Capitalism is a system of production in which commodities are produced. Commodities are articles that are produced for the purpose of being sold at a profit – in other words, goods that are sold on the market. When goods are sold they have realised their values represented by certain quantities of money.
All productive concerns commence with the investment of money in certain ways. The conversion of a sum of money into means of production and labour power is the first step taken by the quantity of value that is going to act as capital. This conversion takes place on the market, within the sphere of the circulation of commodities, that is within the sphere of buying and selling. The second step, the process of production, is complete when means of production have been converted into commodities whose value exceeds the value of all items used up in the productive process, and thus contains the original value (or capital) advanced plus a surplus value. This whole process is constantly repeated and forms what is called the circulation of capital. Money into commodity into money, the latter being greater in quantity than what was originally invested.
Capital invested in production takes two forms – Constant capital and Variable capital. Constant capital comprises all those things whose value reappears without change in the new article; such as raw material, machinery, buildings, etc. Variable capital consists solely of the physical and mental energies of the labourers; it is labour power whose value plus a surplus appears in the new article-because the consumption of labour power, the activity of the labourer, adds more value than is incorporated in its cost of production. Means of production can never add more value to a product than they originally possessed. Further, means of production only become capital under certain conditions. A machine is not capital because it is a machine. It only becomes capital when it is used to extract surplus value, unpaid labour, from the workers.
The rate of profit given in the returns of commercial companies does not by any means give the real picture of the amount of unpaid labour wrung from the workers employed by those companies; the rate of exploitation is far higher. The rate of profit is the relation between the surplus value and the total capital, but the rate of exploitation is the relation of the surplus value to the amount of capital invested in labour-power, wages and salaries because it is solely the labourers’ work that has produced the surplus value. Let us suppose that capital to the amount of £1,000 has been invested and that this investment has taken the form of £500 for machinery, etc., and £500 for wages and salaries. Let us further suppose that this investment has resulted in the production of goods to the value of £1,100. The rate of profit is the relation of the extra £100 to the £1,000 capital invested, that is 10 per cent.; but the rate of exploitation is the relation of the £100 to the £500 invested in wages and salaries, that is 20 per cent. Thus the rate of profit conceals a much higher rate of exploitation.
The capitalist concern engaged in the production of surplus value shares this surplus value with landowners, moneylenders, and others; for the purpose of this article, however, we assume that the original capitalist owns the entire surplus value. The way surplus value is split up into rent, interest, profit, etc., has no bearing on the particular matter we are discussing.
If the surplus value produced serves only as a fund to provide for the capitalists’ personal consumption then it is only simple reproduction, there is no industrial expansion. It would be just as if a farmer only sowed enough seeds each year to provide for the needs of himself and his family. This of course is not the way capitalist production works or the gigantic trusts of today would not have come into existence. It is the constant reconversion of surplus value into capital that is the basis of capitalist expansion. Accumulation of capital resolves itself into the reproduction of capital on a progressively increasing scale. Accumulation of capital is really accumulation of surplus value—unpaid labour.
In the productive process the worker is not paid until after he has produced; he produces his wages at the same time as he produces surplus value. Thus it is the labourer’s own labour, realised in a product, that is advanced to him by the capitalist in the form of a wages fund. Under Feudalism the peasant worked, say, three days on his own land and three days on his lord’s land. The first three days kept him and the second three days kept his lord. When the lord took away the peasant’s land, cattle, etc., the latter had to work as a wage labourer, but still three days covered his own keep and three days his lord’s. From the moment when forced, or customary, labour was changed into wage labour the labour fund took the form of capital advanced as wages by the employer.
The amount of capital originally invested by the capitalist disappears after a time and his declared capital only represents surplus value, accumulated unpaid labour. The surplus value has been capitalised and served to buy means of production and labour power to produce further commodities and at the same time surplus value. Thus the ownership of past unpaid labour has become the sole condition for the appropriation of living unpaid labour on a constantly increasing scale. The more unpaid labour the capitalist has accumulated the more he is able to accumulate. This entirely disposes of the claims made by capitalists that their wealth is the result of their own efforts.
One of the conditions of commodity production was the exchange of equivalents but it has become the very opposite because there was only an apparent exchange of equivalents. In appropriating the surplus value the capitalist is taking without equivalent a portion of the labour of the workers. The laws of property that are based on commodity production work out as the right, on the part of the capitalist, to appropriate the unpaid labour of the workers and make it impossible for the latter to own their own products; these laws have converted the workers into a propertyless class.
Accumulation of capital is obtained by increasing the mass of surplus value produced by the worker and therefore that portion of it that is capitalised. To attain this end wages are forced down as much as possible; piecework is introduced with a progressive lowering of the price paid for work done; hours of factory operation are increased by shift work which lessens the proportion of constant capital needed to provide a given amount of surplus value; new machinery and methods are introduced which results in more production at the same cost. The greater productivity obtained means, however, a greater quantity of raw material worked up in the same time and hence more machinery, larger factories, improved means of transport, and so forth. This, in turn, means that a smaller quantity of labour is required in proportion to the means of production. As the capitalist is not concerned with the production of useful articles but only with the accumulation of surplus value he forces the productive powers to the limit and also builds up ever greater masses of constant capital to offset the shrinking number of labourers required to produce a given quantity of products.
The accumulation of capital, with the introduction of improved machinery and methods, involves the periodical growth of the unemployed army, at the same time this unemployed army is a necessity. In order to meet the needs of accumulation the capitalists must have at hand a reservoir of labour upon which they can call at any moment for the purposes of expansion and can discard when no longer required.
Accumulation of capital means growth in the wealth and comfort of the capitalists and growth in the misery and degradation of the workers. In the course of history, it has developed the means of production to a point where the needs of all can be met without involving unhappy toil, insecurity, degradation and misery for the worker. It only remains for the workers to take possession of the means of production and use them to provide comfort for all instead of surplus value for an idle and useless class.