On Saturday, September 16th 2017
This paper does not pretend to be an exhaustive account either of Marx’s “Das Kapital” or of the history of capitalism in the last 150 years. It is intended rather as a provocative stimulus to the discussion on September 16th- and perhaps to further thinking after that date.
On September 14th 1867 Karl Max published Volume One of his “Das Kapital”- he wrote in German- it was translated into English twenty years later. Volume Two was published by Friedrich Engels in 1885 (from Marx’s notes after his death in 1883), and the final Volume Three followed in 1894.
Marx was born in 1818 in the town of Trier, on the banks of the Mosel River in South-west Germany. His ancestry was Jewish- his grandfather, Marx Levy Mordechai, had been rabbi of Trier. His father, born Herschel Mordecai, became a lawyer, and married Henriette Presburg , Karl’s mother, in 1814.
Trier, like the rest of Germany west of the Rhine, had been ruled by France since 1794, but with the defeat of Napoleon in 1815 the area was ceded to Prussia, as the German state thought most able to prevent any further French invasions of German territory. Prussia did not permit Jews to practice law or hold state office, so after a failed attempt to gain an exemption, Herschel converted to the Prussian Protestant Church around the time of Karl’s birth, changed his name to Heinrich Marx and had his family baptised.
Karl was educated at home until the age of 12, then went to the Trier Gymnasium, to Bonn University in 1835 and finally to the University of Berlin, though his PhD thesis that Theology must give way to Philosophy was granted by the more liberal Jena University in 1841. He became a journalist for the radical newspaper “Rhenische Zeitung” in Cologne but found Prussian censorship oppressive and moved to Paris in 1843 to edit the socialist “German-French Annals”. In June of the same year he married Jenny von Westphalen, a controversial match in view of Jenny’s aristocratic and Lutheran background. In Paris Marx again met Friedrich Engels (they had first met briefly in 1842 in the “Rhenische Zeitung” offices), the son of a wealthy German textile manufacturer. Engels had been sent by his father to Manchester in 1842 to work in the office of the Ermen and Engels Victoria Mill at Weaste, but used his time for research, and published the “Condition of the Working Class in England” at Leipzig in 1845.
Marx and Engels began a life-long collaboration, writing the “Manifesto of the Communist Party” together in 1848 for the newly formed Communist League: “The proletarians have nothing to lose but their chains. They have a world to win. WORKING MEN OF ALL COUNTRIES, UNITE!”
Their involvement in the political upheavals of 1848 forced them into exile in England (which was then much more welcoming to political refugees than it later became) and Marx continued to work on his analysis of the internal workings of capitalism, which he formulated in “Das Kapital”.
Deprived of their ability to support themselves, Marx argued, by the loss of their small-holdings through debt and the enclosure of common land, the rural poor had been forced to become “proletarians”, whose only means of subsistence was to sell their labour power to capitalist employers, who could exploit them by paying barely enough for them to live and produce children who would ensure the continuing supply of future labourers. The profits r employers could reap by selling their workers’ production (which they, the employers, now owned, and not the labourers themselves) represented what Marx called a “surplus labour” value, which the capitalists had wrested from their workers.
But this system was not sustainable. Fierce competition for the available markets between capitalist companies would force employers to reduce their workers’ wages as far as possible, and also to wring more productivity out of each worker by mechanising the process whenever new inventions became available. None of these measures would ensure profitability in the long term, however- small companies would be unable to compete, larger and larger companies would dominate the market, and would confront increasing masses of barely surviving workers in an escalating struggle for existence. Eventually those workers would put up with their exploitation no longer, and would overthrow their capitalist masters, taking over the means of production in a “dictatorship of the proletariat” which could then evolve into a fully socialist society where the means of creating wealth (land, machinery etc) belonged to the whole community. The end of capitalism would come as inevitably as the overthrow of medieval feudalism by merchants and capitalists had done a few centuries earlier.
THE FIRST 140 YEARS: 1867 TO 2008
But it did not happen. Instead, within fifty years (perhaps before the crisis Marx predicted had time to mature?) the rival nations of Europe dragged one another into a vicious war in which, to the dismay of socialists and at least some theologians (such as the Swiss pastor Karl Barth) proletarian workers suddenly became patriots and fought for their countries. The revolution Marx expected them to lead happened, not in the industrialised countries, but in the relatively undeveloped and still mainly rural Russia, producing in the long run a centralised and often viciously cruel dictatorship which collapsed under the weight of its own inefficiency and stagnation some seventy years later.
The economic cost of the war was crippling even to the victors- in the case of the UK the National Debt increased tenfold, from £650 million to over £7 billion. For the losers, who were blamed for starting the war, it was devastating.
Nor did the end of armed conflict bring economic peace. Wartime demand for raw materials collapsed quickly, and in the UK the Government’s decision to return to the gold standard at pre-war parities threatened wages and jobs, leading to the 1926 General Strike. In the United States stock market speculation produced a bubble that burst in the 1929 Wall Street Crash. Mass unemployment spread through industrialised countries and the rise of Fascism in Europe led to yet another destructive war.
All that experience convinced many that a radical change in economic policy was long overdue. It had always been the case that capitalism could save itself from the fate predicted by Marx by paying its workers well, turning them into consumers in a vastly wider market for the goods it needed to sell, and so “buying” their support for the system to continue. Something of that had already begun to happen towards the end of the 19th century, but hampered by the risk of severe losses individual businesses faced if they were among the first to increase their wages bill when other competing companies did not follow suit. Only government leadership could break that dilemma.
The fact that governments successfully organised the defeat of fascism gave people confidence that they could also organise the peace. The ideas of John Maynard Keynes, that the task of government was to invest in the economy to create full employment, backed by a Welfare State guaranteeing social security, helped create the most successful twenty years that capitalism had yet seen, a time when prosperity was spread more widely throughout society than ever before.
By the late 1960s, however, new problems had begun to emerge. The “victors” in WW2 were beginning to face stiff competition from countries which by now had recovered from the devastation of war, whose newly equipped and often better structured industries outpaced the tired US and UK companies. In 1971 President Nixon tried to deal with the US balance of payments deficit (that its exports were no longer paying for its imports) by allowing the dollar to “float” and devalue. Because the oil-producing OPEC countries were paid in dollars they retaliated by raising the price, which by 1974 had multiplied fourfold. Inflation jumped from less than 5% per year in the mid 60s to 25% by the mid 70s. But the most visible and easily blamed causes for this were “excessive” government spending, and the policy of full employment, which many thought gave Trades Unions far too much power.
From the 1980s, therefore, unemployment became the cure for inflation, which caused an automatic rise in government spending, as the cost of unemployment benefits increased, and forced a rise in government borrowing (as tax receipts from formerly employed workers fell sharply). By the turn of the century “flexible working practices” were substituted for unemployment, determined efforts were being made, through the de-regulation of financial services, to shift the burden of public debt onto families and individuals. The result was the 2008 banking crisis- governments were then “forced” to step in and rescue the banks, taking on their debt once more, in order to prevent complete economic collapse.
What is evident by now is that capitalism is capable of creating a great deal of wealth, which it can spread widely. The percentage of people in the world living in extreme poverty has shrunk from over 40 percent in the early 1980s to about ten percent now- mainly through the rapid development of countries like China (although this, of course, has put increasing pressure on manual and factory jobs in older industrial countries).
What capitalism is incapable of doing, however, is to include everyone in the prosperity it provides. As production satisfies the wants of more and more people, and the market reaches near “saturation”, prices begin to drop, profits disappear, and private companies are forced to cut back on production in order to survive. Maintaining prices (and therefore profits) requires a degree of competition, which means that providing enough for everyone is, paradoxically, to “over-supply” the market (in economic terms). The clearest example of this at the moment is probably the housing market, with the Grenfell Tower tragedy as only the most shocking symptom. Private house-building has never provided adequate housing for everyone, and never can.
While democratically elected governments retain at least some authority over their economies, enough people must be “included” in the provision of goods and services to ensure a reliable voting majority for the present system to continue. The fact that a tiny proportion of the population are rewarded out of all proportion to the rest, and a much larger proportion (but still a “containable” minority) are shut out, will be tolerated as long as most voters are satisfied, or can see no workable alternative. The fact that those who are shut out are likely to suffer from various personal disabilities, a lack of education, low self-esteem and motivation or some other handicap, means that it is easy for the others to blame those factors for their poverty, rather than recognise that the present economy does not and cannot give them a place. If all the disabling factors were remedied othes would quickly take their place.
But in any case democratic control over economies is weakening. The fact that large companies are increasingly international, using tax havens to register their profits, means that they can evade making more than a bare minimum contribution to the needs of people who do not serve their own economic purposes. Some financial structures, such as the European Monetary Union and Central Bank, have been deliberately set up to be as free as possible of any democratic constraints, which means that the demands of financial institutions can become their absolute priority.
Some welcome these developments- such as Ian Angell, who in 2000 (when he was Professor of Information Systems at the London School of Economics) wrote in his book “The New Barbarian Manifesto” (published by Kogan Page Ltd.): “Rich areas are realizing the advantage of dumping poor areas….. particularly the soon-to-be-independence-minded Home Counties, which will realize the benefits of discarding that black hole for taxes north of Watford” (page 201- and, we might add, some parts of inner London nearer to home). Charities (including churches) are left to pick up at least some of the pieces, and are praised for doing so. Though if they dare to analyse and criticise the economics that create the poverty they are called upon to deal with, they soon lose favour- and if they are dependent on state funding they risk their very existence.
Is such an economy sustainable? Will it be able to satisfy enough people (or keep enough optimistic about their chances of climbing on board) to retain their support? If that fails can it find the funding needed to suppress those who violently oppose it? Or will it alienate so many people that it “produces….. its own grave-diggers” (Marx and Engels in the Communist Manifesto, chapter 1), not the united proletariat of factory workers they expected, but disparate groups of excluded people, who finally learn to stop fighting one another and turn their attention to the real cause of their troubles?
– “Why Marx was Right” – Terry Eagleton, Yale University Press, New Haven and London, 2011
– “How will Capitalism End?”- Wolfgang Streeck, Verso, London and New York, 2016
– “Capital in the 21st century”- Thomas Piketty (translated by Arthur Goldhammer), Harvard University Press, 2014, (paperback 2017), and at https://dowbor.org/blog/wp-content/uploads/2014/06/14Thomas-Piketty.pdf