3.1 Historical Materialism

Marx embraced, and was the originator of, a materialist conception of history (often called ‘historical materialism’ – the label is not Marx’s). Analytically and institutionally, any society can be seen as a number of domains: political and legal, cultural including education, and economic. For Marx, the development of the economic domain (the “relations of production”) is key to the development of a society at large (a ‘social formation’, such as a feudal or a bourgeois/capitalist society). What happens in the “superstructure” – the juridico-political and cultural domains – is understood in terms of the “base structure” – the economic relations and their requirements. Two aspects are fundamental to the economic relations themselves: first, the relationship between (a) the social layer or class that does the actual work, and (b) the layer or class that has the power to live off the surplus produced by the former, and that usually also possesses the means of production that the former works upon; and second, the “forces of production”, the amalgamation of the labour process in relation to technology (the latter understood in grand, epochal terms).

This schema is especially significant in analysing changes in structures and their aspects, particularly their dynamic interaction during uneven development. ‘Grand’ history can be seen in terms of revolutionary transitions – ‘restructuring’ into more fitting aspects. (Note that especially in the first half of the twentieth century this schema has often been interpreted mono-causally, running from the forces of production, instead of as a dialectic between all structures and aspects.)

Marx developed these ideas when he was 25–30 years of age. They can be seen clearly in the Manifesto. One plausible reading of Capital, or one dimension of it, is as an analysis of the economic base structure of capitalism. Note, though, that the work does not contain an explicit analysis of social class (except for a just over one page unfinished ‘chapter’ on classes at the end of Volume III of Capital, the term class is hardly ever used in Capital). Furthermore, even if there are a few – very few – mostly speculative references to transitional elements within capitalism, transition is not what the work is about.

3.2 Critique

Especially important in reading Capital is the methodology Marx developed alongside his materialist conception of history, namely his method of “critique” – largely acquired from Hegel (post Kant – cf. Benhabib 1986). Almost all Marx’s works carry the term “Critique” [Kritik], which is distinguishable from ‘criticism’. The latter adopts a normative external criterion (ethical, aesthetic or methodological) to evaluate society or such social products as artistic and scientific endeavours. The method of critique evaluates society and social products on the basis of the norms and standards of the object of inquiry itself. An object of inquiry is analysed from within itself. Its norms and standards are taken to their logical conclusions, detecting possible inconsistencies and contradictions – as when capitalist business both lauds ‘market competition’ and seeks to eliminate competitors and achieve monopolistic positions.

In Capital Marx addresses both a material ontological constellation and ideas about it. When the original title, Das Kapital; Kritik der politischen Ökonomie, is translated as: Capital; A Critique of Political Economy (Penguin editions), the double meaning of the German is lost. The English translation correctly indicates that the work is a critique of a science but omits that the work is as much – in my view, in the first place – an internal critique of “the political economy”, an ontological constellation.

Marx scholars today accept ‘internal critique’ as a major aspect of Marx’s method in Capital. However, controversies remain over the method and content of Capital, since other aspects are not necessarily ruled out. For example, is ‘Marx’s’ ‘labour theory of value’ (he never used the expression) still an external norm, or is the concept of value adopted from the object of inquiry? (See further §3.4.)

3.3 Naturalistic versus socio-historical concepts

Marx simultaneously historicises social and economic concepts – the critique is an historicised critique. Social self-understanding usually takes the current social constellation and its concepts for granted, as ‘natural’, or as the norm (‘ethnocentrism’). They are then used to evaluate history or other contemporary societies. (For example, some Americans deploy their notions of ‘market’, ‘competition’, ‘economic freedom’, ‘political democracy’ to evaluate other societies.) Marx identified the ‘mainstream’ political economy of his time as that body of self-understanding in Great Britain and France of 1850 set in ahistorical or naturalistic terms (cf. Mattick 1986).

From this perspective, Marx sometimes distinguished a trans-historical, or general-material, denotation of concepts – ‘goods’ and ‘work’ – from their historical, in this case capitalist, counterpart – ‘commodities’ and ‘labour’ (Arthur 1986; Murray 1988). His aim was not to construct a second language, but to show that in the social domain naturalistic entities do not exist. No trans-historical ‘human needs’, ‘utility’, ‘wealth’, ‘goods’, ‘work’, or ‘technology’ exist; they are always ‘defined’ and ‘subsumed’ within a socio-historical constellation (on human needs, see Campbell 1993; and on wealth and on subsumption generally, Murray 2000, 2002). Whereas J.S. Mill historicises ‘the laws of distribution’ – still eternalising/naturalising ‘the laws of production’ – Marx is a complete de-naturaliser. Anything human is set in an historically specific social form.

3.4 Value-form theory

The view that Marx’s critique is an historicised critique, and that everything human takes on an historically specific social form (§3.3), is highlighted in the recent ‘form theoretic’ interpretation for which Capital is an exposition of the capitalist social form ‘value’ [early proponents are Eldred and Hanlon 1981 and Eldred, Hanlon, Kleiber and Roth 1982–85 who build on work by Backhaus 1969; Rubin 1972 [1923] is an important rediscovered precursor].

The general methodological idea of ‘form theory’ (springing from Aristotle and Hegel – cf. Murray 1997) is that ‘content’ and ‘form’ necessarily go together (for both natural-physical objects and anything created by human beings). ‘Form’ is of the essence of content, just as much as form cannot exist without content. Any actual social formation requires an historically specific form of production and distribution (e.g. tradition, power, democratic decision-making), the capitalist form being value as expressed in monetary dimension. But isn’t it the case that things – sugar, cigar or car – already have a content and form? True. In fact, it is ‘truer’ than the question purports. They surely have a physical form, but from Marx’s point they necessarily also have a social form that can be distinguished but not separated from their physical being. In capitalist economies things are not merely exchanged in markets in terms of value, but are produced as values, which affects how things are qualitatively.

In a traditional interpretation of Capital, Marx introduces in its first chapters a ‘labour theory of value’ – building on the Classical Political Economy of Smith and especially Ricardo – ‘value’ being a naturalistic concept, reckoned in a labour-time dimension. In this interpretation, Marx presents a ‘positive’ theory of value. Hence the materialist internal critique aspect of Marx’s method must, for this part of Capital at least, be de-emphasised (note that the ‘labour-time theory’ interpretation antedates the critique interpretation). For this traditional interpretation, later parts of Capital set out how concrete market phenomena can be ‘reconciled’ with this ‘positive’ theory.

For value-form theory, this first part of Capital is a key materialist critique text. When commodities are produced for sale – a specific characteristic of capitalism – the concrete, utility-producing character of labour is completely secondary to the producer; labour matters to the extent that it is value-producing ‘abstract labour’, a mere expenditure of time. This same text also shows how value (the abstract time facet of labour) is necessarily expressed in abstract monetary terms – and in monetary terms only. Later parts of Capital set out even more complex forms, culminating in the profit form of value, in which things are not merely produced as values, but specifically according to the measure and success-norm of capital: profit and the rate of profit.

How can we appraise these two opposing interpretations? To any reader of Capital it will be obvious that for Marx value is not simply determined by labour-time. The discussions of changing productivity and intensity of labour throughout Volume I problematise such a notion. Nevertheless, Marx often uses the simplified notion as an analytic reference point. Thus, whereas Marx’s value-form theory is a fundamental break from Classical Political Economy, he maintains remnants of a Ricardian labour-time theory of value (Backhaus 1969).

I think that the ‘labour-time theory of value’ interpretation cannot be maintained because too many texts are inconsistent with it. The same applies, however, to a comprehensive monetary value-form interpretation. There are two lines of reasoning within Capital. Marx shares the fate of those who made a fundamental break (a césure), or a paradigm shift, from past conceptions. New conceptions must be formulated in the inherited language. Initial breaks must be partial, inconsistent, or flawed, and need to be completed by researchers following up the break. This, however, does not make the partial break less of an accomplishment (Reuten 1993; for a different view, see Murray 2000).

3.5 Systematic Dialectics

Also controversial is a final methodological interpretation, arising in the middle of the 1980s, which views Capital as Systematic Dialectics. Historical Dialectics describes the evolution and succession of distinct social formations; Systematic Dialectics theorises about one particular social formation, such as the capitalist system, setting out the whole of its object of inquiry as a completely endogenous system, or at least its necessary components and processes.

A major impetus for this interpretation was the 1953/1973 publication of Marx’s Grundrisse, a rough draft of Capital that was, as mentioned in §2, more so than Capital written in a dialectical style. As indicated, a publication, such as the Grundrisse in this case, will not change inherited interpretations overnight. A second impetus was the dedication by a number of scholars (some stimulated by the Grundrisse reading) to the study of the Hegel–Marx connection (cf. Burns and Fraser 2000). As the studies of Marx’s Grundrisse and Hegel’s Systematic-Dialectical works converged, the new interpretation of Capital gradually emerged. [For beginnings, see Banaji 1979, Arthur 1986, and Murray 1988. A comprehensive Systematic-Dialectical interpretation is Smith 1990; cf. his 1993a, 1993b. See Mattick 1993 for critique of the interpretation. For general accounts of the methodology of Systematic Dialectics, not necessarily related to Capital, see Reuten and Williams 1989, pp. 3–36, Arthur 1998, and Reuten 2000.]

A Systematic Dialectic operates on several conceptual levels, from abstract and simple to concrete and complex. Its starting point is also an entry into its whole object of inquiry, formulating that whole both abstractly and simply. Gradual concretion and increasing complexity are achieved at subsequent levels of abstraction; at a final level of ‘abstraction’, the complexity of concrete empirical reality should be attained.

An un-theorised, or naive, empirical reality is the beginning of research. From that, after a complex and creative investigation, the initial highest level of abstraction is reached – the starting point of the systematic presentation (indicated in the previous paragraph). Thus, empirical reality (at first naive, in the end systematically theorised) is both the beginning and the end of the research. A rough outline of this process from the empirical to the abstract to the concrete is found in one of Marx’s few methodological texts (Marx 1903).

Marx identifies neither these levels of abstraction in Capital nor how to get from one level to the next. So this must all be inferred in this interpretation of Capital.

The grand systematic of Capital is in terms of its three volumes: (I) ‘The production of capital’ (from the commodity to money to capital, and from the production of capital through surplus-value to the accumulation of capital); (II) ‘The circulation, or, the organic interconnections of capital’; and (III) ‘The destination and concrete shapes of capital’ (profit and the rate of profit, and competition and the distribution of the fruits of capital into profits of enterprise, interest and rent). The three volumes are each made up of parts, which provide more detailed levels of abstraction.

Levels of abstraction are conceptual terrains. In dialectics, concepts are not fixed – as in conventional ‘linear logic’ (cf. Arthur 1997) – but manifest ongoing conceptual progress from one level of abstraction to another. An axiomatic translation of one level into another is inconsistent with the methodology. In general, when a level of abstraction insufficiently captures the whole, the process is driven forward. Capturing the whole means formulating ‘a system’ that can, in principle, reproduce itself endogenously. At each operating level of abstraction, the ‘discovery’ of its endogeneity limits pushes the process to a new, richer, more complex level. Such a level is institutionally more complex and requires new categories and concepts. With it come both a reconceptualisation and the concretion of the conclusions of earlier levels of abstraction.

To some extent the method may be envisioned as one of successive approximation (Sweezy 1968 [1942]) – but only with the major proviso precluding fixed definitions (they only apply at their own level of abstraction). Indeed, a recurrent reconceptualisation occurs. A succinct example comes from Marx’s Results (1933, p. 969), when he contemplates Volume I of Capital:

Originally, we considered the individual commodity in isolation, as the direct product of a specific quantity of labour. Now, as the result, the product of capital, the commodity changes in form (and later on, in the price of production, it will be changed in substance too).

Earlier he had written (p. 954):

The commodity may now be further defined as follows: … The labour expended on each commodity can no longer be calculated except as an average, i.e., an ideal estimate. … When determining the price of an individual article it appears as a merely ideal fraction of the total product in which the capital reproduces itself.

The manuscripts for the final versions of the three volumes of Capital that we have are dated in ‘odd’ order (Table 1). Inasmuch as Marx reworked and reconceptualised his manuscripts for Volume I, this would have affected the re-study of the levels of abstraction in Volumes II and III. The three volumes of Capital are not only in different states of draft (ranging from mere notes to final versions), but, more important for a Systematic Dialectic, in different states of conception. It is thus especially important to remember, for a Systematic-Dialectical interpretation of Capital, that its last two volumes cannot be seen as conceptually final.

3.6 Conclusions

By 2000 Marx scholars have largely agreed that Capital analyses its object of enquiry from within, aiming to drive the object’s (capital’s) own standards and processes to their logical conclusions. Marx’s method of critique is largely an historicised critique. Whether it is a totally historicised critique – as highlighted in the value-form interpretation – is disputed. While most Marx scholars also agree that some type of conceptual development, or at least ‘successive approximation’, exists in Capital, whether it is as rigorous as the Systematic-Dialectical interpretation claims is disputed.

All of these different overall interpretations of Capital can find confirmations in Marx’s texts. However, there is increasing evidence, from §3.1 to §3.5, falsifying each successive position. We might thus say that Capital is a rich heuristic source of a variety of different reconstructive theoretical approaches.

I-A What is capital? – How it arises

‘Capital’ might be a sum of money, a quantity of means of production, or an investment in commodities. All such ‘shapes’ of capital have in common that they are value forms. For Marx ‘the commodity’ is the elementary shape of the value-form. Therefore he starts with its analysis (Capital I, Part One), turning in succession to money and capital.

There are two aspects to Part One. First, Marx seeks in ‘value’ a reference point for all his Volume I analysis. The problem of a suitable reference point has troubled all great economists, from Petty through Smith, Ricardo and onward to Keynes and later. A main problem in understanding Marx’s text is that he seeks (cf., §3.2) an endogenous reference point, one internal to his object of enquiry. (In contradistinction to external constructs, such as – later on in history – index numbers, or Sraffa’s standard commodity.)

Secondly, Marx seeks not a naturalistic, but an historically specific social reference point (cf., §3.3); one that applies to a society in which commodities are systematically produced with a view to sale (I, pp. 138–9, 153–4, 174). The two aspects appear to combine into one problematic, posing an even greater difficulty for the text.

The reference point for value is “abstract labour” measured by labour-time (I, p. 129). (Therefore Marx’s theory has often been interpreted as a ‘labour theory of value’.) Simultaneously, Marx posits, first, that value exists only in a “value-relation or an exchange relation” and, secondly, that it is manifested in the value form par excellence, the money form (I, 138–9, 152, cf., 255). Indeed, throughout Capital, Marx always expresses value and value entities in monetary terms (£’s). (Thus it seems that Marx adopts a monetary measure of value.) I think, then, that we must accept that there is an ambiguity here, which can only be resolved in a reconstructive way (see, e.g., Backhaus 1969; Bellofiore 1989; Reuten 1993; Smith 1998; Bellofiore and Finelli 1998; Arthur 2002b).

Note that, like the concept of capital, the concept of money – as introduced in Part One, is developed throughout Volumes II–III. Marx starts from a notion of commodity money; this is procedural within a ‘successive approximation’ approach (cf. Campbell 1997, 1998, 2002; Williams 2000).

Marx develops the (level I) concept of capital in sequence from an analysis of the commodity and money. Part Two of Capital I introduces capital proper. Marx’s answer to the question ‘What is capital?’, towards the end of this Part, is abstract and formal: it is inherent to capital that it expands ‘in movement’: “The movement of capital is … the unceasing movement of profit-making” (I, pp. 253–4). It is a movement from money (M) into more money: M … M + ΔM. However, “unless it takes the form of some commodity, it does not become capital” (I, p. 256). Marx uses the formula M–C–M´ (where C is the value of a commodity, or of commodities, and M´ = M + ΔM). This is a formula of exchange, derived from the simpler M – C – M. The latter is a strange buying (M – C) in order to sell (C – M). It is an “inversion” of C_i–M–C_j; that is, selling C_i in order to buy a qualitatively different C_j (I, p. 258). Here, money is merely a facilitator – it does not really matter. In the strange, inverted form M – C – M, however, money is all that matters; by making sense only as M – C – M´, when the end result is an increment (ΔM), a “surplus-value” as Marx calls it. In M – C – M´ value is:

the subject of a process in which, while constantly assuming the form in turn of money and commodities, it changes its own magnitude, throws off surplus-value from itself considered as original value, and thus valorises itself independently. For the movement in the course of which it adds surplus-value is its own movement, its valorisation is therefore self-valorisation. (I, p. 255)

So capital is a movement of self-valorisation, of throwing off surplus-value. (Note that Marx has ‘bracketed’ the notion of ‘profit’ and replaced it by the more abstract notion of ‘surplus-value’. Later on (III-A) we will see “surplus-value” transformed into “profit” and the latter again in the sum of “profit of enterprise”, interest and rent. Before examining the processes of that distribution – in Volume III – Marx’s concern is to explain the abstract total. In Volume I (and II) he proceeds from the temporary assumption that each capitalist owns means of production and requires no hiring or borrowing of land, dwellings, or external finance (I, p. 710).)

Part Two closes by formally introducing a particular commodity and commodity market, that of labour-power, the existence of which is predicated on workers’ lack of means of production. It includes a brief introduction to the value of labour-power; that is, the wage that in principle should be sufficient to reproduce the labour-power – ‘sufficient’ depending on physical, historical, and moral elements (I, pp. 272–5).

I-B How capital works – how it arises

Capital, we saw, is a movement of self-valorisation, of throwing off surplus-value. The middle part of Volume I considers “not only how capital produces, but how capital is itself produced” (I, p. 280). How can surplus-value be explained? Recall M – C – M´. “The change in value of the money … cannot take place in the money itself … The change must therefore take place in the commodity …” (I, p. 270). Hence the key to M – C – M´ lies in C. Marx next shows that the production process is the site where the value of C is turned into C´.

In the exchange M – C, capital in money-form is turned into capital in commodity form: means of production and labour-power. Labour-power is exchanged against the wage, and labourers sell their labour potential. During production, labour is ‘subordinated’ to capital: “the worker works under the control of the capitalist … the product is the property of the capitalist and not that of the worker” (I, pp. 291–2). Because the means of production are static elements, a change in C can only be engendered by the active living element: labour. Labour alone can generate a surplus-value beyond the wage. In labour resides the potential to produce a surplus-product, or, in value-terms, surplus-value. Marx calls the ratio between the amount of surplus-value and the capital laid out in wages the “rate of surplus-value” or the “degree of exploitation of labour-power by capital” (I, pp. 320–7).

The body of the middle part of Capital I, which is more than 400 pages long, consists of a detailed analysis of methods and (organisational) techniques for increasing the rate of exploitation. Throughout, Marx uses the labour-time reference point. Nevertheless, as previously indicated, all of his value entities are expressed in monetary terms (£’s); the same applies to all his numerical examples (cf. Elson 1979a).

I-C Capital’s resulting process – how it arises

“Earlier we considered how surplus-value arises from capital; now we have to see how capital arises from surplus-value. The employment of surplus-value as capital, or its reconversion into capital, is called accumulation of capital” (I, p. 725). In Part Seven, Marx shows how capital’s growth results in three simultaneous dynamic processes: (1) the propagation of a reserve army of unemployed labour, especially by way of the introduction of labour-expelling techniques of production pressing down the wage rate; (2) cyclical growth of capital; and (3) centralisation of capital.

The final Part Eight provides an historical account of the conditions of the buying and sale of labour-power: ownership of the means of production by capitalists. This is the precondition for the I-A starting point, and so rounds off this level of analysis as a circle.

DIV-1-4-2

II-A What is capital? – How it operates

In I-A, Marx treats capital as ‘movement’. Indeed, all of Volume I describes movement, resulting in expanded movement (valorisation and accumulation). In Part One of Volume II this is made explicit. Capital is shown to be a continuous movement through four manifestations/shapes, together constituting the circuit of capital:

→ M —E— C [MP; LP] ..... P ..... C´ —E— M´ →

Capital in the shape of “money capital” (M) is transformed in the exchange process (–E–) into the shape of “production capital” (C); specifically, means of production (MP) and labour-power (LP). The latter work up the former in the process of production (···) where we have the shape of “capital in process” (P); this constitutes a metamorphosis into valorised “commodity capital” (C´), with C´ different qualitatively from C, as well as quantitatively in value terms (C´> C). Finally, another exchange transforms the expanded commodity value C´ into a monetary value equivalent M´, the shape of expanded “money capital”. The process can now resume on an expanded scale – wherein capital is accumulated.

II-B How capital works – How it operates

Until Part Two, capital has been implicitly treated as an expanding flow (fixed capital as introduced in Volume I was set to zero). Now Marx explicitly distinguishes circulating from fixed capital. It is shown how capital as movement works in production in terms of length of production periods and turnover-times of capital. ‘Time’ is key to capital. Speeding up any of the phases of the circuit means that a given quantity of capital can turn around more production.

II-C Capital’s resulting process – how it operates

Part Three presents the circulation of capital in the context of the economy as a whole. Using a two-sector ‘model’, Marx specifies dynamic interconnections pertinent to economic growth and conditions for balanced growth. These conditions are very severe and the implication is that balanced growth is possible, though unlikely.

DIV-1-4-3

III-A What is capital? – How it culminates

Part One of Volume III considers surplus-value (flow) in relation to total capital invested (stock) and introduces the key capitalist profit form: “A sum of value is … capital if it is invested in order to produce a profit …” (III, p. 126). This involves a conceptual transformation of both “surplus-value” and “capital” such that the rate of profit measures the valorisation of capital. Profit and the rate of profit are capital’s continuity measures.

III-B How capital works – how it culminates

The profit-form brings a new dynamic (III, pp. 263, 267, 275); Part Two shows how the profit rate measure works. Since for capital its particular physical content does not matter (bread, spirits or bibles), another aspect of capital’s movement is its flow to branches where it attains the highest profit rate. Thus competition between capitals produces an averaging of the profit rate. Concomitantly we have a further commodification of workers who must move “from one sphere to another and from one local point of production to another” (III, p. 298).

With the profit-form, the concept of price developed in Volume I is modified. After this, however, Marx surprisingly tries to make quantitative translations between the conceptual levels, comparing the transformed profit-form entities with a calculation prior to the profit form. In this Marx underscores the dynamic introduced at this level. The literature on the interpretation and reconstruction of this ‘transformation’ is enormous; for references, see Moseley 1993, Mohun 1994, Foley 2000, Bellofiore 2002, Laibman 2002, and various articles in Bellofiore (ed.) 1998, Vol. 1.

III-C Capital’s resulting process – how it culminates

Part Three presents the resulting dynamic of diachronic change in the average rate of profit through the profit-enforced introduction of cost-reducing techniques of production. These generate cyclical rate-of-profit increases to the initiating capital and a simultaneous cyclical average rate-of-profit decrease, as reversed in cyclical restructuring of capital (for this interpretation, see Reuten 2002a, 2004 – cf. Lebowitz 1976; Fine and Harris 1979; Groll and Orzech 1987).

No longer restricted to undifferentiated “industrial capital”, Parts Four to Six show capital separated into functionally different and conflicting factions: industrial, commercial, financial, and real estate. Profit now separates and is distributed as profit of enterprise, interest and rent (Moseley 2002). The final Part Seven is a draft for further concrete manifestations of the whole. It also emphasises Marx’s fundamental point that capitalism is an historically specific and mutable mode of production that conceals its class structure (Mattick 2002; Murray 2002).

Summary

In Capital the one-dimensionality of the capitalist social form – the value-form as expressed monetary terms – is the basis for capital as a “movement of self-valorisation”. Volume I treats the aspect of self-valorisation as movement and Volume II movement in macrosocial context. In Volume III these aspects are articulated in the working of the profit-form and the ‘concrete abstraction’ of a dimensionless rate of profit – money over money. That non-dimensionality, indifferent to content, drives the base structure of a capitalist society.