Book Review: Capital (Das Kapital) by Karl Marx

Having read some of the great communist works early last year (The Communist Manifesto, The Condition of the Working Class in England in 1844, Socialism: Utopian and Scientific) here I finally come to the daddy of them all. Or did I?

First up, though, a confession. The version I read, in the Oxford World Classics range, is an abridgement. Marx originally intended for his magnum opus to be 5 volumes, but he only finished volume 1. Volumes 2 and 3 were substantially complete at the time of his death, finished off and published by Friedrich Engels. The volume being reviewed contains most of volume 1, a tiny bit of volume 2 and some slightly longer extracts from volume 3. I don’t normally read abridged versions, but it was not my intention to become a disciple of Marx, but rather to understand his thoughts so that I could have a more informed view of what Marx thought. After all, was he not rumoured to have said, upon hearing a particular view described as Marxist, “if that is Marxism, then I am not a Marxist”?

Marx begins with a detailed look at the nature of commodities. What are they are how they are valued. He distinguishes between different kinds of values. It’s important to keep these in mind throughout, as use-value is a different beast to exchange-value, yet we all too easily think of “value” as though it were one thing represented on a price tag. The example Marx starts with is that of a coat and of linen. A coat may be exchanged for 20 yards of linen. Yet the use-value of a coat is not the same as the use-value of 20 yards of linen, for they are intrinsically different and serve different purposes. So use-values cannot be used for comparison. Instead, we need to then consider exchange-values. So a coat may be exchanged for 20 yards of linen or for a quantity of coal or for any other commodity. But then all we have are a set of relative exchange-values expressed, essentially, in terms of barter. One may choose any one commodity to be the standard by which all others are measured. In the economics of the time Marx lived and wrote, this was gold. And we still refer to the gold standard today. Yet it might be interesting to consider what Marx may have made of something like Bitcoin.

And so we get to the concept of money. We see that money is an intangible thing but which is commonly represented by gold, and which is the means of exchange. There is a slight flaw in Marx’s analysis here as he makes a statement that the value of money does not change with time. Yet as almost anyone trained in economics or accounting will be able to tell you, a sum of money does diminish in value over time. Unless you have perfectly steady state economics (see here for more detail) then the time value of money has to be taken into account.

From here we get to the notion of capital. It is something that is tricky to summarise, as it is best dealt with by example. The kind that Marx uses is by contrasting two different types of transactions. One of these is what he sees as a precapitalist kind of transaction whereby an artisan has a commodity, sells it for money and then uses that money to buy other commodities. In contrast, the capitalist transaction process begins with money which is used to buy a commodity (C) and then gets sold on for a higher value of money (M). In chain form, the contrast is between C-M-C’ and M-C-M’. Where C’ is a different commodity from C and M’ is a different sum of money from M. Yet M and M’ are both capital. M is the initial capital and M’ is the final capital. Only then, in Marx’s analysis M’ then becomes the start of the next chain of transactions.

As an aside, it was interesting to think through more recent economic practices, particularly that of short selling, which gained notoriety during and in the aftermath of the 2008 global economic crash. That is very similar to C-M-C’ only in this case C=C’ and the commodity is sold before it is purchased.

For those of you who have some basic accountancy training, the concept is readily identifiable as the process of what happens when you roll forward the accounts of a sole trader where their initial sum is generally referred to as capital anyway. So even though Marx is rightly considered the father of communism, this is not an inherently communistic work. The fact that modern capitalists still use his methodology is indicative that in this respect, at least, his analysis was spot on.

One of the odd features of the book is that at various junctures, Marx tries to posit that there are fundamental contradictions within the capitalist system. But I had to ask myself “what contradictions?” Perhaps it is a consequence of my more modern point of view, but it seemed that the contradictions were only apparent when phrased in the particular way that Marx puts them. In other words, it was flawed questioning and the assumptions that went into those questions that skewed Marx’s thinking and creating the illusion of a contradiction when in fact there was none. One could think of Zeno’s paradoxes as a comparison.

One of the key notions that Marx introduces is that of “surplus value”. He derives this by looking at the value that a worker imparts to his work. As soon as the value imparted is equal to the value required for the worker to live off, then anything in addition is considered surplus. In other words, if (to use today’s prices by way of illustration) a worker is paid £75 per day, then Marx argues that (s)he need only work for as long as it takes him/her to produce £75 worth of goods. If, though he makes this up in 6 hours and the working day is 12 hours, then the employer, the capitalist, gets £150 of value out of the worker, but only spends £75. It is the difference between these two that Marx defines as surplus value.

You may wonder, as I did, whether this was not simply profit. It seems a slightly roundabout way of looking at it. Indeed, it is not until much later on that the admission is finally made that surplus value is the same as profit. Though the example I used above was done so deliberately, as Marx always assumes that rate of surplus of surplus profit is 100%. This assumption is never justified, though his analysis would seem to still work if a different rate were used. It is just unfortunate that his choice of 100% means that some of his numbers are easily confused.

This leads Marx to look at the exploitation of the labourer. His chapter on working conditions makes for sobering reading, as he looks at the extent to which the capitalist system sought to extract out of the worker every last ounce of work in order to generate more and more surplus value (profit). There is even an argument made that work diminishes the lifespan of the worker. Marx is not at this point talking about unhealthy working conditions, but that the mere act of work reduces one’s life expectancy. It’s an argument I found unconvincing as there are so many other factors to take in to account that a controlled experiment or study to determine shortened life seems unfeasible. So at best it is supposition.

Having looked at how capital gives rise to more capital, the question Marx then asks is “[where did it start from?]” In answering this Marx reverts back to his historical paradigm as espoused in the introduction to The Communist Manifesto. He argues that capital only arose through violence and theft. While I subscribe to the idea that there is no such thing as a neutral view of history, Marx is clearly far from it here. He seems to cherry pick his evidence and ignores a wide variety of other factors. It’s not a wholly false view, but it does come across as over-polarised and quite susceptible to critical enquiry.

The rest of the book looks in some detail at various aspects of 19th century industry through the perspective of the above analysis. The focus is inherently industrial which was certainly right for the time that Marx was writing in, though as we are now in a post-industrial age it seems that much of what he observed has now been rendered redundant. Capitalism has moved on and changed in many aspects.

It is for this reason that I would consider much of Das Kapital to be out of date. It served its purpose in a different age, but one has to pick through it to find elements that are applicable to today’s world. I would certainly not advocate throwing the whole lot out of the window, as some might be tempted to do, particularly if they continue under the impression that Das Kapital is a programme for a communist economy. Because one of the failings (possibly Marx may have intended this for later volumes) is that while the book is full of critique, he proposes very little positive change. He says “[this is wrong]” but doesn’t put forward an alternative. Also the very high focus on the industrial age of manufacture has little bearing on a predominantly service-based economy. He does attempt to address services, but is all too brief and dismissive.

So where do we go from here? First of all, at the start of the volume Marx states that he is building upon the work of G.W.F. Hegel and his development of dialectic materialism. I confess that I have neither read any Hegel nor read much about him. So perhaps it would be wise to learn a bit more in that regard before reassessing Marx. Also, it seems that the modern world is need of a critique every bit as sharp as Marx’s, but which takes into account the changes that have occurred in the last century and a half or so. For that, I think our best bet is Thomas Picketty. So it is my intention to review his Capital in the Twenty First Century at some point. Before that, though, it is only fair to hear a view from the other end of politico-economic spectrum.

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