Can the contradictions of capitalism enunciated by Marx really be the causes of its disappearance?
For Marx, social production (a production by a large number of interdependent workers/producers) in the hands of a small private elite who own the means of production (the capitalists) is a major contradiction that will lead to other contradictions, to a class system, to exploitation and social conflicts, to increasingly severe crises and finally to the disappearance of capitalism.
The problem is that exploitation, social conflicts, crises, wars have followed one another and capitalism is still here.
The question on which I would invite you to reflect here is whether the contradictions of capitalism that Marx put forward are capable on their own of causing its disappearance?
Or why has capitalism not already disappeared? Will it disappear? And what will succeed it?
The contradiction between social production and private ownership of the means of production
The dissociation between those who provide the labor and those who own the means of production, the decision-making authority and the fruit of labor, Marx calls it a contradiction.
But this is not necessarily a contradiction, something that would oppose its own existence. We will in a moment design a society with the same dissociation which does not generate its own destruction and which could be stable.
In fact, this dissociation results from a natural evolution of production.
The arrival of machines that require several people to work in very specialized tasks means that workers (unlike artisans) can no longer individually possess the means of production, decision-making authority, and production.
The workers who can be extended to include all employees, the operators of the machines and complex structures which produce goods and services, the salaried workers who are also called the proletariat, contribute only a limited part of the final output. They cannot individually claim their possession.
The dissociation between producers and means of production which puts an end to craftsmanship is a natural evolution linked to the complexification and socialization of work which is necessary to operate machines.
We will see that this dissociation does not necessarily lead to self-destroying contradictions and antagonisms, and that Marx's explanation of the origin of the crises of capitalism is not sufficient to understand them.
An antagonistic class system
The first consequence of the dissociation between workers, the suppliers of labor, and capitalists, the suppliers of the means of production, is that it effectively creates a class system. But any community that suffers from a shortage of the goods and services it produces automatically creates a class system: a class of haves and a class of have-nots, the equal sharing of an insufficient production being impossible. A classless system is only possible with a society of plenty, as was the case with the original societies.
Moreover, such a class system is not necessarily a conflicting system of exploitation. That workers sell their working hours without owning the means of production and the fruits of their labor is not in itself bad. One can imagine a system where people are free to serve others without being exploited. We voluntarily put ourselves at the service of our elders, our youth, our sick, and the disabled. Serving others only becomes evil if we are forced to do so. For example, if one takes away free access to livelihoods and people are forced to work and serve a boss to earn the money necessary to survive, then it effectively becomes enslavement and exploitation. Whoever owns the means of production, whether private or public.
All living things, and of course all human beings, have a right to the things they need to survive for free. This natural and universal right is unfortunately no longer respected by the elaborate systems of society that have been put in place.
Imagine a capitalist society where human beings have free access to everything they need to live decently, and where the work required to make the society function is voluntary, even if motivated by a privilege or a more luxurious lifestyle. In this society, workers are not forced to sell their services to those who need them and therefore are not exploitable and exploited.
The worker/capitalist class system is not a sufficient reason to be an exploitative system. What makes it an exploitative system is forcing people to work by taking away their natural right to free access to their means of subsistence.
And what makes it a conflicting system of exploitation is another contradiction enunciated by Marx as a consequence of the first: the antagonistic interests between the working class and that of the capitalists. To maintain or increase their profits the capitalists must exploit the workers more and more.
To continue to make their capital profitable and increase their capital gains while being competitive, capitalists must always produce more and less expensive and the necessary reduction in manufacturing costs inevitably leads to the development of the means of production at the expense of wages. The accumulation and overaccumulation of productive capital are the cause and the consequence of the reduction of wages, and according to Marx, are at the origin of instabilities and systemic crises of capitalism and its economic cycle. The crises of overproduction and destruction of productive capital that occur in cyclical ways are in fact crises of underconsumption that result from the exploitation of the proletariat, the wage earners.
The origin of the crises of capitalism
Is the exploitation of wage labor and the under-consumption that it generates really at the origin of the crises of capitalism?
The answer is no. But we are not very far from the truth.
To understand this, we will imagine a capitalist system which exploits workers but which does not generate any instability or crisis.
To simplify, we will reduce the capitalist class to a single person who we will call Pharaoh.
I apologize to the Egyptians or some scholars for whom the Pharaoh was not an exploitative monarch but benevolent and revered as a God. We will see later why they perhaps had good reasons to think so.
Our imaginary exploiting pharaoh owns all the means of production and all the workers work for him and buy from him all the goods and services they need. The only condition is that the pharaoh must spend all the profits he earns in the period of renewal of consumption. Consumers globally renew their consumption regularly, usually on the order of a week or a month. To simplify, we will say that they renew their consumption every day. The pharaoh will therefore spend all the money he earns during the day, for example to build a pyramid.
We will assume that the workers all initially have $ 100 to buy everything they need for the day. They get up in the morning, do their shopping, and spend all their $ 100 to buy from the Pharaoh what they need. Then they will work all morning to produce all the goods and services that they will buy the next day.
The pharaoh who is a capitalist is going to make them work for $ 50 each to make a profit of $ 50 on their purchases. At midday workers have $ 50 in their pockets and go to work in the afternoon at the pyramid to earn an additional $ 50. These $ 50 come from the profits that the pharaoh made in the morning and that he must spend during the day. So at the end of the day, the workers all have $ 100 in their pockets, the same amount they had at the start of the day, and they can buy whatever they need again the next day. There will be no crisis.
The Pharaoh can exploit the workers and make them work like donkeys, he can lower their wages, pay them $ 10 to produce all the production and make 90% profit rate instead of 50%. If he spends all of his money building his pyramid, the workers will still be able to buy whatever they need and there will be no crisis.
It was the pharaonic spending that ensured that the population lacked nothing and the whole system prospered. This could explain the reverence of the people to their pharaoh.
If we now consider that the Pharaoh is in fact a group of capitalists, that the pyramid is luxury products, we have a capitalist system which can be extremely exploitative but which does not experience any crisis. As in the case of the Pharaoh, the spending of capitalists in luxury goods, the vanity market, is a factor of stability and prosperity of the system. The more capitalists spend their profits, the more they stabilize the system.
This example shows that it is not really the exploitation, the appropriation of surplus labor (the fruit of the work that the worker performs after having done that necessary to pay his salary) that justifies crises.
The problem is when the profits of the capitalists do not return entirely to the workers. And this is what escaped Marx. It is only if the pharaoh does not spend all of his profits or is slow to spend them that we are in a situation where the workers do not have enough money to buy their consumption the next day, and that there is under-consumption, overproduction and a crisis.
This important law of economics should be highlighted in big letters in all textbooks. It can be stated like this: for exchanges, commerce between 2 people or between 2 communities to operate in a sustainable way, they must be balanced.
The proletarian class is in trade with the capitalist class. One sells its labor force, the other its production. If the proletarian class does not receive in return all the money it spends on the capitalist class, the proletarian class becomes impoverished, and trade between the two classes decreases. If trade decreases, the wages of the proletarian class decrease and it is a self-amplifying cycle that leads to crisis.
It is a problem with the circulation of money.
In order for the level of consumption to be stable, the money spent by a consumer must return to the consumer before the end of his consumption cycle.
If the consumer spends more than he earns, to maintain the level of his consumption he will either have to earn more or borrow from friends, which will increase the speed of circulation, or borrow from the bank, which will increase the money supply.
There are only four possible choices:
1) earn more by working more or getting paid more. Which is limited, difficult, and globally impossible to extend to all workers in a situation of overproduction.
2) earn more by getting help:
- He can get help from the proletarian class (family, friends). It is also limited and only transfers the problem to others who will also spend more than they earn.
- He can get help from the capitalist class. It’s charity. In this case, the capitalist profits return indeed to the workers. But capitalist charity is also very limited. Capitalists have much better options for their capital than giving it to those who need it.
- He can get help from the government. We will come back to that. Let's put aside this possibility for the moment because it is a form of socialization of capitalism. Let's only remember that the state can, by taxing the rich, by taxing corporate profits, by borrowing or by creating money, provide aid to consumers, directly through social aid or indirectly by increasing its expenses and thus wages.
3) borrow: It is possible but unfortunately, we only lend to the rich. When you are insolvent, without the capacity to repay your debts, creditors cannot be found. It is not a sustainable option anyway.
4) reduce consumption: When the options that allow consumers to maintain their consumption by increasing the speed of circulation (earning more) or the money supply (bank loans) are exhausted, the consumer has no other choice than to reduce his consumption.
The problem is that when consumers do not earn enough money to renew their consumption, the circulation of money cannot be self-regulated by an increase in the money supply (bank loans) or by an increase in the speed of circulation of money. For the simple reason that when a consumer runs out of money and cannot earn more, he cannot borrow from the banks or spend any faster.
When the proletarian class spends more than it earns, it cannot spend more or spend faster and the capitalist class is not going to spend more and any faster either, on the contrary. When the profits of the capitalist class do not return entirely to the proletarian class during a cycle of consumption and when the banks refuse to help the latter with credit (directly through consumer loans, or indirectly through business loans that would allow consumers to work and earn more), over the next cycle, the consumption of the proletarian class will decrease, capitalist profits and consumption will decrease. Therefore the monetary circulation will decrease. It’s the economic recession.
The origin of the instabilities of capitalism has nothing to do with overinvestment, the overaccumulation of productive capital that creates overproduction. It's a simple math problem. If during his consumption cycle the worker does not earn as much as he spent, and if he cannot earn more or cannot get into debt, he must reduce his consumption. Applied to the working class, if the profits of the capitalist class do not return entirely to the proletarian class, without an increase in consumer or business loans and without government assistance, consumption decreases. We have the explanation of the crises of underconsumption of capitalism and the role played by banks in generating the phases of recessions and growth of the economic cycle as well as the role that the state can play in supporting consumption. When banks turn on the credit tap, they enable growth. When the debts pile up and the risks of insolvency get too great, they turn off the tap and it's a recession. To get growth back on track, banks need to make more loans or the government needs to increase spending to boost consumption.
In a socialist economy, there is no business cycle. Corporate profits are fully redistributed to consumers through the government. All production is absorbed and stores are emptied. Consumption is limited only by production.
In a capitalist economy, free enterprise allows for an abundance of innovations and choices, but the population cannot afford what it can produce. Consumption is limited by purchasing power. The stores are always full and the vendors are impatient to see customers come in. Overproduction is an illusion. If in the capitalist economy stores are full, it is because consumers are poor.
The confusion or what has escaped the analyzes of Marx
What escaped Marx’s analyzes to explain the crises of capitalism and in general what also escapes the other analyzes of monetary circulation that are taught, is the impact of the imbalance of exchanges between the proletarian class and the capitalist class. The exchanges are not sufficiently well described to be able to observe the true origin of the crises.
What created confusion was to say that anyway money circulates among all consumers, whether capitalists or proletarians, and that if the capitalists do not spend all their profits, if a part of the money is hoarded, that is to say put in a safe and accumulated, it is not a problem for the exchanges because the money will then circulate more quickly. If the money supply in circulation decreases, the speed of circulation increases and it compensates for the decrease. That all amounts of capitalist profits do not return to the proletarian class is therefore not a problem.
But we have just seen that this is precisely the problem. When workers receive less in wages than they spend, they cannot spend more or faster. They must reduce their expenses. The speed of circulation cannot increase, it decreases.
That some of the money no longer circulates and is hoarded was more true in the days when money was pegged to gold and did not lose value with inflation. In the past, but even more today, it is more profitable to lend it or put it in the bank and earn interest.
The money that the capitalists deposit in the banks is in fact the money that they lend to the banks and this money serves as their reserves for bank loans.
But above all the capitalists will lend to the government, which is the safest borrower and which offers much higher interest than the banks. The government needs money to help consumers and support the economy. It will spend it in the form of social aid, civil servants' salaries, and all the other expenses of its budget (education, defense ...).
There is an imbalance in the trade because the capitalist class does not spend all its profits, it will hoard them but above all lend them. And that’s what added to the confusion. Because as long as the capitalists' profits return directly or indirectly to consumers in the form of loans (loans to consumers, companies, or the government), consumers can continue to consume and even consume more by the multiplier effect of bank loans allowed by the fractional reserves system. So during the whole period of growth when banks lend at attractive interest rates, the effects of the trade imbalance are not observable. In fact, all is well. This is thought to be the normal functioning of capitalism. But it is in fact a Ponzi scheme. Consumers globally continue to borrow, their debts piling up without ever having the capacity to repay. They always spend more than they earn to secure capitalist profits. The day when consumers and businesses become insolvent, banks reduce loans, capitalist profits stop being recycled back to consumers, the effects of the imbalance are felt very sharply, it is the recession. The fact that the period of recession is much shorter than that of growth, suggests an abnormal but probably correctable behavior of capitalism. However in this regard, Marx was not mistaken. The crises of capitalism are indeed structural.
But the regulatory role of government and banks in the recirculation of capitalist profits through extensive debt has not been clearly demonstrated and the real cause of capitalist crises has eluded him.
Yet it is observable everywhere. When 2 people, 2 communities, 2 countries are in trade and trade is unbalanced, at a certain point, one of the parties no longer has enough money to continue trading. It's going to ask the other party for a loan. This is true for Greece with Germany, for the United States with China ... It is true for the proletarian class with the capitalist class. This is true for anyone who is struggling to pay and wants to keep trading.
In periods of growth, capitalist profits return to consumers in the form of loans, loans directly to consumers but also loans to companies and to the government which, when spent, will develop employment and increase the purchasing power of workers. Capitalist profits, which are neither consumed nor invested, are the causes of the structural debt and insolvency that breed crises. In addition, the capitalists charge interest on their loans, which also exacerbates the imbalance of trade and the insolvency of consumers.
The fact that the trade of the proletarian class is in deficit serves the system. The indebtedness and misery of consumers will ensure the perpetuity of their work and their submission. These are the chains that keep them at the service of their masters. However, this systemic deficit also creates instabilities.
In Marx's time, credit was perhaps more limited, but hoarding produced the same effects as changes in credit. When business began to decline, the capitalists preferred to hoard rather than to invest creating underconsumption. When business picked up, they resumed investing and circulated their profits back to the workers.
For the pun, hoarding is of no interest anyway. After a certain level of accumulation that guarantees financial security, there is no point to keep accumulating. Once the level of security is reached, the accumulation of wealth is only of interest in the power it provides. And it is usury that will give wealth its power over others, over society. The rich man, whose fortune already gives him all the possible rewards, will continue to accumulate for the power that will give him. Usury always takes precedence over hoarding. Because the debts in an economy are much greater than the money supply, and all the more so than the sums actually hoarded which are only a small fraction of it, we can consider that hoarding is a very secondary factor of instability.
Having said this, we can state the following proposition: the true origin of crises, that is to say of misery accompanied by the destruction of productive apparatus, is not the exploitation or the accumulation of productive capital, it is usury.
By usury I mean lending money with interest, whether it is high or low. Even low interest, when compounded, puts the system in bankruptcy. It's like friction on a spinning wheel. Even a little friction stops it.
The problem isn't lending money, it's really usury. Because it's usury that makes the loan interesting (pun intended). Without interest, there is no interest in lending (another pun). The rich would rather invest their money in things that maintain or increase their value over time without taking the risk of not being paid back. Like art. Until the Renaissance, the rich converted much of their wealth into art and provided work for many artists and craftsmen. It brought prosperity. Think of the pyramid and the luxury goods that boosted the economy.
As soon as the business of lending with interest developed, fantastic artistic creations ceased to be replaced by the creation of debt. Better to recycle the profits by making the world a more beautiful place than to enslave people through debt.
When we understand the effects of usury on the economy, we understand that it is at the root of the greatest misfortunes that have affected mankind. Misery, enslavement, injustice, wars ...
If before the destruction of our civilization there was a recommendation to pass on to future generations who will rebuild theirs, it would be to ban usury. And it is indeed this recommendation that our ancestors passed on to us. Our great religions forbade it. Well, almost all the major religions. The human tribes who did not respect it have grabbed wealth but especially power at the expense of other tribes they have enslaved. We should have listened to their recommendation and driven the merchants out of the temple, forbidding them to exercise usury on us and not let them do to us what we were forbidden to do.
We can ask ourselves here the question of why usury as the real cause of crises has escaped the economic analyzes that we were proposed. I believe the answer is that the usurious elite prevented it. Its power over information, knowledge, and education has allowed it to censor and delude us by focusing our attention on symptoms and passing them off as causes. Usury is the basis of their power. It is completely integrated into the functioning of capitalism. It cannot be questioned without questioning its entire monetary system. So of course we will never know its perverted effects in the media and in our universities, which they take great care to control. As I write these lines I realize that they will be censored, ridiculed, attacked. This is perhaps the biggest taboo or the biggest secret that the elite must keep at all costs. Because it is a truth that alone can break down the illusion, the invisible chains that keep us in bondage.
The origin of the long cycle of depression
There is another cycle that is much longer and more severe, and that is the cycle of government debt. In order to recirculate their profits and support consumption (balancing trade between the proletarian and capitalist classes), the government borrows from the capitalists, and through its spending, the money goes directly or indirectly back to the workers/consumers. When the day arrives when the capitalists realize that the government will no longer be able to provide repayments and interest, they hesitate to lend, increase their interest rates, force the government to privatize its assets (airports, transport, prisons, health ... .), everything that can be privatized. And the day comes when the state must declare bankruptcy. It's the great crisis, the depression, the collapse. This is the big reset. Often followed by a war, an incredible destruction. We make a clean slate so that we can start a new cycle of growth.
The contradiction of the overaccumulation of capital as a factor of crises is indicative of Marx's confusion. For Marx, capitalists spend their profits on consuming and investing to increase their productive capital. Loans and hoarding, which are less profitable than productive investments, are expected to be comparatively negligible and have escaped him as being very important. Observing the crises of overproduction of capitalism, he deduced that it is rather the overaccumulation of productive capital that must be an important factor. We have seen with the example of the Pharaoh that this is not the case. The pharaoh, instead of building his pyramid, can add machines at will to his productive capital, as long as all the profits return in one way or another to the workers, there is no situation of crisis created.
The contradiction of the downward trend in the rate of profit
The rate of profit of the capitalists is the profit or the capital gain which they collect compared to the sums which they invest. It is closely correlated with the economic cycle. It increases in times of growth and decreases in times of recession.
For Marx, the major reason why the crises of capitalism will ultimately lead to its collapse and the advent of communism is that the capitalists' rate of profit is doomed to fall. In the long run, their investments will pay less and less profit. The proletarian masses will have to be exploited more and more and will eventually revolt.
The downward trend in the rate of profit is what crystallizes all the contradictions of capitalism (social production and private appropriation, class antagonism, overaccumulation of capital, real value and exchange value of production ...) and what will bring it to an end.
This is for Marx the major cause of the inevitable demise of capitalism.
First of all, is it true that the rate of profit is doomed to fall in the long term?
We can see it is true at the level of a market. For example the television market.
When a new technology creates a new market or changes the balance of power, profit rates can be high. But in the medium or long term when the competition has taken hold or has caught up, the rate of profit decreases. For example the metal industry, the automobile industry, televisions. Industries are less profitable than when they started. Technology is leveling off, competitive advantages have dissipated, markets are saturating, making investments much less profitable.
Yes in the long term the rate of profit of a market falls but the market does not disappear completely. The washing machine market still exists, but there is not much room for high profits anymore. The market finds a balance at the minimum profit necessary for its survival, but it does not disappear. And the workers of the companies that make the washing machines are not exploited more than the others and do not revolt.
It is difficult to measure the overall rate of profit of companies in a country’s economy, but overall, we observe that the rate of profit still seems to be doing very well. The capitalists are gorging themselves at record levels. Billionaires appear much faster and in greater numbers. The reasons are many. The main one is surely the accelerated rate of emergence of new markets which generates enormous profits in a now globalized market. The capitalists are the big winners of technological advances that follow an exponential curve. The more we progress, the faster we progress and the faster the capitalists can get richer.
Another reason is that capitalism adapts. It creates defenses for its survival. To maintain high profit rates, it will expand markets (imperialism, globalism), develop consumption (marketing, fashions, brands, planned obsolescence), protect profits (copyright, licenses, create monopolies and cartels) and of course the old recipes, if necessary it will destroy the productive capital to restore growth (recessions, crises, wars).
To protect himself from revolts, it will take social measures (minimum wage, unemployment benefits, social security, pensions), indoctrinate and control the population (media propaganda, surveillance, security measures, controlled opposition, censorship) and submit it by creating fears (imaginary enemies or dangers, terrorism, climate change, pandemic).
To the question of whether capitalism can survive its contradictions, the answer is apparently yes.
Why has capitalism not disappeared?
Because it can adapt and put up with the instabilities that it creates and bounce back from its crises.
Capitalists need growth in order to generate the profits that feed them. However, a system where one parasitic class exploits the other cannot grow indefinitely. Crises are necessary to get rid of the extra parasites (the weaker capitalists) so as not to kill the host that feeds them. The big international capitalists who control the credit, therefore the periods of recession and growth of the economic cycle, are also those who finance the two sides of the wars. They are in control of the growth and destruction of capital and can ensure that the system can rise from its ashes and reset itself.
Is capitalism going to disappear?
The answer is yes. It is even living its last years.
It will disappear in 2 possible ways.
The first by destroying life on earth. Self-destruction by atomic warfare or by the destruction of the ecosystem. Capitalism, being the victim of its success can no longer control the fruit and the source of its growth, the density of the population, and will devour itself for the last resources. Overpopulation will be the cause of the last war and/or the destruction of the ecosystem.
The second by a change in the mode of production. If we overcome the dangers of overpopulation, atomic warfare, and the destruction of the ecosystem, then capitalism will disappear as it appeared, with the arrival of a machine: the smart machine.
The machine created both the capitalists and the proletariat, the smart machine will make them both disappear. The smart machine destroys wage labor and therefore consumption and capitalist production. There is no escape.
It is the modes of production that bring about systemic changes. With each new mode of production (hunter-gatherer, agrarian, industrial) a new system of society and a new elite will prevail. A new mode of production brings a new elite to power which will establish the system which optimizes its privileges and its survival.
Even though communism made enormous contributions to the peoples it lifted out of poverty and inspired social reforms in capitalist societies, it was capitalism that triumphed. Free enterprise has proven to be the most powerful engine of innovation, and planning for a collectivist economy has proven too complex to be more effective than the free market.
The capitalists are preparing their great reset for us, their new reset, with new adaptations to remedy massive job losses such as that of the universal basic income. For those many who believe that the universal basic income can save capitalism I invite you to watch the video: https://youtu.be/teUMCRtbGUY?list=PLKSc3gdwl111yHIyO3JiBIJX56IXC4i_X
All the elements are being put in place for the emergence of a new system of society. What is really preparing is not a great reset of capitalism but a great riddance. The great riddance of capitalism.
What will succeed capitalism?
When smart machines replace workers, there will be no more work and therefore no need for money. The robots will produce everything we need for free and an artificial intelligence will administer the resources, production, and distribution of products and services. It will be programmed to be completely dedicated to us and to meet all of our needs and desires.
This society where all men are free and blossom by doing only what pleases them, is called a paradise. And the type of society of a paradise, we can call it paradism.
Paradism looks like the final destination of communism. Like communism, which is sometimes ironically called utopian, paradism is a collectivist society without work or money where all the means of production are owned by the whole community.
What differentiates paradism from utopian communism is the dictatorship of the proletariat. The Communists think that the proletariat must collectively ensure control of their factories and their workplaces, the means of production. Paradism aims at bringing about the disappearance of the proletariat. The two systems are collectivist systems with similar destinations but different paths.
The communist revolutionaries will take to the streets with the cry of "workers let us unite" and will work to preserve the proletarian class which is the basis on which they are founding their future society. The paradist revolutionaries are working to put an end to the proletariat with the cry of "no more work, more freedom".
Communists who do not take the path of paradism risk finding themselves on the wrong side of history and the systemic revolution underway. They will be hindrances to the paradisiacal society that is being set up. And this is regrettable because the revolutionary communist forces with their organization and their international dimension could do a lot to unite revolutionaries of all countries in establishing paradism.
If communism did not triumph, it is because it appeared too early. Artificial intelligence, Big data, the technology that enables planning at all scales had not yet arrived.
Collectivism is the system most suited to abundant societies as evidenced by the original societies. Starting from the primitive society of abundance and collectivism, capitalism was among the transitory systems the one that allowed us an accelerated growth to gain quicker access to the technologically developed society of abundance and collectivism. A journey that has been strewn with the most horrible crimes and injustices that we would have been happy to have done without. Capitalism has nevertheless fulfilled its mission. It can now disappear.
So in the end, Marx was right. Collectivism will triumph over capitalism. He may have been wrong about the real causes of its disappearance, but not by much.
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