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Introduction (Anti-Capitalism)

Alfredo Saad-Filho
The need of a constantly expanding market … chases the bourgeoisie
over the whole surface of the globe All old-established national
industries … are dislodged by new industries … that no longer work up
indigenous raw material, but raw material drawn from the remotest
zones; industries whose products are consumed, not only at home, but
in every quarter of the globe. In place of the old wants, satisfied by the
productions of the country, we find new wants, requiring for their sat-
isfaction the products of distant lands and climes … The bourgeoisie,
by the rapid improvement of all instruments of production, by the
immensely facilitated means of communication, draws all … nations
into civilisation … It compels all nations, on pain of extinction, to adopt
the bourgeois mode of production; it compels them to introduce what it
calls civilisation into their midst, i.e., to become bourgeois themselves.
In one word, it creates a world after its own image.2
The Communist Manifesto rings even truer today than it did in 1848.
Key features of nineteenth-century capitalism are clearly recognis-
able, and even more strongly developed, in the early twenty-first
century. They include the internationalisation of trade, production
and finance, the growth of transnational corporations (TNCs), the
communications revolution, the diffusion of Western culture and
consumption patterns across the world, and so on.
Other traits of our age can also be found in the Manifesto. In the
early twenty-first century, powerful nations still rule the world by
political, economic and military means, and their gospel is zealously
preached by today’s missionaries of neoliberalism. They follow in
the footsteps of their ancestors, who drew strength from the holy
trinity of Victorian imperialism: God, British capital and the Royal
Navy. Today’s evangelists pay lip-service to human rights and the
elimination of poverty, but their faith lies elsewhere, in the sacred
tablets of copyright law and in the charter of the International
Monetary Fund (IMF). They travel to all corners of the globe and, in
spite of untold hardship in anonymous five-star hotels, tirelessly
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preach submission to Wall Street and the US government. They will
never take no for an answer. Native obduracy is initially explained
away by ignorance or corruption, and then ridiculed. However, even
saintly patience has its limits. Eventually, economic, diplomatic and
other forms of pressure may become necessary. In extreme circum-
stances, the White House may be forced to bomb the enemy into
submission, thus rendering another country safe for McDonalds.
It seems that, in spite of our fast cars, mobile phones and the
internet, the world has not, after all, changed beyond recognition
over the past 150 years. However, even if Marx can offer important
insights for understanding modern capitalism, what about his claim
that communism is the future of humanity? Surely the collapse of
the Soviet bloc, China’s economic reforms, and the implosion of left
organisations across the world prove that Marx was wrong?
Contributors to this book beg to differ. Anti-Capitalism: A Marxist
Introduction explains the structural features and the main shortcom-
ings of modern capitalism, in order to substantiate our case against
capitalism as a system. Chapters 1, 2 and 3 show that Marx’s value
theory provides important insights for understanding the modern
world, including the exploitation of the workers, the sources of
corporate power and the sickening extremes of overconsumption
and widespread poverty. Chapters 5, 10 and 17 claim that classes
exist, and that class struggle is, literally, alive and kicking around us.
Chapters 4 and 6 show that technical change is not primarily driven
by the urge to produce cheaper, better or more useful goods, but by
the imperatives of profit-making and social control. Chapter 8
reviews the driving forces of capitalism across history, and Chapter
7 shows that capitalism is inimical to the Earth’s ecological balance.
Whereas environmental sustainability demands a very long-term cal-
culation of costs and benefits, capitalism is based on short-term
rationality and profit maximisation. This social system must to be
confronted, in order to preserve the possibility of human life on this planet.
Chapters 9 to 16 challenge other idols of contemporary thought,
including the claims that capitalism promotes democracy, world
peace and equality within and between nations, that every debt
must be paid, that globalisation is unavoidable and unambiguously
good, that national states are powerless, and that economic crises
can be eliminated. Finally, Chapters 18 and 19 argue that capitalism
is both unsustainable and undesirable. In our view, communism is
justified not only on material but, especially, on human grounds.
Much of what we argue is obvious. Yet often the obvious must be
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demonstrated over and over again, until it becomes self-evident to
the majority.
This book also challenges the knee-jerk reaction against critiques
of contemporary capitalism, the trite motto that ‘there is no alter-
native’ (TINA). Leading proponents of TINA include rapacious
free-marketeers, prematurely aged philosophers of the ‘Third Way’,
delusional economists, opportunistic politicians, corrupt bureau-
crats, bankrupt journalists and other desperados. They claim that
human beings are genetically programmed to be greedy, that
capitalism is the law of nature, that transnational capital is usually
right, and that non-intrusive regulation is possible when it goes
wrong. They argue that capitalist societies, even though historically
recent, will last forever, and that the triumph of the market should
be embraced because it is both unavoidable and advantageous to all.
They reassure us that massive improvements in living standards are
just around the corner, and that only a little bit more belt-tightening
will suffice.
Deceptions such as these have helped to legitimise the growing
marketisation of most spheres of life in the last 20 years. In rich
countries, this has taken place primarily through the assault on the
social safety nets built after the Second World War. Low paid and
insecure jobs have been imposed on millions of workers, the
provision of public services has been curtailed, and the distribution
of income and wealth has shifted against the poor. In poor countries,
national development strategies have collapsed nearly everywhere.
Under Washington’s guidance, a bleak ‘era of adjustment’ has taken
hold across the so-called developing world. In these countries, low
expectations and policy conformity are enforced by usurious foreign
debts and neoliberal policy despotism monitored by the IMF, the
World Bank and the US Treasury Department. Recent experience
abundantly shows that neoliberalism tramples upon the achieve-
ments, lives and hopes of the poor everywhere, and that it often
leads to disastrous outcomes (see below).3
In spite of the much repeated claim that history is dead or, more
precisely, that significant social and political changes are no longer
possible, the neoliberal-globalist project has been facing difficult
challenges. It has suffered legitimacy problems in the United States
because of falling wages in spite of rising national income, in
Western Europe because of simmering social conflicts triggered by
high unemployment and stagnant living standards, and in Japan
because of the protracted economic crisis. It has had to contend with
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the social and economic collapse of the former Soviet bloc, and with
repeated financial and balance-of-payments crises in South East Asia
and Latin America. It has also had to explain away the economic
and political meltdown in sub-Saharan Africa, and to face frequent
wars and unprecedented levels of terrorist activity across the world.
Last but not least, neoliberal globalism has been confronted by
profound disillusion everywhere, and by vibrant protests and mass
resistance, especially in Argentina, Ecuador, Indonesia, Mexico, the
Occupied Territories and South Korea.
In this context, the recent ‘anti-globalisation’ or ‘anti-capitalist’
protest movements are important for two reasons. First, they are
global in scope, combining campaigns that were previously waged
separately. In doing so, they have raised questions about the systemic
features of capitalism for the first time in a generation. Second, they
have shed a powerful light upon the dismal track record of contem-
porary capitalism. Although initially marginalised, these movements
shot to prominence in the wake of the Zapatista rebellion, the Jubilee
2000 campaign and the confrontations that brought to a halt the
Seattle WTO meeting. The new movements have joined vigorous
mass demonstrations in several continents, and they have shown
their opposition to the monopolistic practices of the TNCs,
including pharmaceutical giants and corporations attempting to
force-feed the world with genetically modified crops. They have
challenged patent laws and clashed against other forms of ‘corporate
greed’, leading to boycotts against Shell, Nike and other companies.
These movements have also targeted repressive regimes, such as
Myanmar’s military dictatorship, and shown international solidarity,
for example, with the Zapatistas and the Brazilian landless peasants.
In spite of their rapid growth, these movements remain
fragmented. Different organisations pursue widely distinct objectives
in diverse ways, and occasionally come into conflict with one
another. The lack of a common agenda can hamper their ability to
challenge established institutions and practices. Several pressure
groups, including the environmental, peace, women’s, gay, lesbian,
anti-racist and animal liberation movements, international solidarity
organisations, trade unions, leftist parties and other groups, defend
their autonomy vigorously, sometimes allowing sectional interests to
cloud their mutual complementarity. In spite of these limitations,
political maturity, organisational flexibility and heavy use of the
internet have allowed the new movements to expand. Moreover,
they have often been able to transcend the rules, habits and con-
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ventions that constrain the NGOs, trade unions, political parties and
other institutions of the left. Their recent successes show that there
is widespread discontent and fertile ground for the discussion of
alternatives, at different levels, around the world.
Continuing confrontation against the neoliberal-globalist project
and its destructive implications is inevitable. Perhaps more signifi-
cantly, it is likely that the anti-capitalist feeling previously
channelled through trade unions and political parties of the left has
found new outlets. If true, this shift will have important implica-
tions for the political landscape.
The growing opposition to the neoliberal–globalist project was tem-
porarily checked by the tragic events of 11 September 2001. In
response to those terrorist atrocities, the US government has
unleashed a loosely targeted state terrorist campaign against millions
of people, both at home and abroad. The most important thrust of
this strategy has been the so-called ‘infinite war’ against elusive (but
always carefully selected) adversaries. Rather than helping to resolve
existing grievances, US state terrorism has provided further excuses
for private terrorists around the world to target the United States and
its citizens. In our view, all forms of terrorism – whether private,
state-sponsored or state-led – are reactionary, repulsive, destructive,
criminal and utterly unacceptable.
The so-called ‘war on terror’ has been rationalised by the naked
conflation between the neoliberal-globalist agenda and US imperi-
alism. The global elite (the Washington-based ‘international
community’) has brazenly subordinated international law to US
foreign policy interests. It has granted itself a licence to apply
unlimited force against unfriendly regimes (‘rogue states’) or social
movements (‘terrorist organisations’), either for so-called humani-
tarian reasons or in order to defeat whatever it decides to call
The overwhelming military superiority of the United States allows
its government to pound foreign adversaries anywhere, secure in the
knowledge that its own casualties will be small and that the damage
to the other side will eventually crack the opposition. The war
unleashed by the United States and its vassal states against Iraq, in
1990–91, and further military action in Afghanistan, Bosnia, Kosovo,
Palestine, Panama, Sierra Leone, Somalia, Sudan and elsewhere have
brought important gains to the global elite, not least unprecedented
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security guarantees for its business interests. However, the cost of
these operations is incalculable. Conveniently, the victims are
almost invariably dark-skinned and poor. They speak incompre-
hensible languages and worship lesser gods. They live in intractable
trouble spots, which they are rarely allowed to leave because (in
contrast with their money and goods) they are not welcome abroad.
Their fate is of little concern, as long as they ultimately comply with
Western geopolitical designs.
The tragedy of 11 September has revealed the unexpected limits of
neoliberal globalism. The depth of dissatisfaction with Washington’s
political and economic rule has been exposed, and the claim that
trade and financial liberalisation can resolve the world’s most
pressing problems has suffered a severe blow. The argument that
states are powerless against the forces of globalisation has been
undermined by the expansionary economic policies adopted in the
wake of the attacks, and by the co-ordinated wave of repression
unleashed across the world. Repression included not only the restric-
tion of civil liberties, but also refined controls against capital flows
and the limitation of property rights, for example, against pharma-
ceutical patents in the United States at the height of the anthrax
threat. Finally, important anti-war movements emerged in several
countries, especially the United Kingdom and – courageously – the
United States.
In the wake of the tragedy of 11 September, the global elite seized
the opportunity to open its batteries against all forms of dissent.
Amid a rising tide of xenophobia and racism, rabid journalists cried
out that anti-corporate protests were also anti-American, and
scorned principled objections against the ‘war on terror’. Colourful
politicians on both sides of the Atlantic, eager to please their masters,
even claimed that the new protest movements share the same
objectives as Osama bin Laden.5
Difficulties such as these bring to the fore the need for clarity of
objectives and careful selection of targets when campaigning against
important features or consequences of modern capitalism. Unless
our objectives are clear and the instruments appropriate, we will be
unable to achieve our goals, at great cost to ourselves and the world.
Four issues play critical roles in the analysis of contemporary
capitalism and, consequently, in the search for alternatives: neolib-
eralism, globalisation, corporate power and democracy. It is to these
that we now turn.
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In the last 20 years, for the first time in history, there has been a
concerted attempt to implement a single worldwide economic
policy, under the guise of neoliberalism. The IMF, the World Bank,
the US Treasury Department and, more recently, the European
Central Bank (ECB), have strongly campaigned for neoliberalism,
and they have sternly advised countries everywhere to abide by their
commands. In this endeavour, they have been supported by the
mainstream media, prestigious intellectuals, bankers, industrialists,
landowners, speculators and opportunists vying for profits in every
corner of the globe.
The spread of neoliberalism is due to several factors. These include
the rise of conservative political forces in the United States, the
United Kingdom and other countries, and the growing influence of
mainstream theory within economics, both in its traditional form
and through new institutionalism.6The forward march of neoliber-
alism was facilitated by the perceived failure of Keynesianism in the
rich countries and developmentalism in poor ones, and by the
collapse of the Soviet bloc. Finally, the US government has leaned
heavily on the IMF, the World Bank, the United Nations and the
World Trade Organisation (WTO) to promote neoliberal policies
everywhere. Pressure by these organisations has validated the
increasing use of aid, debt relief and foreign investment as tools with
which to extract policy reforms from foreign governments.
Neoliberal policies are based on three premises. First, the
dichotomy between markets and the state. Neoliberalism presumes
that the state and the market are distinct and mutually exclusive
institutions, and that one expands only at the expense of the other.
Second, it claims that markets are efficient, whereas states are
wasteful and economically inefficient. Third, it argues that state
intervention creates systemic economic problems, especially
resource misallocation, rent-seeking behaviour and technological
These premises imply that certain economic policies are ‘naturally’
desirable. These include, first, rolling back the state in order to
institute ‘free markets’, for example, through privatisation and dereg-
ulation of economic activity. Second, tight fiscal and monetary
policies, including tax reforms and expenditure cuts, in order to
control inflation and limit the scope for state intervention. Third,
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import liberalisation and devaluation of the exchange rate, to
promote specialisation according to comparative advantage,
stimulate exports and increase competition in the domestic market.
Fourth, liberalisation of capital flows, to attract foreign capital and
increase domestic capacity to consume and invest. Fifth, liberalisa-
tion of the domestic financial system, to increase savings and the
rate of return on investment. Sixth, labour market flexibility, to
increase the level of employment. Seventh, overhauling the legal
system, in order to create or protect property rights. Eighth, political
democracy, not in order to safeguard freedom and human rights but,
primarily, to dilute state power and reduce the ability of the majority
to influence economic policy.
It has been obvious for many years that these policies are
successful only exceptionally. Economic performance during the last
20 years, in rich and poor countries alike, has been disappointing,
with growth rates usually lagging behind those in the preceding
(Keynesian) period. Poverty levels have not declined significantly, if
at all; inequality within and between countries has increased sub-
stantially; large capital flows have been associated with currency
crises, and the fêted economic transition in the former Soviet bloc
has been an abysmal failure (at least for the majority). Neoliberals
invariably claim that these disasters show the need for further
reform. However, it is equally logical, and more reasonable, to
conclude that the neoliberal reforms share much of the blame for
the dismal economic performance in rich as well as poor countries.
The above conclusion is reinforced by five theoretical arguments.7
First, neoliberal reforms introduce policies that destroy large
numbers of jobs and entire industries, tautologically deemed to be
‘inefficient’, whilst relying on the battered patient to generate
healthy alternatives through the presumed efficacy of market forces.
This strategy rarely works. The depressive impact of the elimination
of traditional industries is generally not compensated by the rapid
development of new ones, leading to structural unemployment,
growing poverty and marginalisation, and to a tighter balance-of-
payments constraint in the afflicted countries.
Second, neoliberal faith in the market contradicts even elementary
principles of neoclassical economic theory. For example, in their
‘second best analysis’, developed half a century ago, Lipsey and
Lancaster demonstrate that, if an economy departs from the
perfectly competitive ideal on several counts (as all economies
invariably do), the removal of one ‘imperfection’ may not make it
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more efficient. Therefore, even mainstream economic theory can
explain why neoliberal reforms can be worse than useless.
Third, the presumption that the market is virtuous while the state
is wasteful, corrupt and inefficient is simply wrong. This false
dichotomy is often employed in order to justify state intervention on
behalf of capital (for example, privatisation and the curtailment of
trade union rights facilitate capitalist abuse, consumer ‘fleecing’ and
the increased exploitation of the workforce). In fact, states and
markets are both imperfect and inseparable. They include many
different types of institutions, whose borders cannot always be
clearly distinguished. For example, the inland revenue service,
financial services regulatory agencies, accounting and consultancy
firms and state-owned and private banks are inextricably linked to
one another, but the precise nature of their relationship is necessar-
ily circumstantial.
Fourth, economic policies normally do not involve unambiguous
choices between state and markets but, rather, choices between
different forms of interaction between institutions in the two
spheres. Privatisation, for example, may not imply a retreat of the
state or even increased efficiency. The outcome depends on the firm,
its output, management and strategy, the form of privatisation, the
regulatory framework, the strength and form of competition, and
other factors.
Fifth, developed markets arise only through state intervention. The
state establishes the institutional and regulatory framework for
market transactions, including property rights and law enforcement.
It regulates the provision of infrastructure, ensures that a healthy,
trained and pliant workforce is available, and controls social conflict.
The state establishes and regulates professional qualifications and
the accounting conventions, and develops a system of tax collection,
transfers and expenditures that influences the development of
markets, firm performance, and employment patterns. Since
capitalist economies rely heavily and necessarily on state institu-
tions, attempts to measure the degree of state intervention are simply
misguided. What really matters is the gains and losses for each type
of state policy, and the implementation of purposeful and co-
ordinated policies.
This approach to markets and states does not deny the Marxian
claim that the state is ‘a committee for managing the common affairs
of the whole bourgeoisie’8or that it is ‘an essentially capitalist
machine … the state of the capitalists, the ideal collective body of all
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capitalists’.9The reasons are easy to understand. First, the state is
constitutionally committed to capitalism by custom and law, and state
institutions are geared towards, and have been historically shaped
by the development of markets, wage employment and profit-
making activities. Second, the staffing and policy priorities of the
state institutions are heavily influenced by the interest groups rep-
resented in and through them, where capital tends to be hegemonic.
Third, the reproduction of the state relies heavily on the fortunes of
capital, because state revenue depends upon the profitability of
enterprise and the level of employment. Fourth, the economic and
political power of the capitalists, and their influence upon culture,
language and habits, is overwhelming, especially in democratic
societies. Although the commodification of votes, state control of
the media and the imposition of openly ideological selection criteria
for state officials are usually associated with the strong-arm tactics of
African chiefs and Latin American landlords, they are nowhere more
prominent than in the United States.
In conclusion, economic policy and its effects are both context-
dependent and structured by the needs of capital. On the one hand,
pressure for or against specific policies can be effective, and the
ensuing policy choices can improve significantly the living
conditions of the majority. On the other hand, these potential
successes are limited. When faced with ‘unacceptable’ policies, the
capitalists will refuse to invest, employ, produce and pay taxes; they
will trigger balance-of-payments crises, cripple the government,
paralyse the state and hold the workers to ransom. And they will not
hesitate to resort to violence to defend their power and privileges.
History abundantly shows that most state institutions, including the
police and the armed forces, will rally around the moneyed interests
and seek to protect them against challenges from below.
‘Hyper-globalism’ is the international face of neoliberalism. During
the 1990s, analysts and pundits stridently claimed that develop-
ments in technology, communications, culture, ideology, finance,
production, migration and the environment have modified the
world beyond recognition. Drawing on these superficial insights, the
‘hyper-globalists’ argue that globalisation entails the supremacy of
international over domestic institutions, the decline of state power,
and the relentless domination of social life by global markets.10
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Neoliberals have been at the forefront of the hyper-globalist
assault. Most neoliberals proclaim both the virtues and the
inevitability of the coming world market for everything (except
labour, to be kept caged behind borders). They argue that markets
ought to reign unimpeded by national legislation and meddling
international organisations and, implausibly, claim that policy sub-
ordination to global imperatives is essential for national welfare.
Hyper-globalist views have been discredited by a range of critical
studies. These studies show, first, that global integration builds upon,
rather than denies, the existence of nation states, which remain the
seat of legitimacy and political and economic power. Rather than
withering away because of the penetration of TNCs, vast interna-
tional capital flows and the weight of international treaties, the
critics have argued that powerful states promote international inte-
gration in pursuit of their own agendas, especially improved
competitive positions for home capital in key business areas. Second,
global neoliberalism has been associated with undesirable outcomes,
including increasing poverty and inequality, the debasement of
democracy and the erosion of the welfare state, to the benefit of
powerful corporations and financial interests. Third, the critical
literature claims that globalisation is neither new nor overwhelm-
ing. It was preceded by similar episodes, especially before the First
World War; it is not truly ‘global’, being largely restricted to trade
and investment flows between developed countries and, even in this
restricted sphere, capital is not ‘free’ to move at will; finally, in spite
of appearances to the contrary, the net macroeconomic effect of
trade and financial liberalisation is often very small. Fourth, the
critics argue that the hyper-globalists conflate ‘global’ markets with
the theoretical construct of perfect competition, characterised by
perfect information and costless capital mobility. This confusion
provides ideological cover for pro-business policies and for aggressive
state intervention to foster private capital accumulation.
These critiques of hyper-globalism have led to three policy con-
clusions, which may or may not be mutually compatible. Some have
argued for ‘localisation’, or the decentralisation of the world
economy with increasing reliance on local production and exchange.
Others have emphasised the need to democratise policy-making,
including an increased role for sector-specific trade and industrial
policy and national controls on capital flows. Yet others have pursued
‘internationalisation’, or the reform and revitalisation of interna-
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tional institutions (the UN, IMF, World Bank, WTO, EU, ECB, and so
on), in order to promote the positive aspects of globalisation.11
Unfortunately, there are severe problems with each of these alter-
natives. ‘Localisation’ promotes small capital vis-à-vis large capital,
represented by TNCs. This can be analytically misguided, because it
ignores the close relationship that exists between large and small
firms. For example, small firms often cluster around and supply parts
and other inputs to large firms, provide cleaning and maintenance
services, and so on. Their relationship can be so close as to render
‘separation’ between these firms impossible. Moreover, small firms
tend to be financially fragile, lack the resources for technical
innovation and the adoption of new technologies developed
elsewhere, cannot supply large markets, and often treat their
workforces more harshly than large firms. Finally, curbing the TNCs
will inevitably reduce the availability of important commodities
across the globe, including foodstuffs, electronic appliances and
industrial machinery.
Attempts to ‘recover’ industrial policy for progressive ends can be
successful; however, misguided policies can be useless and even
counterproductive. Finally, ‘internationalisation’ is utopian. Most
international institutions are firmly under the grip of the neoliberal-
globalist elites, and it is unrealistic to expect that control can be
wrested from them. In most cases, these institutions ought to be
abolished, to be replaced, when necessary, by alternatives designed
from scratch.
The insufficiencies of these critiques of hyper-globalism are often
due to the misguided opposition between the global, national and
local spheres. This separation mirrors that between markets and
states, discussed above. In general, those spheres should not be
contrasted as if they were mutually exclusive, because they
constitute one another and can be understood only through their
mutual relationship.
Specifically, the presumption that the local and national
economies are the building blocs of the global economy is
misguided. The so-called ‘global’ economy is nothing but the
commuters daily going to the Manhattan financial district and the
City of London, manual workers clocking into position in the Ruhr,
English-speaking call-centre workers cycling to their jobs in Mumbai,
stevedores working in Maputo, and hundreds of millions of workers
producing for people living in distant lands, and consuming not
only locally produced goods but also commodities produced
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elsewhere. In this sense, there is little difference between domestic
and cross-border economic transactions, and economic growth nec-
essarily encompasses the simultaneous development of the local,
national and global economies. In fact, there are reasons to believe,
first, that important aspects of production and finance have always
been ‘international’. Second, that long-distance trade has been more
important for social and economic development than exchanges
between neighbours. Third, that capitalism originally developed
neither in a single country nor in discrete regions, but locally,
regionally and internationally at the same time.
Terms like ‘globalisation’ or the ‘internationalisation of production
and finance’, on their own, are simply devoid of meaning. Capital is
neither national nor international; it is a relationship between people
that appears as things or money. Consequently, there is nothing
intrinsically national or international about capitalist institutions,
production or practices. Detailed studies have shown, for example,
that ‘globalisation’ is not a homogeneous, unidirectional and
inevitable process taking place between neatly separated national
economies. Globalisation does not tend to ‘eliminate’ the nation
state, and recent developments in production, finance, culture, the
environment, and so on are profoundly different from one another
and must be analysed separately. What is often called ‘globalisation’
is, in fact, a set of more or less interlocking processes, some articu-
lated systemically and others largely contingent, moving in different
speeds and directions across different areas of the world economy.
Some of these processes tend to erode national states and local
identities, while other reinforce them.
Both wholesale support for ‘globalisation’ and wholesale
opposition to it are profoundly misguided (for example, it makes no
sense for a global protest movement to be called ‘anti-globalisation’).
What matters, at the local, national and global levels, is what is
produced and how, by whom, and for whose benefit. In the early
twenty-first century, as in the mid-nineteenth century, the distances
between people matter less than the relationships between them.
Similarly, geography remains less important than the social
structures of control and exploitation that bind people together
within cities, between regions, and across the world.
Corporate power
The new ‘anti-capitalist’ movements are famously critical of the large
corporations, especially TNCs. This section argues that the market
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power and political influence of TNCs raise important ethical and
economic questions. However, TNCs are not new, and their recent
expansion is not the harbinger of fundamental changes in the
economic and political landscape. Therefore it would be misguided
to try to turn them into the main focus of resistance.
Several commentators sympathetic to the new movements claim
that one of the most important problems of contemporary
capitalism is the excessive tilting of power towards the large corpo-
rations. The causes and implications of this process are usually left
unexamined, although they are presumably related to neoliberalism
and globalisation. It is also left unclear what should be done about
it, other than imposing unspecified curbs against corporate power.
This is clearly insufficient. Arguments along those lines are often
fruitless because they are not based on a consistent theory of the
state and its relationship to the corporations, and on a theory of
monopoly power and capitalist behaviour, without which corporate
practices cannot be understood. For example, although it is right to
claim that the state is controlled by capitalist interests and forces
(see above), it is wrong to ascribe boundless power to specific groups
or interests, such as the TNCs, financiers, landlords or foreign capi-
talists. No social group can exist in isolation, and none exercises
unlimited power.
Let us analyse in more detail the claim that ‘large firms’ control
production, exchange, distribution and the political process. This
view is incorrect for four reasons. First, it artificially disassembles
capital into ‘large’ and ‘small’ units (see above). Second, it suggests
that small firms, such as tiny grocery stores, family-owned
newsagents and small farms conform more closely to local interests,
as if they were independent of the large firms which they represent
and that provide them with inputs and markets, and as if small firms
were renowned for their promotion of employee interests. Third, it
erroneously implies that the evils of capitalism are due to the large
firms only, and that these wrongs can be put right by anti-monopoly
legislation and domestic market protection against foreign firms.
Fourth, this view misrepresents ‘competitive capitalism’, as if it had
actually existed at some idyllic point in the past. In this idealised
image of Victorian capitalism, unsightly features such as poverty,
imperialism, slavery, genocide and the forces that transformed ‘com-
petitive’ into ‘monopoly’ capitalism are arbitrarily expunged.
Sleights of hand such as these, and the lack of a theory of
capital, the state, competition and monopoly power, explain the
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coexistence of critiques of corporate practices with pathetic
apologias for capitalism. For example, in the words of a well-known
critic of ‘globalisation’:
My argument is not intended to be anti-capitalist. Capitalism is
clearly the best system for generating wealth, and free trade and
open capital markets have brought unprecedented economic
growth for most if not all of the world. Nor is … [it] anti-business
… [U]nder certain market conditions, business is more able and
willing than government to take on many of the world’s problems
I mean to question the moral justification for a brand of
capitalism … in which we cannot trust governments to look after
our interests in which unelected powers – big corporations – are
taking over governments’ roles.12
This approach is profoundly misguided. The outrageous behaviour
of large corporations, from the East India Company to Microsoft,
and from ITT to Monsanto, is not primarily due to their size, greed,
or the support of states that they have hijacked at some mysterious
point in time. Corporate practices and monopoly power are due to
the forces of competition. By the same token, our collective addiction
to McChickens and corporate logos is not simply due to the crude
manipulation of our desires by brutish TNCs. Corporate behaviour,
and its welfare implications, is ultimately rooted in the dominance
of a system of production geared towards private profit rather than
collective need.
Several critics have recently highlighted the increasing emasculation
of democracy, the erosion of citizenship and the declining account-
ability of the state even in ‘advanced’ democratic societies. These
processes are often blamed on the capture of the state by corporate
and other interest groups. However, this view is misleading, and the
explanation is inadequate.
This section briefly reviews the relationship between the state,
capital, the political regime and economic policy. Along with most
of the literature, it claims that political freedom is immensely
valuable, and that the spread of democracy across the world has been
possible only through the diffusion of capitalism. However, this
section also shows that capitalism necessarily limits democracy, and
Introduction 15
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that the expansion of democracy into critically important areas of
life requires the abolition of capitalism.13
A remarkable distinction between precapitalist and capitalist
societies is the separation, in the latter, between the ‘economic’ and
‘political’ spheres. This separation means that, under capitalism,
‘economic’ processes – including the production, exchange and dis-
tribution of goods and services, the compulsion to work and the
exploitation of the workers – are generally carried out ‘impersonally’,
through market mechanisms. It is completely different in pre-
capitalist societies. In these societies, economic processes are directly
subordinated to political authority, including both personal
command and state power, and they generally follow rules based on
hierarchy, tradition and religious duty.
The separation between the economic and political spheres has
three important implications. First, it leads to the constitution of a
separate ‘political’ sphere. For the first time in history, the owners
of the means of production are relieved from public duty, which
becomes the preserve of state officials. The separation of the political
sphere establishes the potential and limits of state intervention in
the economy, including the scope of economic policy and the pos-
sibility of ‘autonomous’ political change, with no direct implication
for the ‘economic’ order. The substance and degree of democracy is
a case in point (see below).
Second, separation entrenches capitalist power within the
‘economic’ sphere. Manifestations of economic power include the
ownership and control of means of production (the factories,
buildings, land, machines, tools and other equipment and materials
necessary for the production of goods and services), the right to
control the production process and discipline the workforce, and the
ability to exploit the workers.
Third, the separation between the economic and political spheres
is relative rather than absolute. On the one hand, the ‘political’
power of the state and the ‘economic’ power of the capitalists may
lead to conflict, for example, over the conditions of work, the
minimum wage, pension provisions and environmental regulations.
On the other hand, we have already seen that modern states are
essentially capitalist. Experience shows that the state will intervene
directly both in ‘political’ conflicts (for example, the scope of
democratic rights) and in purely ‘economic’ disputes (for example,
pay and conditions in large industries), if state officials believe that
their own rule or the reproduction of capital are being unduly
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challenged. When intervening, the state relies on the power of the
law, the police and, in extremis, the armed forces.
The existence of a separate political sphere, explained above,
implies that capitalism is compatible with political (formal or
procedural) democracy. Political democracy includes the rule of law,
party-political pluralism, free and regular elections, freedom of the
press, respect for human rights, and other institutions and practices
that are essential for the consolidation of human freedom.
However, capitalism necessarily limits the scope for freedom
because it is inimical to economic (substantive) democracy. These
limits are imposed by the capitalist monopoly over the economic
sphere, explained above. For example, the franchise and political
debate are not generally allowed to ‘interfere’ with the ownership
and management of the production units and, often, even with the
composition of output and the patterns and conditions of
employment, in spite of their enormous importance for social
welfare. In other words, even though political campaigns can
achieve important transformations in the property rights and work
practices, the scope for democratic intervention in the economic
sphere is always limited.
The limits of capitalist democracy come into view, for example,
when attempts to expand political control over the social affairs are
constrained by the lack of economic democracy – typically, when
governments or mass movements attempt to modify property rights
by constitutional means. The resulting clashes were among the main
causes of the defeat of the Spanish Republic, the overthrow of
Chilean president Salvador Allende and, less conspicuously but
equally significantly, the failure of attempted land reforms across
Latin America. Mass movements attempting to shift property rights
by legal means but against the interests of the state have also been
crushed repeatedly, in many countries. In these clashes, the success
of the conservative forces often depends upon the arbitrary
limitation of political democracy. This implies that political
democracy is rarely able to challenge successfully the economic
power of the capitalist class (embodied in their ‘core’ property
rights). This is not a matter of choice: the advance of political
democracy is permanently limited by the lack of economic democracy.
Tensions between economic and political democracy generally
surface through the ebb and flow of political democracy and civil
rights. These tensions are nowhere more visible than in the
‘developing’ countries. In recent years, multi-party democracy and
Introduction 17
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universal suffrage have been extended across the world, the
repressive powers of the state have been curtailed by the United
Nations and the International Court of Justice, and by the precedents
established by the Pinochet affair and the prosecution of officials of
the former Rwandan government.
In spite of these important advances, the forward march of
political democracy has been severely hampered by the exclusion of
economic matters from legitimate debate. The imposition of neolib-
eralism across the world is the most important cause of these
limitations. Because of neoliberalism, worldwide policy-making
capacity has been increasingly concentrated in Washington and in
Wall Street, leaving only matters of relatively minor importance
open for debate, both in ‘developing’ and developed countries.
Specifically, in the ‘newly democratic’ states of Latin America, sub-
Saharan Africa and South East Asia the transitions towards political
democracy were generally conditional upon compromises that ruled
out substantive shifts in social and economic power. Even more
perversely, in these countries the imposition of neoliberal policies often
depended upon the democratic transition. After several decades
attempting to subvert democratic governments and shore up dicta-
torships across the globe, the US government and most local elites
have realised that democratic states can follow diktats from
Washington and impose policies inimical to economic democracy
more easily and reliably than most dictatorships. This is due to the
greater political legitimacy of formally democratic governments.
This argument can be put in another way. Repression is often
necessary in order to extract the resources required to service the
foreign debt, shift development towards narrow comparative
advantage and support parasitical industrial and financial systems.
However, dictatorships can rarely impose the level of repression
necessary to implement neoliberal policies. This is something that
only democratic states can do successfully, because their greater
legitimacy allows them to ignore popular pressure for longer (however, the
recent upheavals in Argentina show that this strategy is also limited).
In this sense, the neoliberal-globalist project involves a funda-
mental inconsistency: it requires inclusive political systems to enforce
excluding economic policies. These policies demand states hostile to
the majority, even though democratic states are supposedly
responsive to democratic pressure. As a result, we see across the
world the diffusion of formally democratic but highly repressive states.
We also see the perpetuation of social exclusion and injustice, in
18 Anti-Capitalism
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spite of political pluralism and the consolidation of democratic insti-
tutions in many countries.
‘Democratic neoliberalism’ has consolidated economic apartheid
both within and between countries. Economic apartheid includes
the increasing concentration of income and wealth, the segregation
of the upper classes in residential, work and leisure enclosures, their
unwillingness and inability to interact with the poor in most spheres
of social and civic life, the diffusion of organised and heavily armed
criminal gangs, and unbridled corruption in state institutions.
Economic apartheid and the evacuation of economic democracy
can be at least partly reversed through successful mass struggles.
These struggles can limit the power of industrial and financial
interests, and open the possibility of policy alternatives leading to
improvements in the living conditions of the majority. However,
democracy can be extended into critically important spheres of life
only if the capitalist monopoly over the economic sphere is
abolished. In this sense, the success of the struggle depends on the
extent to which the democratic movement becomes anti-capitalist.
The previous section has shown that we should not expect signifi-
cant transformations of contemporary capitalism through appeals
for the restoration of state power, the reform of international insti-
tutions, campaigns for corporate responsibility or the expansion of
formal democracy. Reforms are certainly possible in these and in
other areas, and they can increase greatly the power and influence
of the majority. However, these reforms are always limited and, even
if successful, they will be permanently at risk because they fail to
address the root cause of the problems of contemporary capitalism.
Strategic success depends on five conditions. First, holism.
Successful challenges against different forms of discrimination,
‘shallow’ democracy, the inequities of debt, the destructive effects
of trade and capital flows, environmental degradation, corporate
irresponsibility, and so on, require the consolidation of sectoral
struggles into a single mass movement against the global rule of
capital – the root cause of these wrongs.
Second, whilst the movement ought to remain international, it
should focus its energies in the national terrain. This is only partly
because the potential efficacy of the struggle is maximised at this
level (it is much harder to mobilise successfully in the international
sphere). It is also because national states play an essential role in the
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choice and implementation of economic policy, the operation of
markets and the limitation of corporate power. Moreover, ‘global
capitalism’ is organised primarily nationally, and its actors (TNCs,
international organisations, global markets, and so on) depend
heavily upon state promotion and regulation.
It was shown above that there is no such thing as global capitalism
independently of national states and local workers and capitalists.
By the same token, the most effective means of influencing ‘global’
developments is by exercising pressure upon national states. In fact,
it is because the national states are the critical and, at the same time,
the weakest links in the ‘global economy’ that capital endlessly
repeats the myth that globalisation renders the state powerless and
Third, the movement should develop further the ability to mobilise
large numbers of people by non-traditional means, and pursue innovative
forms of struggle.
Fourth, the growth of the movement depends heavily upon its
ability to incorporate the immediate concerns of the majority. These
includes issues related to unemployment and overwork, low pay,
lack of employment security and rights in the workplace, the degra-
dation of heavily populated environments, the provision of public
health, sanitation and clean and efficient transport and energy, and
so on. Success also requires closer attention to the workplace, which
is the basis of capitalist domination and economic power. Unity
between economic and political struggles, and challenges against
both capital and the state, especially through mass confrontation
against state economic policy and its consequences, are important
conditions for growth and victory.15
Fifth, given the limits of political democracy and state power, the
achievement of equality and the elimination of poverty and
exploitation within and between countries demands transcendence,
or the abolition of capitalism. These conclusions are explained and
substantiated by every essay in this book.
Social reformers, utopian socialists, anarchists, social democrats,
Marxists and many others have questioned the legitimacy and desir-
ability of capitalism for at least two centuries. However, it is beyond
dispute that Marxism provides the basis for the most comprehensive
critique of this social and economic system, including the develop-
ment of the radical alternative to capitalism: communism. The
20 Anti-Capitalism
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Marxist analysis of transcendence can be divided into two areas, the
critique of capitalism and the importance of communism.
Several problems of contemporary capitalism have been discussed
above and, in each case, the root cause of these problems and the
limits to their potential solution under capitalism were highlighted.
Some of these problems can be remedied within the current system,
for example, the erosion of political democracy, lack of corporate
responsibility, and absolute poverty. In contrast, other problems
cannot be resolved, because they are features of capitalism; among
them, unemployment, exploitation of the workforce, economic
inequality, the encroachment of work upon free time, systematic
environmental degradation, the lack of economic democracy, and
production for profit rather than need. Problems such as these can,
at best, be concealed by propaganda and mitigated by economic
Marxists claim that the limitations of capitalism can be eliminated
only through the institution of another form of social organisation,
communism. The misrepresentation of communism in the past two
centuries cannot be put right in this book. However, three
comments are in order. First, communism should not be confused
with the political systems associated with the USSR or China.16
Second, communism is neither inexorable nor unavoidable.
Capitalism will change and, ultimately, be displaced, only if over-
whelming pressure is applied by the majority. Failing that, capitalism
may persist indefinitely, in spite of its rising human and environ-
mental costs. Third, communism is neither an earthly version of
paradise, nor the ‘end of history’. Quite the contrary: communism
marks the end of the prehistory of human society. Communism will
eliminate the socially created constraints of poverty, drudgery,
exploitation, environmental degradation, and other limitations
currently caused by the manic search for profit. Removal of these
constraints will allow history to begin, because human beings will,
finally, free themselves from the dictatorship of moneyed interests,
destitution due to large-scale property, and inequality engendered
by wealth and privileged upbringing. Economic equality is essential for
political equality, thus allowing everyone to become a valued member
of a truly open society.
The struggle against capitalism is part and parcel of the struggle
for democracy in society and in the workplace, against profit and
privilege, and for equality of opportunity for everyone. These are
Introduction 21
Saad-Filho 01 chaps 3/9/02 4:08 pm Page 21
the struggles that define the new movements, but taken to their
logical conclusion.
Arestis, P. and Sawyer, M. (1998) ‘New Labour, New Monetarism’, Soundings,
Summer; reprinted in European Labour Forum 20, Winter, 1998–99.
Barker, C. (2001) ‘Socialists’, in E. Bircham and J. Charlton (eds.) Anti-
Capitalism: a Guide to the Movement. London: Bookmarks.
Callinicos, A. (2001) ‘Where Now?’, in E. Bircham and J. Charlton (eds) Antic-
ipation: A Guide to the Movement. London: Bookmarks.
Chattopadhyay, P. (1994) The Marxian Concept of Capital and the Soviet
Experience: Essay in the Critique of Political Economy. Westport, Conn.:
Engels, F. (1998) Anti-Duhring, CD-Rom. London: Electric Books.
Fine, B. (2001) Globalisation and Development: The Imperative of Political
Economy, unpublished manuscript.
Fine, B., Lapavitsas, C. and Pincus, J. (eds.) (2001) Development Policy in the
Twenty-first Century: Beyond the Post-Washington Consensus. London:
Fine, B. and Stoneman, C. (1996) ‘Introduction: State and Development’,
Journal of Southern African Studies 22 (1), pp. 5–26.
German, L. (2001) ‘War’, in E. Bircham and J. Charlton (eds.) AntiCapitalism:
A Guide to the Movement. London: Bookmarks.
Hertz, N. (2001) The Silent Takeover: Global Capitalism and the Death of
Democracy. London: William Heinemann.
Karliner, J. (2001) ‘Where Do We Go From Here? Pondering the Future of
Our Movement’, CorpWatch, 11 October 2001 (
Marx, K. and Engels, F. (1998) The Communist Manifesto, Cd-Rom. London:
The Electric Book Company.
Radice, H. (2000) ‘Responses to Globalisation: a Critique of Progressive
Nationalism’, New Political Economy 5 (1), pp. 5–19.
WDM (2000) States of Unrest: Resistance to IMF Policies in Poor Countries.
London: World Development Movement (
Wood, E.M. (1981) ‘The Separation of the Economic and the Political in
Capitalism’, New Left Review 127, pp. 66–95.
Wood, E.M. (1988) ‘Capitalism and Human Emancipation’, New Left Review
167, January-February, pp. 3–20
Wood, E.M. (2002) ‘Global Capital, National States’, in M. Rupert and H.
Smith (eds.) Now More Than Ever: Historical Materialism and Globalisation.
London: Routledge, forthcoming.
1. I am grateful to Ben Fine and Mike Lebowitz for their helpful comments
and suggestions.
2. Marx and Engels (1998, pp. 13–14), emphasis added.
3. Resistance against IMF policies in poor countries is documented in WDM
4. See German (2001, pp. 126–127).
22 Anti-Capitalism
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5. ‘G7 activists no better than Bin Laden’ (London Evening Standard,
November 5, 2001). Similar claims were reportedly made by US Repre-
sentative Don Young, US Trade Representative Robert Zoellick and
Italian Prime Minister Berlusconi, among others (Karliner 2001).
6. See Fine, Lapavitsas and Pincus (2001).
7. See Arestis and Sawyer (1998) and Fine and Stoneman (1996), on which
this section draws, and the references therein.
8. Marx and Engels (1998, p. 12).
9. Engels (1998, p. 352).
10. This section draws on the critical surveys by Radice (2000) and,
especially, Fine (2001).
11. For a similar analysis, see Callinicos (2001).
12. Hertz (2001, p. 10).
13. For a detailed analysis, see Wood (1981).
14. See Wood (2002).
15. Barker (2001, p. 333) rightly argues that ‘Putting a brick through the
window of Starbucks is a moral gesture, but an ineffective one.
Organising Starbucks workers is harder, but more effective – and hurts
the Starbucks bosses more … We need to focus on people’s lives as
producers and not simply as consumers – for there is a power in
producers’ hands that consumer boycotts can never match. In any case,
many consumers can’t afford to “choose”‘. Isaac Deutscher made a
similar point to student activists in the mid-1960s: ‘You are efferves-
cently active on the margin of social life, and the workers are passive
right at the core of it. That is the tragedy of our society. If you do not deal
with this contrast, you will be defeated’ (cited in Wood 1988, p. 4).
16. See Chattopadhyay (1994).
Introduction 23
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Part I
Capital, Exploitation and
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1 Value, Capital and
Alfredo Saad-Filho
This chapter explains the essential elements of Marx’s theory of value
and exploitation.2This theory provides the foundation for his
critique of capitalism, and it substantiates Marx’s claim that
capitalism is a historically limited system. Important elements of
Marx’s theory include his explanation of why wage workers are
exploited, the sources of social conflict, the inevitability of, and
systematic form taken by technical change through the growing use
of machinery, the determinants of wages, prices and distribution, the
role of the financial system and the recurrence of economic crises.
If you lift your eyes from this page for a moment, you can see com-
modities everywhere. This book is a commodity and, in all likelihood,
so are your other books, clothes and shoes, your TV, CD player,
computer and other means of information and entertainment, and
your home, bicycle, car and other means of transportation. Your
beauty products are also commodities, and so are your holidays and
food, including ready-made foods and the means to prepare food at
home. Commodities are not only for individual consumption. At
your place of work or study, most things are also commodities. You
live in a world of commodities.
Commodities are goods and services produced for sale, rather than
for consumption by their own producers. Commodities have two
common features. On the one hand, they are use values: they have
some characteristic that people find useful. The nature of their
demand, whether it derives from physiological need, social
convention, fancy or vice is irrelevant for our purposes. What
matters is that commodities must be useful for others, making them
potentially saleable.
On the other hand, commodities have exchange value: they can,
in principle, be exchanged for other commodities (through money,
see below) in specific ratios. For example, one small TV set is
equivalent to one bicycle, three pairs of shoes, ten music CDs, one
Saad-Filho 01 chaps 3/9/02 4:08 pm Page 27
hundred cappuccinos, and so on. Exchange value shows that, in
spite of their distinct use values, commodities are equivalent (at least
in one respect) to one another. In this sense, in spite of their differ-
ences all commodities are the same.
In commodity economies (where most goods and services are
commodities) money fulfils two roles. First, it simplifies the vast
number of bilateral exchange ratios between these commodities. In
practice, only the exchange value of commodities in terms of money
(their price) is quoted, and this is sufficient to establish the equiva-
lence ratios between all commodities. Second, commodity exchanges
are usually indirect, taking place through money. For example, you
do not produce all the goods and services that you want to consume.
Rather, you specialise in the production of one commodity – say,
restaurant meals, if you are a cook – and exchange it for those com-
modities that you want to consume. These exchanges are not direct
(barter), as they would be if cooks offered their dishes to passers-by
in exchange for cinema tickets, shoes, songs and automobiles.
Instead, you sell your talents to a restaurateur in return for money
and, armed with notes and coins (or a chequebook or bank card),
you can purchase what you wish to consume (see Chapter 3).
The double nature of commodities, as use values with exchange
value, has implications for labour. On the one hand, commodity-
producing labour is concrete labour, producing specific use values
such as clothes, food, books, and so on. On the other hand, as was
shown above, when goods are produced for exchange (and have
exchange value) they have a relationship of equivalence to one
another. In this case, labour is also abstract (general) labour. Just like
the commodities themselves, commodity-producing labour is both
general and specific at the same time.
Concrete labour, producing these use values, exists in every type
of society, because people always and everywhere need to appropri-
ate use values for their own reproduction – that is, to reproduce their
own capacities as human beings. In contrast, abstract labour is his-
torically specific; it exists only where commodities are being
produced and exchanged.
Abstract labour has two distinct aspects – qualitative and quanti-
tative – that should be analysed separately.
First, abstract labour derives from the relationship of equivalence
between commodities. Even though it is historically contingent,
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abstract labour has real existence; it is not merely a construct of the
mind. A visit to the local supermarket, for example, shows that your
own labour is actually equivalent to the labours that have produced
thousands of different goods, some of them nearby, and others
halfway across the globe. Labours are equivalent (as abstract labour)
because commodities are produced for exchange. Their equivalence
appears through the convertibility between money and commodi-
ties. When you buy a chocolate bar, for example, you are realising
the equivalence between your own labour – as a cook, for example
– and the labour of the producers of chocolate. The ability of
money to purchase any commodity shows that money represents
abstract labour.
Second, the stability of the exchange values shows that there is a
quantitative relationship between the abstract labours necessary to
produce each type of commodity. However, this relationship is not
direct, as we will see below.
In his Inquiry into the Nature and Causes of the Wealth of Nations,
first published in 1776, Adam Smith claims that in ‘early and rude’
societies goods exchanged directly in proportion to the labour time
necessary to produce them. For example, if ‘it usually costs twice the
labour to kill a beaver which it does to kill a deer, one beaver should
naturally exchange for or be worth two deer’ (Smith 1991, p. 41).
However, Smith believes that this simple pricing rule breaks down
when instruments and machines are used in production. The reason
is that, in addition to the workers, the owners of the ‘stock’ also have
a legitimate claim to the value of the product.
Marx disagrees with Smith, for two reasons. First, ‘simple’ or
‘direct’ exchange (in proportion to socially necessary labour) is not
typical of any human society; this is simply a construct of Smith’s
mind. Second, and more importantly for our purposes, although
commodity exchanges reveal the quantitative relations of equiva-
lence between different types of labour, this relationship is indirect.
In other words, whereas Smith abandons his own ‘labour theory of
value’ at the first hurdle, Marx develops his own value analysis
rigorously and systematically into a cogent explanation of
commodity prices under capitalism (see below and, for details, Saad-
Filho 2002).
Commodities have been produced for thousands of years. However,
in non-capitalist societies commodity production is generally
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marginal, and most goods and services are produced for direct con-
sumption by the household or for non-market exchange. It is
different in capitalist societies. The first defining feature of capitalism
is the generalised production of commodities. Under capitalism, most
goods and services are produced for sale, most workers are employed
in the production of commodities, and commodities are systemati-
cally traded in developed markets, where firms and households
regularly purchase commodities as production inputs and final
goods and services, respectively.
The second defining feature of capitalism is the production of com-
modities for profit. In capitalist society, commodity owners typically
do not merely seek to make a living – they want to make profit.
Therefore, the production decisions and the level and structure of
employment, and the living standards of the society, are grounded
in the profitability of enterprise.
The third defining feature of capitalism is wage labour. Like
commodity production and money, wage labour first appeared
thousands of years ago. However, before capitalism wage labour was
always limited, and other forms of labour were predominant. For
example, co-operation within small social groups, slavery in the
great empires of antiquity, serfdom under feudalism, and indepen-
dent production for subsistence or exchange, in all types of society.
Wage labour has become the typical mode of labour only recently;
three or four hundred years ago in England, and even more recently
elsewhere. In some parts of the developing world, wage labour,
complex markets and commodity production for profit still play
only a minor role in social and economic reproduction.
Most people do not freely choose to become wage workers. Social
and historical studies show that paid employment is generally
sought only by those who cannot satisfy their needs in any other
way. Historically, wage labour expands, and capitalist development
takes off, only as the peasants, artisans and the self-employed lose
control of the means of production (land, tools, machines and other
resources), or as non-capitalist forms of production become unable
to provide for subsistence (see Chapter 8).
The much-repeated claim that the wage contract is the outcome
of a free bargain between equals is, therefore, both partial and
misleading. Even though the workers are free to apply for one job
rather than another, or to leave, they are almost always in a weak
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bargaining position when facing their prospective employers.
Although they are not the property of individual employers, the
wage workers need money in order to attend to the pressing needs
of their household, including subsistence needs, mortgage and other
debt payments and uncertainty about the future. These are some of
the sticks with which capitalist society forces the workers to sign up
‘freely’ to the labour contract, ‘spontaneously’ turn up for work as
and when required, and ‘voluntarily’ satisfy the expectations of their
line managers (see Chapter 5).
The wage relation implies that the workers’ capacity to work, their
labour power, has become a commodity. The use value of the
commodity labour power is its capacity to produce other use values
(clothes, food, CD players, and so on). Its exchange value is repre-
sented by the wage rate. In this sense, labour power is a commodity
like any other, and the wage workers are commodity sellers.
It is essential to distinguish between labour and labour power.
Labour power is the potential to produce things, while labour is its use
– in other words, labour is the act of transforming given natural and
social conditions into a premeditated output (see Chapter 2). When
a capitalist hires workers, she purchases the workers’ labour power for
a certain length of time. Once this transaction has been completed
the workers’ time belongs to the capitalist, who wishes to extract
from them as much labour as possible within the terms of the
contract. The workers, in turn, tend to resist abuse by the capitalist,
and they may limit the intensity of labour unilaterally or reject
arbitrary changes in the production norms. In sum, the purchase of
labour power does not guarantee that a given quantity of labour is
forthcoming, or that a certain quantity of value will be produced.
The outcome depends upon persuasion and conflict in the
shopfloor, farm or office.
The three features of capitalism (explained above) are not merely coin-
cidental. There is a relationship of mutual determination between
them. On the one hand, in advanced capitalist societies a large variety
of commodities are produced for profit by millions of wage workers
in thousands of firms. Many of these commodities are later purchased
by those workers, who no longer can or wish to provide for
themselves. Therefore, the spread of the wage relation fosters, simul-
taneously, the supply of as well as the demand for commodities.
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On the other hand, the diffusion of wage labour and commodity
exchanges stimulates the development of markets. For mainstream
economic theory, markets are merely a locus of exchange, and they
are essentially identical with one another: price changes affect both
supply and demand, sexy adverts can help to sell anything, and the
rest is up to the sales team. This is both partial and misleading.
Markets are part of the institutions and channels of circulation that
structure the systems of provision in the economy. Systems of
provision are the chains of activity connecting production, exchange
and consumption, ranging from the supply of basic inputs (crude
oil, copper, cotton, cocoa, and so on) through to the manufacturing
stage and, finally, the distribution of the finished commodities
(aviation fuel, CD players, tee shirts, chocolate, and other products).
At certain stages in these chains, some commodities are marketed
on a regular basis. The necessity of market exchange, and the form
it takes, depend upon the features of each system of provision.3
Four conclusions follow. First, markets are not ideal structures of
exchange, that can be judged to be more or less ‘perfect’ according
to their degree of correspondence with a general model of perfect
competition (as is presumed by mainstream economic theory).
Although markets are essential for commodity production and the
realisation of profits, they exist only concretely, and the markets for
fuel, clothes, food, computers, labour power, money, credit, foreign
currencies and other commodities can be profoundly different from
one another.
Second, markets are structured not only ‘internally’, by the
systems of provision, but also ‘externally’, by the social and
economic constraints affecting production and exchange, such as
law and the justice system, the transportation, storage and trading
facilities, the international trade relations, the monetary, financial
and tax systems, and so on.
Third, capitalist producers gauge demand only indirectly, through
the purchasing power of their customers and the profitability of
enterprise. This is why markets often fail to satisfy important needs
(for example, effective prevention and treatment for the diseases of
the poor, such as malaria) and, conversely, why luxury, wasteful or
harmful goods are produced in large quantities (cosmetic surgery,
advertising, cigarettes, and so on).
Fourth, markets are often the venue of vicious and wasteful
struggles for profit. Reality does not correspond to mainstream
theory, where market competition almost always is efficient and
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leads to optimum outcomes. In the real world, expensive advertising
campaigns, employing large numbers of talented people, are
regularly concocted to lure potential customers into purchasing
whatever product the capitalists want to sell. Brand names are arti-
ficially differentiated, and virtually identical products compete
wastefully for attention on the basis of packaging design, jingles and
gifts. At the same time, but far from view, managers, brokers and
investors produce, collect, disseminate and traffic information, not
always truthfully, seeking to maximise private gain even at the
expense of social losses. Laws and ethical standards are regularly
stretched, bent and broken in order to facilitate business transac-
tions, increase market share, extract labour from the workers and
draw money from the consumers. Frequent examples of corporate
crimes, from the traumatic South Sea bubble of 1720 to the gigantic
Enron scandal of 2002, provide a glimpse of the true nature of the
‘free market’.4
The capitalists combine the means of production, generally
purchased from other capitalists, with the labour of wage workers
hired on the market in order to produce commodities for sale at a
profit. The circuit of industrial capital captures the essential aspects
of factory production, farm labour, office work and other forms of
capitalist production. It can be represented as follows:
LP ...P... C' M'
The circuit starts when the capitalist advances money (M) to
purchase two types of commodities (C), means of production (MP)
and labour power (LP). During production (… P …) the workers
transform the means of production into new commodities (C'), that
are sold for more money (M').
Marx calls the difference between M' and M surplus value. Surplus
value is the source of industrial and commercial profit and other
forms of profit, for example, interest and rent. We are now going to
identify the source of surplus value.
Surplus value cannot arise purely out of exchange. Although some
can profit from the sale of commodities above their value (unequal
exchange), for example, unscrupulous traders and speculators, this
is not possible for every seller for two reasons. First, the sellers are
also buyers. If every seller surcharged his customers by 10 per cent,
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say, his gains would be lost to his own suppliers, and no one would
profit from this exercise. Therefore, although some can become rich
by robbing or outwitting others, this is not possible for society as a
whole, and unequal exchanges cannot provide a general explana-
tion of profit (‘cheating’ only transfers value; it does not create new
value). Second, competition tends to increase supply in any sector
offering exceptional profits, eventually eliminating the advantages
of individual luck or cunning (see Chapter 4). Therefore, surplus
value (or profit in general) must be explained for society as a whole,
or systemically, rather than relying on individual merit or expertise.
A convincing explanation of surplus value and profits must depart
from the completely general assumption of equal exchange.
Inspection of the circuit of capital shows that surplus value is the
difference between the value of the output, C', and the value of the
inputs, MP and LP. Since this difference cannot be due to unequal
exchange, the value increment must derive from the process of
production. More specifically, for Marx, it arises from the consump-
tion of a commodity whose use value is to create new value.
Let us start from the means of production (physical inputs). In a
chocolate factory, for example, cocoa, milk, sugar, electricity,
machines and the other inputs are physically transformed into
chocolate bars. However, on their own, these inputs do not create
new value. The presumption that the transformation of things into
other things produces value, regardless of context or human inter-
vention, confuses the two aspects of the commodity, use value and
exchange value. It ultimately implies that an apple tree, when it
produces apples from soil, sunlight and water, creates not only the
use value but also the value of the apples, and that ageing sponta-
neously adds value (rather than merely use value) to wine. The
naturalisation of value relations begs the question of why com-
modities have value, whereas many products of nature, goods and
services have no economic value: sunlight, air, access to public
beaches and parks, favours exchanged between friends and so on.
Value is not a product of nature or a substance physically
embodied in the commodities. Value is a social relation between
commodity producers that appears as exchange value, a relationship
between things (specifically, value appears through commodity prices,
that is, through the relationship between goods and money). Goods
and services possess value only under certain social and historical
circumstances. The value relation develops fully only in capitalism,
in tandem with the production of commodities, the use of money,
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the diffusion of wage labour, and the generalisation of market-
related property rights. At this stage, value incorporates the most
important economic relationships. Among other things, value relations
regulate economic activity, constrain the structure of output and
employment, and set limits to social welfare.
If value is a social relation typical of commodity societies, its
source – and the origin of surplus value – must be the performance
of commodity-producing labour (the productive consumption of the
commodity labour power) rather than the metamorphosis of things.
When a capitalist hires workers to produce chocolate, for example,
their labour transforms the inputs into the output. Because the
inputs are physically blended into the output, their value is trans-
ferred, and forms part of the output value. In addition to the transfer
of the value of the inputs, labour simultaneously adds new value to
the product. In other words, whereas the means of production
contribute value because of the labour time necessary elsewhere to
produce them as commodities, newly performed labour contributes
new value to the output (see ‘Labour’ above).
The value of the output is equal to the value of the inputs (MP)
plus the value added by the workers during production. Since the
value of the means of production is merely transferred, production
is profitable only if the value added exceeds the wage costs. In other
words, surplus value is the difference between the value added by the
workers and the value of labour power. Alternatively, the wage workers
work for longer than the time it takes to produce the goods that they
command or control. In the rest of the time, the workers are exploited
– they produce value for the capitalists. For example, if the goods
necessary to reproduce the workforce can be produced in four hours,
but the working day is eight hours, the workers work ‘for themselves’
half the time, and in the other half they work ‘for the capitalists’:
the rate of exploitation (the ratio between what Marx calls ‘surplus’
and ‘necessary’ labour time) is 100 per cent.
Just as the workers have little choice on the matter of being
exploited, the capitalists cannot avoid exploiting the workers.
Exploitation through the extraction of surplus value is a systemic
feature of capitalism: this system of production operates like a pump
for the extraction of surplus value. The capitalists must exploit their
workers if they are to remain in business; the workers must concur in
order to satisfy their immediate needs; and exploitation is the fuel
that moves capitalist production and exchange. Without surplus
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value there would be no wage employment, no capitalist production,
and the system would grind to a halt.
It is important to note that, although the wage workers are
exploited, they need not be poor in absolute terms (relative poverty,
due to the unequal distribution of income and wealth, is a
completely different matter). The development of technology
increases the productivity of labour, and it potentially allows even
the poorest members of society to enjoy relatively comfortable
lifestyles, however high the rate of exploitation may be. Specifically,
if the productivity of labour rises faster than the wage rate (see ‘Profit
and Exploitation’ below), relatively well-paid workers in highly
productive economies may be more heavily exploited than badly
paid workers in less productive economies.
Competition plays an essential role in capitalist societies. Two types
of competition should be distinguished, between capitals in the
same sector (producing identical goods) and between capitals in
different sectors (producing distinct goods). Firms in the same sector
struggle for profits primarily through the introduction of cost-
cutting technical innovations. If an innovating firm can produce at
a lower cost than its competitors, and they sell at the same price, the
more productive firm reaps a higher profit rate and it can increase its
market share, invest more and, potentially, destroy the competition.
Competition between firms producing similar goods with distinct
technologies leads to the differentiation of the profit rates (see
Chapter 4). This type of competition explains the tendency towards
continuous technical progress in capitalism, which is absent in pre-
capitalist societies, and it raises the possibility of monopoly and
crises of disproportion and overproduction (see Chapter 15).
Competition between firms in distinct sectors is completely
different: it produces a tendency towards the equalisation of profit
rates across the (international) economy. This type of competition
explains the equilibrium structures and processes associated with
competitive markets, for example, supply adjustments within each
sector and capital migration. For example, faced with exceptionally
high profits in the Swiss pharmaceutical sector and low profits in
the US steel industry, capitals may decide to invest and thereby
increase supply in the former (which eventually lowers pharmaceu-
ticals prices and profit rates), decrease supply in the latter (which
eventually raises steel prices and profit rates), migrate from the latter
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to the former, or pursue a combination of these strategies. What
these alternatives have in common is this: they create a tendency
towards the equalisation of profit rates across the economy. Inter-
sectoral competition, and the tendency towards the equalisation of
profit rates, is enormously facilitated by the development of the
financial markets.
Capitalist competition has three important implications
(explained in more detail in the references listed in note 2). First, it
would be misguided to seek an arithmetic solution to the conflicting
forces of competition. There is no reason why profit rates should
either converge towards an average (which may itself be rising,
falling or static), or diverge permanently, potentially leading to the
development of super-monopolies. The two types of competition
explained above influence the behaviour of firms in different ways,
and the outcome of their interaction (and other influences on firms’
behaviour) depends upon a wide range of variables that can be
understood only concretely (see Chapter 16). Second, price changes
due to inter-sectoral competition influence the operation of the law
of value. Rather than commodity exchanges being regulated simply
by the abstract labour time necessary to produce commodities, as in
Smith’s rude society, in advanced capitalism prices depend upon the
equalisation of profit rates between sectors of the economy (this is
known as the ‘transformation of values into prices of production’;
see Chapter 4). Third, the interplay of the forces of competition
within and between sectors generates a tendency towards the
reduction of the quantity of labour required in production across the
economy (this is known as the ‘tendency for the rate of profit to fall’,
which Marx analysed simultaneously with the ‘counter-tendencies’
to this law; see Chapter 15).
The profits of firms can increase in many different ways. For
example, the capitalists can compel their workers to work longer
hours or work harder (greater intensity of labour), employ better
skilled workers, or change the technology of production.
All else being constant, longer working days produce more profit
because more output is possible at little extra cost (the land,
buildings, machines and management structures being the same).
This is why capitalists always claim that the reduction of the working
week would hurt profits and, therefore, output and employment.
However, in reality other things are not constant, and historical
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experience shows that such reductions can be neutral or even lead
to higher productivity because of their effects on worker efficiency
and morale. Outcomes vary depending on the circumstances, and
they may be strongly negative for some capitalists and, simultane-
ously, highly profitable for others.
Greater labour intensity condenses more labour into the same
working time. Increasing worker effort, speed and concentration
raises the level of output and reduces unit costs; therefore, prof-
itability rises. The employment of better trained and educated
workers leads to similar outcomes. Such workers can produce more
commodities, and create more value, per hour of labour.
Marx calls the additional surplus value extracted through longer
hours, more intense labour or the employment of better trained
workers absolute surplus value. This type of surplus value involves the
expenditure of more labour, whether in the same working day or in
a longer day, with given wages. Absolute surplus value was especially
important in early capitalism, when the working day was often
stretched as long as 12, 14 or even 16 hours. More recently, absolute
surplus value has often been extracted through the lengthening of
the working week and the penetration of work into leisure time, at
least for certain sectors of the workforce (work often extends into
the weekend and holidays, and the general availability of mobile
phones and portable computers allows the employees to be perma-
nently on duty). Moreover, the workers are frequently compelled to
increase productivity through more intense labour (for example,
faster production lines or reduced breaks) or coerced into acquiring
new skills in their ‘free’ time (for example, by attending conferences
and courses). In spite of its importance, absolute surplus value is
limited. It is impossible to increase the working day or the intensity
of labour indefinitely, and the workers gradually learn to resist these
forms of exploitation.
The introduction of new technology and new machines can also
increase the profit rate of the innovating firms. They allow more
inputs to be worked up into outputs in a given labour time or, in
other words, they reduce the quantity of labour necessary to produce
each unit of the product. When productivity rises faster than wages
across the economy, the share of surplus value in the total value
added increases and the workers’ share declines. Marx calls this
relative surplus value. Relative surplus value is more flexible than
absolute surplus value, and it has become the most important form
of exploitation under modern capitalism, because productivity
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growth can outstrip wage increases for long periods (the implications
of absolute and relative surplus value are discussed in Chapter 5, and
the use of new technology in order to control the workforce is
analysed in Chapter 6; see also Saad-Filho 2002, ch. 5).
Mainstream economic theory defines capital as an ensemble of
things, including means of production, money and financial assets.
More recently, human knowledge and community relations have
been named human or social capital. This is incorrect. These objects,
assets and human attributes have existed for a long time, whereas
capital is relatively recent. It is misleading to extend the concept of
capital where it does not belong, as if it were valid universally or
throughout history. For example, a horse, a hammer or a million
dollars may or may not be capital; that depends on the context in
which they are used. If they are engaged in production for profit
through the direct or indirect employment of wage labour, they are
capital; otherwise, they are simply animals, tools or banknotes.
Like value, capital is a social relation that appears as things. However,
whereas value is a general relationship between the producers and
sellers of commodities, capital is a class relation of exploitation. This
social relationship includes two classes (defined by their ownership,
control and use of the means of production): the capitalists, who
own the means of production, labour power and the product of
labour, and the wage workers, who sell their labour power and
operate the means of production without owning them. The rela-
tionship between these two classes is the basis for the social division
of labour and the production and distribution of commodities.
Competition and exploitation through the extraction of surplus
value render capitalism uniquely able to develop technology and the
forces of production. This is the main reason why Marx admires the
progressive features of capitalism. However, capitalism is also the
most destructive mode of production in history. The profit motive is
blind, and it can be overwhelming. It has led to astonishing discov-
eries and unsurpassed improvements in living standards, especially
(but not exclusively) in the developed countries. In spite of this,
capitalism has also led to widespread destruction and degradation
of the environment and of human lives. Profit-seeking has led to
slavery, mass murder and even genocide (for example, against the
native populations of the Belgian Congo and the United States, in
South Africa under apartheid and in colonial and inter-imperialist
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wars, most clearly in the First World War), brutal exploitation of the
workers (in nineteenth century Britain, twentieth century Brazil and
twenty-first century China), and the uncontrolled destruction of the
environment (in the United States, Europe, India, Indonesia and
elsewhere), with long-term global implications (see Chapter 7).
Capitalism both generates and condones the mass unemployment
of workers, machinery and land in spite of unsatisfied wants, and
tolerates poverty even though the means to abolish it are readily
available. Capitalism extends the human life span, but it often
empties life of meaning. It supports unparalleled achievements in
human education and culture while, simultaneously, fostering
idiocy, greed, mendacity, sexual and racial discrimination and other
forms of human degradation. Paradoxically, the accumulation of
material wealth often impoverishes human existence.
These contradictory effects of capitalism are inseparable. It is
impossible to pick and choose the appealing features of the ‘market
economies’ and discard those that we find distasteful. Private
ownership of the means of production and market competition nec-
essarily give rise to the wage relation and to exploitation through the
extraction of surplus value, and they facilitate crises, war, and other
negative features of capitalism. This places a strict limit on the pos-
sibility of social, political and economic reforms, and on the capacity
of the market to assume a ‘human face’.5
Limitations such as these led Marx to conclude that capitalism can
be overthrown, and another social system created, communism. For
him, communism opens the possibility of realisation of the potential
of the vast majority through the elimination of the irrationalities
and human costs of capitalism, including systemic inequality,
material deprivation, destructive competition, greed and economic
exploitation (this system, and the transition towards it, are discussed
in Chapters 18 and 19).
Fine, B. (1989) Marx’s Capital (3rd edn.). Basingstoke: Macmillan.
Fine, B. (2002) The World of Consumption, (2nd edn.). London: Routledge.
Foley, D. (1986) Understanding Capital, Marx’s Economic Theory. Cambridge,
Mass.: Harvard University Press.
Harvey, D. (1999) The Limits to Capital. London: Verso.
Marx, K. (1976, 1978b, 1981) Capital (3 vols.). Harmondsworth: Penguin.
Marx, K. (1978a, 1969, 1972) Theories of Surplus Value (3 vols.). London:
Lawrence and Wishart.
Marx, K. (1981) Grundrisse. Harmondsworth: Penguin.
40 Anti-Capitalism
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Marx, K. (1987) A Contribution to the Critique of Political Economy (Collected
Works, vol. 29). London: Lawrence and Wishart.
Perelman, M. (2000) Transcending the Economy: On the Potential of Passionate
Labor and the Wastes of the Market. New York: St. Martin’s Press.
Saad-Filho, A. (2002) The Value of Marx: Political Economy for Contemporary
Capitalism. London: Routledge.
Smith, A. (1991) Inquiry into the Nature and Causes of the Wealth of Nations.
London: Everyman.
Weeks, J. (1981) Capital and Exploitation. Princeton: Princeton University
Wood, E.M. (1988) ‘Capitalism and Human Emancipation’, New Left Review
167, pp. 3–20.
Wood, E.M. (1999) The Origin of Capitalism. New York: Monthly Review Press.
1. I am grateful to Andrew Brown, Paul Burkett, Ben Fine, Costas Lapavitsas,
Simon Mohun and Alejandro Ramos for their valuable comments on
previous drafts of this chapter.
2. For overviews of Marxian value theory at different levels of difficulty, see
Fine (1989), Foley (1986), Harvey (1999), Saad-Filho (2002) and Weeks
3. Systems of provision are discussed in detail by Fine (2002).
4. For an outstanding study of the wastes of the market, see Perelman (2000).
5. See Wood (1999).
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2 Does All Labour Create Value?
Simon Mohun
The industrialisation of Britain from the middle of the eighteenth
century transformed both rural and urban environments. Manufac-
turing in the cottages of the countryside (the ‘putting-out system’)
was gradually centralised in larger units (the ‘factory’ system)
typically located in the rapidly growing towns. This enabled sub-
stantial economies of scale through the use of newly harnessed
sources of power, the further development of the division of labour,
and the much closer control that could be exercised over the
production process. At the same time, agricultural enclosures of
common land dispossessed the rural poor of their traditional grazing
and foraging rights (see Chapter 8). The combination of the decline
of cottage industry with the enclosures of common land deprived
large numbers of rural families of their livelihood. The complex and
precarious ways in which a rural family survived, through a combi-
nation of agricultural wage labour, cottage industry, family labour
on a smallholding and access to common land, was increasingly
attenuated, and more and more families were compelled to seek sub-
sistence entirely through the market. Typically, the only commodity
they had to sell was their own capacity to work. Only the sale of this
capacity (their labour power) for a wage could provide them with
the money required for the purchase of the commodities necessary
for subsistence (see Chapter 1). In this manner, a landless working
class was created and industrialisation proceeded, increasingly an
urban phenomenon.
In the late eighteenth century, contemporaries were aware of the
beginnings of these processes, in terms of both their novelty and
their scale, and attempted to theorise the phenomena they were
witnessing. Adam Smith’s Inquiry into the Nature and Causes of the
Wealth of Nations (1776) focused on the benefits from specialisation
as the division of labour was extended. He saw these benefits as
limited only by the extent of the market. Indeed, he linked the
extension of the division of labour with the extension of the market
in a mutually reinforcing process: specialisation increases produc-
Saad-Filho 01 chaps 3/9/02 4:08 pm Page 42
tivity and incomes; this stimulates both investment and demand
(and after a lag, population growth), which widens the market; and
this in turn enables further specialisation. The role of government
was limited to encouraging these processes by guaranteeing internal
and external security (for both people and property), and maintain-
ing a legal system and a stable currency.
However, an important question that worried Smith was whether
all employment contributed to this virtuous growth cycle. This
concern did not originate with Smith. In the 1690s Gregory King
attempted a statistical description of English society for the year
1688, in which more than half of the population was categorised as
‘Decreasing the Wealth of the Kingdom’, meaning dependent to
some degree on transfer payments.1And within the developing
discipline of political economy, the sources of wealth tended to be
located in the activity of some particular sector (for the mercan-
tilists, the acquisition of bullion through foreign trade; for the
physiocrats, an agricultural surplus), thereby defining economic
activity in other sectors as unproductive. So this was an important
issue for Smith to confront.
Smith took a broader view than earlier writers, and designated as
productive the labour that contributed to a positive feedback
between extension of the division of labour and growth of the
market. Employment of such labour was effectively an investment,
contributing more to output than it cost in wages. Otherwise, labour
was unproductive, contributing nothing to the growth of output by
its activity, and consuming a portion of total output by virtue of the
wages it cost. An example of productive labour might be a worker in
one of the new cotton mills. She is paid a wage and is part of a
division of labour that produces an output that is sold, from the
proceeds of which the capitalist recovers his outlay of wages and
gains a profit that provides the funds for further investment. An
example of unproductive labour might be a worker in domestic
service. She is paid a wage (partly in cash, partly in kind) in return
for an output (domestic service) that is not sold on the market but
is directly consumed by her employer. Payments to such a worker
are a net cost to the economy.2
But Smith’s attempt to draw a clear line of demarcation between
productive and unproductive labour in the terms just outlined is
seriously confused by a different distinction he draws, in which
productive labour produces a physical product, and unproductive
labour produces a service. It is easy to see how this second definition
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arises, because Smith wanted to contrast the growing and productive
manufacturing sector, which typically produces a physical output,
with the small armies of retainers unproductively employed in
service by the landed gentry, which he saw as consuming rather than
producing output.3In an economy in which marketed services are
negligible, the two lines of demarcation are very similar. But as soon
as services are marketed to a significant extent, the two definitions
are incompatible. And there is a further confusion, to do with the
contrast between producing and consuming output. For an activity
might be profitable for an individual employer, and yet add nothing
to social output, so that what is productive from a private perspec-
tive might be unproductive from the perspective of society. If for
example the profits on some (unproductive) activity were in fact a
market transfer out of the profits of some (productive) activity, the
unproductive activity would appear productive when considered in
isolation, and yet contribute nothing to aggregate profits and hence
be unproductive when the economy as a whole is considered. In the
early stages of the industrial revolution, it was perhaps inevitable
that these inconsistencies were not so obvious. But by the middle of
the nineteenth century, Smith’s definitions were an increasingly
unreliable guide. Their interest is that they provided the starting
point for Marx’s analysis of productive and unproductive labour.
Marx absorbed Smith’s vision of a dynamically growing economy
and developed further Smith’s first distinction between productive
and unproductive labour, but within a rather different framework.
First of all, and obviously, in any society, labour that produces
anything useful is productive. The difficulty is that what is regarded
as useful is historically specific, and is conditioned and structured
by the framework set by the dominance of some particular relations
of production. It is therefore first necessary to consider those class
relations directly. What differentiates class societies is the form in
which the dominant class is able to extract surplus labour from the
subordinate class. In capitalist society, surplus labour takes the form
of a sum of money, called surplus value or profit. Accordingly for
Marx, any labour in capitalist society is productive if and only if it
produces surplus value.
Several points should be noted about this definition. First, the
nature of the output (for example, whether a physical good or an
intangible service) is irrelevant. Only the social relations under
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which it is produced count. Hence a necessary condition for labour
to be productive is that it is wage labour. Secondly, since wage labour
must produce surplus value, or profit, to be productive, and profit
only derives from the sale of output, a further necessary condition
for labour to be productive is that the output it produces is marketed.
Thirdly, the activity in which productive labour is engaged is a trans-
formative activity of production. The activity cannot be one which
distributes or redistributes an output which has already been
produced elsewhere, and nor can it be one whose function is to
collect together inputs so that they are then ready for production.
These types of activity earn profit that is a redistribution (through
the market via the price mechanism) of profits earned through the
consumption of inputs in a production process, and so do not
contribute in the aggregate to total profits produced. Hence a further
necessary condition for labour to be productive is that additional
surplus value is produced. In sum, in capitalist society, productive
labour first, is wage labour, second, is employed in a capitalist
production process, and third, produces surplus value from a social
point of view. All other wage labour is unproductive.
The implications of each of these necessary conditions are
important. The first condition requires labour to be wage labour if it
is to count as productive. Labour that is not wage labour is not
productive. That this says nothing about the necessity for such non-
wage labour can be seen from the fact that in any society an
enormous amount of time is spent in informal and unwaged caring
activities, looking after the young and the old. No society could
reproduce itself without at least the labour time spent in creating
and caring for children, but all workers engaged in such unpaid
caring activities are unproductive. They produce neither value nor
surplus value; for all that their work is essential.
Secondly, not all wage labour is productive. Output has to be sold
in order that surplus value be appropriated; hence output produced
by wage labour that is not marketed cannot produce any surplus
value. In any society, substantial numbers are employed in a wage
labour relation by ‘general government’. General government
produces output for individual and/or collective consumption that
is consumed directly, makes cash transfers, and invests in public
assets. Its activities are financed by levying taxes and selling financial
instruments.4General government activities include general public
services (executive, legislative and judicial), internal (police) and
external (armed services) security, welfare services (health,
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education, social security, housing) and economic services (admin-
istration of subsidies and other interventions in industry). Hence
general government employs a substantial number of people, but
none of them produces either value or surplus value, and hence they
are all unproductive.
Thirdly, whether wage labour produces surplus value can be
determined only from an overall social perspective. For capitalist
employment of wage labour producing a marketed output and
earning profits might nevertheless consume rather than add to total
surplus value. Consider for example workers employed by a
profitable advertising agency. The agency is contracted by a firm to
run a campaign on the firm’s commodity. The only output (if the
campaign is successful) is increased sales of the firm’s commodity,
and, whether successful or not, the agency is paid out of the revenues
accruing from the firm’s sales. The agency therefore produces
nothing, and is paid out of a transfer of resource from the contract-
ing firm. No matter that the advertising agency might persuasively
create demand and thereby extend the market; what it does is to
facilitate the sale of commodities produced elsewhere. Generalising
from this example, all labour that is employed one way or another
purely to sell output is involved in facilitating a transfer of title of
ownership. Since nothing additional is produced by that labour, then
that labour is not productive. The surplus value deriving from such
commercial activities arises not from the exploitation of workers
employed in those activities, but from a transfer through the price
mechanism of profit produced by productive workers elsewhere.
Whereas the capital that employs workers who produce surplus value
is called ‘industrial capital’, the capital that employs workers to buy
and sell the products of industrial capital is called ‘commercial
capital’. Commercial capital appropriates a portion of the surplus
value produced by industrial capital via an unequal exchange. The
more sophisticated is the knowledge required about the market, the
more commercial capital can carve a specialised niche for itself.
Symmetrically, the same point can be made about all of those
activities that facilitate the purchase of inputs. Large numbers of
people are employed in these activities, typically involved in
recording and accounting for financial flows, and transferring title
to sums of money and to increasingly complicated financial instru-
ments representing sums of money. The capital that employs
workers in these sorts of activities is called ‘financial capital’. The
functions of financial capital are in general to organise and operate
46 Anti-Capitalism
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in financial markets, to spread risk, to consolidate smaller sums of
money into larger ones, and to provide credit. In this manner, large
sums of capital are made available for the purchase of inputs by
industrial capital (see Chapters 3 and 10). The typical payment is a
rate of interest, which determines a transfer of value between the
two contracting parties. But despite the commodity form of a
financial service, there is no commodity produced, hence no
commodity equivalent to match the payments of interest. Conse-
quently, interest payments must be understood in terms of
exploitation and unequal exchange. Like the net earnings of
commercial capital, interest payments are in general a claim on the
surplus value produced by industrial capital. The only difference is
that the activities of commercial capital realise surplus value that has
already been produced, whereas the activities of financial capital are
paid for out of a pre-commitment by industrial capital of surplus
value yet to be produced. Hence in this latter case, a speculative
element is involved. Figure 2.1 summarises this vision of the
capitalist production process.
As soon as financial capital is used to purchase inputs for
production, that capital, as an amount of value, changes its form
from financial to productive capital. Despite the change in form, the
quantity of value does not change. Once inputs have been
consumed in the production process to produce output, the capital
becomes commercial capital (called ‘commodity capital’ by Marx).
Now its quantitative value has increased, by virtue of the difference
between what labour power cost and what labour can produce.
When the output is sold, the sum of gross value produced takes a
financial form, to be recommitted to the production process in due
course. Again, in this change of form, the quantity of value does not
change. The only quantitative change in value (an expansion) takes
place in production, following the advance of capital to purchase
inputs and prior to the appearance of commodity outputs and their
sale. Selling the output, operating in money markets and purchasing
inputs all transfer the form in which value exists, but they do not
alter its quantity.
Figure 2.1 is a highly stylised and abstract representation. The
activities of both commercial capital and financial capital can in
practice be very complex, but analytically the surplus value that they
earn remains a transfer from the surplus value deriving from
production. The labour power hired by commercial and financial
capital is exploited, like any other labour power, if workers are
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compelled to work for longer than is required to produce their con-
sumption needs. But this unpaid labour time is not monetised; the
surplus value accruing to commercial and financial capital derives
from a transfer through the market of surplus value produced by
industrial capital. This occurs through interest payments and fees
charged by financial capital, and through fees charged by
commercial capital combined with unequal exchange (for processes
of pure sale, such as commodity broking). In sum, transformations
of form, from commodity output into money, from money into
other financial assets and back into money, and from money into
commodity inputs, do not change the quantity of value that exists.
That ‘productive’ in the strict sense means ‘productive of surplus
value’ means that the theoretical term has no trans-historical
meaning. It is only concerned with what is productive, what is to
count as social productivity, under specifically capitalist relations of
production. One might be morally offended that the surgeons,
nurses and technicians engaged in vital organ transplants in a state
48 Anti-Capitalism
Stock of financial Capital
(cash and other financial
Consumption of
surplus value
Flow of sales Flow of capital outlays
purchasing labour
inputs (labour power
and non-labour inputs
(means of production)
Stock of Commercial Capital
(inventories of finished
commodities awaiting sale)
Flow of output
Stock of Productive Capital
(inventories of raw materials and
part-finished goods;
stocks of undepreciated plant
and equipment)
Figure 2.1 The Circuit of Capital
Source: adapted from Foley (1986), pp. 66–9.
Saad-Filho 01 chaps 3/9/02 4:08 pm Page 48
hospital are unproductive labour, whereas private sector workers
producing weapons designed to destroy such organs are productive
labour. But that is to be offended at the prevailing relations of
production, in which production is organised by considerations of
private profit rather than considerations of social need. For as long
as production is so organised, the class criterion is paramount: labour
is productive if it produces surplus value.
Like other Marxian categories, the categories of productive and
unproductive labour have no counterpart in the different theoreti-
cal framework of neoclassical economics. For the latter, anything
whose consumption contributes to someone’s utility can command
a price in the market and return a revenue stream to its owner, and
so corresponds to the production of a good or service.5Categories
of productive and unproductive labour are therefore meaningless:
in general any good or service supplied is the outcome of a
production process, and its price (whether real, potential or shadow)
is a return to its owner. Echoes of the distinction between productive
and unproductive labour sometimes surface in concerns about the
size of the state sector and its effects on growth. But it is not that the
state sector is ‘unproductive’ in neoclassical economics. It is rather
that since the state sector is financed by compulsory taxation, too
large a state sector requires levels of taxation which will generate dis-
incentive effects at the margin in the private sector on both
labour–leisure tradeoffs and the investment decision. In sum, for the
neoclassical tradition, notions of productive and unproductive
labour simply make no sense.
Matters are different for a labour theory of value. But even within
this tradition, there is considerable controversy about whether the
distinction between productive and unproductive labour is tenable.6
These controversies can be summarised in terms of each of the three
points emphasised above, first, that productive labour has to be wage
labour, second, that it has to produce a marketed output, and third,
that it is engaged in production.
One line of questioning has been to refocus the meaning of
‘productive’ as necessary or essential. To define some activity as
unproductive carries the connotation that it is unnecessary, and this
slights or denigrates the people engaged in such activity. Consider
unpaid housework and childcare. These are activities that are pre-
dominantly undertaken by women, and to call such activities
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unproductive has been interpreted as an example of the way in
which a patriarchal theory systematically ignores the activity of
women. A response might be that this confuses the reproduction of
capitalist relations of production with the reproduction of the wider
society. There are all sorts of complex interrelations between the two,
structured by the evident truth that children (and thus future
workers) are not produced under capitalist relations of production.
Therefore the reproduction of those relations requires a permanent
flow of inputs of labour power produced (at least in part) elsewhere,
in the family and the school. But the reproduction of capitalist
relations and the reproduction of wider society are not identical, and
the theoretical categories used to analyse the one are inappropriate
for the other.
Secondly, consider wage labour that does not produce a marketed
output, typically employed by general government. General
government in 2000 accounted for about 13.4 per cent of all
employment in the UK, and for about 12.9 per cent in the USA.7So
the numbers involved in developed capitalist economies are sub-
stantial. The questioning of the productive–unproductive distinction
here also focuses on a denial of the distinction between ‘necessary’
and ‘productive’. If society cannot function without general
government, then it makes little analytical sense to call general
government employees unproductive, and indeed concedes too
much to pro-market ideology. But the response is the same as that
already given: it is important not to confuse the reproduction of
capitalist relations of production with the reproduction of the wider
society. A more specific but related line of questioning concerns the
activities involved in the maintenance and training of the working
class. If extra skills are acquired by a worker through consuming
some state sector output of education and training, then that worker
will produce more value in a given time period than an untrained
but otherwise identical worker. Similarly, a healthier worker will
have lower maintenance and reproduction costs than a less healthy
one. In this manner, state provision of education, training and
health contribute to the production of surplus value, not directly,
but indirectly through transformations of the quality of the living
labour input into the capitalist production process. Then it is argued
that there is no reason to separate those activities that are directly
productive of surplus value from those that are indirectly productive.
The difficulty with this argument is its very breadth. If all activities
that indirectly contribute to surplus value are considered productive,
50 Anti-Capitalism
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the term loses any focus and precision, for it is hard to conceive of
any activity that cannot be so interpreted.
A third line of questioning, perhaps the most influential, has been
to focus on what ‘production’ means.8In particular, it is argued that
it is not possible to make a hard distinction between production
activities, in which inputs are combined in a production process
organised by industrial capital to produce an output, and circulation
activities, in which outputs are transformed into money that is then
reinvested in inputs by the activities of commercial and financial
capital. There are only two ways in which critics have argued that
such a separation can be conceived. One way is by reverting to
Smith’s second definition, in which labour is productive if it
produces a physical good, for only a resort to ‘physicalism’ can
adequately determine what is produced from what is circulated. The
other way is to define as unproductive what is specific to capitalism,
by reference to an evaluative standpoint based on communism. For
example, if communist distribution is direct rather than through the
market, then the labour involved in marketing activities will not
exist under communism, and is therefore unproductive in capitalist
society. Since communist production is for need rather than for
profit, there will be no advertising, and so advertising labour is
unproductive, and so on. To identify unproductive labour on this
evaluative criterion is to locate sources of waste in contemporary
capitalist society, and to identify resources that a more progressive
society can employ to increase the production of use values for the
benefit of all.
The ‘physicalist’ criterion bears no relation to capitalist social
relations, and is not therefore a helpful one for the analysis of con-
temporary capitalism. The ‘evaluative’ criterion, while perhaps
determining a useful project in the identification of waste, also bears
no relation to the analytical categories of the labour theory of value,
and so again is not helpful in the present context. But it is argued
that, unless they resort to one or other of these criteria, all attempts
to found a distinction between productive and unproductive labour
fail. The distinction is empty, and should be abandoned. The circuit
of capital should be understood as a metaphorical rather than a
literal description of how surplus value is produced and realised. To
separate production from circulation, with productive labour
confined to the former and unproductive labour to the latter, is to
separate in an artificial and mechanistic way what are distinct yet
simultaneous components of the same social process.
Does All Labour Create Value? 51
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The response to this line of questioning has been to deny that the
distinction is analytically empty, and to assert on the contrary that
it is fruitful at both theoretical and empirical levels. The distinction
between industrial capital, on the one hand, and commercial and
financial capital, on the other, enables a grasp of the changing
organisation of capitalism as their autonomy from each other
develops alongside their dependence on each other, a continually
fluctuating balance of power now favouring the one, now the other.
Focusing on the development of unequal exchange and the
dependence of commercial and financial profits on the surplus value
produced by industrial capital is to focus on both the possibilities
and the limits of specialisation by capital in particular historical
periods. A labour theory of value which includes the categories of
productive and unproductive labour yields a richer picture of
capitalist development, and one that is more consonant with what
one would expect to be shown by Marxian theory, than a labour
theory of value that abolishes the distinction.
The productive–unproductive labour distinction is important in
analysing the development and relative strengths of fractions of
capital (and indeed alliances cutting across those fractions). It focuses
attention upon the dependence of other fractions upon industrial
capital, and hence enables investigation of why that dependence
might be tighter or looser in particular periods. It also differentiates
the determinants of sectoral profitability and the ways in which
different capitals participate in the competition which tendentially
results in all capitals earning the same rate of profit.
Whereas for industrial capital, profitability is determined by the
productivity of labour, the organisation of the labour process, and
the level of wages, for commercial capital, given some cost structure,
profitability is determined by its ability to charge fees for its services
and to increase unequal exchange. These both depend upon its
position in the market, its degree of specialised commercial
knowledge, and its ability to organise networks of distribution. Com-
petition between commercial capitals will tend to reduce unequal
exchange to the level at which revenues are sufficient for each
commercial capital to earn the average rate of profit. For financial
capital, given some cost structure, profitability is determined by the
difference between borrowing and lending rates and its ability to
charge fees for money market operations. In a world of certainty,
52 Anti-Capitalism
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arbitrage between capitals should ensure equality between the
interest rate and the average rate of profit, with the difference
between borrowing and lending rates just sufficient to cover the
costs of making loans. But real uncertainties in the production and
realisation of surplus value by industrial capitals can serve to differ-
entiate the interest rate from the profit rate, which throws the focus
on to the ways in which levels of future profitability of industrial
capitals affect the determination of the current rate of interest.
Secondly, the productive–unproductive labour distinction has
some importance in analysing the changing historical determinants
of general government expenditure. In general terms, Marx saw the
state as representing the interests of capital as a whole. At the same
time the state has in some sense to manage class conflict. On the
one hand, one consequence of working-class struggle is that some
activities are taken out of private production and into state collective
provision financed by taxation. On the other hand, the state
attempts to organise the provision of its activities in ways most
beneficial to capital. The changing balance of class forces at any time
shapes how these factors historically combine. Compare for example
the decade after 1945 in Western Europe with its nationalisations
and other forms of state regulation together with the development
of state education, health and social insurance, with the 1980s and
1990s and their privatisations together with tight restrictions on
expenditure on state education, health and social insurance.
The third way in which the distinction is of some use is in
empirical investigations of capitalist development. Given the nature
of the concepts and the data available, too much precision should
not be expected. In particular, data are generally organised by an
industrial classification, and assumptions must always be made
about how to divide productive from unproductive both across
industrial classifications and within them. Because there are always
borderline cases, and because of data limitations, occasionally
arbitrary and sometimes heroic assumptions must be made. But
while exact precision is impossible, some reasonable estimates of
time trends are possible.
Consider for example the UK in the census years 1861 to 1911 as
shown in Table 2.1.
An example of arbitrariness is the allocation of all services except
domestic service to productive labour, whereas some will certainly be
unproductive. An example of approximation is the determination
of productive labour in each productive sector by the proportion of
Does All Labour Create Value? 53
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wages to salaries in that sector, roughly measuring a ‘blue collar’
(factory operative) ‘white collar’ (office worker) distinction, which
is not exactly what is required. This notwithstanding, the upward
drift in unproductive labour is striking. Comparing 1861 with 1911,
the main movements are the fall in productive labour in agriculture
from 23.0 per cent to 8.9 per cent of total employment; the rise in
distributive trades employment from 6.5 per cent to 12.1 per cent of
total employment, and the rise in unproductive labour in productive
sectors from 12.8 per cent to 17.6 per cent of total employment.
These years of the ‘second industrial revolution’ see a growth in spe-
cialised marketing activities, but with scope for much further
specialisation by productive firms in outsourcing their growing
unproductive activities.
Another question to consider is how unproductive labour has
affected the general rate of profit, although this is not a simple
question (see Chapters 15 and 16). Define the pre-tax rate of profit
54 Anti-Capitalism
Table 2.1 Productive and Unproductive Labour by Industry (thousands),
UK, Census Years
1861 1871 1881 1891 1901 1911
Agriculture and fishing 3017 2663 2369 2181 1924 1820
Mining and quarrying 420 486 563 697 811 978
Manufacturing 3686 4011 4075 4578 4762 4967
Building and contracting 471 563 687 697 867 781
Gas, electricity, water 21 26 33 50 79 91
Transport and communication 506 649 712 921 1153 1198
Health, education and other
professional services 287 333 439 498 572 629
Catering, hotels and other services 386 444 555 680 708 804
Total productive 8794 9174 9433 10300 10875 11268
Productive as % of total 67.2 65.3 62.6 61.8 58.2 55.3
Distributive trades 850 1050 1300 1640 1990 2460
Insurance, banking, finance 20 40 70 110 150 230
Public administration and defence 450 420 460 550 880 840
Private domestic service 1294 1790 1850 1940 1980 2000
Unproductive labour in
productive sectors 1681 1576 1957 2120 2805 3592
Total unproductive 4296 4876 5637 6360 7805 9122
Unproductive as % of total 32.8 34.7 37.4 38.2 41.8 44.7
Ration of Unproductive to
Productive Labour 0.49 0.53 0.60 0.62 0.72 0.81
Source: derived from Feinstein (1976) Tables 60 and 21
Saad-Filho 01 chaps 3/9/02 4:08 pm Page 54
(r) as the ratio of aggregate profits to the aggregate net capital stock
(K), and define profits as the difference between adjusted net
national product (adj.NNP) and total private sector wages.9These
latter are the wages paid to productive labour (WP) and the wages
paid to unproductive labour (WU). Hence:
The first term in the numerator is the money form of the rate of
surplus value (e), so that:
The ratio of unproductive to productive labour in wage terms is
a direct negative influence on the rate of profit, but might
indirectly positively affect the rate of profit if the specialisation of
function enabled by the contracting out of unproductive activities
by productive capital increases the rate of surplus value. Thus the
ratio of productive to unproductive labour in wage terms is an
important one, and its growth in the USA in the last third of the
twentieth century is shown in Figure 2.2. Since the data is in
natural logs, the slope of the line representing the ratio is the rate
of growth of the ratio.
The data divide into three distinct periods. From 1964 to 1978 the
ratio grows in total by 7.9 per cent, periods of positive growth being
interspersed with two periods of negative growth. This fluctuating
but fairly flat overall period is marked by the Vietnam War, the
collapse of Bretton Woods, and the stagflation of the 1970s. From
1978 to 1992, dominated by the expansion of the Reagan–Bush
years, there is a more sustained increase, in which the ratio grows by
rAdj NNP W W
Does All Labour Create Value? 55
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a total of 44.5 per cent. This is followed by another essentially flat
period during the first Clinton presidency (from 1992 to 1997 the
ratio falls and then rises, growing by a total of 0.35 per cent). And the
twentieth century concludes with what looks like another sustained
increase as the ratio grows by 11.9 per cent from 1997 to 2000
(although this may be subject to data revisions). Periods of higher
growth appear to allow significant relative increases in unproductive
labour, whereas periods of lower growth do not (although it remains
to be seen whether the increases of the second half of the 1990s will
be maintained into the twenty-first century). Combined with an
analysis of profitability, and some assessment of the effects of the
relative increase of unproductive labour on that profitability, these
figures provide a basis for an empirical analysis of structural change
in the US economy in the second half of the twentieth century.
Feinstein, C.H. (1976) Statistical Tables of National Income, Expenditure and
Output of the UK 1855–1965. Cambridge: Cambridge University Press.
Foley, D. K. (1986) Understanding Capital. Cambridge, Mass.: Harvard
University Press.
Laibman, D. (1992) Value, Technical Change and Crisis. Armonk, New York: M.
E. Sharpe.
56 Anti-Capitalism
Figure 2.2 Wage Ratio of Unproductive to Productive Labour, USA,
1964–2000 (natural logs)
Saad-Filho 01 chaps 3/9/02 4:08 pm Page 56
Laibman, D. (1999) ‘Productive and Unproductive Labour: A Comment’,
Review of Radical Political Economics 31 (2), pp. 61–73.
Laslett, P. (2000) The World We Have Lost Further Explored. London: Routledge.
Mitchell, B. R. (1988) British Historical Statistics. Cambridge: Cambridge
University Press.
Mohun, S. (1996) ‘Productive and Unproductive Labour in the Labour Theory
of Value’, Review of Radical Political Economics 28 (4), pp. 30–54.
Mohun, S. (2002), ‘Productive and Unproductive Labour: A Reply’, Review
of Radical Political Economics 34 (2), forthcoming.
Office for National Statistics (2001a) ‘Jobs in the Public and Private Sectors’,
Economic Trends, June.
Office for National Statistics (2001b) UK National Accounts (Blue Book) 2001
Edition. London: The Stationery Office.
Shaikh, A. M. and Tonak, E. A. (1994) Measuring the Wealth of Nations.
Cambridge: Cambridge University Press.
Smith, A. (1776) Inquiry into the Nature and Courses of the Wealth of Nations.
London: Everyman (1991).
US Bureau of Economic Affairs: National Income and Product Accounts
US Bureau of Labour Statistics (
1. King’s table is reproduced and discussed in Laslett (2000), pp. 30ff. King’s
data are revised by Lindert and Williamson and reproduced in Mitchell
(1988) ch. 2, p. 102.
2. Smith did not consider how expenditure out of the wages of unproductive
workers adds to overall demand and thereby indirectly contributes to the
extension of the market.
3. The number of families in the category ‘high titles and gentlemen’ in
England and Wales was 19,626 in 1688, 18,070 in 1759 and 27,203 in
1801/3. See the sources cited in note 1.
4. Fees might be charged for some portions of general government output,
but they are not economically significant in terms of cost recovery of the
activities concerned. General government in some very poor countries
might also depend upon the receipt of grant aid from overseas.
5. Some qualification is necessary. Sometimes, the market transaction is only
a potential one. Thus homeowners are deemed to pay a rent to
themselves, which is counted as a return for the production of housing
services, for otherwise national income would fall whenever a renter
purchases a house. And sometimes markets cannot exist for technical
reasons. If consumption of a good by one person does not diminish the
amount available to another person, and if nobody can be excluded from
consuming the good, then the good is a pure ‘public good’ and must be
financed out of taxation.
6. See Mohun (1996, 2002) and Laibman (1999), and the references therein.
7. The figures are on a ‘full-time equivalent’ basis, and for the UK include
those employed by National Health Service Trusts. The UK figures are from
the Office for National Statistics (2001a) and (2001b), and the US figures
Does All Labour Create Value? 57
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are from the US Bureau of Economic Affairs National Income and Product
8. See Laibman (1992, ch. 4, and 1999)
9. Net national product should be adjusted downwards for three reasons.
Imputations should be subtracted, because they correspond to a flow of
services which is not marketed; general government wage costs should be
excluded, because general government workers are financed out of
taxation rather than the market; and household worker wage costs should
be subtracted, because no output is sold.
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3 Money as Money and Money
as Capital in a Capitalist
Costas Lapavitsas
Money permeates economic activity in capitalism, from the
mundane to the vital. Money also permeates social life, making or
breaking personal relations, attaching meaning to human action and
providing a measure of human qualities. But despite its prominence
in capitalism, there is no consensus in social theory on what money
is and how it functions. This chapter considers the social relations
that give rise to money and those that rest on it, from the perspec-
tive of Marxist political economy. The first section (Money as
Money) focuses on money as plain money, that is, money as a
phenomenon of simple commodity exchange. By considering
money purely in the context of market trading, it is possible to
specify what money is as well as its functions and forms in relation
to markets. The second section (Money as Capital) turns to money
as capital, that is, money as a phenomenon of capitalist production
and circulation. Money’s specifically capitalist functioning is thus
specified, including its role in relation to credit.
Money and markets
Capitalism is a social system that incorporates an extremely wide
network of markets. There are markets in which the traded com-
modities are produced by capitalist enterprises employing wage
labour, such as those for consumer and investment goods. There are
markets in which the traded commodities are not produced by using
capitalist methods, typical examples being the markets for land and
labour (see Chapters 1 and 4). There are also markets in which the
objects of trading are not produced commodities at all, but financial
obligations, claims on others, cover for risk and other promises
among people. Finally, there are even ‘markets’ in which the traded
objects can only be imputed by analogy with commodity markets,
such as the ‘markets’ for bribes, for gangster protection, for hired
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murderers, for fines, for libel compensation, and so on. All these
disparate markets, however, have one thing in common: money.
The functions of money in these capitalist markets are ubiquitous.
Money is the means of rendering disparate objects and activities
commensurate with each other (the unit of account or measure of
value). It is the mediating instrument in transactions (the means of
exchange). It is, further, the medium that enables settlement of
promises and obligations between market participants at a time
other than that of the actual transaction itself (the means of
payment). It is also the medium that allows one country to settle its
obligations with, or transfer wealth to, another (world money).
Finally, money is the medium for forming hoards, which are
possessed by individuals or enterprises and held with banks or other
financial institutions (means of hoarding). Financial institutions also
hold their own vast hoards of money (reserves).
Money also has broader social functions in a capitalist society,
most clearly seen in relation to power and hierarchy. Money affords
social power, since it can impel others to comply with its owner’s
will, for example, by placating opponents, mobilising supporters, or
hiring professional expertise. Money also affords political power, as
is clearly seen in the influence exercised on political parties by those
that finance them. Money, moreover, determines rank and social
hierarchy, since it opens the doors of ‘good’ society and secures
membership of exclusive clubs and associations. In capitalist society,
which typically shuns hereditary distinctions and privileges, money
is uniquely able to sustain rank and hierarchy across the generations,
since it can place one’s children in the ‘right’ schools and purchase
husbands and wives.1Finally, money’s power is also global as it
allows countries to acquire military weapons produced by others,
and since countries that can make gifts of money can also persuade
others to do their bidding.
The complex economic and social functions of money are
matched by a bewildering array of its forms. There is gold, which
lies mostly in private and public hoards. There are cheap metallic
coins and banknotes used heavily in the petty transactions of
everyday life. There are many different types of bank deposits that
can be used to effect payments, or transfer wealth, among individual
and large corporations. There are bank and other accounts that can
be charged through the use of credit cards. There are also deposits
held by financial institutions other than banks that can be used for
payment. There are, moreover, several credit instruments that can be
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used in lieu of payment with cash, such as commercial bills. Despite
money’s protean aspect, however, the vast bulk of its forms in a
developed capitalist economy have one thing in common: they are
related to the credit system. The bulk of modern capitalist money is
credit money.
The social relations captured by money in commodity
These simple observations about capitalist markets and money
appear unobjectionable, what economists call ‘stylised facts’. Con-
sequently, it comes as a surprise to find that mainstream economic
theory leaves little room for money in its analysis of markets. To be
sure, there are standard references to money’s functions in
economics textbooks, but they sit very uneasily with the underlying
analytical approach of mainstream theory. The theoretical model of
‘general equilibrium’, which underpins mainstream economic
thinking, is fundamentally a model of direct commodity exchange
between market participants (Hahn 1982). Mainstream economic
analysis, which prides itself in being the most advanced social
science, at bottom sees capitalism as a social system in which things
exchange directly for other things (barter), rather than for money. In
short, mainstream economic theory analyses capitalist markets
without adequately explaining money’s role.2
Marxist political economy is vastly different on this score: money
is shown to emerge spontaneously and necessarily whenever regular
commodity exchange is undertaken. It is deeply misleading to
assume, as mainstream economics does, that widespread commodity
exchange could take place under barter conditions. There is no
evidence (historical, anthropological or sociological) that a durable
system of entirely money-free commodity transactions has ever
existed. Indeed, research into exchange systems in which
commodity owners regularly and frequently meet each other shows
that money is present and touches all transactions, directly or
indirectly.3Economic interactions between owners of particular
commodities inevitably lead to the emergence of money as the
universal commodity, the ‘independent form of value’ or ‘universal
equivalent’. Money and markets are inseparable.
In the first volume of Capital, Marx (1867, ch. 1) provided the
building blocs for a theoretical explanation of money’s emergence as
part of his discussion of the ‘form of value’. Money is shown to
emerge spontaneously and inevitably whenever commodity owners
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come into frequent contact with each other. A very important point
here is that money does not emerge simply as a generally accepted
means of exchange, the mere lubricant of markets. Rather, money is
the ‘universal equivalent’ or ‘independent form of value’. Its essential
property is that it can be immediately exchanged for all other com-
modities, thus enabling its owner to buy all others. Money emerges
in commodity exchange as the monopolist of buying power, it is a
special commodity that possesses a unique ability. The process
through which this takes place is determined by the social relations
between commodity owners, analysed below.
Markets are places in which independent and separate individu-
als interact with each other. Market participants might be related
through kinship, friendship or social habits, but when they meet
each other as commodity owners, these links recede into the
background. They do not fully vanish, but become dominated by
the characteristics of commercial give and take, by the ‘bottom line’.
The overwhelming concern of commodity owners when they meet
is to obtain the exchange value of their commodities, to secure the
‘quid pro quo’ of value that is the very logic of their market activities.
As far as this purpose is concerned, other market participants are
strangers, alien individuals with whom a social relationship is to be
constructed in the market alone. Thus, whenever two commodity
owners meet (the ‘accidental form of value’), one must make the
opening move in establishing a social relation among them: there
has to be an initial gambit. Typically, this takes the form of making
an offer to sell the commodity possessed. The counter-party is, thus,
given the option of accepting or rejecting the offer. The social
relation that begins to emerge between the two commodity owners
places the former in the position of the ‘relative’ or ‘active’ and the
latter in the position of the ‘equivalent’ or ‘passive’. To put it differ-
ently, when two alien commodity owners meet and begin to interact
with each other, one of them immediately places the other in the
position of being able to buy, even if only one commodity. Their
social relation, defined as it is by the market, unfolds on this basis.4
Emergence of money represents the development of this rudi-
mentary ability to buy, and its monopolisation by a single
commodity. It occurs as transactions take place generally and
frequently among similarly independent and separate market par-
ticipants. As they meet each other and engage in quid pro quo
transactions, their social relations develop further and revolve
around a single pole of buying ability. There are successive steps to
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this process. First, one commodity owner makes an offer of sale to
many others (the ‘expanded form of value’), giving to all of them a
little of the ability to buy (making them partial ‘equivalents’).
Second, in reverse, many commodity owners make offers of sale to
a single other (the ‘general form of value’), giving to the latter a
much strengthened ability to buy (making the commodity involved
a ‘universal equivalent’). Third, if a commodity has come to possess
exceptional buying ability (it already is the ‘universal equivalent’ for
a group of commodities), still other commodity owners will offer
their commodities for sale against it because of its power to buy and
not because they want to consume it. Its ability to buy will increase
correspondingly. On this basis, one commodity will eventually
attract toward it offers of sale from all other commodity owners,
becoming an ‘equivalent’ for all others. This is money, the
commodity that can buy all others. It can do so simply because all
other commodities are typically offered for sale against it.
When transactions become monetary, the social relations among
commodity owners acquire a different content. Commodity owners
are still independent and separate from each other, but they also act
in a social way (if unplanned and unconscious), since they make
money emerge by collectively offering their goods for it. Thus,
money has its roots in individual exchange transactions among alien
individuals, but it is also a collective and social phenomenon.
Commodity owners typically offer their goods for money because
they know that money will also be accepted by others. In short,
money is systematically used by market participants because its use
has become a social norm that characterises markets. However, the
general use of money is a very peculiar social norm. It links essen-
tially alien individuals and does not rest on familial, religious,
hierarchical relations on which social norms typically depend.
Money is the glue that holds together the individuals that comprise
the market, it is the nexus rerum’ of a market economy. But it is an
impersonal link, lacking the immediacy and directness of other
norms that hold society together. Participants in capitalist markets
are inherently separate from each other, their connections estab-
lished by a thing that monopolises buying ability, the use of which
has become a social norm.
The source of money’s social power and influence is now clear.
Contrary to what is typically (though often implicitly) assumed by
mainstream economic theory, markets are not characterised by
equality among participants. One commodity stands above all
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others, since it possesses the unique characteristic of being able to
buy all others. Far from being democratic and egalitarian, markets
have a privileged king and a vast crowd of subjects. This is the
foundation of the power possessed by money owners compared to
plain commodity owners. Money owners can mobilise resources,
obtain commodities, secure promises and postpone demands on
them in ways not available to plain commodity owners, thus
affording to themselves economic power. In societies in which
commodity exchange is widespread, the economic power afforded
by money naturally leads to social power. In a capitalist society,
which incorporates a vast network of markets, the king of the market
is a prime instrument for imposing one’s will on others, and estab-
lishing social hierarchy and rank. Social power, privilege and
inclusion in various activities are intertwined with possession of
money in a capitalist society. Equally, lack of money translates into
powerlessness, deprivation and exclusion from several social
activities for the majority of the poor in capitalism. In capitalist
society, successful participation in social affairs depends less on a
person’s abilities and skills and more on possession of money, the
monopolist of the ability to buy.
Forms and functions of money
Thus, from Marx’s work it is possible to piece together an explana-
tion of what money is, namely the monopolist of the ability to buy
in markets, ‘the universal equivalent’. Money emerges necessarily
when commodity owners interact with each other and, in turn, its
use becomes a social norm. Does this derivation imply that money
has to be a commodity? Is Marxist analysis of money tantamount to
a theory of metallic money, namely gold, as Schumpeter, the great
Austrian economist, thought (1954, pp. 699–701)? Moreover, since
commodity money plays a marginal role in the contemporary world
economy, is such analysis obsolete? These questions sound plausible
but actually reveal confusion regarding what money is, its corre-
sponding functions and the forms it takes when it performs them.
The first point to stress is that the multiple economic and social
functions of money flow from what the ‘universal equivalent’ is,
namely the monopolist of the ability to buy. For the functions of
measure of value and means of exchange to become real economic
phenomena, the money owner has to accept an offer of sale from
the commodity owner and part with money. A theorist can certainly
create abstract models of value being measured and commodities
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exchanging in a variety of ways, but for these functions to become
social reality, there must be regular payment of money in exchange
for commodities. In short, if the ability of money to buy is not
exercised regularly in practice, the functions of measure of value and
means of exchange have no social content at all. The same holds
true for the hoarding and paying functions of money, domestically
and internationally. It is possible for commodity owners to create
obligations among themselves that rest on subsequent use of money
as means of payment because money’s monopolistic ability to buy
makes later payment in practice acceptable. Similarly, commodity
owners hoard money in order to be able to confront unforeseen
events in the markets because money has a unique ability to buy.
The multiple functions of money rest on its monopolisation of the
ability to buy.
Money’s original form has to be that of a commodity. It cannot be
otherwise since money emerges within a set of commodities as the
monopolist of buying ability. But as commodity money performs
the function of means of exchange, symbolic money begins to
emerge. By being used in exchange, commodity money is abraded
and worn, and thus has less weight than it purports to do. Through
use, metallic money spontaneously turns into a symbol of what it is
supposed to be, and opens the way for proper symbols of money
(paper or metallic) (Marx 1859, pp. 108–114). Furthermore, by
performing the function of means of payment, money allows growth
of trade credit (‘buy now – pay later’). Similarly, the hoards created
by money make it possible for their owners to make loans aimed at
earning interest, thus opening the possibility of money-lending
credit. In a capitalist economy, financial institutions emerge that
make systematic the advance of both types of credit. Through their
operations a proliferation of other forms of money takes place, all
of which are essentially credit money.
In all its forms (commodity, symbolic or credit) money remains
the ‘universal equivalent’, the monopolist of the ability to buy. At
the same time, it cannot be assumed that every new form of money
is fully adequate for the particular function that it is called to
perform in exchange. Monetary problems and crises may occur if
the form is inadequate for the function, for example, price inflation
may arise out of fiat and credit money functioning as means of
exchange. In developed capitalism, the functioning of commodity
money has been limited to hoard of last resort. Such hoards are held
by the major financial institutions (central banks) of the capitalist
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credit system. The marginal role played by commodity money in
advanced capitalist exchange poses no insuperable problems for
Marxist political economy.5
Money and the circuit of capital
Money is not a specifically capitalist economic phenomenon. The
presence of money and its extensive social and economic function-
ing are well attested in ancient societies as well as in contemporary
communities that are in no way capitalist. Given the analysis of
money as monopolist of the ability to buy, it follows that money’s
presence and functioning in non-capitalist societies depends on the
extent to which commodity exchange is present in them. Never-
theless, money’s nature, functions and forms emerge most clearly
under capitalist social conditions, for it is only then that commodity
exchange becomes truly general and permeates economic activity.
There are two reasons why commodity exchange and money
occupy such a prominent position in capitalism compared to other
societies. First, capitalist production is undertaken by a class of
autonomous and competing producers (capitalists), who purchase
inputs and sell output in a range of markets. Capitalist production,
moreover, relies on the social class of wage workers. They derive their
income from selling their ability to work in the labour market, and
use the proceeds to obtain means of consumption in commodity
markets. The prominence of markets in the economic functioning of
capitalism ensures the prominence of money’s economic and social
role. Second, as discussed elsewhere in this volume, the existence of
a capitalist class and a working class turns commodity value into a
deeply rooted social norm. The economic interaction of these two
classes gives to value a real social substance, namely abstract labour.
The driving motive and mainstay of capitalism is the continuous
expansion of value as abstract labour, through extraction of surplus
value from workers employed in production. Since it is the inde-
pendent representative of value, money possesses a special role in
capitalism: it captures its very social essence, summarised in the drive
for money profits.
The special place occupied by money in capitalism is shown by
money becoming capital. Money as capital is a broader social and
economic phenomenon than money as money. For Marxist political
economy, capital is the sum total of social relations between capi-
talists and workers, but also the ceaseless movement of value in
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pursuit of self-expansion. The latter is best thought of as a circular
flow: capital value starts as money, becomes material inputs to
production through market purchases (means of production and
labour power), turns into finished commodities through production,
and returns to money (augmented by surplus value generated in
production, i.e. profit) through sale of finished commodities (Fine
1975). Money is the natural starting and finishing point for this
circuit. Since it is the circuit’s most fluid element, money is the form
in which capital normally commences its movement as capitalists
make investment purchases. It is also the form to which capital must
return (plus profit), if the capitalist is to retain the ability to invest
where profit can be maximised. Money as capital can be indicated by
M – C – M' (money – commodities – more money), a summation of
the circuit of capital. This is in contrast with money as plain money,
indicated by C – M – C' (commodities – money – other commodi-
ties), a summation of market transactions (or simple exchange). The
motivating purpose of M – C – M' is acquisition of money profit,
while that of C – M – C' is acquisition of different use values. Money
provides the objective of M – C – M', but also a means for achieving
this objective since money as capital hires workers and allows for
generation of surplus value (see Chapter 1). Yet, money as capital
takes advantage of – and does not eliminate – money’s functioning
as plain money. The point is important for reasons of both theory
and policy, as can be seen in the following two ways.
First, the profit-seeking and exploitative character of capitalism
revolves around money but does not result from money’s peculiar
properties. Rather, capitalism originates in the profound social trans-
formation that creates the social classes of capitalists and workers. It
is true that for the emergence of capitalism extensive use must be
made of money’s capacity to be hoarded and to pay in order to create
the original capital available to the capitalist class and to dispossess
the working class from the means of production. But the driving
force behind these changes is social struggle, of which money is a
means and not a cause. Put differently, it is not money that creates
capitalism, but capitalism that transforms money into capital.
Capitalist social relations graft onto money’s functions as means of
purchasing, payment and hoarding the aspect of capital, especially
since surplus value takes the form of money profits. These functions
are incorporated into the circuit of capital and facilitate the ceaseless
expansion of capital. It follows immediately that to tackle the roots
of capitalism and stop money from functioning as capital it is not
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enough to confront the monetary mechanisms of capitalism.
Instead, it is vital to challenge the class relations that underpin it
and result in exploitation. To stop money acting as capital it is
necessary to change the class structure of capitalist society rather
than simply disrupt its monetary mechanisms.
Second, in developed capitalism the economic and social space of
simple commodity exchange (C M C') expands dramatically.
From the standpoint of the working class, market transactions are
simple circulation: workers enter the labour market, sell their ability
to labour, and use the money to obtain necessary means of con-
sumption. Since the development of capitalism implies the
expansion of the working class (that is, the class that earns income
by entering the labour market), it follows that as capitalism develops,
the functioning of money as plain money is intensified. Money
functions as plain money in transactions relating to the sale of
labour power, and that is how it enters the realm (and conscious-
ness) of the worker. The driving motive for workers in such
transactions is acquisition of the use value of goods, and has nothing
to do with the expansion of value. For workers, money is primarily
the means of purchase and of settling obligations, and in a very
limited sense, the means of hoarding.
Consequently, money as the monopolist of the ability to buy
directly affects the social power of workers in capitalism – and of the
poor generally. Their social power could increase dramatically if the
buying power of money were limited relative to key goods. This is
not conditional on changing the class structure of capitalism, or on
overthrowing it. It simply follows from limiting the monopoly
power of money over important elements of the consumption of
workers and the poor. When access within capitalism to health,
education, and transport is regulated through public provision rather
than through private expenditure of money, the social power of
workers rises sharply. Public provision of such goods and services is
not only more economical but also makes for greater social power
and confidence for those who have limited access to money. Money
as capital has little to do with this result. What is vital is to restrict
the functioning of money as money in the social realm of workers
and the poor.
Money and the credit system
Money’s role in the circuit of capital brings one more fundamental
change to its social and economic functioning: money is systemati-
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cally mobilised in credit and finance. Credit practices, that is, both
the advance of goods on trust (for later settlement of the obligation)
and the lending of money, are found in a wide variety of non-
capitalist societies. However, in those societies the practices of credit
are peripheral to the main activities of production, and they are
aimed mostly at facilitating or smoothing consumption. No
mechanisms for the systematic lending of money to undertake
productive investment can be found in non-capitalist societies (Itoh
and Lapavitsas 1999, ch. 3). In contrast, capitalism contains a
financial system, a vast and elaborate social structure that puts credit
and finance at the service of capitalist production.
Money’s role in the circuit of capital is of critical importance for
the capitalist financial system in two related ways. First, by func-
tioning as means of payment, money allows for the systematic
advance of finished commodity output against promises to pay.
Thus, money makes possible the expansion and growth of trade
credit among capitalist enterprises. The typical way of undertaking
market operations in developed capitalism is on trade credit rather
than cash, because such credit economises on money capital and
speeds the turnover of capital. Second, by functioning as means of
hoarding, money allows for systematic concentration of idle money
in the course of the circuit, and creation of loanable money capital.
Hoards are systematically formed by capitalist enterprises as precau-
tionary reserves, fixed capital depreciation, reserves necessary for
maintaining the continuity of production, and so on.6Hoards are
also formed as workers and capitalists realise their consumption
through money. The financial system gathers money hoards across
society and turns them into loanable money capital. This is a special
form of capital, which does not earn profit through direct
engagement in production and circulation but earns interest by
being lent. Access to loanable money capital allows capitalists to start
new – or to expand existing – circuits of capital, thus increasing the
mass of surplus value generated by their own capital. Interest is a
share of the additional surplus value, which accrues to the owners of
loanable money capital (see Chapters 2 and 4).
The capitalist financial system is a complex social mechanism that
organises trade credit, mobilises loanable money capital and transfers
money across society. Its operations rely on money. The hoarding
function of money allows reserves to be created that can form
loanable money capital, by definition impossible in the absence of
money. The paying function of money, on the other hand, allows for
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systematic cancelling out and residual settlement of obligations
among capitalists (clearing), which encourages growth of all credit
practices. The paying function is also vital to lending, as money can
reliably transfer value to claimants at specified points in time,
whether as interest or principal. In turn, the form of money is
profoundly affected by growth and development of the capitalist
financial system. Banks and other financial institutions systemati-
cally generate credit money that overtakes commodity and state fiat
money as ‘universal equivalent’. Capitalist money is overwhelmingly
credit money, mostly functioning as means of hoarding and
payment. The means of exchange function is relegated to the small
change of credit money (mostly banknotes).
The financial system represents a concentration and expansion of
social power on quite a different level from mere money. Access to
credit enables capitals to move into different areas of production and
to beat others in competition. The financial system distributes spare
resources across society, hence control over its mechanisms matters
greatly for the direction of development of a particular society. Nev-
ertheless, the enormous social power that is afforded by the financial
system cannot be analysed in the context of money it requires
discussion of the social relations of credit and finance which, despite
having a monetary aspect, are very different from the social relations
encapsulated in money (see Chapter 10).7One point that should be
made in this connection, however, is that the deeper foundation of
the financial system in capitalism can be found in the systematic
generation of surplus value in the circuits of industrial capital.
Surplus value allows for systematic payment of interest and provides
the wherewithal for other returns made by capitals engaged in
finance. Capitalist society is the only historical society that has been
able to evolve a financial system, as opposed to simple credit trans-
actions, because it is the only society that systematically generates
money profits in production. Thus, although the power of finance
is enormous in a capitalist society, ultimately finance is subservient
to industrial capital.
Money is an economic category intrinsic to markets and funda-
mental to relations between commodity owners. It arises
spontaneously in commodity exchange, through the social (but
unplanned and unconscious) action of other commodity owners. It
is the monopolist of the ability to buy, or in Marxist terminology,
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the ‘universal equivalent’. Money has several complex functions
vital to commodity exchange measure of value, means of
exchange, means of hoarding, means of payment and world money.
As it performs these functions, money’s own form is altered into
forms that include commodity money, symbolic money and credit
money. Each form of money has to be adequate for the function that
it tends to perform. Money’s unique ability to buy gives it an excep-
tional position in commodity markets. Hence, access to money
becomes a source of economic and social power, and the foundation
for capitalist hierarchies and privileges. It also follows that the social
power of working people and the poor in capitalism would benefit
from limiting money’s ability to buy, especially over the goods that
significantly affect their living conditions.
Money is an economic category that is far older than capitalism.
Nevertheless, its nature and functions emerge most clearly under
capitalist social conditions because it is then that commodity
exchange becomes truly general. Moreover, under capitalist
conditions, money becomes capital. It is both starting (money
investment) and finishing point (sales revenue) of capital’s charac-
teristic circular movement. More importantly, money provides the
motive (money profit) for capital’s operations, and captures its
essential purpose: self-expansion. Since it can be used to hire workers
necessary for generation of surplus value, money is also the means
through which capital can bring about its self-expansion. Conse-
quently, the social power of money in capitalism is enormous. Under
capitalist conditions, furthermore, money becomes one of the foun-
dations of the financial system by allowing trade credit to proliferate
and by making possible the formation of loanable money capital. Its
close association with the financial system induces broad changes
in the form of money, and credit money becomes the characteristic
form of money in capitalism. The power of the financial system over
capitalist society is also enormous, but the social relations of finance
need a broader framework of analysis than those of money.
Fine, B. (1975) Marx’s Capital. London: Macmillan.
Fine, B. and Lapavitsas, C. (2000) ‘Markets and Money in Social Science: What
Role for Economics?’, Economy and Society 29 (3), pp. 357–82.
Hahn, F. (1982) Money and Inflation. Oxford: Blackwell.
Itoh, M. and Lapavitsas, C. (1999) Political Economy of Money and Finance.
Macmillan: London.
Money as Money and Money as Capital in a Capitalist Economy 71
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Kiyotaki, N. and Wright, R. (1989) ‘On Money as a Medium of Exchange’,
Journal of Political Economy 97, pp. 927–54.
Lapavitsas, C. (2000a) ‘Money and the Analysis of Capitalism: The Signifi-
cance of Commodity Money’, Review of Radical Political Economics 32 (4),
pp. 631–56.
Lapavitsas, C. (2000b) ‘On Marx’s Analysis of Money Hoarding in the
Turnover of Capital’, Review of Political Economy 12 (2), pp. 219–35.
Marx, K. (1859) Contribution to the Critique of Political Economy. Moscow:
Progress Publishers, 1970.
Marx, K. (1867) Capital, vol. 1. London: Penguin, 1976.
Menger, K. (1892) ‘On the Origin of Money’, Economic Journal 2, pp. 239–55.
Schumpeter, J.A. (1954) History of Economic Analysis. London: Routledge.
Uno, K. (1980) Principles of Political Economy. Brighton: Harvester.
1. For a fuller discussion of money’s social role and power see Fine and
Lapavitsas (2000).
2. There have been neoclassical attempts to explain the spontaneous
emergence of means of exchange as the most ‘marketable’ commodity,
going as far back as Menger (1892). The most recent formulations of this
idea, for instance, Kiyotaki and Wright (1989), leave the property of ‘mar-
ketability’ unexplained. In effect, money is the most ‘marketable’
commodity because market participants think that it is. That is a deeply
unsatisfactory and circular argument.
3. See Itoh and Lapavitsas (1999, chs. 2 and 10).
4. Positing Marx’s analysis of money in these terms is one of the most
decisive contributions of the Japanese Uno school (Uno 1980). It is not
implied here that Marx’s analysis of money is the final word on the
subject. The point is, rather, that it offers a path toward solving the ‘riddle
of money’, while also taking into account the social relations encapsu-
lated in money.
5. For further analysis of this issue see Lapavitsas (2000a).
6. Hoarding in the circuit of capital is fully discussed in Lapavitsas (2000b).
7. See Itoh and Lapavitsas (1999, chs. 3 and 4).
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4 Capitalist Competition and
the Distribution of Profits
Diego Guerrero
Universal competition among all those who sell commodities and
depend on their sale, as well as the capitalist distribution of the
output, must be understood and analysed together in the framework
of their own mode of production: capitalism. The mode of distribu-
tion of the social product is a consequence of the actual mode of
production. When capitalism prevails, its main feature is the all-
embracing dependence of the social processes (including the labour
process) on the specific way production is undertaken. Capitalist
production is carried out in a private and socially fragmented way,
with no possibility of systematic co-operation beyond each unit of
production (see Chapter 1).
The fragmentation of social production into private, independent
and rival units reaches its maximum when labour power becomes a
commodity. Then the wage workers and the public administration,
as well as the capitalists, behave as merchants. The workers depend
on the sale of their labour power, and the state – whose revenues
derive from a productive sector that produces commodities as the
sole means of making money follows a similar merchant
behaviour. Hence, wherever rivalry and competition form the
system’s status quo, all agents (workers, capitalists, and the state)
must behave as merchants subject to the rules of the competitive
war. The study of these rules is the core of the theory of competi-
tion, an aspect of value theory bearing upon the distribution of the
means of production, its implications for the primary distribution
of the newly produced value (between variable capital and surplus
value) and, especially, the distribution of surplus value among its co-
sharers (see below).
The class struggle itself, although not reducible to competition,
includes a competitive dimension. However, the reproduction costs
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of simple labour power are the main determinant of its normal price
(the wage rate). The necessity that this reproduction should be
accomplished without jeopardising the continuity of the process of
capital accumulation ensures that ‘subsistence wages’ (in a social
rather than physical sense) remain the norm in contemporary
capitalist economies (see Chapter 5). This ‘subsistence’ level includes
all categories of wage labour. The fact that the flow of former capi-
talists (and self-employed workers) becoming new wage workers is
greater than the opposite flow is explained by the fact that the
threshold (money) capital required to set up a new capitalist firm is
growing faster than the monetary reproduction costs of the average
socially qualified worker. The net result of this process is the
growing proportion of wage (or proletarian) labour in capitalist
societies (see Table 4.1).
Table 4.1 Proportion of waged (proletarian) labour power, in selected
countries and years.
Country 1930–40 1974 1997
USA 78.2 (1939) 91.5 91.5
Japan 41.0 (1936) 72.6 80.8
Germany 69.7 (1939) 84.5 (West) 90.7
UK 88.1 (1931) 92.3 87.3
France 57.2 (1936) 81.3 87.6
Italy 51.6 (1936) 72.6 74.7
Canada 66.7 (1941) 89.2 n/a
Belgium 65.2 (1930) 84.5 83.6
Sweden 70.1 (1940) 91.0 94.7
Spain 52.0 (1954) 68.4 81.0
Europe – 15 n/a n/a 84.3
Simple Average 65.2 83.7 86.2
The trend towards a growing relative immiseration of the workers
is well documented, and it should not be confused with the simul-
taneous trend toward an increasing real wage. The two trends are
not only mutually compatible but each is inherent in capitalism, as
can easily be seen in developed capitalist societies. As was pointed
out by Marx (1867), the increase in labour productivity reduces the
labour value of each commodity, and each bundle of commodities
(including the ‘subsistence’ bundle of the workers). At the same time,
the increase in average labour intensity generates a trend towards
higher consumption levels, as the only way of replenishing the
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increased labour power consumed per hour. In fact, this duality –
rising real wages and declining ‘relative’ wages – is a very important
factor conditioning the behaviour of the working class. The workers
can improve their material standard of life in the long run (even if
going through phases in which their purchasing power stagnates or
even declines) while, at the same time, inequality grows in terms of
the relative position occupied by the working class in contrast to its
antagonistic class: the capitalists.
Edward Wolff (1998) has shown that the net financial wealth of
the average family in the United States is ten times smaller if ‘only’
99 per cent of the population is taken into account (leaving aside
the highest one per cent). It can also be shown that, in several OECD
countries, the rate of surplus value (the rate of exploitation) has been
rising for two centuries. The only categories we need are those of
surplus value, exploitation and others derived from the labour theory
of value (for a review of the literature, see Shaikh and Tonak 1994).
Each capitalist firm gathers a mass of workers into a single operating
mechanism called its ‘collective’ labour force. In this system of
production, work is collectivised at the level of the individual firm,
but it cannot be co-ordinated with the remaining social labour in
the framework of the capitalist mode of production. ‘Direct’ labour
performed by the whole ‘collective worker’ (the sum total of the
collective workers in all firms) produces an amount of new value
greater than that needed to reproduce the value of the collective
labour power (the value of their means of subsistence or regular con-
sumption). This is due to the generalised existence of surplus labour,
that is, labour over and above the amount needed to reproduce the
equivalent of the bundle of goods actually consumed by the direct
producers. The monetary expression of the surplus labour appropri-
ated by the owners of the firms is the total surplus value, or profit,
extracted by the capitalist class. The core of the theory of competi-
tion concerns the allocation of this surplus value and, specifically,
the discrepancies between the ‘individual’ amounts of surplus labour
extracted and realised by each of the rival productive units.
The state and other institutions able to modify the basic results of
the free competition model should be temporarily set aside, so that
we can focus on productive capital only. Accordingly, we exclude
taxes and monopolies, and the existence of goods that are not freely
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reproducible by manufacturing (land, for instance; see below). We
will firstly study competition among capitalist firms as a process
which is conveniently split into two different analytical moments:
intrasectoral competition and intersectoral competition. Even if both
take place simultaneously in practice, they should be analysed
separately and successively in order to facilitate understanding (see
Chapter 1 and Gouverneur 1983).
Intrasectoral competition
Intrasectoral competition occurs between firms belonging to one
sector, i.e. all those producing the same kind of commodity (homo-
geneous product). Technical diversity within each sector makes the
unit production costs very different in each of the firms. However,
all of them are forced to accept the tendency toward the same output
price, and not demand a higher one, due to their competition for
market shares. These different unit costs, and the simultaneous
tendency toward homogeneous prices, generate a tendency toward
the dispersion of the individual profit rates obtained by each firm.
However, it is crucial not to confuse the cost per unit of input used
up with the cost per unit of output produced. This is a very important
issue, as intrasectoral competition frequently takes place in a
worldwide framework, and the firms producing the same type of
commodity face an increasingly globalised market. The competi-
tiveness of a firm, like that of a sector or country, is ultimately based
on an advantage in unit costs. If the price of a unit of labour power
employed in sector S is lower in country A than in country B (say
one half), but labour productivity is much higher in B (say six times
higher), the result will be that the wage cost per unit of product will
be three times lower in country B (even if the wage rate is higher in
this country). If both producers face approximately the same input
prices, their profit rates will be very different and, paradoxically, they
will be higher in the high-wage country (since high wages usually
reflect productivity differences).
Intersectoral competition
Intersectoral competition operates between firms belonging to
different branches or sectors. As Marx (1894) points out, when taking
into account the fact that commodities circulate not simply as com-
modities, but as the product of capitals (i.e., as capitalist
commodities; see Rubin 1928), competition requires that any
amount of capital invested in one sector should gain a proportion-
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ate yield (an equal profit rate). This means a profit that tends towards
proportionality to the sum of its variable and constant capital, in
spite of the composition of capital in each sector (the ratio between
the two components of capital) being very different in each of them.
Both dimensions of competition produce quantitative modifica-
tions in the value of the individual commodities and in the profits
received by individual capitalists. The latter happens even if the total
value and surplus value produced are unaffected by this double redis-
tribution. Marx (1894) insisted that the unit value in each sector can
be modified as a result of ‘free competition among capitals’. Free
competition (as was pointed out by Smith 1776) prevents one sector
from obtaining a higher average profit rate than the economy’s
average, since the search for maximum profit rates by each
individual capital generates a tendency toward the equalisation of
the average rate of profit in every sector. Marx explained that these
‘modified’ or ‘transformed’ prices, arising from this second tendency
in competition – what he called ‘prices of production’ – would not
be strictly proportional to the total amount of labour spent in
production. This is because differences in the organic and value com-
positions of capital between sectors require that, in the context of
intersectoral competition, profit should be proportional to the total
capital invested, rather than proportional to its variable component
only (the fraction of capital exchanged against the only commodity
capable of producing surplus value, labour power).
Before proceeding to the next section, it is necessary to add two
considerations. First, even if Marx considered Smith’s treatment of
the tendency toward the equalisation of the sectoral rates of profit to
be one of his most important contributions, he completely rejected
the ideological (normative) conclusions that the apologists of
capitalism extract from the idea of the ‘invisible hand’. Marx distin-
guishes between two things. On the one hand, it is true that supply
tends to adjust itself (more or less slowly) to the demand existing in
actual capitalist conditions: this is the ‘automatic’ mechanism in
capitalist reproduction, allowing the pursuit of individual interest
on the part of each firm to lead to a certain mode of social repro-
duction. However, there is no guarantee that this effective demand
truly reflects the needs of the members of society, for it is simply a
monetary demand expressing the mode of distribution correspond-
ing to a system of production that reproduces wealth and poverty in
both poles of the same basic (capitalist) relationship. Moreover,
although the prices of production are the centres of gravity regulating
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the movement of actual (market) prices in conditions of ‘free com-
petition’, the existence of monopolies or public intervention, acting
through ‘price regulation’, may alter the normal oscillation of these
prices around their regulating centres, determined by the conditions
of ‘free competition’ (this process should not be confused with the
neoclassical theory of perfect competition).
The presentation of the theory of competition based on the labour
theory of value is not yet complete. We should now deal with the
unproductive sector of the economy, especially the state (which
finances itself through taxes and other revenues originating from
the productive sector) and the circulation activities (as opposed to
the productive sector), including the redistribution of part of the
surplus value (or its money form, profit), and land rent or, more
generally, any kind of payment made for the use of inputs that are
not freely reproducible.
The public sector
The state – leaving aside the public utilities, which should be dealt
with exactly like private firms that, in this regard, belong either to
the productive or the circulation sectors supplies the so-called
‘public services’ usually without any merchant transaction or price.
This means that the state must take up a fraction of the profits
generated in the productive sector of the economy, in order to pay
for the expenses generated by its ‘administrative’ activities (both
when it performs the most useful activities, like public health or
education, and when it shows more clearly its capitalist class nature,
as in the defence of private property or in helping to fund private
firms). The taxes levied by the state and other public institutions (in
a broad sense, including fees, social security contributions and other
revenues) are a fraction of the total surplus value that cannot be
directed toward the ultimate aim of the capitalist class: accumula-
tion, as additional capital available to expand the scale of operation
of the productive sphere. Hence, it must be considered as a form of
‘social consumption’ of part of the output of the productive sector.
Commodity circulation
The state is not the only sphere where unproductive labour is
performed (i.e., labour creating neither value, nor surplus value, nor
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capital; see Chapter 2). The ‘sphere of circulation’ must be clearly
distinguished from the sphere of production, since only the latter
creates the whole mass of value, while the sphere of circulation
displaces and distributes that mass without modifying it. This
difference is crucial, since the analysis of exploitation starting from
the labour theory of value ought to be based on the assumption of
equivalent exchange. What this means is that, in the global process
of capitalist production, M – C ... P ... C' – M', value and surplus value
(hence profit) are created only in ... P ..., the phase of production,
whereas in both circulation processes (the purchase of inputs, M – C,
and the sale of the output, C' – M') all that happens is the transfer of
ownership from the seller to the buyer, without any modification in
the value of the commodity exchanged (see Chapter 1).
Empirical works dealing with this issue can be misleading, in incau-
tiously identifying the concept of ‘circulation’ with what the
available data characterise as the ‘trade’ and ‘finance’ sectors. In my
view, Nagels (1974) has correctly insisted that this should be avoided
and, instead, that researchers should attempt to analyse two problems
that are often ignored: (a) that productive activities are performed in
these sectors (see Guerrero 1999–2000), and (b) that it is necessary to
locate unproductive circulation activities inside all productive sectors,
because capitalist economies produce not only goods but commodities
and, hence, needs to transmit titles of ownership, as well as perform
other activities that are superfluous, from the point of view of the use
value produced and its consumption.
Land and other non-reproducible inputs
Finally, the question of land rent requires a special treatment in the
theory of value, competition and distribution (Bina 1985).
Productive inputs privately appropriated and reproducible only in
a limited way allow their owners to participate in the distribution
of the surplus value created by the workers in the productive sector.
The reason is simple: these owners can claim from the productive
capitalists a share of the total surplus labour, and this share increases
with the demand for these inputs (whose supply is, necessarily,
limited). Marx (1894) wrote that ‘the fact that capitalist ground-rent
appears as the price or value of land, so that land, therefore, is
bought and sold like any other commodity, serves some apologists
as a justification for landed property since the buyer pays an
equivalent for it, the same as other commodities ... The same reason
in that case would also serve to justify slavery, since the returns
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from the labour of the slave, whom the slave-holder has bought,
merely represents the interest of the capital invested in this
purchase’ (p. 642).
Marx criticised Ricardo (1821) for analysing differential rent only.
Instead, for Marx, there is also an ‘absolute rent’ alongside the
former. Absolute rent is appropriated by the landowners whenever
the demand for the commodity produced with help from land (or
other non-reproducible inputs) raises its price above zero. Absolute
rent is simply due to the ‘monopoly of the ownership of the land’,
and this ‘limitation’ to the free circulation of capital (and hence to
the general theory of competition) ‘continues to exist even when
rent in the form of differential rent disappears’ (Marx 1894, p. 751).
In contrast, differential rent benefits the owners of land (and other
limited resources) who are in a better position relative to their fellow
landowners, either due to the better quality of their land (rich soils
for agriculture, better weather in land for tourist uses), proximity to
the place of manufacturing or sale of the output, or easier exploita-
tion (in the case of mining or exploiting underground or marine
deposits or urban land) and so on. In this way, the owners of the
best quality non-reproducible resources make possible production at
a lower cost than that included in the normal (production) price,
and appropriate the difference.
What has been said in the previous paragraph applies to the so-
called ‘differential rent I’. Marx also discusses ‘differential rent II’,
which arises as a consequence of an additional investment of capital
on a given plot of land, keeping constant both the productivity dif-
ferential of this allotment with respect to others, and the regulating
price of the commodity which is being produced with the help of
this land.
Consequently, in the case of land and other non-reproducible
resources, it is the conditions of the least efficient units that regulate
the price of the commodities to which these inputs contribute. This
is the opposite of what happens with the regulating capitals in most
industrial sectors. In mature sectors, the regulating capitals are
usually those enjoying the average conditions of production; in
contrast, in sectors endowed with the most advanced technology,
especially those undergoing rapid evolution (or ‘revolution’, such as
the personal computer industry during the 1980s and 1990s), it is
the most efficient productive units that set the normal price
regulating the actual (market) price.
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Bina, C. (1985) The Economics of the Oil Crisis. London: Merlin Press.
Gouverneur, J. (1983) Contemporary Capitalism and Marxist Economics. Oxford:
Martin Robertson (updated French edition: Decouvrir l’économie.
Phénomènes visibles et réalités cachées. Paris: Editions Sociales, 1998).
Guerrero, D. (1999–2000) ‘Nonproductive Labor, Growth and the Expansion
of the Tertiary Sector (Thirty Years after the Publication of Marx and
Keynes)’, International Journal of Political Economy 29 (4), pp. 14–55.
Marx, K. (1867, 1894) Capital, vols. 1 and 3. New York: International
Publishers, 1967.
Nagels, J. (1974) Travail collectif et travail productif dans l’évolution de la pensée
marxiste, Brussels: Editions de l’Université de Bruxelles.
Ricardo, D. (1821) On the Principles of Political Economy and Taxation, (3rd
edn.), in The Works and Correspondence of David Ricardo, ed. P. Sraffa and
M. Dobb, vol. 1. Cambridge: Cambridge University Press.
Rubin, I. I. (1928) Essays on Marx’s Theory of Value. Detroit: Black and Red,
Shaikh, A. and Tonak, E. (1994) Measuring the Wealth of Nations: The Political
Economy of National Accounts. Cambridge: Cambridge University Press.
Smith, A. (1776) An Inquiry into the Nature and Causes of the Wealth of Nations,
ed. R. H. Campbell, A. S. Skinner and W. B. Todd. Oxford: Oxford
University Press, 1976.
Wolff, E. N. (1998) ‘Recent Trends in the Size Distribution of Household
Wealth’, Journal of Economic Perspectives 12 (3), pp. 131–50.
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5 Contesting Labour Markets
Ben Fine
Standing alongside its undoubted achievements, there are some
endemic features of capitalism that have persisted despite general,
if not universal, condemnation and concerted attempts to mitigate
and eliminate them. These include uneven development; poverty
for many, even the majority, alongside huge wealth for a minority
both within and between countries; deepening environmental
damage; oppression by race, gender and ethnicity; and the apparent
inevitability of armed conflicts. If capitalism has triumphed, much
of its victory is hollow. At a deeper analytical level, such stark
empirical realities concerning the contemporary world, as part of its
continuing history, point to the systemic character of capitalism,
and the presence of forces, structures, relations and processes that
are not amenable to control. In a previous age, literally, a deus ex
machina would have been invoked both to explain and to justify
the complexities and contradictions of the real world, with mortals
merely playing out a battle between vice and virtue according to a
game set by divine rule. Now, in the age of reason, we cannot afford
such ideological luxuries. They must be replaced by analysis.
At a less dramatic level, unemployment has shown itself to be
uniquely characteristic of capitalism. Unlike other markets, even
when the labour market is ‘tight’, it still leaves workers without jobs,
leading mainstream economics to appeal to a ‘natural’ rate of unem-
ployment in equilibrium, necessary for the economy to function
smoothly. To some, this does not set the labour market apart from
other markets, for all unemployment is perceived to be ‘voluntary’.
If only workers would offer themselves at a sufficiently low wage,
they could be employed. They must prefer the leisure and other
benefits attached to their chosen state of idleness. There are, of
course, many objections to this view of the world, varying from the
false picture painted of the unemployed themselves, often desperate
for work, through to the various versions of Keynesianism that
emphasise deficient aggregate effective demand as the cause of
(involuntary) unemployment. As is readily recognised by those who
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care to see, recessions and unemployment do not reflect conscious
choices, freely undertaken, but unconscious forces beyond our ken.
It is important, however, to recognise that those (Keynesian)
critics who accept that unemployment can be involuntary share
some questionable assumptions with their opponents. First is the
idea that work necessarily incorporates what is termed disutility, and
that it is a matter of the worker gaining maximum reward for
minimum time and effort. Even within capitalist society, this is far
from the full story since the waged worker’s motivation is both
complex and mixed. In addition, non-waged work, in the household
for example or for recreation, is often undertaken for pleasure. In
effect, one undoubted feature of capitalist employment – its often
arduous and unrewarding nature – is taken for granted as an
exclusive characteristic of all work.1Significantly, in his early work
on alienation, Marx placed considerable emphasis on the uniquely
dissatisfying nature of work under capitalism. He focused on the
worker’s loss of control over the production process, in conception,
organisation and execution. Even if this is not the whole picture, the
worker tends to become a repetitively rotating cog in a machine, as
brilliantly displayed in Charlie Chaplin’s film, Modern Times. And
the worker has no control over the fruits of labour, the products
themselves, as they belong to the capitalist. It is hardly surprising
that other aspects of workers’ alienation should be heavily contested
under capitalism, in disputes over conditions of work and not just
levels of wages. In general, workers seek more satisfaction from their
work, and not just more pay for less time, but achievement of their
goals is limited by the capitalist pursuit of profitability.
There is then within mainstream economics a tendency to treat all
work as if it were synonymous with work under capitalism (which is
itself falsely conceived in terms of a simple trade-off between higher
productivity for capitalists and lower disutility for workers). Hence
the same theory is applied seamlessly across other forms of ‘work’,
as in the new household economics and the economics of crime
focusing on the ‘wages’ of theft as against the disutility (derived from
potential punishments). This is indicative of a more general
drawback of economic theories of the labour market they are
universal, ahistorical and asocial. This is already apparent in the
categories of analysis used – such as (dis)utility, production function,
and labour itself. Whilst the theory is intended to address a labour
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market, it does so by deploying concepts that have no roots in such
specific commercial circumstances. To return to the previous issue,
of the inescapable presence of unemployment, it already presumes
much that is to be examined and explained. For there to be the
unemployed, it is necessary to acknowledge that capitalist
employment is the predominant form taken by work or labour, that
a wage system is involved. In other words, we need to know what is
different about the labour market in historical and social terms as
well as by comparison with other commodities that do not
experience chronic unemployment (a term that is used with extreme
reluctance when describing markets other than labour).
Not surprisingly, there is a host of literature concerned with what
is different about labour markets. It has spawned the disciplines and
practices of industrial relations, human resources, and personnel
management. These tend to focus on what is different about labour
or what is different about the market in which it is bought and sold.
As such, it does not deal directly with why labour takes the wage
form and the significance of this in comparison with other markets.
Economists have been even more negligent of such fundamentals,
simply distinguishing labour by its conditions of supply