Fred Skolnik


Chapter 1


I grew up in a Communist household. My father arrived in the United States from Poland in 1920, at the age of 16. He became a union activist, ran for the New York State Senate in 1934 on the Communist ticket, and fought in Spain. In 1948 he campaigned for Henry Wallace and in 1949 for Vito Marcantonio. In our hallway closet we kept a bust of Lenin and bound copies of an English-language Soviet magazine called USSR. Scattered around the house were copies of the Daily Worker. And on the narrow set of shelves in the hall, alongside my Tarzan books and Uncle Remus stories, was a three-volume edition of Capital, published by Charles H. Kerr & Company (“Subversive literature for the whole family since 1886”).

I had never read it, but after my father died in 1988 I took it back to Israel with me. By then I had become a patron of a Russian-language bookstore in Jerusalem that also sold English translations of Russian literature turned out by Moscow’s foreign- language publishing houses, all dirt cheap. Here, in the 1960s, I had bought Bunin’s Shadowed Paths, Lermontov’s Hero of Our Time, Chekhov’s Short Novels and Stories, and Dostoevski’s My Uncle’s Dream and Notes from a Dead House. I had also picked up, out of curiosity and even a sense of intellectual duty, a two-volume edition of Marx and Engels’ Selected Works and also Marxist Philosophy by a certain V. Afanasyev. Now I had Das Kapital itself and even read a few sections, though certainly not the whole of it.

Since that time the Communist system has collapsed. No one, of course, would think to go back to it. Nonetheless, this strikes me as a good time to go back to its origins and read the great work once and for all, perhaps even naively, as though this dream of a workers’ paradise could actually come to pass. So I take down the three volumes and bring them into the living room and lay them down within reading distance and prepare to get to work.

The first volume is called Capitalist Production. Marx published it in Hamburg in 1867 after years of research in the British Museum Library (the second and third volumes were published after his death, completed and edited by his friend and colleague Friedrich Engels). Marx had been born a Jew in the town of Trier in the Rhineland. His father had converted a year before his birth and then converted all eight of his children in 1824, when Marx was six years old. His mother converted a year later. As a university student Marx fell under the sway of Hegel’s dialectic philosophy and subsequently got involved with radicals and socialists. After his marriage in 1843 he went to Paris to edit a journal and then on to Brussels and finally to London. Along the way, in 1848, he and Engels published The Communist Manifesto.

By that time, in the absence of war, the Europe of Karl Marx had entered an inward-looking revolutionary phase that produced the Springtime of Nations. It had also entered the second phase of the Industrial Revolution, which now spread from England to the rest of Europe and the United States. Between 1830 and 1870, iron production would rise by nearly five times in France, ten times in England and the United States and thirty times in Germany. By 1860, 140,000 factories dotted the American landscape, mostly in the North and many under the system of assembly line production and interchangeable parts that would soon conquer the world. In Manchester, light-colored moths died off and dark-colored moths flourished in the soot-filled air that made the former easy pickings for predators. The wheels of industry, however, had also set in motion the wheels of social thought. Claude Henri Saint-Simon, writing at the beginning of the 19th century, before the Industrial Revolution had left its mark on France, saw society as divided into two classes: the idle (the old aristocracy) and the productive, the latter embracing both bourgeoisie manufacturers and merchants and the working class, united, as it were, in a common cause, namely the provision of society’s material needs in a system controlled by the state. Two decades later, however, he recognized the plight of the working class in the new industrial paradise and was now arguing that society should be organized to provide first and foremost for the workingman’s welfare. His contemporary, Charles Fourier, on the other hand, envisaged a series of small agrarian communities as the most rational social model, communist societies in effect, operating along the lines of producer cooperatives. In Britain, Robert Owen, a Welshman operating a textile plant in Scotland, instituted a number of unprecedented reforms, raising wages and reducing hours (from 16 to 10½), ending the employment of children under the age of ten, and providing free schooling from the age of five. Later he took over the village of Harmony in Indiana and ran it along communist lines.

These were the so-called utopian socialists, dismissed with not a little scorn by the Marxists, who wished to place their own brand of socialism on a scientific footing, one that took over and synthesized Hegel’s dialectic and British materialism (Bacon, Hobbes, Locke), incorporating them into a system that explained history in terms of economic forces and class warfare. Its Bible became Das Kapital.

Marx commences the first volume of this massive work with a discussion of commodities, the accumulation of which, in his words, constitutes the wealth of capitalist societies. A commodity is an object that is useful, he writes, a “use value” (Gebrauchswert). It is also the repository of an exchange value, which makes a given quantity of wheat equal in value to a given quantity of silk, for example. Commodities are therefore what they are in a twofold sense, as objects of utility and as repositories of value. They therefore have two forms – a physical form and a value form. But in order to achieve these forms, a third value must be added, and that is human labor. Commodities as use values and exchange values are the products of such labor.

It should be mentioned at the outset that very little of this is stated in plain English, or plain German. If anyone thinks he is going to get the clarity of Freud or Darwin here, he is mistaken. Das Kapital can be a very tedious read, Hegelian in its abstruseness and sometimes near to impenetrable, with an interminable opening discussion of the equivalent value of 20 yards of linen and 1 coat, bolstered by an army of footnotes. Marx himself, in his Preface, does in fact apologize for the difficulty of this preliminary exposition and assures the reader that he has simplified and popularized (popularisiert) whatever he can. And the truth is that, despite the style, at a certain point the story he is telling becomes quite gripping, a kind of saga, the saga of how objects created for personal use are transformed into commodities for exchange, commodities for exchange into money, money into capital and capital into an instrument through which labor is harnessed and people are enslaved for the purpose of creating “surplus value” (Mehrwert) or profits. What begins as a morass of clotted prose ultimately rises into a towering edifice.

What makes the 20 yards of linen equivalent to the coat is, again, nothing more than the equivalency of the total hours of labor invested in each, taking into account that “a given quantity of skilled labor is equal to a greater quantity of unskilled labor.” Marx goes to great lengths to establish this right from the start because it is essential for him to demonstrate that the sole factor that transforms one thing into another – flax into yarn, yarn into linen, linen into a coat – and gives it value is human labor, so that, at the end of the day, he can show that the capitalist makes his money by paying his workers less than what their labor is worth. This is the labor theory of value, already present in the works of Adam Smith and David Ricardo but never carried by them to the Marxian extreme. Its fallacy will be recognized immediately by anyone who has ever coveted a diamond. The amount of labor required to produce a diamond may be equal to the time required to make a chair or two but their exchange value will not be equal. What will determine the value of the diamond or anything else is supply and demand. This is the market theory of value, which simply states that a commodity is worth what people are willing to pay for it. Furthermore, the capitalist will argue, his own inputs have value as well, namely the money he is risking, what he personally sacrifices by tying up his capital, and of course his own expertise or entrepreneurship, all of which justifies his profit. But oddly enough, the fallacy of the Marxian premise in no way mitigates the truth of his argument, namely that capitalists exploit their employees, overwork them, underpay them, and endanger their safety and health. In fact, we are so familiar with this argument and so cognizant of its truth that we hardly need a theory to substantiate it.

But Marx continues. Just as given quantities of two commodities may be equal in value to one another, so can they be equal to a third commodity, and so on and so forth, so that our 20 yards of linen or 1 coat may also be equal to 10 lbs. of tea or 40 lbs. of coffee or half a ton of iron, or one commodity may serve as a standard or “universal equivalent” with everything valued against it. The “equivalent commodity par excellence” is of course gold (or “bits of paper” backed by gold), which now becomes “money” with reference to all other commodities, giving them a common measure of value. A natural and simple system of exchange will therefore yield the scheme C – M – C, turning commodities into money and money into commodities. People thus exchange what they have for what they need through the medium of money. A farmer sells his wheat and purchases supplies. But when the two terms in the equation – commodities and money – do not appear simultaneously, as when a seller is ready to sell before a buyer is ready to buy, that is, has not yet sold his own commodities, the seller may become a creditor and the buyer a debtor, and this, Marx asserts, is what characterized “class war” in the ancient world, leading, in Rome, for example, to the ruin of plebeian debtors and the importation of slaves to replace them.

The modern history of capitalism, Marx goes on to say, dates from the 16th century with the advent of international commerce. Capital as opposed to landed property first takes the form of money. Money as money circulates in the familiar form C – M – C, that is, as selling in order to buy. Money as capital takes the form M – C – M, buying in order to sell. In the latter case, the middle term vanishes and money is in effect exchanged for money. You purchase a ton of cotton for £100 and you sell it for £110 – money for money. The increment or excess over the original value of the commodity is what Marx calls surplus value. And while transactions of the C – M – C type end when the original seller converts the money he has received into a commodity for personal use, the M – C – M variety is open-ended. The accrual of more and more wealth is the sole objective of the capitalist, inspired by “boundless greed.”

In a simple exchange of use value for use value, each buyer gets something that is of more use to him than to the seller, so each side gains in an exchange of equivalents and nothing that can be termed surplus value comes into existence. Therefore the same quantity of labor remains incorporated in the commodity throughout the conversion of a commodity into money and money into a commodity. It is only when the merchant “parasitically” inserts himself between buyers and sellers exchanging equivalent commodities that an imbalance is struck and money becomes capital. “War is robbery,” Benjamin Franklin is quoted as saying, “commerce is generally cheating.” And so much more so moneylending, Marx adds.

The problem for the merchant capitalist is to get more money for the commodity he sells than it is intrinsically worth, for the value is a function of the labor incorporated in the commodity, which remains constant. “Mr. Moneybags” (the Geldbesitzer) does this without adding real value, by “gaining an advantage over both the seller and the buyer,” by cheating both. This is the Marxian view of the wholesale and retail trade. The industrialist or manufacturer, on the other hand, faced with the same problem of creating surplus value or a profit, does this, in effect, by cheating the laborer, that is, by purchasing labor power for less than it is worth.

How does he do this? He does this by paying the worker a bare subsistence wage. This he must do to keep him alive so that he will show up at the factory each morning. He also pays him enough to keep his children alive so that there will be a second generation of factory workers to replace the first. Now the value of the necessities of life for the factory worker and his family – food, clothing, shelter – is equal, like everything else, to the hours of labor incorporated in them, translated into their equivalent in money. If these necessities cost 3 shillings a day, that is what the capitalist will pay the worker, and if it turns out that these same necessities of life require 6 hours of labor to produce them, those will be the number of hours the worker must work to produce an equivalent value, those same 3 shillings, and acquire them. But the worker does not work 6 hours a day in a factory, he works, say, 12 hours, that is, he works 6 hours more than he has to in order to purchase the necessities of life, but still receives the same 3 shillings for his trouble, and therefore gives the capitalist 6 free hours of surplus value, which are worth another 3 shillings and which are incorporated into the finished product to increase its exchange value and gives the capitalist his profit. Otherwise, without these 6 free hours of labor the capitalist would be selling his product for what it cost him to make it. This is the heart of the Marxian argument.

The capitalist in effect kills two birds with one stone in purchasing labor power. First, he augments his capital by squeezing surplus value out of the worker. Second, by his paying or “feeding” the worker with part of his capital, just as in feeding coal into a steam engine, the worker is rejuvenated and his labor power in renewed so that he continues to augment the wealth of the capitalist. As opposed to the case of the slave, where the part of the day that he works to replace the value of his subsistence is deemed as work done for the master so that all his labor is considered unpaid labor, in the case of the wage earner even surplus labor, i.e. unpaid labor, is considered to be paid for.

Free labor disguised as paid labor gives the capitalist an additional benefit, for the worker not only creates value, he also preserves it. He preserves, for example, the value of the cotton purchased by the manufacturer by transferring it into the yarn that he spins, and he preserves the value of the spindles purchased by the manufacturer in the form of the amortized part of their cost that is also incorporated in the finished product. By preserving the value of machinery and raw materials – the means of production – the worker is also doing the capitalist the great service of preserving his capital, free of charge, as it were. (It should be remembered that the value of the means of production is also taken as the equivalent of the number of hours required to produce them and remains a constant.)

What the worker in the British factory system of the 19th century got for all this, in addition to his 3 shillings, was a workplace that simply beggars the imagination in its Dickensian grotesqueness, with children beginning their professional careers at the age of five and sometimes pitching in on the factory floor from the age of two and three, a workday extending to 18 hours and sometimes 30 hours at a stretch in the busy season, barely enough air to breathe or space to move in, and what little there was filled with industrial poisons, unbearable heat or freezing cold, undernourishment, disease (pneumonia, bronchitis, asthma, tuberculosis, rheumatism and liver and kidney ailments), and, not surprisingly, an early death (at an average age of 15 and 17 in Liverpool and Manchester, well under half the average in the upper middle class). Such conditions have existed wherever free enterprisers have been left to their own devices, from the sweatshops and slaughterhouses of turn of the century America to the present-day Nike factories of Southeast Asia.

In Britain itself a series of Factory Acts sought to set limits to the exploitation of labor. During the 18th century, Marx writes, before modern industry had gotten its teeth into the working class, the English laborer had been able to earn enough in four days to keep himself going for the entire week and could not be induced to work the other two days for the capitalist. “The cure,” wrote an anonymous author in 1770 in an Essay on Trade and Commerce, “will not be perfect till our manufacturing poor are contented to labour six days for the same sum which they now earn in four days.” In the “ideal workhouse,” the writer continues, “the poor shall work 14 hours in a day,” so that, allowing two hours for meals, “there shall remain 12 hours of neat-labour.” And this indeed came to pass 63 years later in the Factory Act of 1833, which limited the working day for children aged 13 to 18 in four branches of industry (cotton, wool, flax and silk) to 12 “neat” hours. Subsequent Factory Acts reduced hours still further, for women as well, to 10. Already adept at getting around these Factory Acts, the manufacturers now retaliated by reducing wages by 25%. “If labour could be had without purchase,” wrote John Stuart Mill, darling of the libertarians, “wages might be dispensed with,” to which Marx replies: “If laborers could live on air they could not be purchased at any price.” In any case, the consensus among Britain’s economic thinkers was that workers should be kept poor and ignorant so that they would continue to work on farms and in factories to stay alive and never be tempted to become lazy and insolent.

What Marx calls necessary labor time (the number of hours the worker has to work to sustain himself) is a constant factor. Surplus labor time, on the other hand, is variable, since the workday may be extended or productivity increased. The workday, however, cannot be extended indefinitely, as it has a natural limit, just as wages cannot be lowered indefinitely, as they too have a natural limit, beyond which lowering them becomes counterproductive, crippling the worker, if not worse. Therefore the most effective way to create surplus value is to make the worker more productive, and this the capitalist may achieve by improving production methods. In the first phase of capitalist production, from the middle of the 16th century to the last third of the 18th century, this was achieved through the division of labor. In the next phase it was achieved through the intensive use of machinery. In both cases, the net effect of producing more with the same workforce or an even smaller one, and reaping all the benefits of economy of scale, was to be able to produce more goods more cheaply. But if more goods are produced, the capitalist must dispose of them, and to do this, demand must be increased. To increase demand, the capitalist lowers prices, though not by so much as to eat up all the extra surplus value he has extracted from his worker. Not surprisingly, it is the worker himself who benefits the least from his increased productivity, because the production of cheaper goods means that the necessities of life will also be cheaper and the capitalist will be able to pay the worker even less to keep him alive.

In the first phase of capitalist production, workers were concentrated on the factory floor to create a new power, the collective power of masses. Craftsmen under one roof either contributed their part to the finished product, which was assembled in the final stage, or the craft itself was broken down into successive steps performed by different workers. By working collectively to produce a single product, craftsmen began to lose the versatility of their crafts. Tools too became specialized to perform micro-tasks so that the worker would become more efficient by endlessly repeating the same task with the same tool. This division of labor also made possible the employment of unskilled workers who specialized in simple tasks instead of augmenting their skills through apprenticeships. Unfit now “to make anything independently,” writes Marx, “the manufacturing laborer engages in productive activity as a mere appendage of the capitalist’s workshop.” “The man whose whole life is spent in performing a few simple operations,” notes Adam Smith, “… generally becomes as stupid and ignorant as it is possible for a human creature to become.”

But it was the use of machines, in the second phase of capitalist production, that marks the real beginning of the Industrial Revolution. At first glance, as the value of the machine must be amortized in the finished product and the machine has a greater value than the artisan’s tool, it would seem that the use of machines would increase costs. But the machine with its greater output allows a smaller and smaller part of its value to be transferred to the individual product as well as a smaller and smaller part of the worker’s necessary labor, thus increasing the total hours of surplus labor received by the capitalist. Before the cotton gin was invented it took a slave woman a full day to separate the seed from a single pound of cotton, at a cost 50 cents. After it was invented she could clean 100 lbs. a day, enabling the planter to sell it at 10 cents and make a greater profit than before. In addition, vis-à-vis the tool, which is operated through the muscle power of the worker, the machine uses its own power, allowing more extensive employment of women and children. The employment of the worker’s entire family served in effect to depreciate the value of the worker’s own labor. It may be that the capitalist paid somewhat more to employ all four members of a family, say, but in return he got four full days of work instead of one and the commensurate surplus value, and the worker himself, trafficking in his own family, became a kind of slave dealer selling his wife and children to the capitalist. This can be seen very clearly in our own time, again in the Nike factories of Southeast Asia, where 12-year-old girls were found putting in a 70-hour week for a dollar a day.

The attempts by legislators to limit the exploitation of labor only led capitalists, in addition to finding ingenious ways to get around restrictions (such as introducing shift work to keep the factory going around the clock or whittling down meal time and starting work a little early and finishing a little late), to compensate for any loss of labor power by intensifying it, that is, by introducing more productive machines and running them at maximum speed. At the same time, as machines replaced men, the labor market was flooded by the unemployed, causing wages to drop still further and creating a spillover into the servant class to serve the rich capitalists, while those who had jobs were forced to work that much more feverishly to produce more and keep their jobs. Of course, all these profits led to industrial expansion, so that some of the workers flushed out of the system were ultimately rehired, though the workforce always diminished relative to capital investment. Thus, while the expansion of capital by the constant reinvestment of surplus value and the commensurate expansion of industry had been limited throughout history by the slow growth of the exploitable working population, the modern age made certain that a surplus labor population was always available independently of absolute population growth thanks to the improved methods that “lessen the number of laborers employed in proportion to increased production.” Expansion of industry also stimulated the export trade, flooding foreign markets with cheap goods, ruining local artisans there and forcing foreign countries to become colonies supplying raw materials.

In the Marxian scheme, capital always begets capital, as the surplus value or profit is either plowed back into the business or privately consumed, that is, passed on to other capitalists as money is spent to enjoy life. The capitalist, Marx concedes, may get his original capital through his own hard work or that of his forefathers, but as to the additional capital that accrues as profits, “there is not a single atom of its value that does not owe its existence to unpaid labor.” Further, when the capitalist reinvests his profits and expands his business, all he is doing is “appropriating … a portion of the previously materialized [free] labor of others and exchanging it for a greater quantity of living labor.”

For Marx, the entire secret of the origins of the modern capitalist system lies, ironically, in the emancipation of the laborer from the feudal system that bound him to the soil and to his lord. What this emancipation amounted to was the separation of the former slave, serf or bondsman from the means of production that had sustained him as well as liberation from the fetters of the guilds with its strict regulations, transforming him into a free seller of his labor power. But with the capitalists replacing the feudal lords and guild masters, all that was accomplished was the institution of a new form of servitude.

The breakup of the great estates along with the expropriation of Church property during the Reformation, with the land ending up in the hands of court favorites and speculators, and thus driving out hereditary tenants, along with the theft of state and communal land by bourgeois capitalists, which transformed arable land into pasture land, turned the rural population into an army of vagabonds and paupers. This ultimately created a ready supply of cheap industrial labor while destroying small home industries as larger spinning and weaving establishments in the rural sector absorbed those still attached to the soil as day laborers. Capital itself, Marx writes in the concluding chapters of this first volume, was created among freemen who had managed to become semi-independent farmers, dividing produce with their landlords and themselves employing wage laborers. These were enriched in the agricultural revolution of the late 15th and 16th centuries and by usurping public land to graze their cattle. They also benefited from the fall in the prices of precious metals in the 16th century, which lowered wages and rents while higher prices for produce increased profits, creating capitalist farmers. Industrial capitalists, on the other hand, grew out of artisans and guild masters who transformed themselves into small capitalists while the big money created through usury and commerce, once prevented by the feudal system and the guilds from becoming industrial capital, was now free of all restraints. On this note, adding a few words about colonialism, Marx concludes his survey of capitalist production.

Marx died in 1883, leaving behind the rest of his huge manuscript. As mentioned, Engels edited and completed it, publishing Capitalist Circulation in 1885 and Capitalist Production as a Whole in 1894. The first volume had dealt with the process of capitalist production. The second deals with the movement of capital within the production cycle while the third looks at the form that production and circulation assumes “on the surface of society, in competition, and in the ordinary consciousness of the human agencies in the process.”

Capitalist Circulation is a dry, highly technical treatise, of which the following is a fair example:

Let us now consider the total movement M — C … P … C’ — M’, or, M — C … P … C’ (C + c) — M’ (M + m), its more expanded form. Capital here appears as a value which goes through a series of interconnected, interdependent transformations, a series of metamorphoses which form so many phases, or stages, of the process as a whole. Two of these phases belong to the sphere of circulation, one of them to that of production. In each one of these phases capital-value has a different form for which there is a correspondingly different, special function. Within this movement, value not only preserves itself but grows, increasing in magnitude. Finally, in the concluding stage, it returns to the same form which it had at the beginning of the cycle. This process as a whole constitutes therefore the process of moving in circuits.

This is the cycle through which money and commodities (raw materials) are augmented in the production process to yield greater value, where L is labor and MP is means of production, coming out at the other end as more money than the capitalist started with, only to renew the cycle and again reproduce itself with new surplus value. Production as such is not an end in itself. It is an intermediate stage, “a necessary evil of money making.” If money could be manufactured from air, to echo Marx, there would be no industry.

Initially, money circulates as money when it is used to purchase a commodity. But unless the commodity enters the production cycle as a raw material, the circulation of money stops right there, never becoming capital. It is when the commodity, including labor purchased by the capitalist as yet another commodity, enters into the system of capitalist production that true capitalist circulation is achieved. As to labor, money can only be used to purchase it because the laborer has been separated from the means of production that he requires to materialize his labor and which the capitalist now owns. It is not money that creates this relation but the existence of the two classes – laborers and capitalists. Money is not what makes slavery possible. It is the existence of slavery that makes it possible to purchase slaves.

In the process of circulation, labor expended indirectly, in that purchasing and sales, for example, does not generate surplus value. However, the worker will be paid according to the same principle that governs the payment of production workers, namely, an equivalent in wages that represents fewer than the total hours he actually works, that is, the equivalent of necessary hours of labor. The other hours, however, being unproductive, do not represent surplus value but only lower the capitalist’s costs. The same holds true for other unproductive workers, such as bookkeepers, for example, who consume their own nonproductive materials, like pens and paper.

The idea here is again to show that the value or selling price of the finished product is a function of the surplus value produced by unpaid labor. But even leaving aside the question of supply and demand and the different conditions in different factories, industries and countries (which for Marx is irrelevant since for purposes of illustration he sets out to show how the average is obtained), in actual accounting practice all indirect expenses are figured into the final price as a given percentage of direct production costs before the profit margin, which may vary according to circumstances, and is tacked on without reference to anything that can be called surplus value. Marx understands that this is how the capitalist looks at costs and profit but asserts that, whether consciously or not, he conceals in this the real nature of his profits, by viewing them as a return on his total capital investment rather than on variable capital alone (wages) in the shape of surplus value.

The different ways of looking at the calculation of profits and surplus value, with the factor of turnover tossed in as well, allows Marx to arrive at astounding results in the third volume of Das Kapital . If, therefore, in a spinning mill, fixed capital (machinery) is valued at £10,000 and circulating capital amounts to £2500, of which £2182 is constant (raw materials, rent, depreciation, etc.) and £318 is variable (wages), and the circulating capital is turned over 8½ times a year, then weekly wages of £52 and a weekly surplus value of £80 will yield a surplus value rate of 154% (80 ÷ 52) and an annual profit rate of 33% (52 × 80 ÷ 12,500), but most amazingly they will yield an annual surplus value rate of over 1300% (8½ × 154). Thus, in Marx’s example, though just 1/40 of a total capital of £12,500 is invested in wages (£318), these same wage earners produce an annual surplus value of £4160 (52 × 80) thanks to the rapid turnover of circulating capital.

This is of course a Marxian calculation that many will see as meaningless, though no one would deny that without his workers, the capitalist’s machines, buildings and raw materials would be useless to him.

Marx also notes that the problem of surplus value as a product of unpaid labor would not be solved even by selling at cost, for all that would be accomplished if, say, the consumer was able to buy his 20 lbs. of yarn at a 10% discount, i.e., without the surplus value added into the price, would be to give the customer 2 lbs. of surplus value free of charge instead of the capitalist’s getting it while the worker was still being paid the same subsistence wage. The only way the worker can benefit is if the product is sold at its full value and the worker is paid for a full day’s work, that is, for both his necessary labor and his surplus labor, namely the full 6 shillings instead of 3 for 12 hours of work in Marx’s example.

Marx insists, again and again, that in ordinary circumstances the market prices of commodities will remain a function of their surplus value, so that prices fall if labor time is reduced and prices rise if it is increased. However, the value of an individual item may be above or below the market value of the given item depending on whether the labor time is more or less than the labor time expressed in the market value. Market value can thus be seen as an average value or as the value of commodities produced under average conditions. Marx argues that, deviations notwithstanding, the sum of the average profit on all invested capital in a society cannot be anything but the sum of the surplus value produced by this capital. In other words, he wishes to say that x representing the number of commodities sold in a society times p representing the average profit per commodity must equal the sum of the surplus value produced by wage earners – a questionable proposition to say the least. To the extent that supply and demand regulate market prices, that is, cause the deviations from the market value of a commodity (determined by surplus value), market value itself “regulates the proportions of supply and demand, or the center around which supply and demand cause the market prices to fluctuate.” Manufacturers producing under the best market conditions will sell their products above their individual value; those producing under the worst conditions – below. If supply meets demand, the commodity will be sold at its market value. This is the natural state that would pertain if society and not capitalists controlled production. Demand, however, is not the same as need. The consumer demands cotton because he needs clothes; the capitalist demands it because he wants to make money and not in the least to satisfy social needs.

Since profit as calculated by a capitalist is a function of capital investment, the greater the constant capital (means of production), the smaller the rate of profit, if variable capital (wages) remains the same. Marx thus concludes that under these circumstances there must be a gradual fall in the rate of profit throughout industry, since the tendency is to have the same number of workers set in motion greater and greater quantities of means of production. Thus capitalist efficiency, at first glance, is self-defeating! However, Marx notes, while the rate of profit falls, total profits will rise, for in order for the sum of profits to rise when the rate of profit falls, the amount of capital invested merely has to rise at a greater rate than the rate at which variable capital falls, though to enable more labor to be exploited, the outlay on wages may rise too, as long as its ratio to total capital investment drops. “Practically,” says Marx,


a fall in the price of commodities and a rise in the mass of profits contained in the augmented mass of these cheapened commodities is but another expression for the law of the falling rate of profit with asimultaneous increase in the mass of profits.


Which means , when all is said and done, that a 5% profit on a turnover of £10 m. will earn more money than a 10% profit on £1 m.

The expansion of industry, according to Marx, at first creates a demand for labor that increases wages and creates a sense of prosperity that works to increase the size of the population. However, as the expanded industries become more efficient, the demand for labor drops. At the same time, endless expansion naturally leads to overproduction, so that capital too undergoes a process of contraction after reaching a saturation point where surplus capital can no longer be realized as surplus value. However, Marx assures us, the cycle ultimately corrects itself as the depreciation of idle capital raises the rate of profit (as a percentage of total investment) and employment rises again, so that despite the social upheaval caused by these periodic crises, business goes on as usual, unless, of course, the workers of the world unite.

To round out the third volume, which he never completed though producing no fewer than a thousand pages of a first draft, Marx returns to his old nemeses – merchants and usurers – along with landowners and their “ground rents,” all of which he sees as extensions of the capitalist system, the first as expediting the circulation of capital by disposing of its products and ensuring rapid turnover, the second by providing loans and extending credit (“usurer’s capital”) as well as performing technical services, the third by “the transfer of surplus profit from the capitalist tenant to the landowner” – all three thus taking their bite out of the capitalist’s profits without creating surplus value themselves.

Thus, in sum, we get an economic system actuated in its totality by industrial, commercial and financial operations calculated solely to produce profits for the capitalist class without any regard to the social value of what is produced or the well-being of the laborers who are forced to generate these profits as the price for staying alive.

Marx was active in the socialist movement (the Communist League, the First International) though he never became an outstanding leader. We are all familiar, nevertheless, with his program: “conquest of political power by the proletariat,” as he phrased it in The Communist Manifesto, followed by abolition of private property and centralization of all means of production in the hands of the state (and ultimately the dissolution of the state itself as a political entity). It was left to Lenin to pursue this dream.

Revolutionary Russia did indeed enjoy its own springtime, an era of hope and renewal that unfortunately deteriorated into political tyranny before too many years had passed. The rest is history, as the saying goes. But at the same time it is worth mentioning, parenthetically, that, the failure of Communism notwithstanding, a number of popular misconceptions prevail about life under Communist or, for that matter, any form of tyrannical rule, even the rule of a Saddam Hussein, it must be said. One is that ordinary people are not allowed to live ordinary lives and another is that extraordinary people are not allowed to live extraordinary lives. The image we have in our minds when we contemplate China or Cuba or the Former Soviet Union is of a totally repressed people. This is of course not the case. People in Communist countries, even in their strictest phases, go about their daily business and are as far removed from centers of power as Americans or any other Westerners. It would therefore be fair to say that ordinary people in a Communist country have or had as little chance of being thrown in jail as ordinary people in America. Furthermore, all the occupations that you find in the Western world are found in Communist societies as well, so that, relatively speaking, there are as many doctors, lawyers, judges, scientists, engineers, architects, accountants, clothing designers, factory foremen, athletes, actors, dancers, musicians, artists, policemen, fire fighters, commercial airline pilots, teachers, nurses, professional soldiers, bankers, journalists, barbers, librarians, pharmacists and veterinarians as anyplace else. What is more, these people like their work, advance professionally, enjoy prestige, love their country and participate in the life of society, even in North Korea, let it be said. As for ordinary people, they simply go about their business, watch TV, make babies, visit friends, and even talk about current events.

Moreover, within the system too, vocal criticism is tolerated, that is, citizens can challenge the way things are being done and incompetent or corrupt officials are removed when their incompetence or corruption is exposed. What cannot be challenged is the system itself, which is something Americans too got a taste of in the McCarthy era, when belonging to the Communist Party could have proved as hazardous as belonging to a “democratic” party in China or the Soviet Union. This is not to say that freedom reigned under the Communists. Far from it. Dissenters, that is, those same “democrats,” plus journalists who were too critical of the regime and intellectuals who were too noisy – in a word, a very small minority of vocal anti-Communists – were dealt with very harshly. The question then became whether a system designed, in theory, to benefit, say, 300 million ordinary Russians should be overthrown in order to allow a few thousand or even a few million thinking Russians to say whatever came into their heads and freely import Western culture. Had the system worked economically, the answer might be no, just as it has to be no in China, where there is no conceivable way that a nation of 1.5 billion Chinese could be governed democratically without the kind of chaos that prevails, for example, in neighboring India, where the right hand seldom knows what the left hand is doing and half the population lives in poverty. But the system did not work economically, in Eastern Europe at least, so that it failed in what it had set out to do and therefore the political price lost its rationale and the system collapsed, whereas in China the system was transformed into one of one-party rule combined with relative economic freedom and continues to flourish. In fact, even in the 1950s the Chinese were well fed and well clothed under Communism.

Russia and China are special cases. Both require a strong hand. The Russians got rid of Communism and went almost directly from Gorbachev to Putin without any great improvement in the standard of living, which only now, after two decades, is reaching the Communist level. The Chinese too retained their all-powerful central government but also created a relatively prosperous middle class, at the price, we should add, of growing crime and unemployment. Cuba is more of a conventional case, in Communist terms, though state control of the economy is being relaxed there too. In all these Communist societies a central aim was to create an egalitarian wage system, though in practice there was always wage differentiation, in accordance with skill, output, seniority, etc. The alternative to each of these Communist regimes was what preceded them – an inequitable division of the country’s resources and total neglect of a largely peasant population.

To find a Communist society that worked on every level, one must of course go to the historic Israeli kibbutz, though it too was a special case, operating democratically within a non-Communist state, albeit a socialist one, and it must also be noted that here too the system ultimately collapsed. The purely Marxian kibbutz idea was in truth inseparable from the idea of reclaiming the land and rebuilding the nation in the Land of Israel. The first kibbutz, or rather small-scale kevutzah (group), was founded in 1909. By 1918 there were 29 such kevutzot and starting in the 1920s, with large-scale immigration, the bigger kibbutz proper came into being. In 1948 these numbered 145 with a population of 43,000 and in the 1970s reached a peak of around 250 with a population of 110,000 (3.5% of Israel’s population).

The kibbutz system was completely egalitarian. Kibbutz members received whatever they required from the communal kibbutz stores along with standard cash allowances for outside purchases (clothing, furniture, vacations, etc.). No distinctions were made between managers and workers, the skilled and the unskilled, those who worked more and those who worked less. There were neither bonuses nor overtime pay. Kibbutz members working outside the kibbutz turned over their entire salaries to the kibbutz. Surprisingly or not, productivity in the kibbutz was around 15% higher than the national average.

The kibbutz was not immune to the familiar frictions of village life – petty jealousies, resentments, intrigues – but these were overridden by a larger ideological and national unity, such as was entirely absent, for example, in the Soviet kolkhoz, where the peasant population concerned itself with its own survival under what was for it merely a different system of government control with different rules. In Israel, in the pre-state period and in the first two decades of statehood, the entire society was committed to the national effort, but the kibbutz stood in the forefront of the struggle, setting the tone, supplying the leaders, sending its young men to the elite army units.

Today the kibbutz is a shadow of itself, the great majority of them totally privatized, its members shareholders in the old communal enterprises. The push toward privatization took wing in the 1980s and can be attributed to a variety of causes. Two stand out: the economic chaos in Israel during the Begin years, which severely undermined the economic stability of the kibbutz and subsequently its ideological status in the country, and the final transition of Israel from a Zionist-socialist society to a Western-style consumer society whose tentacles reached into the kibbutz as well. What the founding fathers did not understand was that once the nation was built, everyone would go his separate way. With the decline of the kibbutz a last best hope was extinguished.

Lions tear apart whatever they get their teeth into. Certainly no one would argue that being eaten alive is good for the victims. Capitalism, however, has traditionally argued that whatever promotes it – meaning, in plain English, low wages, long hours, minimum benefits, minimal health and safety measures, and consequently greater profits – is also good for the victims, as big profits create more jobs. And if one job is not enough, the victims can always work at two. No one ever lost any money underestimating the magnanimity of free enterprisers, as H.L. Mencken might have put it. In fact, even their greatest champions regard them as lacking in the higher human qualities, assuring us that if high taxes or excessive regulation cause them to make a little less money, they will simply shut down operations and even turn their backs on their own countries to set up shop somewhere else. The understanding here is that unlike scientists, scholars, artists and others who work for love of what they do and would continue to do so even if they weren’t paid well, the capitalist operates solely to make money and it is irrelevant to him what he does to get it. Thus the driving force in his life is recognized as being the very un-Christian will to accumulate wealth, which some people will find puzzling, given the variety of meaningful occupations that are available to human beings and the little time we have on this earth to do something worthwhile.

It is a basic feature of modern capitalism that wage earners are rewarded for the economic value of their labor rather than for its social value. This is natural and desirable from the capitalist’s point of view. Work that produces money is worth more on the market than work that doesn’t, and therefore executives in the dog food industry make a lot more money than teachers, and baseball players make a lot more money than cleaning women, though the work of the latter has considerably more social value than the work of the former, since without cleanliness we would get disease while without entertainment we would only get boredom. In this respect, medieval man was far more sensible than modern man, rewarding jesters and jongleurs modestly and holding them in fairly low esteem in contrast to our own times where clowns become idols and sometimes even get their own talk shows.

Many people in America, the citadel of capitalism, nevertheless earn what they consider a decent wage and have no complaints. This is not due to the generosity or fairness of their employers (if it was up to them the 16-hour work day and child labor would still exist in America) but to the unremitting pressure that was brought to bear on them throughout the 20th century by government and the labor movement, though certain industries with an elite workforce and great earning power have created decent conditions of their own accord. But while employers fight tooth and nail against any change that improves working conditions at their expense, this in itself does not guarantee their success as entrepreneurs. All of them naturally understand that the best way to make a lot of money is to do a lot of business. This, however, is not so simple. It is a fact that roughly as many businesses close their doors each year in America as are started up (around 600,000). In fact, about half of American businesses don’t make it past their fifth year and only a third make money. This may look like a vindication of the argument that higher wages – any increase in the minimum wage, for instance – will drive still other businessmen out of business and put more Americans out of work. But here we arrive at a kind of bottom line. Because it may just be that these struggling businesses have no business existing in the first place, not precisely because free enterprise works to weed out the least competitive entrepreneurs, to the everlasting benefit of the consumer, as we are meant to believe, but because, recalling Marx, there is a limit to how much “merchandise” can be rammed down the consumer’s throat, how many back scratchers and toe exercisers, how many smartphones and training bras, how many carcinogenic hamburgers and vampire movies.

For at a certain point it will surely dawn on anyone who thinks about it that modern economies are like giant Ponzi schemes. To keep themselves going, they must generate economic activity, the sole purpose of which is to move money from one pocket to another. The moment there is a significant let-up in production or consumption, the system collapses – companies go out of business, jobs are lost, and there is an economic recession. Therefore it makes absolutely no difference what is produced or what is consumed, as long as the wheels keep turning, and therefore it may truthfully be said that the majority of people in the West are employed in work that has no intrinsic value or essential purpose and that most of the goods and services that consumers are seduced or manipulated into purchasing likewise have no essential purpose, meaning that people could easily live without them, and certainly should, if only from a financial standpoint, because, led to spend more money than they have, they themselves are perpetually on the brink of financial ruin. The greatest enemy of a modern economy is prudent personal spending and consequently the greatest challenge of a modern economy is to get people to buy what they don’t need or can’t afford. That this state of affairs should constitute the basis of our social order is simply incredible.

It is true that capitalism can no longer be viewed as exploitative in the classic sense, except insofar as it extends into the Third World or to enterprises like Wal-Mart where two-thirds of its workers – around 900,000 employees – make less than $12 an hour, placing them pretty close to the poverty line. What it does exploit in the West is by and large the vulnerability of the consumer, that is, his illusion that the images attached by advertisers to the goods and services he purchases will somehow rub off on him and give him what he doesn’t have and doesn’t know how to get. Add to this a food industry that poisons his food and preys on his children and the false or meaningless claims of just about anyone with something shoddy or frivolous to sell and you have a modern economy. However, to shake all this worm-eaten rottenness from the tree, to use a Nietzschean metaphor, all of society would have to be transformed, people would have to go back to a simpler, more meaningful way of life, less materialistic, more in touch with itself. This is not likely to happen.

The failure of Communism as an economic system is not the result of its flaws but of ours. We are simply not good enough to live in the way that Marx thought we might, to give without taking, to share what we have, to remove the barriers that separate us. Half animal and half human, we are, in effect, freaks of nature, equipped with a moral sense but unable to realize it fully, for biological imperatives still drive us. Many would argue that this is necessary for our survival. However, those who prevail are not the most human but, more often than not, the most greedy. These are the creatures who have inherited the earth.


Originally published in Palooka, Issue 5, Nov. 2014.


[Fred Skolnik is the editor in chief of the 22-volume second edition of the _]Encyclopaedia Judaica[, winner of the 2007 Dartmouth Medal. He is also the author of two novels: ]The Other Shore[ (2011) and ]Death[ (2015). Writing as Fred Russell, he published two novels in 2014: ]Rafi’s World [_and _]The Links in the Chain[. A collection of his stories will be published by Fomite Press in 2017._]



  • Author: Fomite
  • Published: 2017-02-01 01:20:26
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