-a-real-god-2/

[11] https://www.marxists.org/archive/marx/works/1868/letters/68_07_11-abs.htm