Thursday, April 14, 2016

Marx’s Capital, Volume 1, Chapter 24: A Critical Summary

Chapter 24 of volume 1 of Capital is called “The Transformation of Surplus-Value into Capital” and deals with capitalist accumulation, as capital successfully expands and reproduces itself.

Marx divides the chapter into five sections:
(1) Capitalist Production on a Progressively increasing Scale.

(2) Erroneous Conception by Political Economy of Reproduction on a Progressively increasing Scale.

(3) Separation of Surplus-Value into Capital and Revenue. The Abstinence Theory.

(4) Circumstances that, independently of the Division of Surplus-Value into Capital and Revenue, determine the Amount of Accumulation.

(5) The So-called Labour Fund.
A section by section review follows.

(1) Capitalist Production on a Progressively increasing Scale.
Marx deals here with the use of surplus value to grow the total amount of capital invested. As Marx says,
“Employing surplus-value as capital, reconverting it into capital, is called accumulation of capital.” (Marx 1906: 634).
That is, accumulation of capital occurs when surplus value is re-invested in buying and using more means of production and more labour-power to produce more commodities.

Material production in capitalism has to produce all the capital goods required in new cycles of production (Marx 1990: 726):
“To accumulate it is necessary to convert a portion of the surplus-product into capital. But we cannot, except by a miracle, convert into capital anything but such articles as can be employed in the labour-process (i.e., means of production), and such further articles as are suitable for the sustenance of the labourer, (i.e., means of subsistence.) Consequently, a part of the annual surplus-labour must have been applied to the production of additional means of production and subsistence, over and above the quantity of these things required to replace the capital advanced. In one word, surplus-value is convertible into capital solely because the surplus-product, whose value it is, already comprises the material elements of new capital.

Now in order to allow of these elements actually functioning as capital, the capitalist class requires additional labour. If the exploitation of the labourers already employed do not increase, either extensively or intensively, then additional labour-power must be found. For this the mechanism of capitalist production provides beforehand, by converting the working class into a class dependent on wages, a class whose ordinary wages suffice, not only for its maintenance, but for its increase. It is only necessary for capital to incorporate this additional labour-power, annually supplied by the working class in the shape of labourers of all ages, with the surplus means of production comprised in the annual produce, and the conversion of surplus-value into capital is complete. From a concrete point of view, accumulation resolves itself into the reproduction of capital on a progressively increasing scale.” (Marx 1906: 636).
So “the working class creates by the surplus-labour of one year the capital destined to employ additional labour in the following year” (Marx 1906: 638). Moreover, the ordinary wages of the working class “suffice, not only for its maintenance, but for its increase” to provide new workers for expanded capitalist production.

Marx sums up the whole process:
“We have seen, in the first place, that the original transformation of a certain quantity of values into capital proceeded strictly according to the laws of exchange. One of the contracting parties sells his labour-power, the other buys it. The first receives the exchange-value of his commodity, while its use-value, labour, passes into the possession of the other. This second party then converts means of production belonging to him into a new product belonging to him by right through the instrumentality of labour also belonging to him. The value of this product comprises, in the first place, the value of the consumed means of production. Useful labour cannot consume these means of production without transferring their value to the new product. But in order to be saleable labour-power must be able to furnish useful labour in that line of industry in which it is to be employed.

The value of the new product comprises, furthermore, the equivalent of the value of labour-power and a surplus-value. It does so for the reason that the labour-power sold for a certain length of time, such as a day, a week, etc., has less value than is produced by its employment during that time. The labourer, however, has received the exchange-value of his labour-power and given up its use-value in return, as happens in every sale and purchase.

The fact that this particular commodity labour-power has the peculiar use-value of supplying labour and creating value cannot affect the general law of the production of commodities. Hence, if the sum of values advanced in wages is not merely reproduced in the product, but also increased by a surplus-value, this is not due to an advantage gained over the seller, who received the value of his commodity, but simply to the consumption of this commodity by the buyer.

The law of exchange requires equality only for the exchange-values of the commodities passed from hand to hand. But it requires at the outset a disparity of their use-values, and has nothing to do with their consumption, which does not begin until after the trade has been made.

The original transformation of money into capital proceeds, therefore, in strict compliance with the economic laws of the production of commodities and with the property right derived therefrom. Nevertheless it has the following results:

(1) That the product belongs to the capitalist, not to the labourer;

(2) That the value of this product comprises a surplus-value over and above the value of the advanced capital. This surplus-value has cost the- labourer labour, but the capitalist nothing, yet it becomes the lawful property of the capitalist;

(3) That the labourer has reproduced his labour-power and can sell it once more, if he finds a buyer for it.”

Simple reproduction is but a periodical repetition of this first operation. .... It does not alter matters any, if simple reproduction is replaced by reproduction on an enlarged scale, by accumulation. In the first instance the capitalist consumes the entire surplus-value, in the second he demonstrates his civic virtue by consuming only a part of it and converting the remainder into money.” (Marx 1906: 640–642).
The “law of exchange” here is of course just another phrase for the “law of value,” the view that commodities exchange at equal values.

Harry Cleaver sums this up as follows:
“… investment, wherein surplus-value is used to purchase new means of production and to hire new workers to expand production, doesn’t violate the ‘laws of exchange’, i.e., we can continue to assume equality in exchange. But, because the extraction of surplus-value constitutes the very unequal exploitation of workers, the ‘laws of exchange’ hide the reality of the situation.”
Cleaver, Harry. Study Guide to Capital Volume I, “Chapter 24: The Transformation of Surplus-Value into Capital”
(2) Erroneous Conception by Political Economy of Reproduction on a Progressively increasing Scale.
When capitalists use surplus value merely to buy consumption goods or domestic servants, this does not count as accumulation of capital (Marx 1990: 734–735).

Hoarding money which represents surplus value is not accumulation either (Marx 1990: 735).

Marx points to what he sees as errors made by the Classical economists:
“Classical economy is therefore quite right, when it maintains that the consumption of surplus-products by productive, instead of by unproductive labourers, is a characteristic feature of the process of accumulation. But at this point the mistakes also begin. Adam Smith has made it the fashion, to represent accumulation as nothing more than consumption of surplus-products by productive labourers, which amounts to saying, that the capitalising of surplus-value consists in merely turning surplus-value into labour-power. Let us see what Ricardo e.g., says: ‘It must be understood that all the productions of a country are consumed; but it makes the greatest difference imaginable whether they are consumed by those who reproduce, or by those who do not reproduce another value. When we say that revenue is saved, and added to capital, what we mean is, that the portion of revenue, so said to be added to capital, is consumed by productive instead of unproductive labourers. There can be no greater error than in supposing that capital is increased by non-consumption.’ There can be no greater error than that which Ricardo and all subsequent economists repeat after A. Smith, viz., that ‘the part of revenue, of which it is said, it has been added to capital, is consumed by productive labourers.’ According to this, all surplus-value that is changed into capital becomes variable capital. So far from this being the case, the surplus-value, like the original capital, divides itself into constant capital and variable capital, into means of production and labour-power.” (Marx 1906: 646).
So accumulation also consists in converting surplus value into constant capital, as well as variable capital (Brewer 1984: 70).

(3) Separation of Surplus-Value into Capital and Revenue. The Abstinence Theory.
In reality, the surplus value of capitalists tends to be divided into both accumulation of capital and the capitalists’ consumption (Marx 1990: 738).

The part of surplus value accumulated by the capitalist is “saved” ((Marx 1990: 738).

The historical tendency of capitalism, especially of early capitalists who were poor, is accumulation of capital (Marx 1990: 742–745).

Marx describes the psychology of the capitalist:
“And so far only is the necessity for his own transitory existence implied in the transitory necessity for the capitalist mode of production. But, so far as he is personified capital, it is not values in use and the enjoyment of thein but exchange-value and its augmentation, that spur him into action. Fanatically bent on making value expand itself, he ruthlessly forces the human race to produce for production's sake; he thus forces the development of the productive powers of society, and creates those material conditions, which alone can form the real basis of a higher form of society, a society in which the full and free development of every individual forms the ruling principle. Only as personified capital is the capitalist respectable. As such, he shares with the miser the passion for wealth as wealth. But that which in the miser is a mere idiosyncrasy, is, in the capitalist, the effect of the social mechanism, of which he is but one of the wheels. Moreover, the development of capitalist production makes it constantly necessary to keep increasing the amount of the capital laid out in a given industrial undertaking, and competition makes the immanent laws of capitalist production to be felt by each individual capitalist, as external coercive laws. It compels him to keep constantly extending his capital, in order to preserve it, but extend it he cannot, except by means of progressive accumulation. ...

To accumulate, is to conquer the world of social wealth, to increase the mass of human beings exploited by him, and thus to extend both the direct and the indirect sway of the capitalist.” (Marx 1906: 649).

“As capitalist production, accumulation, and wealth, become developed, the capitalist ceases to be the mere incarnation of capital. He has a fellow-feeling for his own Adam, and his education gradually enables him to smile at the rage for asceticism, as a mere prejudice of the old-fashioned miser. While the capitalist of the classical type brands individual consumption as a sin against his function, and as ‘abstinence’ from accumulating, the modernised capitalist is capable of looking upon accumulation as ‘abstinence’ from pleasure.” (Marx 1906: 650).

“At the historical dawn of capitalist production,—and every capitalist upstart has personally to go through this historical stage—avarice, and desire to get rich, are the ruling passions. But the progress of capitalist production not only creates a world of delights; it lays open, in speculation and the credit system, a thousand sources of sudden enrichment. When a certain stage of development has been reached, a conventional degree of prodigality, which is also an exhibition of wealth, and consequently a source of credit, becomes a business necessity to the ‘unfortunate’ capitalist. Luxury enters into capital’s expenses of representation. Moreover, the capitalist gets rich, not like the miser, in proportion to his personal labour and restricted consumption, but at the same rate as he squeezes out the labour-power of others, and enforces on the labourer abstinence from all life’s enjoyments.” (Marx 1906: 651).

“Accumulate, accumulate! That is Moses and the prophets! ‘Industry furnishes the material which saving accumulates.’ Therefore, save, save, i.e., reconvert the greatest possible portion of surplus-value, or surplus-product into capital! Accumulation for accumulation's sake, production for production’s sake: by this formula classical economy expressed the historical mission of the bourgeoisie, and did not for a single instant deceive itself over the birth-throes of wealth. But what avails lamentation in the face of historical necessity? If to classical economy, the proletarian is but a machine for the production of surplus-value; on the other hand, the capitalist is in its eyes only a machine for the conversion of this surplus-value into additional capital.” (Marx 1906: 652).
It is very interesting that Marx sees the life of luxury of the capitalist as based on forcing the labourer into an “abstinence from all life’s enjoyments.” (Marx 1906: 651) – this is consistent with Marx’s subsistence theory of real wages.

In the earliest stages of capitalism, Marx argues, the need and drive for accumulation was much stronger (Brewer 1984: 70).

For Marx, the vulgar economists (after the time of the Classical economists) invented the abstinence theory of capitalism: profits are a reward for the abstinence of the capitalists from consumption (Brewer 1984: 70–71).

(4) Circumstances that, independently of the Division of Surplus-Value into Capital and Revenue, determine the Amount of Accumulation.
There are three fundamental ideas in this section, as follows:
(1) When wages fall, or labour per given hour is made more intense, or labour becomes more productive (or there is a combination of these), capitalists can engage in more accumulation;

(2) Greater productivity per hour decreases the unit value and price of commodities, so that the same given amount of surplus value has a greater purchasing power;

(3) When more workers are employed in production, the same rate of surplus value will produce a greater mass of surplus value (Brewer 1984: 71).
The size or mass of surplus value naturally affects the size of accumulated capital (Marx 1990: 747).

Marx recalls that surplus value can be increased in various ways:
“It will be remembered that the rate of surplus-value depends, in the first place, on the degree of exploitation of labour-power. Political economy values this fact so highly, that it occasionally identifies the acceleration of accumulation due to increased productiveness of labour, with its acceleration due to increased exploitation of the labourer. In the chapters on the production of surplus-value it was constantly presupposed that wages are at least equal to the value of labour-power. Forcible reduction of wages below this value plays, however, in practice too important a part, for us not to pause upon it for a moment. It, in fact, transforms, within certain limits, the labourer’s necessary consumption-fund into a fund for the accumulation of capital.

‘Wages,’ says John Stuart Mill, ‘have no productive power; they are the price of productive-power. Wages do not contribute, along with labour, to the production of commodities, no more than the price of tools contributes along with the tools themselves. If labour could be had without purchase, wages) might be dispensed with.’ But if the labourers could live on air they could not be bought at any price. The zero of their cost is therefore a limit in a mathematical sense, always beyond reach, although we can always approximate more and more nearly to it. The constant tendency of capital is to force the cost of labour back towards this zero.” (Marx 1906: 657–658).

“The part played in our days by the direct robbery from the labourer’s necessary consumption-fund in the formation of surplus-value, and, therefore, of the accumulation fund of capital, the so-called domestic industry has served to show.” (Marx 1906: 660).
It is noticeable here that Marx sees the reduction of wages below subsistence level as an important, real world tactic by capitalists.

This includes reducing the wages of workers to those of less developed nations (Marx 1990: 748–749).

Engels added an interesting footnote to the third German edition of Capital:
“Today, thanks to the competition on the world-market, established since then, we have advanced much further. ‘If China,’ says Mr. Stapleton, M. P., to his constituents, ‘should become a great manufacturing country, I do not see how the manufacturing population of Europe could sustain the contest without descending to the level of their competitors.’ (‘Times,’ Sept. 9, 1873, p. 8.) The wished-for goal of English capital is no longer Continental wages but Chinese.” (Marx 1906: 658, n. 4).
Production of output and accumulation can be increased by more workers, sometimes without extra constant capital (Marx 1990: 751–752).

Productivity growth is the next major method by which accumulation is accelerated:
“Another important factor in the accumulation of capital is the degree of productivity of social labour.

With the productive power of labour increases the mass of the products, in which a certain value, and therefore, a surplus-value of a given magnitude, is embodied. The rate of surplus-value remaining the same or even falling, so long as it only falls more slowly, than the productive power of labour rises, the mass of the surplus-product increases. The division of this product into revenue and additional capital remaining the same, the consumption of the capitalist may, therefore, increase without any decrease in the fund of accumulation. The relative magnitude of the accumulation fund may even increase at the expense of the consumption fund, whilst the cheapening of commodities places at the disposal of the capitalist as many means of enjoyment as formerly, or even more than formerly. But hand-in-hand with the increasing productivity of labour, goes, as we have seen, the cheapening of the labourer, therefore a higher rate of surplus-value, even when the real wages are rising. The latter never rise proportionally to the productive power of labour. The same value in variable capital therefore sets in movement more labour-power, and, therefore, more labour. The same value in constant capital is embodied in more means of production, i.e., in more instruments of labour, materials of labour and auxiliary materials ; it therefore also supplies more elements for the production both of use-value and of value, and with these more absorbers of labour. The value of the additional capital, therefore, remaining the same or even diminishing, accelerated accumulation still takes place. Not only does the scale of reproduction materially extend, but the production of surplus-value increases more rapidly than the value of the additional capital.” (Marx 1906: 662–663).
Marx states here that increasing productivity decreases the value of the commodities required for the means of subsistence of workers, so that the value of the maintenance and reproduction of labour- power – that is, the subsistence wage – is lowered.

It is also very important to note Marx’s explicit comment:
“But hand-in-hand with the increasing productivity of labour, goes, as we have seen, the cheapening of the labourer, therefore a higher rate of surplus-value, even when the real wages are rising. The latter never rise proportionally to the productive power of labour.” (Marx 1906: 662).
Marx states clearly that in capitalism the wages of workers “never rise in proportion to the productivity of labour” (Marx 1990: 753).

This agrees with Marx’s rejection of the wage theory of Henry Charles Carey in Chapter 22 of Capital – “that the wages of the different nations are directly proportional to the degree of productiveness of the national working days” (Marx 1906: 616) – which Marx dismisses as an absurdity and contrary to the “whole of our analysis of the production of surplus value” (Marx 1906: 616).

It is also absolutely consistent with Marx’s view in Chapter 23 that real wages in capitalism will not rise in a continuous and significant manner in the long-run and allow workers to become more independent of capitalists, and instead will tend to the subsistence level, so that the workers must sell their labour-power to capitalists again and again (Brewer 1984: 68).

Finally, it also follows from Marx’s endorsement in Chapter 19 of the Classical view that wages fluctuate above and below an equilibrium value: the “necessary price” or “natural price” of labour, which for Marx is the value of the maintenance and reproduction of labour-power, a subsistence wage.

When fixed capital wears out and is replaced it tends to be replaced with new more productive machines, which increases productivity still more (Marx 1990: 753).

Science and technology are the keys to advancing productivity of capital:
“Every introduction of improved methods, therefore, works almost simultaneously on the new capital and on that already in action. Every advance in Chemistry not only multiplies the number of useful materials and the useful applications of those already known, thus extending with the growth of capital its sphere of investment. It teaches at the same time how to throw the excrements of the processes of production and consumption back again into the circle of the process of reproduction, and thus, without any previous outlay of capital, creates new matter for capital. Like the increased exploitation of natural wealth by the mere increase in the tension of labour-power, science and technology give capital a power of expansion independent of the given magnitude of the capital actually functioning. They react at the same time on that part of the original capital which has entered upon its stage of renewal. This, in passing into its new shape, incorporates gratis the social advance made while its old shape was being used up. Of course, this development of productive power is accompanied by a partial depreciation of functioning capital. So far as this depreciation makes itself acutely felt in competition, the burden falls on the labourer, in the increased exploitation of whom the capitalist looks for his indemnification.” (Marx 1906: 663–664).
As productivity increases, the daily output per worker increases and so the worker uses more constant capital to produce a greater output (Marx 1990: 754).

Hence the differences in the value produced by workers using different production methods:
“An English and Chinese spinner, e.g., may work the same number of hours with the same intensity ; then they will both in a week create equal values. But in spite of this equality, an immense difference will obtain between the value of the week’s product of the Englishman, who works with a mighty automaton, and that of the Chinaman, who has but a spinning wheel. In the same time as the Chinaman spins one pound of cotton, the Englishman spins several hundreds of pounds. A sum, many hundred times as great, of old values swells the value of his product, in which those reappear in a new, useful form, and can thus function anew as capital.” (Marx 1906: 664).
Eventually as the price of capital goods and machinery decreases and their physical productivity soars, they start to resemble free resources:
“With the increase of capital, the difference between the capital employed and the capital consumed increases. In other words, there is increase in the value and the material mass of the instruments of labour, such as buildings, machinery, drain-pipes, working-cattle, apparatus of every kind that function for a longer or shorter time in processes of production constantly repeated, or that serve for the attainment of particular useful effects, whilst they themselves only gradually wear out, therefore only lose their value piecemeal, therefore transfer that value of the product only bit by bit. In the same proportion as these instruments of labour serve as product-formers without adding value to the product, i.e., in the same proportion as they are wholly employed but only partly consumed, they perform, as we saw earlier, the same gratuitous service as the natural forces, water, steam, air, electricity, etc. This gratuitous service of past labour, when seized and filled with a soul by living labour, increases with the advancing stages of accumulation.” (Marx 1906: 666).
Marx ends by noting that the more “capital increases by means of successive accumulations, the more does the sum of the value increase that is divided into consumption-fund and accumulation-fund” (Marx 1906: 667).

(5) The So-called Labour Fund.
Marx ends the chapter by attacking the wages fund or labour fund theory:
“Classical economy always loved to conceive social capital as a fixed magnitude of a fixed degree of efficiency. But this prejudice was first established as a dogma
by the arch-Philistine, Jeremy Bentham, .... In the light of his dogma the commonest phenomena of the process of production, as, e.g., its sudden expansions and contractions, nay, even accumulation itself, become perfectly inconceivable. The dogma was used by Bentham himself, as well as by Malthus, James Mill, M’Culloch, etc., for an apologetic purpose, and especially in order to represent one part of capital, namely, variable capital, or that part convertible into labour-power, as a fixed magnitude. The material of variable capital, i.e., the mass of the means of subsistence it represents for the labourer, or the so-called labour fund, was fabled as a separate part of social wealth, fixed by natural laws and unchangeable. To set in motion the part of social wealth which is to function as constant capital, or, to express it in a material form, as means of production, a definite mass of living labour is required. This mass is given technologically. But neither is the number of labourers required to render fluid this mass of labour-power given (it changes with the degree of exploitation of the individual labour-power), nor is the price of this labour-power given, but only its minimum limit, which is moreover very variable. The facts that lie at the bottom of this dogma are these: on the one hand, the labourer has no right to interfere in the division of social wealth into means of enjoyment for the non-labourer and means of production. On the other hand, only in favourable and exceptional cases, has he the power to enlarge the so-called labour-fund at the expense of the ‘revenue’ of the wealthy.” (Marx 1906: 668–669).
External Link
Cleaver, Harry. Study Guide to Capital Volume I, “Chapter 24: The Transformation of Surplus-Value into Capital”

Brewer, Anthony. 1984. A Guide to Marx’s Capital. Cambridge University Press, Cambridge.

Harvey, David. 2010. A Companion to Marx’s Capital. Verso, London and New York.

Marx, Karl. 1906. Capital. A Critique of Political Economy (vol. 1; rev. trans. by Ernest Untermann from 4th German edn.). The Modern Library, New York.

Marx, Karl. 1990. Capital. A Critique of Political Economy. Volume One (trans. Ben Fowkes). Penguin Books, London.


  1. "It is also absolutely consistent with Marx’s view in Chapter 23 that real wages in capitalism will not rise"

    But you just quoted him saying "even when real wages are rising." How can real wages rise if real wages won't rise?

    The only way to make sense of that is with reference to the "in proportion" bit. He's saying real wages CAN rise, but where rises in productivity are concerned, workers won't absorb the full benefit of it. I think it's clear from this and other previous discussions that the issue of real wage growth is (though related) a separate issue from the fight over paid vs unpaid labor time.

    1. (1) if you had any decent understanding of my views on this, you'd know what I mean is:

      "It is also absolutely consistent with Marx’s view in Chapter 23 that real wages in capitalism will not rise in a continuous and significant manner in the long-run and allow workers to become more independent of capitalists, and instead will tend to the subsistence level, so that the workers must sell their labour-power to capitalists again and again (Brewer 1984: 68)."
      I've edited the post now.

      (2) Are you so stupid you didn't read what I wrote immediately afterwards?:

      "Finally, it also follows from Marx’s endorsement in Chapter 19 of the Classical view that wages fluctuate above and below an equilibrium value: the “necessary price” or “natural price” of labour, which for Marx is the value of the maintenance and reproduction of labour-power, a subsistence wage."
      So, yes, Marx thought real wages can sometimes rise (especially during booms). But capitalism tends to drive them back to the subsistence wage. A major mechanism causing this is the massive downward pressure on wages from the reserve army of labour.

      (3) so, finally, there is no contradiction here. Only your incompetent misunderstanding.

    2. originally you thought that if real wages rose, that meant that the rate of exploitation must have fallen. At least you've realised your error and moved on to other arguments.

    3. There are plenty of circumstances in Marx's theory where if real wages, then the actual rate of exploitation must fall.

      Marx focusses on one limited case under highly unrealistic conditions to have the rate of exploitation rising as a real wage rise, but even then exploitation also decreases in 2 important senses.

      But as I have told you repeatedly the whole theory in vol. 1 is worthless nonsense because it all depends on the assumption that commodities exchange at true labour values.

    4. "Marx focusses on one limited case under highly unrealistic conditions to have the rate of exploitation rising as a real wage rise."

      It's not one limited case in highly unrealistic conditions at all. I have no idea why you think that.

      The case is very simple, straightforward and common: as productivity rises more goods can be produced in less time. Therefore real wages can rise whilst the amount of unpaid surplus labour time increases or stays the same.