The second and third volumes of Marx’s work shared the same destiny as the first: he hoped that he would be in a position to publish them soon after the first volume had appeared, but many years passed, and he was finally unable to produce manuscripts that were ready for printing.
He was prevented from completing his opus by his need to engage in a series of new and ever-deeper studies and by protracted illnesses, and thus it was Engels who assembled both volumes from the uncompleted manuscripts left behind by his friend. These consisted of transcripts, drafts, and notes, which at times formed large, cohesive sections, and at others merely consisted of brief, jotted observations, as are made by a researcher for his own clarification—in all, a colossal intellectual endeavor, spanning (with interruptions) the long period between 1861 and 1878.
These circumstances make clear why it would be wrong to expect to find something like a self-contained and finished solution to all of the most important problems of economics in these two final volumes of Capital; to a certain extent, they merely provide a formulation of these problems, and indications of the direction in which their solution is to be sought. In accordance with Marx’s whole worldview, his magnum opus is no Bible containing ultimate truths that are valid for all time, pronounced by the highest and final authority; instead, it is an inexhaustible stimulus for further intellectual work, further research, and the struggle for the truth.
The same circumstances also explain why outwardly, in their literary form, the second and third volumes are not as consummate, not as intellectually scintillating, and do not contain the same flashes of inspiration as the first volume. Yet, for certain readers, these volumes offer even greater rewards than the first one, precisely because they present Marx’s mere thought processes as he transcribed them without any concern for the form in which they were expressed. In terms of content, the second and third volumes constitute a substantial supplement to, and further development of, the first, and are thus indispensable for a comprehension of the Marxian system as a whole; until now, however, they have unfortunately been neglected in all popularizations of Marx’s Capital, and thus remain unknown to the broad masses of enlightened workers.
In the first volume, Marx addresses the cardinal question in economics: What is the source of wealth, of profit? In the time before Marx came on the scene, answers to this question were given in two directions.
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*Rosa Luxemburg composed this text at the request of Franz Mehring for his biography of Marx: Franz Mehring, Karl Marx: Geschichte seines Lebens (Leipzig: Leipziger Buchdrückerei, 1918); Franz Mehring, Karl Marx: The Story of His Life, translated by Edward Fitzgerald (London: Routledge, 2011).
The “scientific” apologists for this best of all possible worlds in which we live, men who were to a certain extent also held in some esteem and trusted by workers, like for example Schulze-Delitzsch, explained capitalist wealth by means of a series of more or less plausible justifications and devious manipulations, arguing that it is the fruit of a systematic premium on the price of commodities as “compensation” to the entrepreneur for the capital that he gallantly “cedes” in order for production to take place, a reimbursement for the risk run by each industrialist, a remuneration for the “intellectual management” of the enterprise, and so on. Each of these explanations merely sought to present the wealth of some, and thus the poverty of others, as being “just” and therefore incontrovertible.
On the other side, the critics of bourgeois society—i.e., the various schools of socialists that emerged before Marx—explained the wealth of capitalists as principally the result of downright fraud or even theft from the workers, which was made possible by the mediation of money or by the lack of organization of the production process. This led these socialists to develop various utopian plans to eliminate exploitation through the abolition of money, through the “organization of labor,” and so on.
By contrast, Marx revealed the actual roots of capitalist wealth in the first volume of Capital. Here he neither engages in justifications for the capitalists, nor in denunciations of their iniquity; rather, he shows for the first time how profit arises and how it comes to accrue to the capitalists. He explains this through two decisive economic facts: first, the mass of workers consists of proletarians, who must sell their labor-power as a commodity; and second, this commodity, labor-power, today possesses such a high degree of productivity that it is able to produce a much greater product in any given time than is necessary for its own maintenance within the same time period. As a consequence of these two purely economic facts, which are at the same time given as a result of objective, historical development, the fruits of the labor of the proletariat automatically land in the lap of the capitalists and are mechanically amassed to form an ever-increasing wealth as capital as long as the wage system persists.
Thus Marx explains capitalist wealth neither as any kind of compensation to the capitalist for imaginary sacrifices and good deeds on his part, nor as fraud or theft in the ordinary sense of the terms, but rather as an exchange transaction between the capitalist and the worker that is fully legitimate in terms of criminal law, and that is concluded precisely according to the same laws as govern any other sale or purchase of commodities. In order to thoroughly elucidate this unimpeachable transaction, which bears golden fruit for the capitalist, it was necessary for Marx to complete the development of the law of value (i.e. the explanation of the internal laws of commodity exchange) first established at the end of the eighteenth and beginning of the nineteenth century by the eminent British classical political economists, Smith and Ricardo, and to apply this law to labor-power as a commodity. From the law of value, Marx derives the wage and surplus value, thus explaining how the product of wage-labor is automatically divided up into the meager subsistence of the worker and the wealth that the capitalist gains without working. This constitutes the main content of the first volume of Capital, and herein lies its great historical significance: Marx was able to demonstrate that exploitation can only be eradicated by the elimination of the sale of labor-power—i.e. by the dissolution of the wages system.
The first volume of Capital is located exclusively within the workplace, whether this is an individual factory, a mine, or a modern agricultural enterprise. The process that occurs here applies to every capitalist enterprise. The individual capital that typifies the entire mode of production is the sole object of analysis in this volume. By the end of the volume, Marx has clarified the daily formation of profit, and shed light on the internal mechanism of exploitation. For each commodity amid the mountains of wares of all kinds emerging, still damp with the sweat of the workers’ brow, from the factory, it is now possible to sharply distinguish the part of its value that derives from the unpaid labor of proletarians and that is appropriated by the capitalist just as legitimately as is the whole commodity. Exploitation can now be grasped by the root.
At this stage, the capitalist is still far from bringing in the harvest, however. The fruit of exploitation is at hand, but it is still contained in a form that cannot be consumed by the entrepreneur. As long as it remains in his possession in the form of a pile of commodities, the capitalist cannot reap the benefits of exploitation. In this he is unlike the slaveowner of the ancient Greco-Roman world or the feudal lord of the Middle Ages, who oppressed the working population for their own luxury and in order to maintain their great courts and households. The capitalist needs his wealth in hard cash, in order to use it both for the maintenance of a “standard of living befitting his station” and for the ongoing expansion of his capital. For this purpose, the sale of the commodities produced by the wage laborer is necessary, including all the surplus value contained in them. These commodities must leave the factory warehouse or the agricultural repository and be brought to market; the capitalist leaves his office to track them on the exchanges and in the shops, and the reader of the second volume of Capital is able to follow him there.
In the sphere of commodity-exchange, where the second chapter of the capitalist’s life is played out, he encounters some difficulties. In his factory, or on his estate, he was master. There he could impose the strictest organization, discipline, and order. On the commodity markets, by contrast, complete anarchy—so-called free competition—reigns. Here, no one is concerned about anyone else or about the operation of the system as a whole. Yet it is precisely in the midst of this anarchy that the capitalist feels his dependence on others, his all-round dependence on society.
He is compelled to keep pace with his competitors. If he wastes more time than is absolutely necessary in concluding the sale of his commodities, if he omits to provide himself with enough money in order to acquire raw materials and everything else that is required at the right time in order to avoid any interruptions in production by his enterprise, if he fails to ensure that the money that he receives as revenue from the sale of his commodities does not lie idle, but is profitably invested somewhere, then he will inevitably lag behind his competitors. The devil takes the hindmost, and the individual entrepreneur who does not take care that his business operates as effectively in the continual to-and-fro between the factory and the market as in the factory itself will not make the usual profits, however diligently he exploits his wage-laborers. A part of his “well-earned” profit will be diverted along the way, and will fail to appear in his bank account.
Yet even this is not sufficient. The capitalist can only accumulate wealth if he produces commodities—i.e., objects of use. However, he must produce precisely the types and kinds of commodities, and only in the respective quantities, that society requires. Otherwise his commodities will remain unsold, and the surplus value that they contain will also go down the drain. But how is an individual capitalist to know all this? There is no one to tell him which particular goods and how many of each are required by society, for precisely the reason that no one is in a position to know this. This is because we live in an anarchic society, one bereft of planning! Each individual entrepreneur is in the same position. And yet, out of this chaos, this disarray, a whole must be constituted, one that is capable of facilitating capitalists’ individual transactions and their enrichment at the same time as it meets the needs of society as a whole and guarantees its continued existence.
More precisely, amid the confusion on the unregulated market, the following conditions must be met. First, the constant movement of individual capitals within their circuit must be facilitated—individual capitalists must be able to produce, sell, purchase, and produce anew, with capital constantly emerging from its money-form into its commodity-form and vice versa: these various phases must interlock with one another smoothly, and reserves of money must be available in order to take advantage of market fluctuations for procurement, and in order to cover current expenditures by the enterprise. Second, it must be possible for the money gradually flowing back as revenue from sales of commodities to be instantly reactivated—i.e., reinvested. The individual capitalists, who are seemingly completely independent of one another, in actual fact join ranks in a great fraternity by continually advancing each other the money they require and relieving each other of money held in reserve through the credit and banking system, thus enabling the uninterrupted continuation of production and sales of commodities both for individual capitalists and for society as a whole. Whereas bourgeois economics can only explain credit in terms of an ingenious mechanism for “facilitating commodity exchange,” Marx is casually able to show in passing in the second volume of Capital that credit is simply a mode of existence of capital, and a link between the two phases of the life of capital (i.e., its life in production and on the commodity market), as well as between the seemingly autonomous movement of individual capitals.
Secondly, the constant movement of production and circulation at the level of society as a whole must be kept flowing within its circuit amid the chaotic behavior of individual capitals; more specifically, this must occur in such a way as to guarantee the conditions for capitalist production: the production of means of production, the maintenance of the working class, and the progressive enrichment of the capitalist class—i.e., the increasing accumulation and activation of total social capital. Admittedly, Marx does not provide a definitive solution in the second volume of Capital to the question of how the innumerable divergent movements of individual capitals combine to form a whole, how the movement of this whole is brought back into the correct proportions through constant deviations, fluctuating between the excesses of the expansionary phase and collapse during the crisis, only for these proportions to be completely upset the very next instant. Nor does he completely resolve the question of how all these processes combine to ensure, on an increasingly enormous scale, the maintenance and economic progress of the present society, but only as a means, and progressive capital accumulation as its end. However, he was the first since Adam Smith, a century before him, to establish a firm foundation for these questions in terms of the laws that govern them.
Even if all of the above conditions are satisfied, however, there still remain tasks fraught with difficulties for the capitalist. For now, insofar as his profit has been progressively turned into gold, he is faced with the big question as to how the booty is to be allocated. Here, utterly disparate groups stake their claims: alongside the entrepreneur, there is the merchant, the financier,* and the landowner. They have each played a part in facilitating the exploitation of the wage laborer and the sale of the commodities produced by him, and now they each demand a part of the profit. This distribution of profit is a much more complex task than it would appear at first sight, however. For among the entrepreneurs there are also significant variations, according to the type of enterprise, in the profits that they achieve (i.e., in terms of the profits freshly produced at the point of production, so to speak).
In one branch of production, the production and sale of commodities is accomplished very quickly, and capital flows back to the capitalist along with an increment in the briefest period of time; it can thus be used for renewed enterprise and to generate new profits in brisk cycles. In another branch, capital is tied up in production for several years, and thus only yields a profit after a longer period. In certain branches the entrepreneur must invest the majority of his capital in dead means of production (buildings, costly machinery, etc.) that do not in themselves generate a profit, however necessary for profit-making they might be. In other branches, the entrepreneur can use his capital mainly for recruiting workers, each of whom represents the hardworking goose that lays him golden eggs.
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*Leihkapitalist—literally, “loan capitalist.”
Consequently, there are large variations in the profits generated by individual capitals; to bourgeois society, this constitutes a much more flagrant “injustice” than the peculiar “distribution” between capitalist and worker. How can these variations be compensated for, how can an “equitable” distribution of the booty be achieved, such that each capitalist gets his “just deserts”? Moreover, all of these tasks must be carried out without any conscious, planned regulation: distribution in the present society is equally as anarchic as is production. No actual “distribution” occurs in the sense of the application of measures of social policy; all that takes place is exchange, the circulation of commodities, mere transactions of sale and purchase. The question is thus the following: how is it possible, by the route of the blind exchange of commodities alone, for each stratum of exploiters, and each individual within each stratum, to be allocated an “equitable” portion—i.e., an “equitable” portion from the standpoint of capitalist domination—of the wealth created by the labor-power of the proletariat?
Marx answers these questions in the third volume of Capital. Having analyzed the production of capital and the secret of profit generation in the first volume, and outlined the movement of capital between the factory and the commodity market—between production and consumption at the level of society as a whole—in the second volume, he retraces the distribution of profit in the third volume. All the while he maintains the same three basic conditions: first, that everything that occurs in capitalist society proceeds not according to arbitrary decisions, but is effectively regulated by determinate laws, even if social agents are unaware of them; second, that economic relations are not based on the violent measures of robbery and theft; finally, that there is no social rationality that is brought to bear on the whole through a planned, effective intervention. Employing a clear and logically consistent argument, Marx gradually develops all the phenomena and relations of the capitalist economy exclusively from the mechanism of exchange—i.e., from the law of value and the surplus value deriving from it.
If his magnum opus is surveyed as a whole, the following observations can be made: the first volume, which develops the law of value, wages, and surplus value, merely lays the foundations of the present society, whereas the second and third volumes identify the stories of the edifice that stands on these foundations. Alternatively, to use a completely different metaphor: the first volume shows us the heart of the social organism, where the life-giving sap is produced, whereas the second and third volumes indicate the blood circulation and alimentation of the whole organism down to the outermost skin cells.
In accordance with their content, the movement in the latter two volumes occurs on a different plane than the first. In the latter, it was the factory, the deep shaft of labor within society, in which the source of capitalist wealth was detected. In the second and third volumes, the movement occurs on the surface, on the public stage of society. Warehouses, banks, the stock market, financial transactions, “distressed landowners” and their concerns—all these are foregrounded here. Here, the worker plays no part. Nor is he concerned with these matters in reality, as they take place behind his back, after his hide has already been tanned. Amid the noisy hustle and bustle of the throng as it conducts its business, the workers are only encountered at dawn as they trudge in droves to their factories, and at dusk when they are once again spewed out in long columns.
Accordingly, it might not be immediately apparent why the various private concerns that capitalists have in profit-making, and their wrangling over the spoils, should be of interest for the workers. In actual fact, however, the second and third volumes of Capital are just as indispensable for an exhaustive knowledge of the present economic mechanism as is the first. Admittedly, they do not have the decisive and fundamental significance for the modern workers’ movement that the latter has. However, they, too, contain a rich wealth of insights of inestimable importance in terms of equipping the proletariat intellectually in its practical struggle. Two examples of this should suffice.
In the second volume, Marx engages with the question of how the regular sustenance of society can result from the chaotic rule of individual capitals, and in this context he naturally touches upon the question of crises. The reader should not expect to find a systematic and instructive treatise on crises here, but merely a few incidental remarks. However, their application would be of great use to enlightened and reflective workers. A core part of the stock—to use an economic metaphor—of strategies for social democratic agitation, particularly by the trade unions, is the argument that one of the principal reasons why crises arise is through the shortsightedness of capitalists, who absolutely refuse to recognize that the masses of workers are their best customers, and that they merely need to pay the latter higher wages in order to maintain a customer base with purchasing power and thus to ward off the threat of crises.
This conception is as completely misguided as it is popular, and Marx refutes it as follows:
It is a pure tautology to say that crises are provoked by a lack of effective demand or effective consumption. The capitalist system does not recognize any forms of consumer other than those who can pay, if we exclude the consumption of paupers and swindlers. The fact that commodities are unsalable means no more than that no effective buyers have been found for them, i.e., no consumers … If the attempt is made to give this tautology the semblance of greater profundity, by the statement that the working class receives too small a portion of its own product, and that the evil would be remedied if it received a bigger share, i.e., if its wages rose, we need only note that crises are always prepared by a period in which wages generally rise, and the working class actually does receive a greater share in the part of the annual product destined for consumption. From the standpoint of these advocates of sound and “simple” (!) common sense, such periods should rather avert the crisis. It thus appears that capitalist production involves certain conditions independent of people’s good or bad intentions, which permit the relative prosperity of the working class only temporarily, and moreover always as a harbinger of crisis.*
In fact, the exposition in the second and third volumes of Capital affords a profound insight into the essence of crises, which simply arise as the inevitable consequences of the movement of capital—a movement that, amid the unbridled and insatiable drive to accumulate, tends immediately to surpass any constraint posed by consumption, no matter how much the latter is expanded through the increased purchasing power of a particular social stratum or by the conquest of new markets. Thus the conception lurking in the background of this popular trade union agitation must be dispelled—i.e., the conception of a harmony of interests between capital and labor that the entrepreneurs merely fail to recognize due to their myopia. Likewise, all hope of a palliative patching-up of economic anarchy of capitalism must be abandoned. The struggle for material improvements in the living standards of waged proletarians has a thousand better weapons in its intellectual armory, and has no need of such theoretically untenable and practically ambiguous arguments.
The second example can be found in the third volume of Capital, where Marx is the first to give a scientific explanation for a phenomenon that had perplexed economists since the inception of economic science—i.e., the phenomenon whereby capitals in all branches of production tend to yield the so-called “customary countrywide” profit, despite the huge variation in the conditions under which they are invested. At first sight, this phenomenon would seem to contradict the explanation given by Marx himself of capitalist wealth as deriving exclusively from the unpaid labor of the waged proletariat. How is it in fact possible that the capitalist who must invest a relatively large proportion of his capital in dead means of production can earn the same profit as his colleague who has fewer outlays of this kind and is thus in a position to engage a correspondingly greater proportion of living labor?
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*Marx, Capital, Vol. 2, pp. 486–7.
Marx proceeds to solve this conundrum in an astonishingly simple way by showing how the variations in profit are equalized through the process whereby certain types of commodities are sold above their value, while others are sold beneath theirs, leading to the formation of an “average rate of profit” for all branches of production. Quite unconsciously, and without any intentional agreement between them, the capitalists proceed in such a way during the exchange of their commodities that they effectively pool the surplus value that each of them extracts from his workers, and divide up this total yield of exploitation among themselves in a fraternal manner, such that each obtains a share according to the size of his capital. The individual capitalist thus in no way reaps the benefits from the profit personally obtained by him; instead he is allotted a portion of the profits achieved by all his colleagues:
As far as profits are concerned, the various different capitals here are in the position of shareholders in a joint-stock company, in which the dividends are evenly distributed for each 100 units, and hence are distinguished, from the standpoint of the individual capitalists, only according to the size of the capital that each of them has put into the common enterprise, according to the number of his shares.*
This ostensibly dry law of the “average rate of profit” thus affords a profound insight into the solid material foundations of the class solidarity of the capitalists, who, although hostile brothers in their daily business dealings, form a freemasons’ society vis-à-vis the working class, bound by the greatest and most personal interest in the overall exploitation of the latter. Despite the fact that the capitalists of course do not have the slightest awareness of these objective economic laws, their unerring class instinct is an expression of their sense of their own class interests, and of how these stand opposed to the proletariat; unfortunately, this sense on the part of the capitalists preserves itself much more securely through the tempests of history than does the class consciousness of the workers, for all that the latter is scientifically enlightened and substantiated through the works of Marx and Engels.
These two brief and randomly selected items of supporting evidence ought to give an idea of how many treasures—in terms of the intellectual stimulation and profundity they offer the enlightened working class—lie waiting to be unearthed in the two final volumes of Capital, and that remain to be given a popularizing exposition. As incomplete as these volumes are, they provide something infinitely more valuable than any supposed final truth: a spur to reflection, to critique and self-critique, which is the most distinctive element of the theory that was Marx’s legacy.
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*Karl Marx, Capital, Vol. 3, p. 258 (translation modified—translator).