Marxism

This processes created a capitalist mode of production, in which “the capitalist” claimed the “surplus labor” of a worker (the output of the worker’s labor output beyond what they need to sustain themselves), and after paying the costs of production, retains the “surplus value” (or profit) of the production process as their own to distribute as they please. In short, capitalists retain ownership and the right to the distribution and income of the produce of the workers labor. This creates a division that polarizes individuals, communities, and societies, and leads to class based societies of the rich bourgeoisie and the working class proletariat (Marx (1992[1867]; Marx and Engels; Wolf 1982).

To Karl Marx, capitalism began when precapitalist modes of exchange that used money as a medium to exchange two commodities (Commodity à Money à Commodity, C-M-C), transitioned to capitalist modes of exchange where money was exchanged for more money using commodities as a medium of exchange (Money à Commodity à Money, M-C-M) (1992[1867]).  According to Marx, within the capitalist process, money is not spent but rather “advanced,” as commodities are no longer exchanged based on their “use-value,” but on their “exchange value” within monetary terms (Marx 1992[1867]:249). Within capitalist modes of production, money is advanced into the market through a commodity that is then sold for an additional amount that adds on “surplus value” through a valorization process, better understood today as profit. The valorization of this surplus value happens when the capitalist transforms a use-value into an exchange value by producing a good “greater in value than the sum of the values of the commodities used to produce it and usually equates to labor value” (Marx 1992[1867]:293). To Marx, capitalist modes of production begin with this desire to exchange money for more money (M-C-M’), and charging more for the end product than the cost of the material and labor inputs needed to create it – the investment of capital to create even more capital.

This ability to charge more for the end product comes through surplus labor, the output of the worker’s labor beyond what they need to sustain themselves. Upon the sale of goods, the capitalist pays the laborer, but retains the value of the surplus labor to pay the cost of production, and then is left with a surplus value (i.e. profit) to distribute as they please. In short, the capitalist retains ownership of the produce of the workers labor, and the right to distribute all its proceeds as they see fit (e.g. capital). This creates a division that polarizes individuals, communities, and societies, and leads to class based societies of rich bourgeoisie and a working class proletariat (Marx (1992[1867]; Marx and Engels 1848; Wolf 1982).

“By turning his money into commodities which serve as the building materials for a new product, and as factors in the labour process, by incorporating living labour into their lifeless objectivity, the capitalist simultaneously transforms value, i.e. past labour in its objectified and lifeless form, into capital, value which can perform its own valorization process, an animated monster which begins to ‘work’ as if its body were by love possessed’” (Marx 1992[1867]: 302).

Marx, writing earlier with Freidrich Engels, saw the outcome of this capitalist transformation as creating “[t]he need of a constantly expanding market for its products chases the bourgeoisie over the whole surface of the globe. It must nestle everywhere, settle everywhere, establish connections everywhere” (Marx and Engels 1948: 83). This is a process we now call globalization, but which has transformed over time.

Marxist scholar, activist, and communist leader, Vladimir Lenin (writing in 1916-17), believed that commodity production was key to capitalism, but it was being undermined by big profits going to “the ‘genius’ of financial manipulation” (Lenin 1918:187). Lenin claimed that in the early 1900’s that “the old capitalism, the capitalism of free competition with its indispensable regulator, the Stock Exchange, is passing away. A new capitalism has come to take its place, bearing obvious features of something transient, a mixture of free competition and monopoly,” (Lenin 1918:197-8) which is reminiscent of today’s capitalism. Lenin calls this “financial capitalism,” or “monopoly capitalism” in which large companies and banks inbreed with each other (and the government), and all work towards one goal – one monopoly of capital (Lenin 1918:199-200)! Within this form of capitalism, capital is consolidated amidst a small number of “financially powerful” people and states, in which “profits of production” are replaced by “profits of commissions” as capitalism (especially today) shifts from a “system of production into a system of financial speculation” (Harvey 2005:142). This consolidation of capital and power in the hands of only a few, allows those individuals to control a majority of global trade (and economies more generally) with little impetus to share – unless it makes them more money. This is perhaps one of the most poignant critiques of capitalist production; that “surplus capital will never be utilized for the purpose of raising the standard of living of the masses in a given country, for this would mean a decline in profits for the capitalists, but for the purpose of increasing profits by exporting capital abroad to the backward countries” (Lenin).

While we may not use descriptors such as “backward countries” today, Lenin’s point is still relevant; and been used by David Harvey within his discussions of accumulation by dispossession, and within World-Systems analysis’ notion of core and peripheral states. In both of these theories there is a capitalist elite (be they countries, people, corporations, or organizations) that have or are accumulating wealth from other states that must (perhaps forcibly) stay in a subservient – or periphery – position to those within the core areas (Arrighi 2000, Harvey 2005). It is those core states and areas that bringing in more money than they are investing elsewhere (Arrighi 2000:138).  For it would not be capitalism if MàCàM brought back less money! Within this calculation, capitalism must use financial capital (and money) to invest in commodities to make the invested money back plus a surplus, or profit. As we will see later in the section of (neo)classical interpretations, mainstream capitalist economics is based on growth that Marx (1992[1867]:762-772) calls capital accumulation and which he envisions inevitably leading to a “chronic crisis of over accumulation” (Harvey 2005:144). To Harvey, this accumulation is done by dispossessing the working classes and periphery countries of their capital and wealth. This begins by “forcing” non-capitalist territories open their economies, “not only to trade (which could be helpful) but also to permit capital to invest in profitable ventures using cheaper labor power, raw materials, low-cost land, and the like” (Harvey 2005: 139). This can be seen from colonial expansion, to imperial expansion, to the “new” imperialism of today; and to Harvey is simply a new name for accumulation “based upon predation, fraud, and violence” and which was labeled as ‘primitive’ or ‘original’ accumulation by Marx, but claimed to no longer be relevant in today’s capitalist systems (Harvey 2005). It is Harvey’s contention that this accumulation by dispossession is in fact the essence of capitalist production, that capital creates and maintains disproportionate systems of power in which countries and people in high capital positions subordinate and disposes countries and people in lesser capital positions, and that capitalism is about accumulating capital by dispossessing it from others – using markets, coercion, or force – that inherently “creates its’ own ‘other’” and then positions them beneath those with the capital (Harvey 2005: 141; chapter 4).

World-Systems Theory is another Marxist inspired theory of global accumulation and differentiation.  Largely penned by Immanuel Wallerstein and Ferdinand Braudel, World-Systems Theory sees a world economy not bound by one political force, but based upon a division of labor leading to “significant internal exchange of basic or essential goods as well as flows of capital and labor” (Wallerstein 2004:23).  Within World-Systems Theory the world-economy and capitalism are symbiotic, with the modern world-system is seen as “the only world-economy to have survived for a long time… and that is because the capitalist system took root and became consolidated as its defining feature.” This is a framework that Wallerstein claims the capitalist system cannot exist outside of.  To Wallerstein “capitalism is not the mere existence of persons or firms producing for sale on the market with the intention of obtaining a profit. Rather, such persons or firms have existed for thousands of years all across the world. Nor is the existence of persons working for wages sufficient as a definition. Wage-labor has also been known for thousands of years. We are in a capitalist system only when the system gives priority to the endless accumulation of capital… [and] that people and firms are accumulating capital in order to accumulate still more capital, a process that is continual and endless” (Wallerstein 2004:24, my emphasis). 

This process of accumulation leads to an unequal relationship between a capital intensive core and a weaker periphery that lacks the same capacity to generate profit. This relationship creates similar types of monopolization and consolidation as Lenin and Harvey speak of; and amalgamates the higher capital core into less and less political units; therefore pushing semi-peripheral political units into a growing periphery and semi-periphery that compete against each other.

“Core-periphery is a relational concept. What we mean by core-periphery is the degree of profitability of the production processes. Since profitability is directly related to the degree of monopolization, what we essentially mean by core-like production processes is those that are controlled by quasi-monopolies. Peripheral processes are then those that are truly competitive. When exchange occurs, competitive products are in a weak position and quasi-monopolized products are in a strong position. As a result, there is a constant flow of surplus-value from the producers of peripheral products to the producers of core-like products. This has been called unequal exchange” (Wallerstein 2004: 28).

And this inequality is the cornerstone of Marxist inspired interpretations of capitalism. There is always a creation – or expansion – of “new classes, new conditions of oppression, new forms of struggle in the place of old ones” that are splitting society more and more “into two great hostile camps, into two great classes directly facing each other: Bourgeoisie and Proletariat” (Marx and Engels 1848:80). Within Marxist interpretations of capitalism, society is about capital exploiting both labor and society in general – political, economic, and social – in ways to maximize surplus values through maximizing labor hours worked in exchange for the minimum pay at the expense of individual and groups of labors. This therefore creates two classes of individuals, the bourgeoisie (those with control of capital), and the Proletariat (the workers that control only their own labor). And with this division of people, also the division of capital and wealth.