CHAPTER 27

Karl Marx

Compared to the shorter and more sensational Communist Manifesto, Capital is often seen
as the dull but worthy masterwork that underpinned Marx’s thinking. There is a reason for
this. Capital was in Marx’s mind a continuation of A Contribution to the Criticism of Political
Economy (1859) his critique of classical economics, and indeed the first chapters of the work
read like an economics textbook, explaining in detail concepts such as “use value” and
“exchange value.”

Yet this objective tone soon gives way, as Marx provides a snapshot of the horrifying
conditions in which men, women and children labored in early industrial Britain. In contrast to
the rosy view of progress and prosperity of Victorian times that we get in, say, Samuel
Smiles’ Self-Help, in page upon page of examples Marx reveals the dark side of capitalism.
England’s industrial revolution had brought social disintegration, and would be a template for
the rest of Europe, Marx tells his readers: “The country that is more developed industrially
only shows, to the less developed, the image of its own future.” Rather than bringing with it
increased leisure time and comforts, technological wizardry combined with capital had
turned Britain’s workers and rural folk into a class of “white slaves.” Its patriarchal society
became one in which people were reduced to factors of production, with the whole system
fueled by the desire for export profits.

Capital took years to write (mostly in the reading room of the British Library), and it shows.
Marx wished to provide a damning case against laissez-faire economics, and even if you are
an ardent capitalist it is hard to walk away from the book without thinking about the perennial
question of labor versus capital, and whether things have even changed much since Marx’s
day. All in the making: the labor theory of value Marx’s labor theory of value, borrowed from
Ricardo, says that the value of something is simply the labor that has gone into it. A coat, for
instance, is “congealed human labor.”

Something created simply for its “use value,” or its worth as that product (making a coat to
wear it) is to be distinguished from things which are created to be a store of value, and to be
traded, bought or sold as a commodity (making coats to sell, to get rich). Because one kind
of commodity can be used to purchase other commodities, and labor is the basis of the
creation of commodities, it means that all labor has an equivalence. Thus, a 20-yard roll of
linen becomes exchangeable for two ounces of gold. When it is expressed in money form,
labor becomes a kind of social utility, and every product becomes a kind of “social
hieroglyphic,” Marx says. We know what someone is “worth” by what they can exchange
their labor value for, converted into money.

This sounds innocent enough. Take it to its conclusion, though, and you will see transitions
from, for instance, a society of self-sufficient farmers, to one that has slavery as the basis of
its economic relations. If everything in society becomes commoditized, and labor is the main
input into the creation of commodities, Marx notes, people become objects to be bought and
sold.

Money (which becomes capital) changes everything Imagine an entrepreneur with some
money savings who opens a shoemaking shop, and employs a leatherworker. The
leatherworker owns his own labor, and cannot sell all of it at once, as he would be selling
himself. But because he owns only his labor, and not any means of production (for example,
machinery or leather to make shoes), he is immediately in a lesser position than the
entrepreneur who does own such means; he can only sell his labor, and not the product of
that labor. In this “unnatural economic relation,” Marx says, the laborer will be paid only to
the extent that he is kept in food, fuel and housing (“subsistence”) so that he can renew
himself each night in order to come back and work the next day. The price of his labor will be
the sum cost of the commodities he must buy to keep himself and his children alive.

In modern societies, social relationships exactly shape themselves around economic

Surplus labor-value: the secret key to capitalism Capital contains large sections on the
length of the working day, and Marx explains why he is almost obsessional about it. There is
a portion of the day which is “necessary” labor time, because it both pays for the worker’s
subsistence, and for the owner’s costs of running the factory. But there is a second part of
the day which is not necessary, in that all costs have been covered; this surplus laboring is
pure profit for the capitalist, while no extra value is gained by the worker. Thus “the laborer
… works one half of the day for himself, the other half for the capitalist.” It was precisely
because most factories would have entered the profit zone only at the end of the day, that
English manufacturers tried to stop laws mandating a ten-hour day in place of twelve. The
only difference between a slave-owning society and a wageearning one, Marx says, is in the
degree of exploitation. The so-called “greatness” of a nation is not measured by the quantity
of what is produced, he notes, but by how much surplus labor-value is generated: “Capital is
dead labor, that, vampire-like, only lives by sucking living labor, and lives the more, the more
labor it sucks.”

Marx describes the “relay system,” in which mills and factories were kept going 24 hours a
day, and which saw ten-year-olds being made to work 15 hours a day for a few shillings a
week. An 1863 physician’s report on the Staffordshire pottery industry stated that workers
had a range of pulmonary diseases, their growth as children and teenagers had been
stunted, and they became prematurely old. Children in the match making industry were
exposed to phosphorus and developed lockjaw. In even apparently benign industries such
as baking, extreme overwork meant that bakers rarely lived past the age of 42. In sum,
capitalists believed it was more efficient to use up a worker’s labor-power for a few years,
then discard them for new blood, than to keep that same worker on but in conditions which
would give them a longer working life. Marx provides a history of the Factory Acts in
England, from 1833 to 1864. The opposition to them from industry, he says, is characteristic
of the “spirit of capital.” Yet if the engine of wealth was the ability of factories to coordinate
large quantities of raw materials and labor, putting many workers all under one roof, this also
created an opportunity, for “As the number of the co-operating laborers increases,” Marx
notes, “so too does their resistance to the domination of capital.” The scene is set, with an
emerging sense of collective identity, for a great struggle between capital and labor.

Final comments For Joseph Schumpeter, the patron saint of capitalism, Marx presented his
ideas as the articulation of grand impersonal forces of history, yet he somehow failed to see
the most salient feature of capitalism: its dynamism and affinity to human aspiration. Marx
ignored the reality that capital is built up in the first place through intelligence, energy,
creativity, hard work, and saving—not accumulated by force, subjection, and exploitation as
Marx believed. And rather than spending time developing “class consciousness”, the
average worker is instead looking to move up a rung on the social ladder. He accepts the
rules of capital as long as there is some chance for him to use it to his own advantage. Marx
did not take enough account of the role of technology and productivity in making things
cheaper to buy for the average worker, or that through contributions to a pension fund, which
invests in industrial stocks and real estate, the average worker becomes a capitalist himself;
capitalism works because it ensures that labor retains a piece of the pie.

For all its flaws, Marx’s “economic interpretation of history” did show how the economic
environment and forms of production shape religion, art, philosophy, and institutions—the
society we live in. One of Marx’s achievements, Schumpeter admitted, is the reminder that “it
is our daily work which forms our minds, and that it is our location within the productive
process which determines our outlook on things.” Whether owner, investor, or worker, our
“location within the productive process” will be a major determinant of our happiness, and so
warrants deep reflection. Our work and our relationship to capital may not define us
completely, but it is a big part of who we are. Reading Capital may make you stop and
ponder how much of your day is spent earning money for yourself, and how much is spent
enriching your employer—and whether this is fair. If your work involves use of your
judgement and knowledge, why shouldn’t you take charge of the “means of production” (your
mind), and reap the fruits of your labor? In Marx’s day business was very capital-intensive,
whereas today there are many areas of business where one can begin with almost nothing.
Technological advances, combined with the democratization of capital, mean that “surplus
value” is more easily captured if an individual comes up with a winning product or service.
But for capitalism to be humane, all who have worked to create the product or service must
feel they are getting a proportionate gain. An unbalanced labor–capital equation may bring
workplace mutiny, flight of talent, or at a societal level, rebellion against “the 1 percent”
through the ballot box.

Karl Marx Marx was born in 1818 in Trier in the Prussian Rhineland, one of nine children.
Marx’s grandfather and great grandfather were rabbis, but his liberal lawyer father Heinrich
converted the family to Lutheranism to avoid anti-Semitic laws preventing him from
practicing. Marx’s mother Henrietta came from a wealthy Dutch Jewish family who would
later start the Philips electronics company.

At Trier Gymnasium, Marx gained a solid grounding in Latin, Greek, French, and German.
He attended university in Bonn and Berlin, then gained a doctorate from the University of
Jena, but was considered too radical to be given an academic post. He married Jenny von
Westphalen, of a Prussian aristocratic family, in 1843. They would have seven children.

In 1842 Marx began working for the radical New Rheinische Zeitung in Cologne. After it was
shut down by the authorities he moved to Paris, a center for socialist ideas, mixing with
anarchists Pierre Joseph Proudhon (famous for saying “property is theft”), and Mikhail
Bakunin, and becoming friends with his subsequent collaborator, Friedrich Engels. Forced to
leave Paris in 1845 after pressure from the Prussian state, he continued agitating from
Brussels, penning The Communist Manifesto (1848—see commentary in 50 Politics
Classics). After being thrown out of Belgium and refused entry to Prussia, Marx moved to
London in 1849. He was never granted citizenship, but lived there until his death in 1884.

The English edition of Das Kapital did not appear until 1887. Volumes 2 and 3 of Capital
were put together by Engels from Marx’s notes.

Stabilizing an Unstable Economy

“To be exact, our economic leadership does not seem to be aware that the normal
functioning of our economy leads to financial trauma and crises, inflation, currency
depreciations, unemployment, and poverty in the midst of what could be virtually universal
affluencein short, that financially complex capitalism is inherently flawed.”
“What we seem to have is a system that sustains instability even as it prevents the deep
depressions of the past. Instead of a financial crisis and a deep depression separated by
decades, threats of crisis and deep depression occur every few years.”

In a nutshell

Competitive market economies, it is held, naturally create efficiency and stability.