Capital grows in leaps and bounds not because of the asceticism practised by capitalists. Capitalists employ all sorts of tricks to accumulate more of it. It is not without reason that Marx used the metaphor of a werewolf and a vampire to describe a capitalist.
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IT was the great French novelist Gustave Flaubert who, in his little-known book the Dictionary of Received Ideas (1911), described the term 'free trade' as the "cause of ruination of all nations".
Capitalism, as we know, did not drop from the sky. It arose out of specific historical and social conditions. Capitalism arose specifically in Europe in the sixteenth century. It was the time when mercantile capitalism was founded, with trade links being established with various metropolises of the world. The medieval world was crumbling— a fact attested to by the plays of English playwright, poet and actor William Shakespeare— and a new world was coming into being.
The nascent and sporadic nature of capitalism got the requisite boost when in the eighteenth century in England and in parts of Europe, there emerged what historians call the Industrial Revolution. For the first time in human history, the factory and not one's home became the site of production.
“According to this legend, a capitalist is able to accumulate wealth because they lead a simple lifestyle. The reason why they become rich is that by abstaining from consuming all that they are producing, they are thereby, at the same time, also saving some of it. And these savings will later be converted into capital.
Capitalism as we know, despite perpetrating structural inequalities and violence, has managed to remain a dominant mode of production and exchange across a large part of the globe. Despite so many predictions about capitalism's inevitable withering, it remains, even in our time, a fairly popular mode of production and exchange of commodities.
A short history of capitalism tells you that this mode of production and exchange did not remain confined to Europe. This system was transported to the colonies. The Indian sub-continent that did have remnants of capitalism, developed once the stock exchange was formed in London in 1801. This enabled capitalism to develop in the colonies.
But capitalism is bad, so we are told. Yet somehow it has managed to survive, and mutate. This must be a conundrum of some sorts. For after all, if something is bad, it is rejected by the people. This is what common sense tells us. But in this case, common sense fails to explain the story of the success of capitalism; a mode of production that India in particular has openly embraced since the 1990s.
My argument is that this is possible because capitalism is not just a mode of production, but more than that, it is a set of ideas. It is a reflection of the world. For instance, as Scottish economist and philosopher Adam Smith argued, "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own self-interest."
While the kernel of capitalism is, as Smith says, to pay regard to one's self interest, there are other ideas that make capitalism possible. Generation of profit is another major idea of capitalism. It is this that will be examined in this piece. The question that is often asked is how is profit generated?
Some of you may have heard or read about industrialist and philanthropist Ratan Tata flying with an economy class ticket, or a similar story about billionaire businessman Anand Mahindra's austere lifestyle. There are a plethora of such stories doing the rounds on the internet and in print media.
Writing about the industrialist Birla family in his book India Unbound (2000), author Gurcharan Das had this to say:
"Aditya Birla was shy and it was difficult to believe that he was G.D. Birla's grandson and the inheritor of one of the largest family fortunes in India… However, stark simplicity had been part of his family tradition."
Sometime back it was revealed that one of the richest men on this planet, Elon Musk, is so simple that he does not even own a house. He, like Robinson Crusoe, owns next to nothing. Businessman and philanthropist Azim Premji is rumoured to lead such a simple life that he monitors toilet papers and switches off lights at his office before leaving the premises. Apparently, he avails of autos to go to the airport and return from there to his home.
“If a lay person were to believe in this idea that an austere lifestyle makes profit possible, then they would fail to comprehend the actual and scientific reason behind their wage-slavery.
These are but a few anecdotes; discerning readers and Google users may find many such stories that are meant to act as a red herring for the masses. According to this legend, a capitalist is able to accumulate wealth because they lead a simple lifestyle. The reason why they become rich is by abstaining from consuming all that they are producing, they are thereby, at the same time, also saving some of it. And these savings will later be converted into capital.
Readers would have noticed that in the above theory, the entire question of worker's existence is ignored. It is as if labour had no part in producing profit for the capitalists.
The theory of abstinence is not a new theory, nor is Das its first avatar. The earliest proponent of this theory is English lawyer and economist Nassau W. Senior. Senior was a professor of political economy, and in the early part of the nineteenth century, that is, during German philosopher, author, social theorist and economist Karl Marx's lifetime, he taught economics to students at Oxford University.
Those who have read Marx's Das Kapital (1867), particularly Volume 1, would know well that Marx had devoted some pages on the figure of the capitalist 'abstainer', "that Knight of the woeful countenance", as Marx describes them. Prof. Senior in his An Outline of the Science of Political Economy (1836) that was written, as Marx says, "for the instruction of Oxford students and cultivated philistines," has proposed this theory. Senior wrote, "When the savage makes bows, he exercises an industry, but he does not practise abstinence." The chief quality that makes one a capitalist is actively practising a form of self-denial.
Marx, paraphrasing Senior, wrote that, "Profits then are derived from the labour of the capitalist, and interest from his asceticism, in other words, from his abstinence."
Capitalism, as we can see, not only makes its existence possible on the strength of law and its institutions; capitalism is able to operationalise itself because it can give birth to a vast array of ideas and theories that shimmer at first but crumble upon serious inspection. If a lay person were to believe in this idea that an austere lifestyle makes profit possible, then they would fail to comprehend the actual and scientific reason behind their wage-slavery. As Marx wrote, "To be a productive labourer is, therefore, not a piece of luck, but a misfortune."
This is the reason Marx himself set out to analyse the fundamental laws that make capitalism possible. Profit is generated in capitalism; there is no doubt about this. The only question is: how? For liberals, as we have seen, abstention is the chief reason, while for Marx, it is the other way around.
“According to Marx, surplus value is generated only when the capitalist receives more than he gives.
The first volume of Das Kapital, referred to in the Marx household as the 'leviathan', duly appeared in 1867. This was the German edition. The English edition (usually known as Capital: A Critique of Political Economy) appeared in 1887.
Das Kapital is the most famous anti-capitalist text ever authored in human history. It is justly referred to as 'the Bible of the working class'. Marx had developed a whole web of theories, ideas and concepts that enabled one to see the flip side of capitalism. One of the sturdiest theories that Marx developed in Das Kapital, volume one is the theory of surplus value, alongside two other theories: the theory of primitive accumulation, and the modern theory of colonisation. These three theories actually dethroned the claim that profit is produced due to abstinence of the capitalist.
Readers of Marx would be aware that these theories, that is, the theory of surplus value, the theory of primitive accumulation of capital, and the modern theory of colonisation, do not appear in the early works of Marx. They do not find any mention, for instance in the Paris Manuscript or the Economic and Philosophic Manuscripts of 1844. These theories are the product of life-long research conducted by Marx.
On surplus value, Marx had written in Part V, Chapter XVI, titled 'Absolute and Relative Surplus Value' that:
"Capitalist production is not merely the production of commodities; it is essentially the production of surplus value. The labour produces, not for himself, but for capital. It no longer suffices, therefore, that he should simply produce. He must produce surplus value. That labourer alone is productive, who produces surplus value for the capitalist, and thus works for the self-expansion of capital. If we may take an example from outside If we may take an example from outside the sphere of production of material objects, a schoolmaster is a productive labourer when, in addition to belabouring the heads of his scholars, he works like a horse to enrich the school proprietor.
That the latter has laid out his capital in a teaching factory, instead of in a sausage factory, does not alter the relation. Hence the notion of a productive labourer implies not merely a relation between work and useful effect, between labourer and product of labour, but also a specific, social relation of production, a relation that has sprung up historically and stamps the labourer as the direct means of creating surplus-value. To be a productive labourer is, therefore, not a piece of luck, but a misfortune."
According to Marx, surplus value is generated only when the capitalist receives more than he gives. If the capitalist paid to the labourer, say X amount of money and he got back labour of the exact amount, in such a transaction, no surplus value would be generated. Surplus is generated when the labour is compelled to give more than the wages they receive.
Capitalism would have looked like a private form of socialism if this were indeed the case. But, we know that this is not so. Profit is the engine that drives the train called capitalism. So, generally speaking, there are two known methods that allow one to accumulate wealth. The first is prolongation of the working hours and intensification of the working time with the aid of machinery. The second is the lowering of the hourly or daily wages.
Aside from conceptualising this hugely productive theory of surplus value, Marx also formulated the theory of primitive accumulation of capital that we may now briefly consider.
The theory of primitive accumulation of capital is one of Marx's most notable contributions to the study of social science. The question that often arises is if Z is a capitalist, how on earth did they acquire capital? After all, the power to appropriate collective labour that once belonged to the king is now in the hands of a capitalist. The hands that once built the Pyramids and the Taj Mahals at the command of the king are now producing commodities in factories.
Writing on primitive accumulation, Marx had this to say:
"The discovery of gold and silver in America, the extirpation, enslavement and entombment in mines of the aboriginal population, the beginning of the conquest and looting of the East Indies, the turning of Africa into a warren for the commercial hunting of black-skins, signalized the rosy dawn of the era of capitalist production. These idyllic proceedings are the chief momenta of primitive accumulation."
It was French socialist, politician, philosopher and economist Pierre-Joseph Proudhon who had famously said that property is theft. It is this that Marx tried to theorise.
“Conquest, enslavement, robbery, murder, and force play a great part in allowing the capitalist to horde wealth.
Primitive accumulation is a process of gathering capital. According to Marx, it plays the same part in the political economy as the original sin in theology. Conquest, enslavement, robbery, murder, and force play a great part in allowing the capitalist to horde wealth. Creating forms of enclosure by evicting peasants from land is one of the oldest sports of the capitalist, something we saw for ourselves in India during the historic Kisan Andolan.
Capital grows in leaps and bounds not because of the asceticism practiced by the capitalist. Like Shylock, it employs all sorts of tricks to accumulate more of it. There is no crime that the capitalist does not commit, be it murdering an individual or an entire society. The creation of colonies is an excellent example of this.
It is not without reason that Marx in his magnum opus used the metaphor of a werewolf and a vampire to describe a capitalist. As Marx stated, "Capital is dead labour, that, vampire-like, only lives by sucking living labour and lives the more, the more labour it sucks."