Chapter fifteen

ECONOMIC DEVELOPMENT OF CAPITALIST SOCIETY. PRODUCTIVE PHASE (INDUSTRIAL CAPITALISM).


1. Socio-productive relations.


After levelling the rates of trade and employers' profit, the mass transfer of capital from the sphere of trade to the sphere of production began. It does not mean that some crisis in the sphere of trade set in; on the contrary there was no even the reduction of capital there. The volume of capital in the sphere of commerce continued to rise, but the pace of this growth became much smaller comparing to that at the trade phase and comparing to that in the sphere of production at the productive phase of capitalist society, or industrial capitalism.

As a result of this mass investment of capital into the sphere of production, the large capitalist production, agricultural and, especially, industrial, appeared; at first, it only supplemented the small production, but then it subordinated the latter turning to the basic form of social production. All the necessary conditions were created for the development of large capitalist commodity production. The bourgeois social revolution had released all the labourers from serf slavery. The trade capitalism had "released" a considerable part of labourers from their means of production, putting the major part of other small owners to the verge of beggarly existence and, at the same time, concentrated huge capitals in the hands of single persons. The industrial-technical revolution provided the large capitalist production with machine technics, new materials, new kinds of energy, new methods of processing, and operational division of labour.

As soon as capitalists began to gain equal profits in the spheres of production and trade on the same capital, the large capitalist production began to grow rapidly and soon it dominated in the capitalist society. XVIII and XIX centuries were the era of prevalence of production capital, era of industrial capitalism. Having subordinated the sphere of production to its domination, capital, first of all, performed the technical overturn in industry that is usually called industrial overturn. As a result of this overturn, the traditional artisan hand technics was substituted for qualitatively new, more powerful, more productive, more effective machine technics. At the same time, capital began to widely use the operational division of labour in production, especially in industrial one.

Generally speaking, the term industrial overturn or industrial revolution is used by different researchers to designate different phenomena, though occurring more or less simultaneously. Some of them use the term industrial overturn in the meaning of technical overturn in social production. And since the technical overturn on the basis of machine technics took place, first of all, in industrial production, it is called industrial overturn. Other researchers interpret the industrial overturn as the process of industrialization of one or another country, i.e. as structural-branch overturn. The third group of researchers understand the industrial overturn as the process of transition of capitalism from trade phase to production one, transformation of trade capitalism to industrial capitalism. Finally, the fourth group unite all the three above phenomena in various combinations under the same term industrial overturn adding still more confusion to this question. May be, to make things clear, it would be better to refuse from this term at all?

The productive forces of industrial capitalism differed from those of trade capitalism radically. First, by the fact that the social production of trade capitalism was based on primitive pre-machine technics: draught mechanisms in agriculture and hand technics in industry. Machine technics, though being applied, played a secondary role since the small individual economy of peasants and craftsmen did not let them use expensive machine technics. But the social production of industrial capitalism was grounded on up-to-date machine technics the use of which enabled capitalists to rise the labour productivity sharply and to lower the costs of production. The second distinction is in the fact that the large capitalist production, especially industrial one, unlike simple commodity production, made wide use of the benefits of operational division of labour. Third, the large capitalist production widely applied the achievements of technological progress. Finally, fourth, while the leading branch of trade capitalism was agriculture, the main branch of industrial capitalism was industry.

The same way radical was the difference between socio-productive relations of trade and industrial capitalism. If, at the trade phase, the dominant form of ownership of the main means of production was the small individual ownership, then, at the productive phase, the large private capitalist ownership became the prevailing form. If, in trade capitalism, the production was based on free labour of independent producers, then the production of industrial capitalism was grounded on hired labour of workers who got to life servitude to capitalists-employers. If the social production of trade capitalism was small, decentralized, then that of industrial capitalism became large, relatively centralized. If the main classes of trade capitalism were the class of trade bourgeoisie and the class of small commodity producers, then the main classes of industrial capitalism were the class of industrial capitalists and the class of industrial hired workers.

During the transition of capitalism from the first, trade to the second, production phase, the form of exploitation of labourers by capitalists had changed as well: the trade exploitation, as the main form, was substituted for production one, i.e. exploitation in process of capitalist production. At that, the trade exploitation had not dwindled a bit; it continued to grow with the expansion of commodity production and commerce. But the scale of production exploitation increased much faster, so that it became the main form of exploitation at the production phase of capitalism.

In the period of industrial capitalism, the hired workers, formed as a class from broken small commodity producers, began to constitute, first, relative and, then, also absolute majority of population; at that, the major part of the class of hired workers was occupied in industrial production, including construction, while a smaller part was used in other branches and sectors of social production: transport, agriculture, commerce, human services, etc.

The small commodity makers, that were the basis of society in the period of trade capitalism, broke in masses during the industrial capitalism, being not able to stand competition with the large capitalist enterprises based on machine technics and operational division of labour, the price of production of commodities at which was lower than that of small commodity producers. In the period of industrial capitalism, the number of small commodity producers reduced all the time; masses of them entered the class of hired workers. On the contrary, the number of capitalist enterprises increased, they became larger, exploiting ever growing number of hired workers and bringing ever growing number of small commodity producers to ruin by means of competition.

2. Exploitation of hired workers in the sphere of production.
Production (employers) profit.


At the production phase of bourgeois-capitalist society, the main exploited class was the class of hired workers, the exploitation of which was significantly different from that of small commodity producers in the time of trade capitalism. If the small commodity makers were exploited in process of circulation, trade exchange, then the hired workers occupied in the sphere of production were exploited in process of production; K.Marx proved that in the first volume of Das Kapital. Meanwhile, many bourgeois economists continue to insist that the class of hired workers is exploited not by capitalists-employers in the sphere of production but by capitalists-traders in the sphere of exchange. They explain this in such a way that employer pays workers the value of their labour in full, but traders, buying the commodities of employers at their values (or, rather, prices of production), sell them at the prices higher than values (prices of production). But where does the employers profit appear from? The others assert that employers, paying for labour at its value, sell their commodities to traders with extra charge, i.e. at a price higher than value. This very difference is employers profit. But if, as it was convincingly proved by Marx in the first volume of Das Kapital and by Engels in the foreword to the third volume of Das Kapital, all commodities on commodity market are sold, in spite of the law of value, at the prices higher than values and only one commodity named labour is sold at its value, then, in the end, everything would remain the same if we proceed from the fact that all the commodities are sold at their values and only labour of hired workers is paid not in full but partially. In both cases hired workers are exploited by capitalists: employers and traders. Simply, in the first case, the workers are exploited as consumers, and in the second one as producers. But is it so, are hired labourers really exploited as consumers, as bourgeois economists say? Or Marx was right?

Lets imagine an agricultural capitalist-employer that sells all his agricultural products on the market. It is hard to understand here, how the agricultural hired workers are exploited as consumers or as producers since they get their wages from employer in the form of money. Commodity-money relations mask, disguise the real essence of process of exploitation. But lets suppose that one, not very fine day or year our capitalist meets with difficulties in the sale of his agricultural products. In order to get out of this situation, he, by agreement with hired workers, temporarily replaces money wage by wage in the form of agricultural products. As natural or product payment, he gives them some part, say, one half of agricultural products made by these hired workers at his enterprise. Lets suppose, to avoid confusion, that material costs are negligible. Another half of agricultural products made by the hired workers pass into the possession of capitalist irrespective of their further destination: to be used directly by the capitalist and his family or to be sold, in full or partially, on the market. Has this capitalist paid his workers for their work in full? Not, of course. Otherwise, where would the second half of agricultural products come from? The exploitation in this example comes out as exploitation in process of production since the hired workers do not buy consumer goods on the market and, therefore, are not exploited by trade bourgeoisie as consumers. They are exploited by capitalist-employer as producers in process of production. But if it is true for some part of hired workers it should be true for the others, if it is applicable for hired workers today it should be applicable tomorrow or next year, regardless of the form in which they get their wages: money or natural.

Hired workers create, in process of labour, i.e. in process of consumption of their labour power, labour products of higher value than that of their labour power. For example, hired worker creates the product of labour, value of which is equal to the value of his labour power. But the capitalist hired him under condition that the worker would work for him during 8 hours day. So, the labour product created during the next 4 hours constitutes the surplus product, and its value is the surplus value that is appropriated by the capitalist-employer free of charge.

All the 8-hour working day is divided to necessary and surplus labour. The necessary labour comes out as paid labour, while the surplus labour as unpaid labour. The necessary or paid labour creates the necessary product, the value of which is equal to the value of workers labour power; the surplus or unpaid labour creates the surplus product, the value of which is equal to surplus value or employers profit (if one does not account the fact that some part of surplus value is expropriated: by bourgeois state in the form of taxes, by money capitalist in the form of loan interest, by landed capitalist in the form of ground rent, and by trade capitalist in the form of trade profit).

Thus, industrial capitalist pays only some part of workers labour. The remaining part of labour is left unpaid. Worker creates the product of labour of higher value than the value returned by capitalist. Consequently, non-equivalent exchange takes place here. The mechanism of exploitation of the class of hired workers by the class of employers-capitalists has been thoroughly investigated by K.Marx in his famous Das Kapital, so there is no need to dwell upon this question in detail; otherwise, it would take too much space, that we could not afford within the framework of our investigation. Besides, there is no need to repeat the facts that have already been investigated and became the subject of many literary works, including manuals and popular books.

3. Economic laws and economic contradictions.


In process of development of industrial capitalism, not only the growth of number of large capitalist enterprises but also their increase in size took place. Capitalist enterprises became larger and larger; they were far bigger than the largest latifundia of Ancient Rome. But if the latter gave lower and lower rate of profit as they became larger, then the large capitalist industrial enterprises, growing more and more in size, gave, as a rule, higher rate of profit than smaller enterprises.

One of the main reasons of higher efficiency of larger capitalist enterprises was the use of benefits of operational division of labour. If we take two large slave-holding latifundia with the same level of technics and technology, in one of which the number of serf slaves is twice as much, then this larger (by size of land and by volume of production) latifundium would give its owner a lower rate of profit than the other, somewhat smaller latifundium. On the contrary, if we take two large industrial enterprises with similar technics and technology, manufacturing the same production, and the number of hired workers at one of them is twice as much, then the larger enterprise would bring, as a rule, a higher rate of profit, than the other, smaller enterprise.

These directly opposed changes of efficiency of enterprises depending on their size are consequences of the action of law of correspondence of production centralization degree to the level of operational division of labour. The centralization of production in slave-holding latifundia was too high for their level of operational division of labour. There was a discrepancy between the centralization of production and operational division of labour; and the larger was the latifundium, the larger was this discrepancy. But the more is the discrepancy between the degree of centralization of production and the level of operational division of labour, the more evident is the violation of the economic law, the less effective is the production, the lower is the rate of profit it brings.

On the contrary, at capitalist industrial enterprises, the centralization of production corresponds, more or less, to the level of operational division of labour for larger enterprises, and the larger is industrial enterprise, the better is this correspondence. The level of operational division of labour in capitalist industrial production based on machine technics grows much faster than the degree of centralization of production, size of enterprises.

In XVIII century, the centralization of industrial production corresponded, more or less, to the level of operational division of labour. In XIX century, there appeared a contradiction between them consisting in the fact that the rate of growth of operational division of labour was to be restrained, since relatively small size of industrial enterprises hampered its further rapid development. The use of machine technics in production and in transport (that led to the sharp decrease of transportation costs), application of new technology, production of complex industrial products consisting of many parts for production of which a great number of various operations was needed; all these gave the vast opportunities for the growth of level of operational division of labour and, consequently, for the increase of labour productivity, but relatively small dimensions of capitalist enterprises did not enable to implement these benefits of operational division of labour. Comparatively slow agglomeration of industrial enterprises at productive phase of capitalist society hampered the growth of operational division of labour. The opposite picture can be seen in large slave-holding production. There, the agglomeration of enterprises took place quicker than the growth of operational division of labour did. The large slave-holding latifundia became too centralized comparing to low level of operational division of labour, so their efficiency dropped as they grew. On the contrary, capitalist enterprises in XIX century, especially in its second half, became too decentralized comparing to sharply increased level of operational division of labour at the largest, more advanced enterprises.

This economic contradiction between the centralization of industrial production and the level of operational division of labour became more and more acute, and, in the end, it was resolved by means of transformation of private capitalist production to large and first-rate joint-stock industrial production. The stepwise increase of centralization of production took place. Small and medium enterprises disappeared either by means of amalgamation with larger ones, or being ruined unable to stand competition with more effective huge corporate enterprises. This transformation of private capitalist enterprises to collective joint-stock capitalist enterprises signified the completion of productive phase of capitalist society that, at the turn of XX century, entered the new, highest, last, usurious phase of its development, the phase of usurious or joint-stock or monopoly capitalism.

The transition of capitalism from productive to usurious phase was the resolution of economic contradiction between the operational division of labour and the low degree of centralization of social production, especially industrial. This economic contradiction arose and strengthened in process of natural-historical development of capitalist society; then, having reached a certain level of acuteness, it was resolved, this whole evolution being a reflection of the effect of economic law of correspondence of degree of centralization of social production to the level of operational division of labour. In the slave-holding society, such a contradiction had been resolved in II-III centuries AD in directly opposite way by means of stepwise, rapid, mass decentralization of large slave-holding enterprises. But both in slave-holding - serf and in bourgeois-capitalist societies, the resolution of this contradiction led to the same result transition of society to the last, usurious phase of its development.

At the productive phase of capitalist society, the further growth of social division of labour took place as well. Its level grew in the course of agglomeration of capitalist production, with the increase of proportion of industrial production in overall production, with the reduction of transportation costs, etc. And the growth of the level of social division of labour led to almost complete exclusion, elimination of natural economy. All the production in capitalist society, both large and small, both capitalist and non-capitalist, based on personal labour of small producers, both industrial and agricultural, both in the sphere of production of material values and in the sphere of human services and spiritual wealth; all the social production turned to commodity production. The process of production commodization in capitalist society is hampered by narrow bounds of national markets. The social division of labour and commodity production was in need of a larger commodity market, but the bourgeois, especially petty-bourgeois, nationalism did not enable to resolve this appearing contradiction in a radical way. It was partially resolved by the establishment of closed, regional trade-economic groupings, alliances, agreements that disappeared as quickly as they arose. The availability of a great number of state borders of small, dwarfish states with their diverse trade-economic policies was an obstacle to the development of trade, commodity production and social division of labour. However, this contradiction was not acute at the productive phase of capitalist society. It began to show its worth only at the border between productive and usurious phases and, especially, at the last phase of capitalist society.

By the end of productive phase of capitalist society, there also appeared a contradiction between the increased needs of people and relatively slow growth of labour productivity, volume of production of material and spiritual values, as well as service. This contradiction was strengthened sharply from time to time, approximately once in 10 years, during crises of overproduction being specifically capitalist phenomena that is only peculiar to this socio-economic structure. In time of economic crises, living standard of people decrease sharply, wide masses of labourers are doomed to half-starved and hungry existence. But if all the population feels this contradiction between the level of peoples needs and the low labour productivity only from time to time, when it strengthened sharply during industrial and agricultural crises of overproduction, failures of crops, wars, then a significant part of labourers feel it for long periods of time since, at the productive phase of capitalist society, chronic unemployment deeming people to extinction from starvation, as well as the fear of the future appeared.

In ones time, the contradiction between the growing needs of people and the slower increase of labour productivity was temporarily and partially resolved by the transition of capitalist society from trade to industrial phase. Now, this contradiction, that grew again, was resolved, again partially and temporarily, by means of transition of capitalist society from industrial to joint-stock (monopoly) phase. At the same time, at the turn of XX century, a new, fourth revolution in the development of productive forces arose in the depths of capitalist society the scientific and technological revolution, destined to resolve this contradiction more radically in process of its development.

K.Marx described the capitalist society of that period of its development, i.e. its productive or industrial phase, in such a way: Everything is as if fraught with its opposition in our time. We see that machines possessing a marvelous ability to reduce human labour and to make it more fruitful bring people sorrow and exhaustion. The new, so far unknown sources of wealth, owing to some strange, incomprehensible magic, turn to the sources of poverty. Victories in engineering appear to be bought at the price of moral degradation. It seems that, in the course of submission of nature by mankind, man becomes a slave of other people or a slave of his own meanness.

Apparently, even clear light of science can shine only against the gloomy background of human ignorance. All our discoveries and all our progress as though lead to the fact that material forces are endowed with intellectual life, while human life, being deprived of its intellectual side, is reduced to the level of simple material force. This antagonism between modern industry and science on the one hand, and modern poverty and decay on the other hand; this antagonism between productive forces and production relations of our epoch is a tangible, inevitable and indisputable fact (K.Marx and F.Engels. Works, vol. 12, p. 4).


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