It is a fundamental principle, if not an axiom, of Marxism that capital is a fiction and only exists as an illegitimate and parasitic phenomenon, which alienates from the workers part of the value created by labor. This is why Capitalism is called "Capitalism" and Marx's book about it Das Kapital.
However, Marx's own system contains a feature that can only be understood as reflecting the reality of capital. As Marx allowed, indeed celebrated, that over time the material conditions and modes of production change and improve, representing the economic progress of history, he overlooked the circumstance that this progress must then be ranked according to a system and scale of value. The
quantity of labor may not change, but what it can produce, in quantity and quality, does. The ratio between quantity and quality of labor, or between the quantity of labor and the quantity of production, is called "productivity."
A dramatic example of this concerns agricultural labor and productivity in modern economies. In traditional societies, it takes from 85 to 90% of labor to produce enough food for all, including a surplus that supports the 10 to 15% of non-agricultural labor. This percentage persisted in some African countries who adopted socialist policies at independence, perhaps taking seriously the assertion of celebrated communist author Jack London that a worker who is more produtive than his fellows is already a "scab," i.e. strike-breaker -- neglecting that increased productivity is part of Marx's own theory.
In the United States, the percentage of the population that was in farm labor dropped below 50% by 1880, and the percentage of the population that was rural dropped below 50% by 1920. Farm labor was down to 27% by 1920, 21% by 1930, 17% by 1940, 12% by 1950, 6% by 1960, 3% by 1970, and only 2% by 1980. In other words, there was a trend; and the trend was that agriculture became more capital intensive. One person driving a combine, which harvests, threshes, and bundles wheat, can do in a day what it used to take a vast workforce to do less quickly. Seasonal workers are still needed to harvest certain things, like fragile fruit -- but "smart" mechanical pickers will soon be able to do this.
Thus, the vast number of Egyptian masons and other laborers (including unskilled peasants drafted into the corvée during the season of the Flood) who could produce a pyramid, an essentially (socially) useless object, would now be put to better use producing the consumer and capital goods of an industrial economy. The difference in productivity between the pyramid builders and automobile makers is covered by Marx with a version of Hegel's dialectic, which is supposed to produce ever more complex and sophisticated structures with each iteration. Be that as it may, this effectively introduces a new variable into the equation of value. A quantity of automobile labor differs in a different dimension of value from an equal quantity of pyramid labor. Nothing prevents Marx from identifying such a scale in the dimension of dialectical progression. However, there is already a name for such a scale of value: It is the value of capital, including human capital.
Pyramid building is labor intensive production, while automobile building is capital intensive production. Capital intensive production requires skills and knowledge, whose fruits may be effected by the industrial workers, but which may only be conceived and held systematically in the consciousness of the industralist, i.e. the Henry Ford. Yet even the level of capital development represented by pyramid building, whose products remain marvels of human achievement (at least for their audacity, scale, technical achievement, and durability -- not unlike the Eiffel Tower), is historically credited to one genius, the semi-divine III Dynasty architect Imhotep.
Marx's denial of the existence and necessity of capital means that his own theory is incoherent, since it denies but does actually contain a scale of value, which we can now recognize as that of
capital, to explain
improved modes of production,
increased productivity, and more technologically and aesthetically sophisticated products. His entire theory of the historical dialectic of class struggle depends on this, and yet it is simultaneously refuted by it.
In order to disparage the success of capitalism, modern Marxists are reduced to anhedonic and anaesthetic condemnations of "consumerism," recycling moralistic arguments originated by Plato. In other words, Marx, who appreciated that industrial workers were better off than peasants, now inspires people who want the "masses" returned to agriculture, perhaps so that the limos of the elite, e.g. Al Gore, will not get caught in traffic.
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The needs of the "English petty bourgeois" are thus not "false needs", however dismissive Marx sounds, but true needs in relation to a capitalistic mode of production -- needs which will change over time, in a historicist sense, as the mode of production changes. As a "science" of history, Marxism would succeed or fail to the extent that it could actually predict the evolution of production and its various effects.
Marx thought that as capitalism had replaced feudalism with a new mode of production, which was more productive and efficient, the same thing would happen to produce a replacement for capitalism. In the end, as the workers were impoverished (when capitalists drove down wages) and the number of capitalists dwindled (as competition was replaced by larger and larger monopolies), the capitalists would end up with no one to sell their goods to and nothing to do with the capital derived from their profits. This would produce increasingly severe credit and banking crises, until the proletariat would easily tip over the whole rotten structure and replace it with a classless society.
Centralisation of the means of production and socialisation of labour at last reach a point where they become incompatible with their capitalist integument. This integument is burst asunder. [Capital, Vol. I, p.837, Charles H. Kerr & Co., Chicago, 1906, translation by Edward Aveling, quoted by Thomas Sowell, On Classical Economics, Yale, 2006, p.170]
Already in this we find the essence of the fallacy of Marxist economics. Marx believes that as the dialectic of history evolves new modes of production, greater productivity and greater wealth will be created, ultimately eliminating the need for alienated and exploited labor. However, there is not a
variable in Marxist value theory to account for greater productivity. If labor (or "socialy necessary" labor) creates value, then a greater quantity of labor will create greater value, but only in quantity, not in kind. More labor for pyramid building just builds more pyramids. Thus, some other variable is involved besides labor. In fact, that is capital. Labor intensive production gives way to capital intensive production, and greater capital means great productivity, not just in quantity, but in kind. But Marx does not believe that capital exists, which is why capitalism is called "capitalism." This means that Marxism cannot explain increased productivity. And then Marxism also contains another trend disparaging to productivity as such. Jack London, less well remembered now as a communist than as an author, said that a worker who is more productive than others "is already a scab," i.e. a strike breaker. Thus, the view seems to be that increases in productivity are part of the exploitation of labor.
Unfortunately, without such increases, 90% of labor would still be involved in agricultural production, while in the United States that is now less than 2% of labor, the rest of which goes into producing other things. Those "other things" are what pose the problem for an economic system like Marxism. Since British industry was largely involved in building railroads in Marx's day, he seems to have actually believed that, once the railroads were built, there would be nothing for that workforce, or its capital, to do. But this is the key to the whole meaning of capital. Capital is knowledge. Capital is imagination. Capital investment may be thought of as the construction of machinery, but the machinery, with its use and purpose, must first be
conceived. The new purposes require that new products be thought of. But then with the conception of new products, new uses, and new purposes, the machinery may only be one element, or no element, in it. Simply a different way of doing things represents new knowledge and new capital. Thus, we have idea in modern economics of "human capital," where some people simply know how to do things better than others. Also, the value of capital can simply evaporate in misconceived investments. "What is sunk is sunk," is the principle: bad investments, into which capital has been sunk, must at some point be written off. It is "sunk."
Marx's thesis of the fictional nature of capital is thus equivalent to his lack of imagination regarding what it would be possible for people to
do with their capital. That entirely new products and industries could be conjured up, to be brought to life with capital investment, was a process that was simply off the radar of Marxist economics. Perhaps he thought that the unexploited workers would sit down one day and simply begin producing cell phones, with the conception perhaps spontaneously coughed up by the Hegelian dialectic. No. Since Marx was the kind of person who would never know what to do with capital, he did not believe there
was anything to do with it. This is a common state of mind, and it is still about the level of economic understanding of much modern political discourse.
