KOREA COLUMN 15

The Contradictions of Capitalism

My last column, on dialectics, showed that for Marx all change takes place through contradictions. To nothing does this apply more strongly than the development of capitalism. Capitalism is a mass of interlocking contradictions.

First there is the contradiction between the forces of production and the relations of production. Capitalism has developed the forces of production to a degree inconceivable under any previous economic system but because they are based on alienated labour the more they develop the more they turn into forces of destruction, either in the form of weapons of unimaginable power or through the destruction of the environment on which our survival depends.

As capitalism drives the productive forces forward, so the need becomes ever more urgent for the social ownership and democratic planning of the economy – one thing capitalism, by its nature, cannot deliver.

Then there is the contradiction between the capitalist class and the working class rooted in the exploitation that takes place in every capitalist workplace. This class conflict has accompanied capitalism from its birth. For centuries the bourgeoisie has used all its economic, ideological and political power to incorporate, divert and repress working class resistance. Time and again it has been successful, inflicting on the working class numerous grievous defeats, and time and again its ideologists have proclaimed the end of the class struggle.

But to no avail. The fact is capitalism cannot do without the working class; it needs it to produce its profits. And the more capitalism grows and expands, the more it is compelled to increase the size and potential power of its mortal enemy. The bourgeoisie can win battle after battle but it cannot win, or end, the war. The class struggle can end only with the overthrow of the bourgeoisie and the abolition of capitalism.

A further contradiction is that between the capitalists themselves. Capitalist production is organized on the basis of competition between rival capitals. This competition permeates the whole system from the level of the smallest corner shop to the biggest super market, from the most humble workshop to the mightiest multinational corporation, and, because the state is the instrument of capital, it produces competition between states which in turn leads to imperialism, arms races and wars.

Capitalist competition is competition to accumulate capital through the exploitation of labour. Any capitalist business that falls behind in the race risks bankruptcy or take over by its more profitable rivals. Every capitalist is therefore compelled to attempt to increase the exploitation of their workforce and the sum of their profits, thus intensifying the contradiction between the classes. Free market competition turns into its opposite, monopoly, as unsuccessful businesses are swallowed up by successful ones, but competition is not ended, it breaks out anew between the monopolies.

Competition drives capitalism forward and accounts for its historic dynamism, but it also undermines it, preventing it ever achieving stability or equilibrium, and pitches it into crisis.

Competition pushes the capitalists, especially when the system is booming, to produce more and more, but because workers are always paid less than the value of the goods they produce there can arise a crisis of overproduction.. More goods are produced than the workers can afford to buy with their wages. This leads to some businesses being unable to sell their goods and making their workers redundant. This further diminishes the purchasing power of the workers and leads to more cutbacks in production and more workers being made unemployed. A vicious circle develops in which the economic boom turns into recession or slump.

The tendency to overproduction can be overcome but only by means that exacerbate other contradictions in the system. The government can intervene with a programme of public spending which employs workers on various state projects. This puts money in the pockets of workers and stimulates demand thus reversing the downward spiral into slump. But this method known as Keynesianism ( after the British economist Maynard Keynes) has the effect of generating inflation, caused by too much money chasing too many goods, and this fuels the industrial struggle as workers fight for wage demands to keep up with rising prices.

Overproduction can also be avoided by the capitalist class itself buying up the surplus which the workers can’t afford, either as luxury goods for its own consumption or as means of production ( new machinery for its factories etc.) If the capitalists of one country opt for consumption then that country’s economy will grow more slowly and fall behind countries where they opt for investment in new means of production. But opting for investment feeds into another fundamental contradiction of the system, namely the tendency of the rate of profit to decline.

This tendency derives from the fact that the source of all profit is the exploitation of workers, of living labour, but the trend of capitalist production is to combine ever greater amounts of machinery, technology etc i.e. dead labour, with relatively smaller quantities of living labour thus reducing the rate of profit as a proportion of the capitalists’ outlay. If the rate of return on investment declines so too does the willingness of the capitalists to invest, causing the economy as a whole to go into crisis.

But if this is the case, why do the capitalists concentrate their investment in machinery rather than in living labour? The answer is because there is a contradiction between the mass of profits and the rate of profit and the interests of each individual capitalist business and the interests of the system as a whole. Each individual capitalist unit is driven by competition to try to increase its mass of profit and its share of the total profit in the system. It can do this by investing in new technology which enables it produce more efficiently and sell more cheaply thus, at least temporarily, stealing a march on its rivals. But once the use of the new technology is generalized the temporary advantage is wiped out and the overall rate of profit is reduced.

The tendency of the rate of profit to decline is only a tendency. It too can be countered or offset in various ways - by increasing the rate of exploitation, by imperialism, arms spending and war – but each of these methods generates resistance and sharpens the other contradictions in the system.

None of these contradictions by itself, nor even all of them taken together, guarantees the victory of socialism but they do make the system, for all its immense power, vulnerable. The question is can the working class overthrow it before its contradictions destroy us all.

John Molyneux

3 Jan 2007