In this essay, I want to explain Marx’s ideas of the general law of capitalist accumulation in my own way. In each section, I will summarize Marx’s idea first. Then, I will discuss the insightful points of his idea, in terms of methodological reflection or his acute quotation and critiques of other scholars. The whole essay will be divided into four sections, just as the original sequence of Marx’s Capital.
1. A Growing Demand for Labor-Power Accompanies Accumulation if the Composition of Capital Remains the Same
What does Marx intend to talk about in this whole chapter? He made it very clear by saying “we shall consider the influence of the growth of capital on the fate of the working class”. (Marx, Capital, 762) So the next question emerges: what is capital and what is the growth of capital?
In previous chapters, capital was divided into two parts: constant capital and variable capital. Constant capital is the money for buying machine and raw material, of which the value would not grow in the process of production. Variable capital is the money for buying labor power, a special commodity, of which the use value is to produce more value. When the capitalist goes into a progressively increasing scale of production, constant capital and variable capital will go up. In this section, Marx assumes the ratio of constant capital and variable capital does not change in a progressively increasing scale of production, in order to build up a pure foundation of analyses. Good.
After capitalists invest surplus value into production, what will happen next under the circumstance of a steady ratio of C/V, or in another word, a steady technology standard? There will be more demand for variable capital, the labor power. Given a stagnation of technology improvement, it asks for a higher wage standard of the working class. Thus, the surplus value for capitalist decreases. Capitalists have less incentives to invest more, which results in a decrease demand for labor power and a decrease of wage standard. The low wage standard would make a higher ratio of surplus value available again and a new circulation will happen. This circulation not only reproduce surplus value, but also reproduce the social relation between capitalist and workers. Good. “Magnitude of the capital” determines “the number of the working population”. Capital takes the first move, and the number of working population takes the second move. These two variables are not independent of each other. Good.
There are several points need to be discussed more:
First, the reproduction of capital is also the reproduction of a social relation. Why is it so important? Because we cannot fully understand the movement of capital without concerning the effect of human beings and society. A social relation is fundamentally different from a material relation. Humanity is not commodity. Constant capital, a dead labor, would not revolt. Man would. But why and under what circumstance does man not rebel? The whole game of the capitalist mode of production needs the working class’ constant active or passive participation. So paying attention to the social aspect of relation opens a new realm of questions of why working class have to participate willingly or unwillingly. It will be answered in the third section: the reserve army of labor. Marx would not find this answer if he had not paid attention to the social aspect of relation. I will come back at this topic later. Good.
Second, Marx gives us several quotations of other scholars. Marx quotes from Bernard de Mandeville. (Marx, Capital, 764) Mandeville’s opinion on the relation among poverty, ignorance and hardworking is so insightful.[GD1] Besides, Marx critics about Malthus. For Malthus, population grows so fast that the growth of wealth is not enough to feed the population. Malthus believes the reason of the social problems lies in population. Marx argues “the principle of population” is wrong because Malthus takes the result as the reason. Again, I will come back at this topic later.
2. A Relative Diminution of the Variable Part of Capital Occurs in the Course of the Further Progress of Accumulation and the Concentration Accompanying it
In this section, Marx argues the process of production will go beyond the phase in which the technical composition of capital remains constant. He wants to figure out what would happen next. Good.
When the technical compositions of capital remain constant, the fate of working class is the numbers of hired working class would increase in a fluctuating way as surplus value is reinvested. But the inherent tendency of capitalism prevents this situation. On the one hand, capitalists compete with each other so that new technologies are constantly being invented. On the other hand, the concentration of capital matters. These two dynamics result in an increasing constant capital and a relatively decreasing variable capital. In terms of a relatively decreasing variable capital, the absolute amount of variable capital may or may not decrease, but the increasing speed of the variable capital is far slower than the increasing speed of the constant capital. Thus, relatively, the ratio of constant capital to variable capital increases. Marx would argue finally this process will come to a stage that the absolute demand of labor will decrease. Good.
3. The Progressive Production of a Relative Surplus Population or Industrial Reserve Army
So What does a decreasing ratio of variable capital mean to working class? It means as technology improving, speed of job creation will decrease, and to some extent, the absolute amount of job may decline. Thus, a large horde of jobless workers emerges: an industrial reserve army. What does this reserve army mean for capitalism?
First, an industrial reserve army is a result of capitalist production and it becomes a source for further capitalist production. Here the result becomes reason again, and a reproduction circle emerges. Good. Since technologies improve, workers are becoming more and more substitutable. Facing a large army of potential competitors of reserve army, those who are lucky enough to have a job have to work harder to secure their job. But it has two consequences: first, the more workers do, the less jobs are necessary for capitalist production. Hardworking people drove themselves out of jobs; second, the more innovative workers are, the better technologies standard become, and thus more variable capital could be substituted by constant capital. It is not only a reproduction of material, like technologies, but a reproduction of social relations, a competition between the working and the jobless. It is a reproduction swirl which cannot fade away without a fundamental change. Very nicely argued.
Second, an industrial reserve army could provide a huge amount of workers when necessary. Capitalism is constantly innovative. When a new sector emerges, an industrial reserve army could easily and quickly put into work without drawing workers away from other sectors. An industrial reserve army becomes a reason for rapid economic expansion in new markets or new sectors.
Third, an industrial reserve army means capital plays both in the supply side of labor power and the demand side of labor power, thus an equilibrium of labor power price would be lower than it is supposed to be by orthodox economists. When the need of labor power increases, orthodox economists would predict price of labor power increase and more people would get their jobs. However, it may not be true. Under pressure an industrial reserve army, those who have jobs have incentive to work harder to secure their jobs by “voluntarily” prolonging working hours, like “voluntary overtime” in auditing industry today. Thus, jobs are not necessarily created by an enlarged demand of labor power. Supply of labor should be count by numbers of working hours, not numbers of working people. In addition, capitalists could apply better technics to substitute workers under this circumstance too. Then, labor power becomes excess again. Very good.
When students of economics could not see through the mirage of industrial reserve army, they tend to make a lot of mistakes. Some would argue workers lose job because workers give too many births. But the problem here is not the absolute amount of workers. Even if the amount of workers is kept constant, technologies improvement would still drive workers less skillful and out of job. Malthus wants to establish a trans-historical law of population. He is wrong, because there is not abstract and trans-historical law of anything in the field of social science. “This is a law of population peculiar to the capitalist mode of production; and in fact every particular historical mode of production has its own specific laws of population, which are historically valid within that particular sphere”. (Marx, Capital, 783) Here, Marx is teaching us how to do social science. We should not be cheated by commodity fetishism. We should not take the existing as granted. We should investigate and compare the different historical forms of the existing specifically. When doing so, mirage disappears and truth emerges. Nicely argued.
4. Different Forms of Existence of the Relative Surplus Population. The General Law of Capitalist Accumulation
So what do those above mean to the working class? The answer is clear enough now. The capitalist accumulation determines that without struggle, the rich will become richer and the poor will become relatively poor. Even if some poor may escalate themselves into a higher social stratum, even if the general situation of the poor could be improved to a secure standard so that the capitalism could carry on, the law of capitalist accumulation would not change.
39 years ago, in the year of 1978, when China launched its market economic reform, Deng Xiaoping, the actual leader of China at that time, promised Chinese people that “the reform would make a few rich first, and those become rich first will help others become rich too, and finally we will come to a stage that we are all rich.”
39 years later, in the year of 2017, his promise failed. China has experienced huge economic growth due to the economic reform. But the inequality standard is so high that the government stopped reporting the Gini Coefficient from 2003 to 2012.(http://www.bbc.com/zhongwen/simp/chinese_news/2013/01/130118_china_gini.shtml )
I was wondering why there are so many VC and PE in China, meanwhile, why the situation of Chinese traditional manufacturing, the tradition comparative strength of Chinese economy, is suffering a lot. The reason may be that the workers in China get so little that there is not enough demand in the market for the Chinese manufacturing, when the demand from abroad dramatically declined after 2008. The workers get so little because of the high tax and the effect of capitalist accumulation. However, the high tax does not become a solid social welfare system. There is so much surplus value in the market and there is not enough demand in the market. So the money is going to real estate market in China, to real estate market in Vancouver, to credit industry, to stock market, to VC and PE. Very good. If you have time, listen to the first few minutes of this report (which was broadcast on National Public Radio—the host is certainly NOT Marxist, but a Marxian logic is in evidence here: https://www.thisamericanlife.org/radio-archives/episode/355/the-giant-pool-of-money
Recently, Chinese government alleged that the economic problem of China lay in the side of supply. They want to conduct a supply side reform, which mean provide better commodity to the world, to solve the economic problem in China. For example, China used to sell clothes to the world. Now, the government wants to sell aircrafts to the world. It is not necessarily wrong. But when they are paying attention to the supply side, they should also pay attention to the demand side. Why there is not enough demand? What if the surplus value does not go to capitalists’ personal consumption aboard, like houses in Vancouver, or Lamborghini? The so-called “capital outflow” is a problem haunting the government too. What if these surplus value started to be shared more by the ordinary working class? What if the money goes to Vancouver real estate market change into working class wage or bonus?
Is there a way out? I think there is. The way out is class struggle. Although real trade unions are banned in China, subtle improvement still happens. Although I do not know what to do specifically, I believe there must be a way out.
Very nicely done, Ming. Am pleased to see you grappling so carefully with the concept of accumulation, and to see you taking such care to tease out just what Mrax is saying in this regard. Keep up the good work! Grade: 9.7