(This educational material has been prepared as part of the course “The political economy of capitalism“)
25. The universal law of capitalist accumulation
The accumulation of capital means above all the growth of capitalists’ wealth. As capitalism develops, as production expands, so does the number of the working class. But capitalist production develops in a contradictory manner. On the one hand, there is a growing demand for labor, and on the other hand, there is a huge surplus of it in the form of an army of unemployed. What is the cause of this phenomenon?
As we know, capital is divided into two parts: constant “c” and variable “v”. The relationship between them is called the organic structure of capital. The bigger constant capital is in comparison to variable capital, the higher the organic structure of all capital involved in the capitalist production. The level of the organic structure of capital reflects the growth of the technical armament of labor. For example, the change from a hand spinning wheel to a spinning machine or from a hand saw to a chainsaw means a tremendous increase in the technical armament of labor. The proportion of constant capital increases by comparison, and hence the organic structure of capital also increases.
The development of capitalism, the growth of capital accumulation, inevitably leads to an increase in the share of constant capital and, consequently, a decrease in the share of variable capital. This is caused by the fact that capitalists, under the influence of competition and in the pursuit of additional surplus value, improve production techniques and technology. This increases expenses on constant capital.
The growth of the organic structure of capital is characteristic of any capitalist country. For example, in 1889 in the U.S. manufacturing industry constant capital (c) was $8.3 billion, variable capital (v) was $1.8 billion. And in 1959, respectively: c was $303.8 billion, a v was $43.2 billion. During this time, permanent capital increased 36-fold, while variable capital increased only 24-fold, i.e., its growth was much slower. For every dollar of variable capital there was $4.6 of constant capital in 1889 and $7 in 1959. The same process continues today.
What are the consequences of the growth of the organic structure of capital?
First of all, the demand for labor (in relative terms) is decreasing.
Let’s assume that the organic structure of capital is 1/1, i.e., every 100 units of capital consist of 50 c and 50 v. If, when capital is renewed, the organic structure of capital changes to 3/1, then the organic structure of 100 units of capital will be expressed as follows: 75 c + 25 v. Thus, the variable capital will decrease by a factor of 2. This means that the demand for labor will also halve.
Capitalist accumulation leads to an absolute decrease in the demand for labor when the former capital is reproduced with an increased organic structure, and to a relative decrease in the demand for labor when additional capital is produced in the course of accumulation. The formation of a vast army of the unemployed, who serve as a colossal reserve of labor for the capitalist factories and plants, is thus inevitable. This army of the unemployed is called the industrial reserve army.
The formation and growth of an industrial reserve army is a demographic law characteristic only of the capitalist mode of production.
“The working population,” wrote C. Marx, “by producing an accumulation of capital, thereby produces in increasing amounts the means which make it a relatively surplus population. This is the law of population peculiar to the capitalist mode of production…”
Hence the capitalists’ barbaric attitude toward the labor force, toward the proletarian and laboring masses, which in the age of imperialism expresses itself in such ultra cynical measures as artificial reduction of the population of certain countries, the destruction of entire peoples by purposefully organizing famines, wars, spreading drug addiction, deadly diseases, etc.
In the course of capitalist accumulation, a growing army of idle workers is created. This army is not only inevitable, but essential to the existence and development of capitalism. Lenin wrote: “The army of the unemployed is a necessary part of the capitalist economy, without which it could neither exist nor develop”.
But this does not mean that as the organic structure of capital increases, the number of workers employed in production decreases in absolute terms. As the volume of production increases, additional investments of capital are made in capitalist production, and hence the number of the working class grows, although its share in the total capital decreases.
When there are many unemployed, it is easier for capitalists to increase the degree of exploitation of already employed workers. The unemployed become, as it were, their competitors. Capitalists take advantage of this by lowering wages, lengthening the working day, increasing the intensity of the work, passing some of their expenses onto the workers, for example by making them buy their own overalls, etc.
All this leads to an increase in the exploitation of workers, an increase in the accumulation of capital.
In addition, the capitalists need the reserves of free labor hands very much in order to expand production when the need arises.
As we can see, the course of capitalist accumulation turns one part of the workers into unemployed, while it subjects another part, the employed workers, to ever-increasing exploitation. This process is constant, which means that the army of the unemployed is constantly growing.
There are three forms of unemployment: fluctuating, hidden, and stagnant.
Fluctuating unemployment is caused by the unequal development of capitalist production. Some enterprises close, unable to withstand the competition, while others arise. Some enterprises introduce new machinery and throw out employees who have become unneeded, while others expand production and attract new workers. In some factories and plants, workers who have reached the age of 35-40 become “unfit”, while the owners of other factories are ready to accept them, but for very low pay and part-time work, etc., etc. Therefore, many workers are either unemployed, joining the ranks of the reserve army of labor, or find it again, but usually with lower pay.
Thus, a certain part of the labor force is drawn in and out of production. Fluctuating unemployment is characteristic of all capitalist countries.
Hidden unemployment comes mainly from the ranks of poor agricultural workers. Under present conditions capitalist machine production is occupying more and more of the agricultural sector. The mechanization and chemicalization of production processes is growing, the use of artificial fertilizers is increasing, the share of industrial feed production is increasing, the processing of milk, vegetables and other products is separating from agriculture and becoming an industry. Together, all this leads to a diminishing demand for labor power in agriculture.
This is why the development of capitalism in agriculture produces agrarian overpopulation. The ruined agricultural workers, unable to find work in the city, are forced to keep their tiny piece of land, even though it cannot provide even the lowest standard of living.
But if there is a great demand for labor in industry, the agrarian workers, most of them laborers with an allotment, abandon their land and join the ranks of the industrial proletariat.
Agrarian overpopulation is a hidden form of unemployment. But bourgeois statistics classify ruined farmers as self-employed (“self-employed”), which, of course, seriously improves the “statistics” of capitalist countries by greatly reducing the actual size of actual unemployment in the country.
Stagnant unemployment. In any capitalist country there are elderly workers, former bushmen and craftsmen, disabled workers, etc., and they make up a considerable part of the population. They cannot find permanent work and are forced to live off casual earnings or occasional work at home for the factory or store. This stratum leads a half-starved existence, “characterized,” as Marx writes, “by maximum working hours and minimum wages,” and “constitutes for capital an inexhaustible reservoir of free labor”. These unemployed people are subjected to the most brutal exploitation. In the end, finally knocked out of the sphere of production, many of them join the numerous ranks of beggars, vagrants, etc.
Such is the result of the accumulation of capital. At one pole of bourgeois society, the gigantic growth of the capitalists’ wealth is concentrated and, at the same time, at the other pole, the strengthening of the exploitation of the working class, the growth of unemployment, poverty and deprivation. This is the essence of the universal law of capitalist accumulation discovered by Marx. Marx formulated it as follows: “The greater the social wealth, the functioning capital, the size and energy of its increase, and consequently the greater the absolute size of the proletariat and the productive power of its labor, the greater the industrial reserve army… the relative size of the industrial reserve army increases along with the increase of the forces of wealth. But the larger this reserve army compared to the active labor army, the more extensive the permanent overpopulation, whose poverty is directly proportional to the suffering of the active labor army from exploitation. Finally, the greater the poverty of the working class and the industrial reserve army, the greater the official pauperism. This is the absolute, universal law of capitalist accumulation.”
The universal law of capitalist accumulation is one of the most important manifestations of the basic economic law of capitalism – the law of surplus value. The root cause of the accumulation of capital and the worsening situation of the proletariat in bourgeois society is private ownership of the means of production, the exploitation of labor by capital, and the capitalists’ pursuit of the maximum surplus value.
The accumulation of capital and the accumulation of poverty and the agony of labor are two inseparable sides of capitalist society.