If the first volume of Capital is the most famous and widely read, and if the second is the unknown one, the third is the most controversial. The disputes started before it was even published, as Frederick Engels indicates in his Preface. They continued after the latter brought it out in 1894, most notably in the form of a critique of Marx’s economic doctrines by the Austrian economist Eugen von Böhm-Bawerk two years later.1 They have been going on ever since. Hardly a year passes without some new attempt to refute one or other of Volume 3’s main theses, or to indicate their alleged inconsistency with Volume l.2
The reason for these insistent polemics is not hard to discover. Volume 1 concentrates on the factory, the production of surplus-value, and the capitalists’ need constantly to increase this production. Volume 2 concentrates on the market-place and examines the reciprocal flows of commodities and money (purchasing power) which, as they realize their values, allow the economy to reproduce and grow (while requiring a proportional division both of commodities into different categories of specific use-value and of money flows into purchasing power for specific commodities3). While these volumes contain a tremendous amount of intellectual and moral dynamite aimed at bourgeois society and its prevailing ideology – with all that these entail for human beings, and above all for workers – they give no precise indication of the way in which the system’s inner contradictions prepare the ground for its final and inevitable downfall.
Volume 1 shows us only that capitalism produces its own grave-digger in the form of the modern proletariat, and that social contradictions intensify inside the system. Volume 2 indicates that capitalism cannot achieve continuously enlarged reproduction; that its growth takes the form of the industrial cycle; that its equilibrium is only a product of constantly reappearing disequilibria; that periodic crises of overproduction are inevitable. But the precise way in which these contradictions (and many others) are interrelated, so that the basic laws of motion of the capitalist mode of production lead to explosive crises and its ultimate collapse, is not worked out in detail in these first volumes. They are initial stages in an analysis whose final aim is to explain how the system concretely operates – in ‘essence’ as in ‘appearance’.
Such an explanation of the capitalist economy in its totality is precisely the object of Volume 3. However, it is not completed here. In the first place, Marx did not leave a finished manuscript of the volume, so that important sections are lacking. It is certain that the unfinished Part Seven, which ends with the barely initiated Chapter 52 on social classes, would have provided a vital link between the economic content of the class struggle between capital and labour, as developed at length in Volume 1, and its overall economic outcome, partially sketched in Chapters 11 and 15 of Volume 3.4 In the second place, Volume 3 is subtitled ‘The Process of Capitalist Production in its Totality’. But as we already know from Volume 2, the totality of the capitalist system includes circulation as well as production. In order to complete an examination of the capitalist system in its totality, Capital would have had to include supplementary volumes dealing, among other matters, with the world market, competition, the industrial cycle and the state. All this was contained in Marx’s plan for Capital, and there is no indication that he abandoned it;5 on the contrary, there are passages here which confirm that he postponed detailed examination of these problems to later volumes, alas unwritten.6 Volume 3 provides valuable indications of how Marx would have set about the integration of these questions into an overall view of the capitalist system. But it does not contain a fully developed theory of the world market, of (national and international) competition, or especially of industrial crisis. Many of the controversies centring around the third volume of Capital are precisely due to the incomplete nature – for the reasons just indicated – of some of the theories contained in it.
But the basic reason for the amplitude and duration of these polemics lies in the fact that Volume 3 aims to answer the question: ‘Whither capitalism?’ It seeks to show that the system is intrinsically (‘immanently’) crisis-ridden: that neither the efforts of individual capitalists nor those of public authorities can prevent crises from breaking out. It seeks to show that inherent mechanisms, which cannot be overcome without abolishing private property, competition, profit and commodity production (the market economy), must lead to a final collapse. That this judgement is unpalatable to capitalists and their hangers-on hardly needs emphasizing. That it is equally unwelcome to ‘neutral’ economists who, in spite of their claims to be value-free, in reality assume the permanence and preferability of commodity production and the market economy – as determined by human nature and corresponding to the interests of mankind – can also be taken for granted. Finally, that it poses formidable problems for philanthropists and social reformers who, though sharing Marx’s indignation at the mass poverty and destitution provoked by the spontaneous workings of the system, believe that these can be overcome without getting rid of the system itself, has been confirmed repeatedly in theoretical discussions and political struggles within and around the labour movement since the end of the nineteenth century. So there are indeed compelling social reasons why Volume 3 should have created the furore it undoubtedly has.
Volume 3 is constructed with the same logical rigour as its predecessors. The substantive problem which Marx seeks to elucidate here is not that of the origin of the two basic categories of revenue: wages and profits. That problem was solved in Volume 1. What he wants to show here is how specific sectors of the ruling class participate in the distribution of the total mass of surplus-value produced by productive wage-labour, and how these specific economic categories are regulated. His inquiry deals fundamentally with four such ruling-class groups: industrial capitalists; commercial capitalists; bankers; capitalist landowners.7 Five categories of revenue, therefore, appear in Volume 3: wages; industrial profits; commercial (and banking) profits; interest; land rent. These are further regrouped by Marx into three basic categories: wages, profits and land rent.
But in order to analyse the different parts into which the total mass of surplus-value is divided, a whole series of intermediate steps have to be taken. The rete of profit has to be distinguished – as a separate analytical category – from the rate of surplus-value, and the various factors which influence that rate of profit identified. The tendency towards an equalization of the rate of profit between all capitals, independently of the amount of surplus-value produced by their ‘own’ variable capital, i.e. by the productive wage-labourers whom they productively employ, has to be discovered. And from these two conceptual innovations is deduced the centre-piece of the entire volume: the tendency of the average rate of profit to decline – in the absence of countervailing tendencies. Having deduced profit in general from surplus-value in general, Marx goes on to show how profit itself becomes divided into entrepreneurial profit (be it in industry, transport or trade) and interest, i.e. that part of surplus-value which accrues to capitalists who own-money capital and limit themselves to lending it to entrepreneurs. Finally, the total mass of surplus-value which is divided among all entrepreneurs and money-lenders is reduced by introducing the category of surplus profit (surplus-value which does not participate in the general movement of equalization of the rate of profit). The reasons why such surplus profit can arise are studied in detail for one special case, that of land rent. But Marx makes it clear, especially in Chapters 10 and 14, that land rent is only a special case of a more general phenomenon. Therefore, we are justified in saying that what Part Six of Volume 3 is really all about is the more general problem of monopoly giving rise to surplus profit. In his theory of surplus profit, Marx anticipates the whole contemporary theory of monopoly prices and profits, while being much clearer as to their origins than are most of the academic economists who, throughout the twentieth century, have been trying to elucidate the mysteries of monopoly.8
The fundamental logic of Marx’s Capital unfolds in all its majesty once we integrate the structure of Volume 3 into that of Volumes 1 and 2. The diagram on pages 14–15 gives a schematic representation of their overall contents and global cohesion.
In Volume 1, Marx showed that surplus-value is only produced by living labour: from the capitalist’s point of view, by that fraction of capital which is spent on purchasing labour-power, and not by that spent on buying buildings, machinery, raw materials, energy, etc. For this reason, Marx called the former fraction of capital variable and the latter constant. It would at first seem to follow that the greater the proportion of capital which each industrial branch spends on wages, the higher its rate of profit (the relation between the surplus-value produced and the total amount of capital invested, or spent in annual production). However, such a situation would contradict the basic logic of the capitalist mode of production, which consists of expansion, growth, enlarged reproduction, through a substitution of living by dead labour: through an increase in the organic composition of capital, with a growing part of total capital expenditure occurring in the form of expenditure for equipment, raw material and energy, as against expenditure for wages. This basic logic results both from capitalist competition (the reduction of cost price being, at least in the long run, a function of more and more efficient machinery, i.e. of technical progress which is essentially labour-saving) and from the class struggle (since again, in the long run, the only way in which the growth of capital accumulation can prevent labour shortage and hence a constant increase in the level of real wages, which