Accumulation of Capital
The previous chapters have characterised capitalism as a mode of production. This provides a framework in which capital accumulation, and the historical development of capitalism as the world’s dominant mode of production, can be understood. For, having uncovered the relations of production specific to capitalism, the systemic forces behind their creation, operation, reproduction and development can be isolated from the mass of phenomena taking place more or less simultaneously.
Marx devotes large sections of Volume 1 of Capital to the task of interpreting the genesis of British capitalism and the fundamental role played by the compulsion to accumulate. This must stand as a major application and confirmation of his conception of historical change. Here only an outline of his work can be offered. For more depth, those interested should consult Capital itself for Marx’s own analysis, and later Marxists for more concrete studies of the causes, nature, timing and location of the first and subsequent capitalist transitions and ‘industrial revolutions’.
An essential feature of capitalism is the existence of labour power as a commodity. A necessary condition for this is the separation of labour from ownership of the means of production. The workers depend upon somebody else to provide these, for if the workers had unmediated access to the means of production, the product of labour rather than the capacity to work would be sold (if market exchange of products could persist in such circumstances). Hence, on the other side of the coin must be the capitalist with money to advance to purchase labour power and the wherewithal to maintain ownership of the means of production. The historical establishment of these social relations of production out of the feudal ones in Britain holds the key to the birth of capitalism.
In any society beyond the most primitive there will be saving of current output and the production of long-lasting inputs to form means of production for the future, whether it be in the form of corn seed, animal stock, hunting weapons or other implements. One of the distinguishing features of capitalism is the increase in the rate of savings. Marx found it commonplace, once capitalism had been established, for economists to attribute the growth in savings to the self-sacrifice of energetic entrepreneurs, ploughing slowly rising profits back into their businesses. (More recently, the observation that too small a part of the national income is saved in poor countries is considered by many development economists as a major barrier to development.)
Marx pours scorn on self-sacrifice theory. Capitalism is founded upon the forcible separation of the workers from the existing means of production. In Britain, historical evidence shows that this separation was at times brutally imposed by large landowners, the aristocracy and the state, rather than being the cumulative outcome of individual thrift and selfless devotion to work in small farms and family enterprises that, very gradually, managed to enrich themselves. It entailed the conversion of the traditional (feudal) use of existing means of production and labour power into their use in capitalistic production units. This does not require, in the first instance, any additional accumulation of means of production or even their more efficient use, just their redistribution and operation according to new relations. Once this has occurred the process of competitive accumulation gathers its own momentum (see below, and Chapters 3 and 4).
Since agriculture was, by far, the dominant sector of production in the pre-capitalist era, in terms of both output and volume of employment, this sector was the source of a class of ‘free’ wage labourers. The secret of primitive or original accumulation of capital lay, then, in the expropriation of the agricultural population from the land, and the destruction of the right or custom of individual independent cultivation (even if feudal dues had to be paid). This could be undertaken on an individual basis by landowners responding to the growing imperative of market exchanges. For example, it might arise out of pressures for cash due to the accumulation of debt by the landowners, the impact of secular inflation, rising prices of wool relative to grain, requiring fewer people to work in the fields, and so on.
Whatever their immediate causes, these transformations required the power of the state to make any headway in a violent and violently resisted process. State intervention, representing the interests of the emerging capitalist class, was twofold. First, enclosure movements dispossessed the peasantry of both common and individual land usage. Resistance was fierce, generalised and brutally crushed. The class of landless labourers was created. Second, wage legislation and perverse systems of ‘social security’, culminating in the infamous Poor Law of 1834, forced long hours and industrial discipline on the landless labourers. The combined impact of these transformations, over several decades, was to turn the majority of the peasants into wage workers, creating the potential source of absolute surplus value.
Here Marx’s emphasis is on the changing use of the existing means of production, rather than their accumulation. No doubt technical progress and the reorganisation of production contributed to the rise in agricultural output that was to feed industry as well as the industrial workers. Simultaneously, but secondarily, technical progress also contributed to the rise in manufacturing output demanded as inputs for agricultural production. However, few labourers felt the benefit of this increased output and, for those who did, it must have paled into insignificance against the deterioration of working conditions and the destruction of a way of life. Illustrative of this is the essential role played by physical force and the state in the creation of the proletariat, involving the police, the army, the tax and justice systems, and so on, rather than the smooth operation of market forces expressing the ‘preferences’ of landowners, peasants, and wage workers. The tumultuous origin of the proletariat contrasts with most present-day labour relations, where the dull compulsion of economic needs and their development through tradition, education, habit and firmly established laws induces the working class to look upon the conditions of the capitalist mode of production as self-evident and morally justified, as well as unavoidable. Force rarely needs to be at the forefront now (although it is available if required), because labour is deeply tied to capital, giving the appearance that thus it has always been and must always be.
This extremely brief account explains the origins of the capitalist relations of production. By the seventeenth century the first enclosure movement had been completed (another was to follow in the eighteenth century), creating a landless labouring class as well as a class of capitalists, who first appeared as farmers. In the eighteenth century the use of the national debt, the taxation system, protectionist trade policy and the exploitation of colonies to accumulate wealth had reached its climax. The combination of labour and wealth in capitalist relations accompanied these processes, with the nineteenth century heralding the rapid pace of technological innovation and the accelerated growth of industrial society.
It is as well to recognise, however, that the creation of capitalism in Britain has been rather different from elsewhere. The forcible dispossession of the peasantry from the land was more extensive than in the rest of Europe, and its character was quite different from similar developments in other parts of the world. In Britain, a larger proportion of the population was transformed into wage workers. This was done through the creation of a system of large-scale landed property, so that a relatively small number of aristocrats came to hold the vast majority of privately owned land. Elsewhere in Europe, as well as in the north-eastern United States, the peasantry, or sections of it, proved better able to defend themselves by taking possession of the land in smaller parcels, thereby making themselves independent of wage labour to a much greater extent. The significance of these changes persists to the present day, with Britain’s agriculture continuing to be characterised by larger farms and Britain’s working population containing many fewer employees (and self-employed) in the agricultural sector than is the case in the rest of Europe.
While Marx’s analysis of primitive accumulation focuses on Britain, and to that extent deals with an exception, his analysis of the formation of the class of wage labourers out of the agricultural population remains an essential starting point for the study of capitalist transitions in most parts of the world.
While, for Marx, the crucial element in the transition to capitalism is the formation of a class of wage workers out of pre-capitalist class relations, this leaves open the immediate causes and mechanisms by which such transitions are achieved. These are diverse and complex, ranging over the different factors in the formation of markets both before and after the transition, from the role of the state to colonisation, access to credit, export markets, changes in property law, and so on. Not surprisingly then, as already observed, transitions to capitalism have not only been varied in content and trajectory, but they have also been heavily debated both within Marxism and between Marxism and other approaches.
The Development of Capitalist Production
In Britain capitalism came to the fore gradually, largely through the coincidence of favourable economic conditions – the discovery and hoarding of precious metals, and low rents and wages, as well as proactive economic policies, inspired in part by mercantilism. The subsequent genesis of industrial capitalism was less protracted than elsewhere, developing out of artisans and guilds and the absorption of the workers pushed out by capitalist farming. Simultaneously, the ending of the peasantry’s largely self-sufficient livelihood created a domestic market for industrial capital. Previously the peasants had generally been able to serve their own needs through their control of the means of production (especially land and agricultural tools) according to feudal custom. With the advent of capitalism, the remaining independent producers needed money to purchase seeds, tools and other agricultural implements, and to pay taxes; this contributed to their transformation into wage workers. Thus capital does not necessarily destroy household production by virtue of its superior efficiency. Indeed, household production persists even today – for example, in small firms and sweatshops. Rather, independent production is largely destroyed and generally subordinated to capitalist production by the social changes associated with the rise of capitalism. The English peasantry, for example, was destroyed by forcible eviction from the land and the commercialisation of inputs and outputs, rather than by competition from capitalist farms.
In the early stages of the formation of industrial capital in Britain, the technical methods of production remained largely unchanged. However, the workers lost their direct access to the means of production and the inputs and, therefore, the possibility of controlling their own labour and output. The process of dispossession of the peasantry, described above, made the wage workers ‘free’ in two quite distinct senses – free from the lords and the duties imposed by the feudal system, and free from direct access to the means of production. These ‘free’ workers had now to sell labour power regularly in order to be able to procure their means of subsistence. Dispossession is one of the key historical sources of the British industrial working class. The other main source is the contracting out of independent artisans to produce goods to order and, later, to process inputs delivered by, and belonging to, a capitalist intermediary (putting-out system). The next historical stage was the bringing together of these independent producers to work in ‘compounds’ belonging to the capitalists, the factories, initially with unchanged technologies (see Chapter 3).
The emergence of the factory system is not simply a technological development. It is also a process of social reorganisation completing the transformation of independent artisans and dispossessed peasants into wage workers. Marx calls this the formal subordination (formal subsumption) of labour to capital. This choice of terminology highlights the fact that, whereas labour has been effectively subjected to capital, the labour process itself remains essentially unchanged. In this case, exploitation depends primarily upon the extraction of absolute surplus value: the extension of the working day to 12, 14, 16 or more hours per day; the employment of children and the brutal exploitation of every family member for pitiful wages; the disregard for workplace safety; and the imposition of degrading living conditions on the working class. Filth, disease, the threat of starvation, pressures from church and state, and the lack of alternatives compelled the ‘free’ labourers ‘voluntarily’ to sign up to the labour contract and turn up ‘spontaneously’ to work even under the most appalling conditions. This is the bedrock of the labour market, a key capitalist institution.
In spite of its humble beginnings, the factory system has profound implications for the organisation of social and individual life. It creates new conditions of labour, and changes the processes of production and social reproduction beyond recognition. Inside each factory, machinery gradually imposes its own discipline, as it fragments the labour process into uniform repetitive tasks, which are more easily monitored by the agents of capital: the line managers, supervisors, accountants, time-keepers and their hierarchy of superiors, whose own performance is appraised by the board of directors and, ultimately, in developed capitalism, by the firm’s banks and shareholders.
Through the processes of mechanisation, labour fragmentation and capitalist control, the factory system tends to transform independent artisans and skilled craftspeople into appendages of the machines that they are paid to operate – the factory workers are minders of alien fixed capital. Marx calls this the real subordination of labour to capital. The detailed co-operation of labour within the factory contrasts sharply with the finer division by workers’ tasks that accompanies specialisation. The real subordination of labour marks the beginning of capitalist production proper, based on the extraction of relative surplus value. These are the economic battering rams with which capitalism can defeat other forms of production on the basis of its superior productivity. Simultaneously, outside the factory, towns become rapidly growing industrial centres, disrupting every relation between town and country, while life itself is revolutionised by the diffusion of capitalist methods of production throughout the economy and across the entire world.
Competition and Capital Accumulation
Capitalist competition makes itself felt through various channels. In the sphere of production, competitive pressures lead to the real subordination of labour and the extraction of relative surplus value through mechanisation. Institutionally, mechanisation is associated with the diffusion of interlocking systems of ownership and control, involving complex hierarchies of ‘white collar’ workers, managers, executives, shareholders, the financial system and the state, seeking to maximise corporate efficiency regardless of their impact on the welfare of the workers. Finally, at the level of exchange, firms are immersed in competition in several markets simultaneously, including those for means of production, labour power and finished commodities. At all levels, capitalists seem to find themselves at the mercy of anonymous ‘market forces’. These arise from the imperative of capital in general to accumulate, which determines the behaviour of each individual capital.
In order to distinguish between these channels of competition and explain their consequences, Marx identifies two distinct types of competition in capitalism: intra-sectoral competition (between capitals in the same branch of industry, that is, producing identical use values), and inter-sectoral competition (between capitals in different branches, producing distinct use values).
Intra-sectoral competition is examined in Volume 1 of Capital. This type of competition explains the tendency towards the differentiation of the profit rates of capitals producing identical goods with distinct technologies, the sources of technical change, and the possibility of crises of disproportion and overproduction (see Chapter 7). When competing against other capitals producing identical commodities, firms can defend their market share and profitability, and avoid bankruptcy, only by attempting to become more efficient than their immediate rivals – that is, through unit cost reduction. This requires ruthless discipline and extensive control over the labour process, mechanisation and the continuous introduction of more productive technologies, machines and labour processes, as well as economies of scale (cost minimisation by large-scale production, reducing average fixed costs).
These continuous upheavals are imposed by systemic imperatives, rather than through wickedness or restlessness on the part of individual capitalists. These forces create a situation of competitive accumulation for all of them; taking part is a condition of survival. Competitors will therefore innovate as well as adopt every available technical improvement, eroding the advantage of the innovating firms while preserving the incentives for further technical progress across the economy.
Fighting this battle increases economic efficiency and cheapens the commodities produced in every firm, farm, shop or office, including those consumed by the workers (relative surplus value). It also tends to strengthen the large capitals, which are normally better able to invest larger sums for longer periods, select among a broader range of production techniques, and hire the best workers. In these ways they reinforce their initial advantages and tend to destroy their weaker competitors (important counter-tendencies are the diffusion of technical innovations among competing firms, the ability of smaller capitals to undermine the existing technologies through invention and experimentation, and foreign competition).
The second type of competition identified by Marx is inter-sectoral competition, between capitals producing different use values. This type of competition is examined in Volume 3 of Capital. Rather than leading to the transformation of production technologies and work practices, explained above, profit maximisation can lead instead to capital migration to other (presumably more profitable) sectors. These movements, in response to structural demand shifts, the development of new products or profit opportunities elsewhere, or merely because of short-term repositioning of assets in the stock market, alter the distribution of capital and labour and the productive potential of the economy. There is a tendency to increase supply in the more profitable branches, reducing their excess profits. An immediate consequence of inter-sectoral competition is the tendency for rates of profit and wages to be equalised as economic agents seek maximum exchange value for their commodities on the market. This type of competition also transforms the expression of values as prices, as the latter become prices of production (see Chapter 10).
Marx argues that the conflicting forces of competition within and between sectors operate at different levels, with the former being more abstract and relatively more important than the latter. This is because, first, profit must be produced before it can be distributed and tendentially equalised. Second, although migration of capital between sectors can raise the profit rate of individual capitals, technical progress can increase the profitability of capital as a whole. Because of these different levels of complexity, the conflicting forces unleashed by different types of competition cannot simply be added up in Marx’s analysis of the contradictory dynamics of capital accumulation. For the same reason, there can be no presumption that adding up the implications of different forms of competition could lead to static outcomes; as if, for example, continuing movements of capital might lead to profit rate equalisation and stable long-run equilibrium as in mainstream economics, or to the relentless concentration of capital as discussed in the analyses of monopoly produced by early-twentieth-century German social democratic writers.
Even if such a state could be reached, it would immediately be disturbed by the unavoidable pursuit of competitive advantage. Competition is never a smooth process, and it often generates instability and economic crises. For Marx, analysis of competition offers the basis on which more complex structures and processes, influential at different levels and in distinct markets, can be understood. Capital accumulation is the outcome of the interaction between these two types of competition, both of which are funded by the financial system.
A capitalist’s ability to compete is clearly limited by the potential to accumulate. Sources of accumulation are twofold. On the one hand, profits may be reinvested, amassing capital over time. Marx called this the process of concentration. On the other hand, a capitalist can borrow and merge, gathering together existing resources. This Marx called the process of centralisation. Concentration is a slow process, diluted by inheritance; but centralisation, through the lever of a highly developed credit mechanism and stock markets, accomplishes in the twinkling of an eye what could take concentration many years to achieve.
As the individual capitalist accumulates, what is true of each is true of capital as a whole. This is reflected in the social accumulation of capital, the reproduction of capital and its relations of production on an expanded scale, the increase of the proletariat, and the development of the forces of production. But the individual capitalist’s solution to competition is not reproduced on a social scale: accumulation is also undertaken by competitors, so that competition itself is reproduced, both within and between sectors. Competition causes accumulation, accumulation creates competition. Those who fall behind in the accumulation process are destroyed. First it is independent artisans and other modes of production that are swept aside by the advance of productivity, mass production and the iron rule of market evaluation. Later capital turns on itself, big capital destroying little capital as centralisation, credit and concentration amass more and more capital in fewer hands. At the same time, small capitals continually emerge, often introducing new technologies that can transform the marketplace and potentially overcome older and much larger capitals. In sum, capital as self-expanding value exists in rival and separate units, and this mode of existence triggers competition, which is fought by accumulation. The need to accumulate is felt by each individual capitalist as an external coercive force. Accumulate or die: there are few exceptions.
Marx’s study of primitive accumulation in Britain can be found in Marx (1976, pt.8). Outstanding Marxian studies of the historical origin of capitalism in different regions include Jairus Banaji (2010), Robert Brenner (1986, 2007), Terry Byres (1996), Neil Davidson (2010), Vladimir I. Lenin (1972), Michael Perelman (2003) and Ellen Meiksins Wood (1991, 2002), and the contributions in Chris Wickham (2007). The explanation for the origins of capitalism as transition from feudalism has been highly controversial, both within and against Marxism. The Dobb–Sweezy debate concerned the relative importance of developments within feudal production and its class relations (as argued for by Dobb) as opposed to the external, disintegrating role of commerce (Sweezy), with corresponding emphases on country and town, and producers and merchants, respectively. The key texts in this debate are included in Rodney Hilton (1976). This controversy has been carried forward by the so-called ‘Brenner debate’; see Trevor Ashton and Charles Philpin (1985). See also Stephen Marglin (1974) for the idea that the transition to capitalism is initially about how production is organised and ruled rather than about technical methods of production as such.
Marx explains his theory of capitalist reproduction and accumulation in Marx (1976, pt.7). The analysis of competition and accumulation in this chapter draws on Ben Fine (1980, chs 2, 6) and Alfredo Saad-Filho (2002, ch.5); see also Michael Burawoy (1979), Paresh Chattopadhyay (1994, ch.2), Diego Guerrero (2003), David Harvey (1999, chs 4–7) and John Weeks (1985–6, 2010, ch.6).