The capitalist mode of production is a concept in Karl Marx’s critique of political economy. For Marx, “capital”, “capitalism”, the “capitalist mode of production” and “capitalist society” referred to different phenomena. They were not all the same thing, although he sometimes treated them as synonymous in his manuscripts (a sort of shorthand). Jump to: navigation, search Karl Marx Karl Heinrich Marx (May 5, 1818 Trier, Germany – March 14, 1883 London, England) was an influential philosopher, political economist, and revolutionary organizer of the International Workingmens Association. ... Jump to: navigation, search In politics a capital (also called capital city or political capital — although the latter phrase has an alternative meaning based on an alternative meaning of capital) is the principal city or town associated with its government. ... Jump to: navigation, search In common usage capitalism refers to an economic system in which all or most of the means of production are privately owned and operated and where the investment of capital, and the production, distribution and prices of commodities (goods and services) are determined mainly in a... In the writings of Karl Marx and the Marxist theory of historical materialism, a mode of production (in German: Produktionsweise, meaning the way of producing) is a specific combination of: productive forces: these include human labor-power, tools, equipment, buildings and technologies, materials, and improved land social and technical relations...

Basic distinctions

The existence of “capital” presupposes only property relations which make it possible to make money from trade in goods, money and services, and to accumulate that money. Jump to: navigation, search A fruit stand at a market. ...

“Capitalism” as a chrematistic, money-making activity could exist in the shape of merchants and bankers who acted as intermediaries between non-capitalist producers engaging in simple commodity production (hence the reference to “merchant capitalism” – an economic system of banks and trading houses or trading companies in which factory industries play only a minor role, if at all). Simple commodity production (also known as petty commodity production; the German original word is einfache Warenproduktion) is a term coined by Frederick Engels to describe productive activities under the conditions of what Marx had called the simple exchange of commodities, where independent producers trade their own products. ...

What is specific about the “capitalist mode of production” is that all or most of the inputs and outputs of production are supplied commercially through the market (i.e. they are commodities). The word commodity has a different meaning in business than in Marxian political economy. ...

This has the important consequence that the whole production process is reshaped and reorganized in line with the economic rationality of capitalism, which is expressed in price relationships between inputs and outputs (costs, sales, profits).

That is, the whole process is organized is reshaped in order to conform to “commercial logic”. Another way of saying this is that production itself becomes directly a source of capital accumulation, based on the commercial exploitation of surplus labour. Jump to: navigation, search Most generally, the accumulation of capital refers simply to the gathering or amassment of objects of value; the increase in wealth; or the creation of wealth. ... This article discusses the economic concept of exploitation. ... Jump to: navigation, search Surplus labour is a concept used by Karl Marx in his critique of political economy. ...

In this context, Marx refers to a transition from the “formal subsumption” of production under the power of capital to the “real subsumption” of production under the power of capital. In what he calls the “specifically capitalist mode of production”, both the technology worked with and the social organization of labour have been completely refashioned and reshaped in a commercial (profit and market-oriented) way; the “old ways of producing” (for example, crafts and cottage industries) have been completely displaced by modern industrialism. Jump to: navigation, search This article needs to be cleaned up to conform to a higher standard of quality. ... An organization (U.S. spelling) or organisation (U.K. spelling) is a formal group of people with one or more shared goals. ... Commercial may mean: as a noun: a form of advertising, as in a television commercial as an adjective: referring to commerce or for-profit activities or trade (compare with non-profit organization) a breed of cattle, Commercial This is a disambiguation page — a navigational aid which lists other pages that... Jump to: navigation, search Profit is a positive return made on an investment by an individual or by business operations. ... Street markets such as this one in Rue Mouffetard, Paris are still common in France. ... Arts and crafts comprise a whole host of activities and hobbies that are related to making things with ones own hands and skill. ... A cottage industry is an industry – primarily manufacturing – which includes many producers, working from their homes, typically part time. ...

Origins

Marx argued that capital existed incipiently or on a small scale for thousands of years, in the form of merchant and lending activities, and occasionally also as small-scale industry with some wage labour (Marx was also well aware that wage labour existed for hundreds or even thousands of years on a modest scale before the advent of capitalist industry). Simple commodity exchange, and consequently simple commodity production, which form the initial basis for the growth of capital from trade, have a very long history. Jump to: navigation, search In politics a capital (also called capital city or political capital — although the latter phrase has an alternative meaning based on an alternative meaning of capital) is the principal city or town associated with its government. ... Jump to: navigation, search The word commodity is a term with distinct meanings in business and in Marxian political economy. ... Simple commodity production (also known as petty commodity production; the German original word is einfache Warenproduktion) is a term coined by Frederick Engels to describe productive activities under the conditions of what Marx had called the simple exchange of commodities, where independent producers trade their own products. ...

For the capitalist mode of production to emerge as a distinctive mode of production dominating the whole production process of society, many different social, economic, cultural, technical and legal-political conditions had to come together.

For most of human history, these did not come together. Capital existed, commercial trade existed, but it did not lead to industrialisation and large-scale capitalist industry. That required a whole series of conditions, namely specific technologies of mass production, the ability to independently and privately own and trade in means of production, a class of workers compelled to sell their labor power for a living, a legal framework promoting commerce, a physical infrastructure making the circulation of goods on a large scale possible, security for private accumulation, and so on. In many Third World countries, many of these conditions do not exist even today, even although there is plenty capital and labour available; the obstacles for the development of capitalist markets are less a technical matter and more a social, cultural and political problem. Jump to: navigation, search Labor power (in German: Arbeitskraft, or labor force) is a crucial concept used by Karl Marx in his critique of political economy. ... This article is about law in society. ... Jump to: navigation, search This article is about the business concept; Commerce is also the name of several places in the United States. ... For the Jamaican reggae band, see Third World (band). ...

A society, region or nation is “capitalist” if the predominant source of incomes and products being distributed is capitalist activity; even so, this does not yet mean necessarily that the capitalist mode of production is dominant in that society. For the song by the California punk band Pennywise, see Society (song). ... One of the most influential doctrines in history is that all humans are divided into groups called nations. ... In the writings of Karl Marx and the Marxist theory of historical materialism, a mode of production (in German: Produktionsweise, meaning the way of producing) is a specific combination of: productive forces: these include human labor-power, tools, equipment, buildings and technologies, materials, and improved land social and technical relations...

Defining structural criteria

Marx never provided a complete definition of the capitalist mode of production as a short summary, although in his manuscripts he sometimes attempted one.

In a sense, Das Kapital as a whole provides his “definition”. Nevertheless, it is possible to summarise the essential defining characteristics of the capitalist mode of production as follows: Das Kapital (Capital) is a very large treatise of political economy written by Karl Marx in German. ...

• The means of production (or capital goods) and the means of consumption (or consumer goods) are mainly produced for market sale; output is produced with the intention of sale in an open market; only through sale of output, can the owner of capital claim part of the surplus-product of human labour, and realize profits. Equally, the inputs of production are supplied through the market, as commodities. The prices of both inputs and outputs are mainly governed by the market laws of supply and demand (and ultimately by the law of value).

• Private ownership of the means of production ("private enterprise") as effective private control and/or legally enforced ownership, with the consequence that investment and management decisions are made by private owners of capital who act autonomously from each other and, because of business secrecy and the constraints of competition, do not co-ordinate their activities according to collective, conscious planning. Enterprises are able to set their own output prices within the framework of the forces of supply and demand manifested through the market, and the development of production technology is guided by profitability criteria.

• The corrolary of that is wage labour (“employment”) by the direct producers, who are compelled to sell their labour-power because they lack access to alternative means of subsistence (other than being self-employed or employers of labour, if only they could acquire sufficient funds) and can obtain means of consumption only through market transactions. These wage earners are mostly "free" in a double sense: they are “freed” from ownership of productive assets, and they are free to choose their employer.

• Being carried out for market on the basis of a proliferation of fragmented decision-making processes by owners and managers of private capital, social production is mediated by competition for asset-ownership, political or economic influence, costs, sales, prices, and profits. Competition occurs between owners of capital for profits, assets and markets; between owners of capital and workers over wages and conditions; and between workers themselves over employment opportunities and civil rights.

• The overall aim of capitalist production, under competitive pressure, is (a) to maximise net profit income (or realise a net superprofit) as much as possible, through cutting production costs, increasing sales, and monopolisation of markets and supply, (b) capital accumulation, to acquire productive and non-productive assets, and (c) to privatize both the supply of goods and services and their consumption. The larger portion of the surplus product of labor must usually be reinvested in production, since output growth and acccumulation of capital mutually depend on each other.

• Out of preceding characteristics of the capitalist mode of production, the basic class structure of this mode of production society emerges: a class of owners and managers of private capital assets in industries and on the land, a class of wage and salary earners, a permanent reserve army of labour consisting of unemployed people, and various intermediate classes such as the self-employed (small business and farmers) and the “new middle classes” (educated or skilled professionals on higher salaries).

• The finance of the capitalist state is heavily dependent on levying taxes from the population and on credit; that is, the capitalist state normally lacks any autonomous economic basis (such as state-owned industries or landholdings) that would guarantee sufficient income to sustain state activities. The capitalist state defines a legal framework for commerce, civil society and politics, which specifies public and private rights and duties, as well as legitimate property relations.

• Capitalist development, occurring on private initiative in a socially unco-ordinated and unplanned way, features periodic crises of over-production (or excess capacity). This means that a critical fraction of output cannot be sold at all, or cannot be sold at prices realising the previously ruling rate of profit. The other side of over-production is the over-accumulation of productive capital: more capital is invested in production than can obtain a normal profit. The consequence is a recession (a reduced economic growth rate) or in severe cases, a depression (negative real growth, i.e. an absolute decline in output). As a corollary, mass unemployment occurs. In the history of capitalist development since 1820, there have been more than 20 of such crises; nowadays the under-utilisation of installed productive capacity is a permanent characteristic of capitalist production (capacity utilisation rates nowadays normally range from about 60% to 85%).

In examining particular manifestations of the capitalist mode of production in particular regions and epochs, it is of course possible to find exceptions to these main defining criteria. But the exceptions prove the rule, in the sense that over time, the exceptional circumstances tend to disappear. Jump to: navigation, search The law of value is a concept in Karl Marxs critique of political economy. ... A wage is the amount of money paid for some specified quantity of labour. ... According to Karl Marx, there is a clear distinction between labor and labor-power in economics. ... Jump to: navigation, search Competition is the act of striving against another force for the purpose of achieving dominance or attaining a reward or goal, or out of a biological imperative such as survival. ... Jump to: navigation, search Profit is a positive return made on an investment by an individual or by business operations. ... Superprofit (or surplus profit or extra surplus-value; in German: extra-Mehrwert), is a concept in Karl Marxs critique of political economy, subsequently elaborated by Lenin and other Marxist thinkers. ... Sales, or the activity of selling, forms an integral part of commercial activity. ... Jump to: navigation, search Most generally, the accumulation of capital refers simply to the gathering or amassment of objects of value; the increase in wealth; or the creation of wealth. ... Privatization (sometimes privatisation, denationalization, or — especially in India — disinvestment) is the process of transferring property, from public ownership to private ownership. ... Jump to: navigation, search Surplus product (German: Mehrprodukt) is a concept explicitly theorised by Karl Marx in his critique of political economy. ... Jump to: navigation, search A state is an organized political community occupying a definite territory, having an organized government, and possessing internal and external sovereignty. ... In economics, a depression is a term commonly used for a sustained downturn in the economy. ... Jump to: navigation, search Dorothea Langes Migrant Mother depicts destitute pea pickers in California during the Great Depression. ... In the writings of Karl Marx and the Marxist theory of historical materialism, a mode of production (in German: Produktionsweise, meaning the way of producing) is a specific combination of: productive forces: these include human labor-power, tools, equipment, buildings and technologies, materials, and improved land social and technical relations...

State capitalist interpretation

As mentioned, Marx never explicitly summarised his definition of capitalism, beyond some suggestive comments in manuscripts which he did not publish himself. This has led to controversies among Marxists about how to evaluate the "capitalist" nature of society in particular countries.

Supporters of theories of state capitalism such as the International Socialists modify the definition of the capitalist mode of production given above. In their view, claimed to be more revolutionary (in that true liberation from capitalism must be the self-emancipation of the working class - "socialism from below"), what really defines the capitalist mode of production is: There are multiple definitions of the term state capitalism. ... International Socialists is the name of the number of Trotskyist organisations in the International Socialist Tendency. ...

• means of production which dominate the direct producers as an alien power;
• the existence of a wage-earning working class which doesn't hold or have power;
• the existence of an elite or ruling class which controls the country, exploiting the working population in the technical Marxist sense.

If true, then property relations generally and private property in particular are irrelevant to the definition of capitalism. The existence of commercial relations and commodity production, at least in an open form, are also irrelevant. The term working class is used to denote a social class. ... // Use of the term The concept of property or ownership has no single or universally accepted definition. ... This page deals with property as ownership rights. ... Commercial may mean: as a noun: a form of advertising, as in a television commercial as an adjective: referring to commerce or for-profit activities or trade (compare with non-profit organization) a breed of cattle, Commercial This is a disambiguation page — a navigational aid which lists other pages that...

Many of the state capitalist theories, (which actually originated in Germany, where they were already criticised by Frederick Engels), define "capital" only as a social relation of power and exploitation. Friedrich Engels Friedrich Engels (November 28, 1820 - August 5, 1895) was a German Socialist philosopher and the co-founder of modern Communist theory with Karl Marx. ... Social relation can refer to a multitude of social interactions, regulated by social norms, between two or more people, with each having a social position and performing a social role. ... Sociologists usually define power as the ability to impose ones Will on others, even if those others resist in some way. ... This article discusses the economic concept of exploitation. ...

This idea is based on some passages from Marx, where Marx emphasized that capital cannot exist except within a power-relationship between social classes which governs the extraction of surplus-labour. It is this power-relationship that is most important for the proponents of theories of state capitalism; everything else is secondary. Sociologists usually define power as the ability to impose ones Will on others, even if those others resist in some way. ... A social class is, at its most basic, a group of people that have similar social status. ... Jump to: navigation, search Surplus labour is a concept used by Karl Marx in his critique of political economy. ...

The underlying argument is that:

• Calling societies such as the USSR, China, Cuba and Vietnam etc. genuinely "socialist" or "communist" makes no sense and is confusing - because those societies have been just as oppressive and exploitative as capitalist societies. True socialism means workers' power, which would consist precisely in eliminating the exploitation and oppression of workers, and is impossible without workers' democracy.
• Alternative, "orthodox" Trotskist attempts to explain their oppressive nature by viewing them as "degenerated" or "deformed" workers' states fail for various reasons. For example, the spread of the same system to Eastern Europe without revolution, and the continuity of most of the same people in power before and after the collapse of the USSR and its satellite regimes, are held to be inconsistent with these explanations.
• Revisionist explanations that posit a new, third modern mode of production, neither true socialism nor capitalism, such as "bureaucratic collectivism", are implausible. It is difficult, for example, to give any clear economic or class basis for such a system; all attempts to date are held to be insufficient.
• These countries of "actually existing socialism" have effectively competed in the international (capitalist-dominated) market through the mechanism of the arms race, as well as some direct trade, and thus were subject to its pressures. This has forced them to function much like giant corporations, and so they have shared key characteristics of capitalism.
• Therefore, the USSR, China, Cuba, Vietnam etc. must be state capitalist, just as much as Western "state capitalisms."

The "state cap" interpretation of the capitalist mode of production, however, has its Marxist critics, who argue that:

• For the Western and Oriental bourgeoisie or capitalist class, capitalism is fundamentally about private enterprise based on private property and free markets.
• The majority of Russian, Chinese, Cuban etc. people have viewed their own societies as being some kind of socialism.
• "State-cap" interpretations cannot in truth be reconciled with Marx's own texts. They are very selective interpretations of those texts.
• "State-cap" theorists make their interpretation true by definition, by running together characteristics from very different historical epochs and forms of society. By the same token, they fail to identify what is specific about the socio-economic structure of different societies.
• The "state-cap" interpretation makes it difficult to understand how a transition from capitalism to socialism could occur, beyond general rhetoric about "workers power".

This does not mean, according to those critics, that state capitalism cannot exist; of course it can, if the state plays a very big role in an otherwise capitalist society, or monopolizes a strategic resource of major economic importance. Examples might be the U.S., during the Second World War if not the entire period since the New Deal, or the social democracies of Western Europe. But it does mean that the concept of the capitalist mode of production shouldn't be used indiscriminately, as, it is claimed, "state-cap" theorists do. Jump to: navigation, search Bourgeoisie () in modern use refers to the wealthy or propertied social class in a capitalist society. ... In economics, a capitalist is someone who owns capital, presumably within the economic system of capitalism. ... Jump to: navigation, search In common usage capitalism refers to an economic system in which all or most of the means of production are privately owned and operated and where the investment of capital, and the production, distribution and prices of commodities (goods and services) are determined mainly in a... Capitalism generally refers to a combination of economic practices that became institutionalized in Europe between the 16th and 19th centuries, especially involving the right of individuals and groups of individuals acting as legal persons (or corporations) to buy and sell capital goods such as land, labor, and money (see finance... This page deals with property as ownership rights. ... A free market is an idealized market, where all economic decisions and actions by individuals regarding transfer of money, goods, and services are voluntary, and are therefore devoid of coercion and theft (some definitions of coercion are inclusive of theft). Colloquially and loosely, a free market economy is an economy... Jump to: navigation, search The color red and particularly the red flag are traditional symbols of Socialism. ... There are multiple definitions of the term state capitalism. ... In the writings of Karl Marx and the Marxist theory of historical materialism, a mode of production (in German: Produktionsweise, meaning the way of producing) is a specific combination of: productive forces: these include human labor-power, tools, equipment, buildings and technologies, materials, and improved land social and technical relations...

References

• Karl Marx, Das Kapital
• Karl Marx, Grundrisse.
• Alex Callinicos, "Wage Labour and State Capitalism - A reply to Peter Binns and Mike Haynes", International Socialism, second series, 12, Spring 1979.
• Erich Farl, "The Genealogy of State Capitalism", in: International (London, IMG), Vol. 2, No. 1, 1973.
• Anwar Shaikh, "Capital as a Social Relation" (New Palgrave article)

http://homepage.newschool.edu/~AShaikh/pal2.pdf Das Kapital (Capital) is a very large treatise of political economy written by Karl Marx in German. ...

• Marcel van der Linden, Western Marxism and the Soviet Union. New York: Brill Publishers, 2005 (forthcoming).
• Fernand Braudel, Civilization and Capitalism.

See also

• mode of production
• simple commodity production
• capital
• capitalism
• state capitalism
• state monopoly capitalism
• capital accumulation
• primitive accumulation of capital
• relations of production
• surplus labour