The Contradictions of Capital

The wealth disparity of the world we live in today is unlike that ever-recorded in human history. The centralisation of wealth has seen global society fractured and the widening of political fault lines. The result is a struggle between those with a monopoly on wealth, and those without access to its rewards; but it is not a struggle that the majority seems to be winning.

It seemed to me that it was time to revisit the work of Karl Marx. What follows is an edited extract from the introduction to my current thesis which looks to marry Marx’ analysis of the relations between Wage-Labour and Capital to current predictions concerning the impact of automation and Artificial Intelligence on the labour market. These specific sections detail Marx’ understanding of the nature of capitalism, and ultimately why its pursuit of profit creates a growing inequality which unsustainably limits consumption.


Capitalism

The specific relationship between the class of wage-labourers and the owners of capital is what constitutes, for Marx, the system of capitalism. The true significance for our later analysis of automation however, is revealed in the intricacies of this relationship. For Marx, it is symbiotic. Just as the worker, under capitalism, needs the wage-labour of the capitalist to survive, capital requires a class of workers to facilitate its function. ‘The existence of a class which possess nothing but the ability to work is a necessary presupposition of capital’ (1849, 16). The two are codependent, a change in the nature of one will undoubtedly affect the nature of the other.

Within capitalism, the success of capital is the best hope for an improvement in the quality of life of the worker. As Marx states, ‘the fastest possible growth of productive capital is, therefore, the indispensable condition for tolerable life to the labourer’ (1849, 17). In modern day capitalism this codependence manifests itself under the notion of ‘trickle-down’ economics, the idea that the greater the income of the capitalist, the greater the wage with which he compensates his worker. As Adam Smith famously suggested, ‘the invisible hand’ of capital distributes a fraction of its profits to the worker through reinvestment in its productive forces; ‘It is not the actual greatness of national wealth, but its continual increase, which occasions a rise in the wages of labour’ (Smith, 1776, 59). This is a central facet of the classical laissez-faire economic system of capital, and Marx actively corroborates its existence.

Marx breaks from this logic, however, when considering whether this system is in the interest of the worker. Whilst classical Smithian economics, and more recently Keynesian economics, emphasises an improvement in the absolute financial position of the worker as not only permissive, but positive; Marx focuses on the relative wealth of the worker in relation to the capitalist. As capital will always seek to maximise profits, an increase in surplus value will always be taken on in greater measure by the capitalist than is donated to the worker in wages. With an improvement in the means of production, the capitalist will reap the financial reward at a greater rate than that of the worker. Thus, Marx explains, as capital improves, the relative position of the worker in relation to capital is degraded;

‘To say that “the worker has an interest in the rapid growth of capital”, means only this: that the more speedily the worker augments the wealth of the capitalist, the larger will be the crumbs which fall to him, the more can the mass of slaves dependent on capital be increased’ (1849, 22).

The emphasis Marx’ places on relative income over real or nominal wages is the basis of his theory that ‘the interests of capital and wage-labour are diametrically opposed’ (1849, 22), which underpins his central critique of capitalism. For Marx however, it is not just the relative wage of the worker that is constantly depressed under capitalism, but similarly the worker’s life-activity. The financial position of the worker is simply a representation of their social situation. As inequality extends with the rate of return on capital increasing over that of wage-labour, the worker’s dependency on capital is exaggerated. As a result, the labourer increasingly submits themself to capital, furthering their own alienation and entrenching the social hierarchy by which they are estranged.

The diametrically opposing interests of wage-labour and capital create the social tensions that underline the basis of Marx’ theory set out in The Communist Manifesto that ‘the history of all hitherto existing society is the history of class struggles’ (1848, 14). This is not to say that all human endeavours are uniquely explicable by analysing  social tensions, but that class division remains a constant underpinning presence along the historical narrative of humanity (Harvey, 2017,112). The developing mechanics of this relationship comprise the shifting phases that make up Marx’ theory of historical materialism. Marx is not a determinist. He does not identity any factor as the primary agent in developing the historical process (Harvey, 2017, 115). Rather he understands that people’s relationship with each other, mirrored through the ownership and the use of means of production, defines a system. Capitalism simply represents the current organisation of this relationship. Under capitalism, the means of production are manipulated within a societal framework for a certain end, profit.

‘The Social Chasm’

The outstanding conclusion of Wage-Labour and Capital, and the pivotal one to our later analysis of automation, is Marx’ assertion that the system of capitalism holds within it an innate and ever-growing polarisation of wealth. As the rate of return on capital increases over the relative wage of the worker, there is ‘a widening of the social chasm’ . This, Marx argues, is the trait which makes capitalism unsustainable in the long term (1849, 22).

‘in short, the crises increase. They become more frequent and more violent, if for no other reason, than for this alone, that in the same measure in which the mass of products grows, and there the needs for extensive markets, in the same measure does the world market shrink ever more’ (1849, 26).

The worker’s diminishing relative wage means the ever-increasing requirement of capital for a consumer base is matched with a relative reduction in the buying-power of the consumer. This contradiction creates a situation in which either the rate of return on capital can no longer increase because of limited consumption, or the concentration of wealth in the hands of capital increases indefinitely, devastating the livelihood of the working classes (Piketty, 2013, 11-12). As this process develops, and power of the capitalist over the class of workers intensifies, the social position of the worker is worsened, and this tension creates periodic crises in the workings of the system.

In Marx’ eyes, these ‘industrial earthquakes’ (1849, 26), will inevitably lead to a breakdown of capitalism. As the relationship between the classes is symbiotic, this breakdown would represent the destruction not only of capital itself, but of the workers dependent on that capital; as Marx’ states in his final chapter of Wage-Labour and Capital, ‘[capital] drags with it into its grave the corpses of its slaves, whole hecatombs of workers, who perish in the crises’ (1849, 26).

This is the basis of Marx’ belief that, in the long run,what the bourgeoisie produces, above all, are its own grave-diggers’ (1848, 21).

Image Courtesy of Period Paper


Key Sources:

K. Marx, Wage-Labour and Capital.

K. Marx, The Communist Manifesto.

K. Marx, The German Ideology. 

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