The industrial capitalist obtains an income by buying the elements of an industrial production process whose suitable workflow he organizes and whose products he sells. The surplus of his income above his expense is his profit, the quantity of money he uses for the objects of his needs, on which he lives all the better the larger it is. His kind of reproduction is based on disposal over a certain amount of property in money form, which he manages in the above-mentioned way, because not only the material elements of production and the objects of individual consumption, but also labor and its services, are for sale. [1]
The use of his property for the purpose of its continuous reproduction includes the periodic repetition of the sales process; the profit is measured not by the unique yield of an investment, but by the average surplus over the periodically transacted expenditures. [2] Its size depends on the frequency with which his property functions in a certain period, the speed of turnover of his capital.
In planning his activity, the industrial capitalist therefore strives for the continuity of his business. He buys, has production done and sells in a way that avoids interruptions in the profitable functioning of his property. Thus he differentiates between fixed and circulating assets [3]; these functional components of his property differ in regard to the time periods within which he must ensure their availability by the use of money. While the return flow of the capital laid out for the fixed assets distributes itself through several turnover processes and is replaced only after repeatedly going through all phases until it becomes rundown, the other part of the “factors of production” must be constantly replaced by new purchases. Because the turnover of the fixed assets includes several turnovers of the circulating assets, the different parts of the property invested in by the capitalist are always concurrent in their different functions, whereby the size of his profit becomes dependent on his liquidity, by disposal over money, as often as the continuity of his business requires it. [4]
As a buyer of the elements of production and as a salesman of products, the industrial capitalist operates on the market. In the prices of commodities, he encounters the prerequisites for his economic success, which set limits on his profit. His own appearance influences the level of prices to his disadvantage. On the demand side, he finds rising prices, so the costs of his elements of production increase; as a salesman in competition with other sellers, he lowers the price of his commodities, whose proceeds secure his advanced capital plus the profit. Insofar as the result of his business is contingent on the process of competition, his profit arises from the fact that he prevails against the others.
a)
This mode of reproduction requires forcible prevention of the measures that the competitors, intent on their special interests, seize whenever they are hindered from reaching their goal by others: the exchange process requires the protection of property, the mutual acknowledgment of those dependent on each other, but as buyers and sellers only interested in their private advantage. The competitors need and finance the restrictive power of the state, separate from their private business, not only to protect their person and property, but to protect them from the resulting collisions with various regulations, thus completing the injuries to person and property: the legal terms of exchange – i.e., contracts, trade laws, as well as employment law. The state also bears responsibility for the functioning of the universal equivalent, which the competitive standpoint of the private subjects needs as a legal, recognized “means of information.”
The discontinuous return flow of capital from the sale of products, which is subject to the unpredictable movements of the market, endangers the continuity of the turnover process. On the one hand, the industrial capitalist receives payments which do not yet befit transformation into the elements of the production process; on the other hand, delays in sales lead to a lack of money for purchasing the elements of production that are needed in the present. No matter whether part of his property lies idle in its monetary form or is steadily diminished by liquidity problems – dependence on the intermittent return flow is always at the expense of the rate of turnover, curtailing the profitable use of his property. [5]
By commercial credit, the capitalist secures the continuity of his turnover process against its endangerment by the market: he accepts promises to pay for the delivery of commodities and requires credit for his purchases. The circulation of certificates of indebtedness saves the capitalist time and thus money. Credit helps avoid this; it reduces the rate of turnover or – what is actually the same thing – it advances additional money for the maintenance of production. However, this service of credit has its limit: every debtor’s solvency is always based on the actual return flows, concomitantly – in case of delays past the due date – on disposal over capital reserves. Thus credit by no means makes concerns about liquidity superfluous: its reason remains, supporting the assignment of property to its different, mutually exclusive functions. [6] It enriches the executive management of the industrial capitalist through the art of the write-off [7] and financial planning, which differentiates his property according to liquidity ratios [8] and strives for “optimal liquidity.”
With credit, the capitalists jump over the barriers that the market sets to their profits, without eliminating them. They produce only in consideration for the market, for demand, for solvent need – and, at the same time, act as if the sale of their commodities is only a question of time. By circulating their debts, they act without consideration for the terms of exchange. They transform their conflict on the market into the relationship of creditor and debtor, enhancing their competition into a positive connection to each other, one produced by credit: each is dependent on the success of the other. [9]
b)
By regulating trade, which takes place with the help of credit, the state has to ensure that the contractors follow through on their commitments. It designates general trade laws for the terms and conditions of repayment, writes a bills of exchange act, etc. Because of the joint participation in credit, one competitors’ death harms them all. In cases of insolvency, it must protect the creditors’ rights and manage the bankruptcy in such a way that it allows the others’ damage to be avoided or reduced.
Dependence on competition is a burden for the capitalist: he uses its qualities as best he can and nevertheless always remains exposed to risks, whose earnings appear too meager for him. Because he is successful as long as he is a capitalist in the unpredictable world of the market, he thinks the world of himself. His skill in dealing with risk has brought him the earned profit. Indeed, this might consist of a markup on his expenses, but he has calculated on it in such a way that his bargain was desirable. Success also pushes him to glorify competition in which his own success counts, and only his. If he fails, he cannot possibly be faulted, but has bad luck – or he represents himself as a victim of a not at all pure competition. He does not lack reproaches to the state, which limits him but opens up no new opportunities. The laws that the profit-eager entrepreneur must submit to are quite unfair, taxation above all. [10]
The industrial capitalist confronts the difficulties that the conditions of the market prepare for him in maximizing his profit by making changes in that sphere where he alone determines over the end product of his assets; nothing can be done about the fact that purchase and sale set barriers to the rate of turnover – the market is the positive basis for his business. But it is possible for him to allow more capital to transact within the same time. He uses a part of his profit as additional capital in order to increase his profit. By expanding production, he provides for the increase of his income. He masters the problems that arise for him from the continuous use of his property by allowing more production under his command and in this way increases his turnover per time. He coolly takes note of the technical-organizational task that results from the expansion of his business – he pays for wage labor, which “accepts its responsibility” in the division of labor. [11]
But his efforts have an effect on market conditions which is detrimental to the goal of increasing profit: increased wages and purchasing prices, as well as sinking retail prices, prevent him from obtaining a profit that rises in proportion to the expansion of his business. The industrial capitalist discovers that the equation “time is money,” which he deduces from the barriers which the market imposes upon him with the functional division of his capital, cannot be repealed. Because time is not money, but money costs – and this isn’t up to him, but is the business of the capitalist – he strives to deal appropriately with this obstacle. He pays attention to the improvement of his market opportunities and sells to dealers who worry about the most effective (and low-priced) sale of his products; on the other hand, he entrusts – with payment – a special professional group to manage his cash transactions. [12]
The capitalist lets himself be represented by others, which accelerates his business in his own interest in economizing and the turnover process. The commodity- and money-dealing capitalists perform the business of several industrialists simultaneously, and provide for the optimization of buying and selling, as well as liquidity. [13] Even if, between them, a continual dispute over the price of their services takes place – the commodity dealers and the financiers determine and carry the “risk” of the industrial capitalist, thus decrease it.
a)
The state ensures the creation of the transportation and communications that become necessary with the expanded market, mechanisms that represent investments too large with too slow a turnover to be operated in the form of private enterprises. With tax receipts from the entire society, it finances the material conditions for capitalistic expansion, which the competition between industrial, merchant and financial capitalists demands, as well as the further legal and police efforts for the regulation of the resulting collisions. Where not enough workers are available for the needs of capital accumulation, the state uses its force for extending the appropriate offer; and if the expanded production makes excessive demands on the availability of existing energy resources, it strives for a remedy when the private owners do not seize the initiative themselves, because business must be made from it.
The industrial capitalist, who covers the means for his expansion from profits, discovers a positive side in the discontinuity of his return flows: instead of hoarding part of his income as money, which he needs for the future replacement of capital goods and for when reinvestment becomes due, he uses this “surplus liquidity” for the purchase of additional elements of production. [14] He is confident in his business, so he incurs the risk of not being able to sell a part of his products or sell them at decreased prices, and therefore needs credit for the continuation of his expanded business. He uses the means that are available to him in credit deliberately, not only in that he gives and accepts promises to pay. He borrows money for the inevitable bottlenecks in liquidity or for the immediate expansion of production; he accepts credit from those who administer the liquid means of all capitalists in order to not be directly dependent on the continuity of his own turnover process. [15]
The money capitalists are thus not only service providers for the technical operations which commerce needs with its stop and go. For their part, they use the need of the industrial (and merchant) capitalists for “liquidity,” i.e. money for the continuity and expansion of their businesses, by allowing themselves to be paid for the feat of making the funds transferred to them by a third party available for the running of technical operations during the turnover process of the industrialists. They require interest for the temporary allocation of money, whether it arises now from the short term overdraft of an administered account or is carried out formally as a loan, also however paying (lower) interest for the cash entrusted to them and making their business from the difficulties which the industrial capitalists have raising funds during their turnover process. This service, which the banks are out for, consists of making their customers debtors, whereby the interest of their business in the issuance of credit exceeds really existing deposits. The financial business is one of debts, and it profits from its cause, the interest of the industrialists in letting no peso lie “inactive” and always being liquid. The bankers appear as a means of the industrial capitalists against them and force them to pay attention, in the acceleration of their turnover process, to what extent the cost of credit is also worthwhile for them. However, this constraint – to consider when planning his business how the relationship of internal and external financing is to be arranged most favorably – hardly disturbs Mr. Factory Owner, even if it makes the fact obvious that he gets his own business going with the help of other people’s money. [16] He must proceed in the organization of his accounting system so that the demands and costs that develop on the part of the banks serve the goal of the company instead of defeating it. In the modalities of the banks’ granting of credit – paying attention for their part to the “balance” of the in- and outgoing payment streams: they can also become illiquid [17] – the industrial capitalist experiences that his independence from the momentary return flows of his capital and the solvency of his immediate business partners, attained by credit, represents only another form of dependence in which he stands to the market and the business of the whole class.
b)
The state has to regulate the competition between industrial and financial capitalists so that the interests and economic disputes of both sides do not impair the functioning of their businesses. It enacts responsibilities for both sides in connection with the practice of granting credit. It breaks the temptation of the industrial capitalists to get rich by sham transactions at the expense of others by regulating the ratio of their own capital funds to liquidity (e.g., requirements to give notice of large credits), etc. Likewise, it fights against the penchant of bankers to use the dependence of the industrialists to the point of their ruin. The regulations for banks operate on the premise that they work satisfactorily as suitable means for the increase of the national wealth (in private form, of course), also setting minimum reserves and certain prohibitions on speculation, which are to prevent the business with debts from bringing the credit system to a standstill (“bankruptcy”!). If, finally, debts circulate as money, the danger exists that the market will dissolve into inflationary processes which arise from the issuance of bank notes dictated by special interests: the central bank controls this with all the uses of its authority, monopolizes the issuance of bank notes, etc.
Because the capitalist profitably re-invests a part of his profits – from which he could also buy himself luxuries – he is not the only one who hits on the idea that his wealth results from abstinence. Polemically against the financial capitalist who obstructs him and makes profit without the prudent guidance of a turnover process consisting of three parts, he persuades one and all that he is exceptional not only in his abstinence, but also in his diligence; his profits represent in the long run only a fair wage for “a special service.” When his business, pursued with a lot of virtue, fails, others have ruined him, in particular the bankers. The fascist moment in the entrepreneur’s consciousness, the interest (which he shares with others) in a state which eliminates the barriers which competition sets for him, has not prevented friends of the working class to this very day from criticizing bourgeois class society in terms of finance capital and its allies in the state. Given the revisionists' interest in the state and its ideals, it is understandable why they are not convinced by Part V of Volume III of Capital, that with the imposition of capital in earlier times in many places the state ended the promotion of money capitalists at the expense of the industrialists. Their common characteristic with the fascists is that, like them, the “anti-fascists,” of all people, would have the state abolish the evil elite that they discover in the bourgeois world. This point will be stressed quite often in sections 4.
The expansion of production by reinvested profits fails as a means to increase profits as soon as the demand for the products of the industrial capitalist no longer corresponds to his offer (and that of his competitors). The competition on the market, which causes him to expand, also forces him to examine whether he can permanently secure and increase his profit only by qualitative changes in production. It is not only a matter of investing more. What he needs is lower production costs that permit him to press the prices of his commodities below those of his competitors, without thereby having to make reductions in his profit. His calculations are directed toward changing the relationship of investment and yield – of the commodity that he sells: his interest is in the reduction of the unit cost price. The increase of his invested property only pays off if he can produce more cheaply. Thus every one of these abstainers, when he gets down to business, arrives at the practical admission that, first of all, his income owes itself to a comparison of the ratio between the actually created profit/costs he manages with the corresponding ratio of his competitors; secondly, that the result of this comparison depends on what happens in the production process, whose elements he buys and over which he determines, but in which he is not involved ex professione; and thirdly, that all the modifications which he arranges for the improvement of the profit/costs ratio are to increase the yield which his workers produce. This admission comes easily to him, as it is dictated by his interest; he does not need to study Marx.
Thus the industrial capitalist, who wants to tilt the relation to his competitors in his favor by the organization of his production process, operates as a direct enemy of his workers. By putting his calculation into practice, he denies some of them their livelihood by their “redundancy,” others by their employment. In the forms of wage payment, he dictates their conditions of existence to them as a means to increase his means: because by changes in the production process his need for labor takes the form of an absolutely growing supply of job applicants, thus the pressure of the labor market reduces his costs [20], he discovers in the wage the flexible cost factor par excellence. With his minions, he develops an interest in thoroughly measuring the productivity of his staff – but not in order to pay it, but to increase it. In time wages, once fixed, it strikes him that the output that he gets for his money depends on the organization of the division of labor in the company, thus by the design of the workplace a more positive effect on his profits can be managed from his investments in wages. [21] He reaches his cost-accounting goal of lowering his unit wage costs better by arranging the relationship of wages and output, where the technical circumstances of manufacturing permit, if he uses the interest of the workers in increasing their incomes for the acceleration of his turnover process (= lowering fixed costs relative to variable costs). In piece rate wages, the type of payment elicits the dedication of the worker for the success of his calculation: each technical change represents an opportunity to demand from the worker a special effort for the increase of the profit for which he is paid. [22] Group piece work also transfers to the staff the task of carrying out the selection of able and willing co-workers, as well as their effective combination, so that the only concern that remains for the capitalist is whether or not a lack of quality in the product and recklessness in handling his “fixed costs” jeopardizes the beautiful effect of his measures. With bonus wages, he gets rid of this problem: he makes his concerns about his means of production and competitive power into those of the worker for his pay package, strives for the most effective combination of all remuneration systems [23] and is confident, in view of the risk and the effort that he imposes on his workforce, that he does a lot of good for his business. He has proved to the world, however, that his success in competition is determined by how much output he gets out of his workers for such low wages. In obeying the compulsion, experienced in competition, to set in motion with his means of production as much work as possible, dealing thereby economically with the cost factor labor, the capitalist is concerned with surplus value. He compares the costs of the workers with the surplus that their labor produces – means of production serve the enlargement of the surplus only if they increase the productivity of labor and decrease its costs. [24]
The change of production methods – as a reaction to the reduction in profits that the capitalist experiences on the market – is directed at being able to underbid his competitors. He uses his productivity advantage by lowering the market price, offers a rising quantity of products and forces his adversaries to produce likewise more cheaply, upon punishment of failure. Because a privileged position in price comparison is only temporary, the industrial capitalist undertakes everything possible in order to accelerate the redemption of his investments: concessions to retailers, advertisements, etc., which make his profits skimpier than “corresponds” to his innovations in exploitation, his advanced productivity. In the race with the competition over new production methods, over the prevention of “moral depreciation” (which can take place via a simple fall in the price of his technical means as well as by the development of better ones), he anticipates the inevitable result of his ambition: that he will in the future be forced, again with a more effective division of labor, to produce more cheaply with improved machinery, thus also with increased employment of capital. “The fundamental law in competition, as distant from that advanced about value and surplus value, is that it is determined not by the labor contained in it, or by the labor time in which it is produced, or, the labor time necessary for reproduction. By this means, the individual capital is in reality only placed within the conditions of capital as such, although it seems as if the original law were overturned.” (Grundrisse, p. 657)
a)
The rationalization of production is based on the use of management and technology, which themselves do not represent profitable businesses. When special technologies are bought by a capitalist, the state, on which the organization of science is incumbent, grants temporary rights to their exclusive application: with patent laws, trademark protection, etc., the state honors the efforts of the economy to progress in such a way that it really benefits private property, which takes part of its tasks from it. It protects the special features of the production process and the product, thus the competition.
Because changes in production also demand the skill and knowledge of the workers – which they possess neither from nature nor acquire in the family – the state has to establish an education system which allows individuals to be employed in short instatement terms (= vocational training) in each possible function in the division of labor. It sets up individuals who are useful to industrial production by supplemental measures that promote their mobility, so that the capitalists have a pleasingly flexible labor market available. And it does justice to the destructive effects of exploitation with its health service.
Credit permits the industrial capitalist to increase his profit by reducing his unit cost prices, provided that he is able to compensate for the proportion sunk into increased fixed capital on his profit by the growth of his sales. If the industrialists take the credit offered by the banks according to their production needs and make up for the differences in production costs by steadily revolutionizing production, they also create their market restriction and run up against the limits of solvent demand: victims are inevitable. A part of the loan is taken in expectation of future profits, from which it is certain that they remain an expectation. Debts are invested as capital without working as such. They are levers for the businesses tied up in industrial innovations and are used by every capitalist to cope with the pressure of the market – and they are nevertheless never this means for all of them. In their insolvency, some capitalists notice that their property is fictitious. [25] They did not use their debts in such a way that they earned their repayment, so their creditors end the illusion that the same property exists several times. The competition between lender and borrower, which is based on putting this illusion into practice, is clear when it no longer guarantees both sides their profit. In the bankruptcy of industrialists, it is clarified where this double profit originates from, certainly with the not insignificant side effect that the finance capitalist also enriches himself off the failing industrialist. In reverse, this also appears in bankruptcy, but as a procedure that, in the process of competition between industrial and bank capital, is not useful to the free-market economy, because the compulsion to rationalize entails a transition to speculative transactions and swindling. The industrial capitalist doctors balances and simulates wealth by pseudo-representations in order to be credit worthy, thus he deals consciously with fictitious capital if he notices the conditions of credit (the interest rate) no longer pays off for him, “really,” any more.
b)
This is why the state has to enforce compliance with its credit laws: its interest is in its business-happy citizens using their freedom to really increase wealth instead of only taking it from others, so it sets appropriate barriers to all the competing parties.
The difficulties of exploitation offer plenty of reference points for the bourgeois mind to praise the capitalist: thanks to him there is the constant modernization of production and the world is supplied with an ever larger number of improved products. As a man of progress, he does not enjoy a lot of things; as everyone knows, he is entitled to his profit. It is nothing other than the entrepreneur’s wage, remuneration for his hard work, for his contending with the objective constraints of the market, on which he only does the most. Those functionaries of the capitalist mode of production who suffer heart attacks prove their willingness to sacrifice themselves; if exploitation takes so much work, it is an aptitude that contrasts favorably with the character of the speculating banker. The claims of productive capital are justifiable to the state, so fascists like revisionists blame the money grubbing financiers as the main offenders.
As a consistent materialist, the industrial capitalist does not let himself be disturbed by the effects of his measures on the market. If using the means for increasing profit that the society holds ready for him leads him to overshoot the solvent demand for his products, then the capitalist does not need to hang up his career for long. He depends only on the fact that he is not affected by the deterioration of the profit/costs ratio in his industry; i.e. he must calculate consciously with the lower profit rate on his advanced capital and ensure the quantity of his profit by the mass of his sales. The size of his capital is a weapon in competition because it permits him to increase his turnover relative to the others’ share within an industry, at the expense of the competitors; this is his exclusive sphere of action. Thus the successful capitalist does not differ from his less fortunate class brothers in the high art of management, in continuously decreasing payment for the production carried out in his service – they all do that – but by the size of the wealth that he can bring to bear and that permits him to continue practicing his abstinence when the others have run out of funds. And because he asserts himself in his specific line of business, its limits are also no problem for him: his invasion of one branch of production just offers him the possibility of transferring his profits to profitable use in other branches. He practices his interest in the size of profitably invested capital by constantly comparing the profitability between all spheres of production – an activity which, conversely, the size of his capital gives him the ability to do. The competition between manufacturers of products of the same type is supplemented by competition for other spheres of investment, which is why the free competition of the social free-market economy includes the mutual expropriation of the capitalists. The capitalists manage the preservation of profitable investments by treating the inevitable effects of their profit-increasing measures as barriers caused by competition, and continuing the increase of their private property at the expense of active wealth, thus from the failure of accumulation in one place providing the means for its continuation in another. Led across all branches of production, this competition for monopoly – by which the capitalists, in increasing their wealth, make themselves independent of the growth of the remaining social wealth, thus from the condition for their business – has consequences. [26]
Because the different investment spheres and the competition over them are based on ruthless dealings with the workers, and the capitalists are confronted with the resistance of workers' coalitions against the existence-destroying effects of exploitation (see “Wage Labor…” IV.2), they see themselves obliged to stand together on the labor market against the trade unions. [27] Certainly, they have an excellent instrument in the “redundancy” effect of their productivity increases. To make their exploitation material willing and cheap, however, this “natural” consequence of their profit-increasing measures no longer works if strikes interrupt production and the replacement of striking workers proves to be impossible, due to the special requirements of the workplaces. So the capitalists supplement exploitation with class warfare, by which they protect their competition among themselves in employer organizations against the unity of the workers. While this union of the capitalists is permanent in opposition to the workers, because their common action is useful to them all for avoiding debilitating labor costs, and for asserting competition without prescribing their behavior on the labor market, the alliances that arise from common interests opposite other competitors on the commodity market (price-fixing arrangements, subdivision of the market, etc.) are, true to their nature, no pillar. They originate with certain constellations of the market, and their reason also disappears with them. “The common interest is appreciated by each only so long as he gains more by it than without it. And unity of action ceases the moment one or the other side becomes the weaker, when each tries to extricate himself on his own as advantageously as he possibly can.” (Capital III, Ch. 10) The forms in which the capitalists waive their competition on the market just aim at its continuation, and their effect extends only as far as “solvent demand” permits it. It is clear that class warfare and cartel formation represent other ways by which ruthlessness against the market becomes the general consequence of the practices that these conditions maintain – but the capitalists are genuinely indifferent.
a)
The state can prevent the defensive struggle of the workers against their destruction either by force, allowing capital to destroy its own means, or – and this distinguishes the modern state – it makes a virtue of necessity: it permits not only the right to union struggles, but orders the “social partners” to negotiate the relationship of wages and work. Following the principle of equality, it completely grants the right to unionization to the employers as well and orders limits to the class conflicts, i.e. collective bargaining autonomy. This appears in the rightward drift of labor disputes, which prescribes what is permitted, primarily to the trade unions, i.e. they may not harm the well being of the “whole.” It is open to the demands of the employer associations for the improvement of the state-guaranteed conditions of free employment because it notices what it lives on when it promotes its “economy” – while it instructs the trade unions in the correct use of their freedom and the legal limits of their influence.
The state demonstrates once again in the laws against restraints on trade that it limits the entrepreneurs only in the interest of the functioning of the principles that they assume and need for their business. In antitrust law, cartels are basically forbidden. As the state recognizes the collision of class interests in the right of association and institutionalizes them through it, it reacts with understanding to the fact the capitalists merge with others for the sake of the self-preservation of their business – the limit of its understanding lies in the well-being being of the entire economy of the nation, and this limit is very wide, as not only the penalties show. All the laws about restraints of trade begin with the formulation: “here the antitrust law does not apply …” because of gains from the positive side of “dangerous” cartel formation, so that even economics textbooks notice: “The exceptions are so numerous that the prohibition principle is violated to a large extent.” With the state listing of a number of “approved” and “announcement-requiring” trusts, it does justice to their business rationality, just like its obligation to order a stop to their market-damaging tendencies when necessary.
The capitalists, through the extension of productive property in order to remain in business at the expense of others, which they are not capable of through the support of the achieved profits, transform credit into a form of union: they extend the scale of production by forming corporations. By giving up their autonomy, they support the profitable functioning of their property, which it is not suited for because of its limited size. They master the requirements of competition, which are no match for those who stand alone, by an association with other capitalists in which they can use their property profitably because it is combined with the property of others: capital is credit.
(i)
In a corporation, socialized means of production function as individual property; private property, the exclusive disposal over a portion of the social wealth, also permits the capitalist to use the property of others. Technical supervision, administration and management, thus the functions of the entrepreneur, separate completely from their basis, private property, so that some of the previously cited illusions about the specific services of the capitalists are void here: for the shareholder, mere possession of a part of the enterprise ensures that his wealth increases.
(ii)
Just as the union of the capitalists against the workers’ organizations and the formation of cartels serves the common interest of several private owners, so the abolition of their competition in the individual interest of the capital owners also continues the competition. Because the continuation of business depends on the size of an enterprise, the establishment of a corporation precludes the partners from arbitrarily withdrawing their money or the tangible assets they make available. The protection of free commerce with private property in the search for optimal profitability must not destroy the collective enterprise – the business with shares that circulate as title deeds to a portion of the profit gained.
(iii)
Thus the competition of the capitalists plays itself out over spheres of investment, a profitability comparison in the form of a capital market on which the securities that represent the really existing and functioning productive capital receive prices resulting from the expected profits of the enterprise in which it takes part. As an alternative to the profitable lending of money, the trade with shares continuously refers to the price of lending capital: “If the nominal value of a share of stock, that is, the invested sum originally represented by this share, is £100, and the enterprise pays 10% instead of 5%, then its market-value, everything else remaining equal, rises to £200, as long as the rate of interest is 5%, for when capitalised at 5%, it now represents a fictitious capital of £200. Whoever buys it for £200 receives a revenue of 5% on this investment of capital. The converse is true when the proceeds from the enterprise diminish.” (Capital III, Ch. 29) This opens participation in industrial enterprises for banking capital with the help of debts transformed into money that does not belong to the bankers, whereby the competition between industrial and money capitalists is supplemented by their cooperation.
(iv)
If capitalists appear as shareholders in order to wage their battle for profitable investment spheres, then the separation of capitalist property from its economic function is not only relevant to the position of the capitalist as leader of his business. The increase of private property by the stock market makes itself independent from its basis, the gaining of a surplus in the business of the industrialists. From the quotations of securities, by which they become nominal representatives of existing and functioning capital, it follows that speculation on the profits of industry delivers the means for their competitive power, and that the size and mobility of the capitalists is based on the fact that they grant satisfactory dividends. Like commercial and bank credit, combination into joint-stock companies also permits the continuation of competition in such a way that the capitalists ignore the profits obtained from the industrial turnover process, thus the conditions for their expansion of production. [28] With the help of the different forms of credit, they increase production to the point that it becomes unprofitable – and because they proceed with credit into a positive dependence on each other, overproduction becomes an affair that concerns them all: Crisis.
(v)
The reason for crisis lies in the capitalists’ eagerness to produce so as to assert themselves in competition “without consideration for the existing limits of the market or solvent demand,” so that the development of production carried out by them comes into conflict with the purpose they pursue: the increase of their capital. The credit system, the lever for the accumulation of private wealth, is at the same time the lever for overproduction because it permits the entrepreneurs to carry out the development of their companies as if they would be independent of the realization of their profits (around which everything revolves) on the market. They treat the condition of the market as their condition, while in the immediate business of exploitation behaving in such a way – on account of the compulsion to maintain ground against others under these conditions – as if their accumulation would be secured with this business. Because the market – their sales process operating in practice separate from the advance of industrial expansion, as the competitive commodities of one’s own enterprise – and money capitalists do their business, and because every one of the capitalists involved in this competition strikes his advantage from the fiction that “the conditions of direct exploitation and those of realizing it” are identical, they all work together to prove the opposite, which produces the crisis: “The first are only limited by the productive power of society, the latter by the proportional relation of the various branches of production and the consumer power of society.” (Capital III, Ch. 15)
With the reason for the crisis (overproduction = too much was produced for the profits of the capitalists), the developmental forms of the crisis are also no longer a mystery. If the conversion of profit into new capital has increased the wealth of the capitalist class to such a degree that the conditions for its profitable use are lacking in the society, then the competition over the markets and credit of the interdependent businessmen does not take effect as a celebration of the breakdown of the free-market economy, but they strive with all their power to gain or restore their conditions for accumulation against the others. The perception of crisis has its joke in the fact that capital lacks what it depends on: profits – so that it only concerns property which yields no profit, therefore does not represent capital, which must be eliminated from the competition or reorganized so that it again makes profits: depreciation.
The specificity of competition in a crisis period lies in the fact that the capitalists use the lack of profits as an opportunity to convey the conflicts connected with their occupation so that others are responsible for restoring the conditions of accumulation disturbed by too much accumulation: the successful among them are by no means disturbed that material wealth is sacrificed. The fact that only solvent needs are worthy of the benefit of capitalistic production, this platitude of the world of private property is most impressively demonstrated during the crisis: production is reduced in view of an army of unemployed persons who can't obtain an income by selling their labor and who lack the necessities for living: the law of value determines consumption. Such materialism as displayed by the propertied class certainly is not possible without the idealism of the exploited, because without a shocking amount of idealism they cannot be barely exploited in order to be exploited again.
b)The state is responsible for the production of this idealism and its preservation, by the way. What it does for the crisis-afflicted capitalists is a necessary accompaniment to the protection that it grants private property (see I.). Who says A must also say B, who sets on private property, lives on taxes (thus also only gets tax funds when capital flourishes), maintains that capitalistic growth is equivalent to the promotion of the wealth of the nation – this holds true particularly in crisis periods. The bourgeois state uses its political force for the economic necessities of the entrepreneurial class when it
On account of the fact that capitalism creates crises for the capitalists and this does not exactly please them, there is a criticism of capitalism from the standpoint of the capitalists. It exists in the attack on all the social characters who become particularly visible in the crisis because they disturb the business of the capitalist. The trade unions occupy place number one among the enemies of the system, the workers place number two because they neither work, save or buy enough. Place number three goes to the foreign competition, which is the transition to the point of view of the state in its crisis management. It never fulfills its duties to its favorite citizens consistently or fast enough: because the state is in demand as a crisis manager, it also makes itself available to figures who level it, to the reproach that this afflicts its competence. This again does not mean that someone who makes the reproach that the bourgeois state does not do enough for the protection and reorganization of the national wealth must become an absolute partisan of fascism or imperialism: also the revisionists, pleading for a worker-friendly use of capital, strive during every crisis to search for culprits as well as for constructive suggestions for the statesmen as to how to resolve the crisis on the basis of mass purchasing power which, as can be seen, exists only for capital. The inanity of criticizing capitalism for its crises is thus based on consent with, on the one hand, the goals of the dominant class and their economic growth and, on the other hand, the inevitable injuries to various interests in the support of these goals. Certainly, the antagonists of such criticism have no embarrassment in invoking the anxiously viewed difficulties of the economy: isn't the social role of the capitalist to create jobs? No matter how it turns out on the level of ideological debates, capital can describe its route to economic growth only when the capitalists, and no one else, use it for themselves. The various ways of giving bits of advice to capital for overcoming its problems are inventions of the right, middle and left wings of political economy.
Footnotes
[1] Business management economics has the same subject as this paper. It also concerns the measures that a capitalist will take for the sake of his profit, but indeed not to explain his laws as a capitalist. All aspects of his hustle and bustle appear in business management as factors that have a positive or negative impact on the size of his profit, which must be combined with each other, and depends on skillful management. This subsidiary science for business practices positions itself on the viewpoint of the capitalists, not to understand him in his necessities, but to weigh the alternative choices of the entrepreneur with regard to their effects on the course of business: “Business administration looks at the empirical object from the viewpoint of economic efficiency and profitability, or profit maximization.” (LÖFFELHOLZ: Revision of Business Administration, 2nd ed., Wiesbaden, 1967, p. 66) From this viewpoint, all the phenomena are described which in our study are explained. The citations from the statements of business management does not prove the identity of their results with ours – they merely show how the necessities of capital suggest themselves to its character masks, without the realization of their interest needing a glimmer of explanation of the laws that they execute. All citations from business management texts are testimonies to the false consciousness of the capitalists and their paid managers – and which use to their advantage: thus looks their work from their interest: techniques of exploitation.
[2] See LÖFFELHOLZ, p. 636: “Budgeting and accounting are time period- or period-oriented, viz. the bill is intended to identify the cost, performance and the success of a billing period.”
[3] See LÖFFELHOLZ p. 505: “The assets of the company consist of the useful life of two complexes of goods: l. Fixed assets: These are the means of production which outlast several production processes, e.g. land, buildings, machinery, the entire operating facility; and 2. Circulating or operating assets: These are the means of production that can only be used once in the production process, namely (!) in turnover, e.g. raw materials, inventories, energy, liquid assets and receivables, in particular for the purchase of goods and payment of salaries, wages and taxes.” The view of his business from the standpoint of the circulation of his capital, closing his turnover as rapidly possible, leads – as one can see – to the fact that the capitalist notices the difference between fixed and circulating capital and at the same time confuses these differences of his productive capital with completely different laws!
[4] Already the abstract concept of the industrial capitalists reveals about his relation to the wage laborers:
[5] See LÖFFELHOLZ. p. 515: “Liquidity and profitability are in a certain dichotomy to each other.” “For liquidity costs money.” (MELLEROWICZ)
[6] See Grundrisse, p. 545-6: “The most that credit can do in this respect – as regards mere circulation – is maintain the continuity of the production process, if all other conditions of this continuity are present, i.e. if the capital to be exchanged with actually exists etc.”
[7] See LÖFFELHOLZ, p. 722: “The write-offs serve different purposes (which link together in causal connection):
1. They serve to return the net assets and capital structure of a company to the correct balance
2. The means should be provided by the proceeds coming in from the write-offs to purchase the depreciated item (reinvestment) after the expiration of its operating period (preservation of the company’s assets)
3. The write offs serve for the exact determination of the profit by the cost distribution in the periodic income statement ...
4. The write offs serve as cost accounting in the net costs appraisal.”
[8] See LÖFFELHOLZ, p. 519: “The cash funds, namely money and bank balances, are liquid means of the first degree, bills of exchange, provided that they are eligible for discount, are liquid means judged hardly inferior ... The securities are liquid means in stock securities, acceptable for collateral and not distinguishable from collateral ... The commodity stocks also have a different liquidity character, and depend on the nature of the product and market situation ... The fixed assets are generally not sold, but most lendables belong to the illiquid resources ...”
[9] Thus Marx here explained why what falls outside of Capital and concerns the capitalist class he always designates with “competition and credit” and also notes that the “real crisis” can only be explained from “the real movement of capitalist production, competition and credit.” (Theories of Surplus Value II, p. 512, see Capital III, Ch. 6, p. 205). It is the constraints of the competition that the capitalists bring about through their self-interest in practicing the exploitation of capital, of which they themselves have no concept. And to them credit, besides permitting him to deal with the practical obstacles to his profit-making, negotiates the contradictions of the utilization of capital: it provides for the generalization of the antithesis of production and circulation that strike capital in crises, but will not take the blame from the capitalists. Because this much is certain: if the contradiction of this form of reproduction takes the character of borrowing credit, which promotes the disposal of property, then the failure of this business does not affect the existence of the “wealthy”: They have resources! (See Wage Labor 1.3)
[10] To be sure, the revelations of Business Management economics are detailed implementations of the false consciousness of the capitalist about his activities. We separate them from the common ideas about his role in the world, not only for reasons of representation, which the most important lessons of Business Management bring into view, where the professed dealings of the capitalists with his property immediately follows what Business Management makes of it. What is summarized in section 4 as flourishing false consciousness is actually separate from the “technical” knowledge necessary for exploitation and exists not only in the minds of capitalists, but also the rest of the population. They are false consciousness about the nature of the ruling class.
[11] See LÖFFELHOLZ, p. 220 f.: “The medium-sized business differs from the small business in two respects. Initially, the management of the ongoing business requires one manager for itself ... In the big companies one or another of the other executive functions must be the task of a group that organizes itself as a board ... The very large company is characterized by the fact that both the management of the ongoing business as well as the provision of general corporate policy must be organized on a group basis. And each of these tasks requires the full manpower of several people ...”
[12] There are these people: their business is retail, they are a pre-existing condition found by the industrial capitalists, who use them. See Capital III, Ch. 20.
[13] See LÖFFELHOLZ, p. 22: “Merchant businesses (which are by no means “unproductive”): They provide for the distribution of the goods of the productive companies by offering them appropriate arrangements (assortments) at low priced, opportune locations (taking over transport and warehousing) and promote them in conditions which are favorable for the buyer and other companies, usually by advertisement. Banking businesses: They take over services in the payments and credit transactions.”
[14] Business Administration celebrates this approach as an invention of LOHMANN and RUCHTI; see LÖFFELHOLZ, p. 589: “The write-offs serve, as has been mentioned several times, to basically replace the depreciated object. But also the consumption-conditioned write offs work as a source of new investment, a process first described by H. RUCHTI and E. LOHMANN (The Lohmann-Ruchti Effect). This effect is based on the fact that in the selling prices of the manufactured products the amortization value for the assets used in the earlier period will be recompensed as needed for the renewal of the wear and tear of the assets, by which the quantities for amortization are obtained, i.e. that the liquefaction of the capital bound in fixed assets and the elimination of spent capital goods from the production process fall apart temporally. If the amortization amounts anticipated in this sense are constantly reinvested, then it leads to a plant expansion, without requiring the injection of new funds (by intake of outside capital or increasing its own capital funds).”
[15] See LÖFFELHOLZ. P. 571: “(l) Business credit or turnover credit is a short-term loan to cover a temporary cash need. The applicant for credit is granted a kind of advance on the market revenues from finished or in-process materials or merchandise. Each real (!) business credit allowed from the sales process, for which it was made available, is liquidated ... (2) Investment credits are loans for the creation of operational readiness or for the procurement of goods for the implementation of the company's goal. Credits for productive purposes, which cannot be paid back from the turnover process within the duration of the circulation of goods, are by their nature always fixed loans. Even credit given for the creation of the necessary stocks of raw and auxiliary materials and manufacturing goods, as well as resources for the workforce, thus the normal wage and salary fund are basically fixed loans. Because the turnover of the company will drop if one wants to draw from the necessary resources, and may lead to the collapse of the company. Such loans may only be covered from the profits of the company ...”
[16] Business administration economics summarizes this consideration in the “Golden Accounts Rule” and in discussions about its usefulness. See LÖFFELHOLZ. P. 524: “(l) The Golden Accounts Rule in the narrow sense, in the so-called classic form, requires that the fixed assets will be financed by equity capital; (2) the Golden Accounts Rule in the broader sense demands that not only the fixed assets, but also the circulating capital engaged for a long period, the iron components of circulating capital, be covered through one’s own equity and long-term debt, the rest of the circulating capital assets by short-term outside capital. The Golden Accounts Rule in its other version is as a general rule quite correct because it means that long-term investment are not to be financed in principle with short-term debt ...”
[17] See LÖFFELHOLZ, p. 525: “The Golden Bank Rule ... requires, in its strictest version, ‘perfect liquidity’, i.e. the credits (active loans) granted by a bank must correspond both in scope as well as maturity exactly according to the amounts made available by the bank (passive loans) in amount and maturity. The Golden Bank Rule in the strict form evolved only in the Renaissance (in the 16th century) after numerous bank crashes demanded it. And it can not be maintained by the modern credit bank at all, because it is in the nature of the bank to transform short term deposits into longer-term credits ...”
[18] See LOFFELHOLZ, p. 376 f.: “Fixed costs are part of the total cost, which remain uninfluenced by changes in the rate of utilization. Fixed costs thus arise from the willingness to produce at the existing capacity …Variable or variable costs are part of the total cost, its height is the rate of utilization of the company, e.g. manufacturing wages, raw material costs, etc. ... “
[19] See LÖFFELHOLZ, p. 2 & 1: “Technology ... is the practical application of the discoveries of the laws of nature for the substitution of human labor by mechanical aids and natural forces. The purpose of technology exists therefore primarily in substituting the factor of productive labor by the production factor of the operational funds (one speaks also of the substitution of labor by capital and then understands by capital produced means of production). The advantages of this substitution of labor are obvious: The productivity of labor ... rises tremendously ... is still constantly increased. Their disadvantages are also sufficiently well known. By the mechanization and automation of the labor process humans become ever dependent on the technical apparatus. A business shows this dependence in a very strong shift in the operational cost structure. By substituting labor the share of the proportional costs (wages) sinks within the total costs of the enterprise, while the fixed costs of the growing plants increase strongly. The enterprise becomes more immovable thereby, the bottom price is very high because of the high fixed costs, i.e. the enterprise can come into difficulties if its profit sinks slightly for long; then it cannot cover the fixed costs any longer.”
[20] Business administration economics remembers therefore the useful character of the labor market, which in economics show up in the talk of “wage formation theory”; this characteristic arises for the capitalist from the self-evident to everyone in the world fact that the “labor commodity” – is just the condition for his business: there are people who must pay for their existence by the sale of their labor. See LÖFFELHOLZ, p. 266: “According to newer perceptions, the law of supply and demand is also good indeed for wage formation, but the labor market has a number of peculiarities based on the peculiarity of human labor[!], for human labor is a commodity that does not increase arbitrarily: it can be reduced. The labor supply on the labor market consists of three components: the number of able workers, the number of working days in the week and the number of daily working hours. If the hourly wage is very low, then however not the labor supply declines, but on the contrary, it increases because each able bodied worker attempts to increase his wage level with the high labor supply. With high hourly wages, on the other hand, the labor supply shrinks because many workers are content with their wage income and are not willing to do more work.”
[21] See LÖFFELHOLZ p. 269 f.: “In the time wage, the wage is calculated after the consumed working time; in the time unit the executed job performance is not [!] taken into consideration.. By changing [!] the work performance in the time unit, the unit wage cost sinks proportionately ...” “In the modern assembly line, the production time wage again gained importance because the workers were forced to adapt to the pace of the conveyor belt.” “The disadvantage of the time wage is mainly due to the fact that the company bears the risk [!] of the willingness to work and the adroitness of the workforce entirely …[!]. The time wage gives no incentive to increase the labor performance. Poor work attitudes must be prevented through surveillance measures.”
[22] VgL LÖFFELHOLZ. P. 275: “The disadvantages of piece wages do not lie in the system, nor in the danger of too high an incentive to increase the performance, but only in the great difficulty of fixing the piece time properly. Today there is a whole series of very good methods for piece determination, however it is not a business task, but one for scientific management. The infamous piece scissors are thereby prevented, which consists in simply reducing the piece rates (a system that with high piece wages that is very popular in the Soviet zone).”
[23] See LOFFELHOLZ, p. 279: “The bonus pay for qualitative performance improvement can be combined of course with a piece wage system. For example, a quality premium of a high enough amount prevents the pieceworker from overloaded work by which the quality of the labor performance suffers, making a lot of re-working or re-machining necessary.”
[24] What the wage forms mean for the workers and their competition is discussed in the corresponding points of analysis in “Wage Labor.”
[25] It is thus understandable that Business Administration economics immediately throws up this “liquidity problem” as a cost-benefit calculation in the skillful management of debt. See Note 8!
[26] The usual idea of monopoly as a capital of extraordinary size has at first nothing to do with the concept of monopoly, because the amount of capital employed is indeed the means to avoid comparison with competitors, at the same time however also guarantees the “instability” of the exceptional position of a company because it is overcome through merging with the competitors. (See IV.3.) But also the monopoly which is based on the exclusive use of a technical process or exclusive use of natural production conditions dissolves by the discovery of similar procedures and other resources, so that it – precisely because of the principles of competition from which arises the quest for monopoly – is only temporarily and exceptionally that there are real monopoly prices which are determined by nothing other than the solvent need for the product concerned.
[27] See LÖFFELHOLZ, p. 266: “A further characteristic of the modern labor market is a form of market, because it is now largely a bilateral monopoly. Formerly, when the workers were not yet organized, the entrepreneurs were in the stronger position and could press down the wage. Through the uniting of workers into unions, workers now have to a considerable extent a supply monopoly [!] which faces the demand monopoly of the employers. However, just as little as with other monopoly prices can the wage be arbitrarily settled through bilateral monopoly on the labor market. The productivity of labor [!] is basically the upper limit of wages.”
[28] When Business administration economics discusses the advantages which arise for a company from a change to a new juridical form of business, then it enumerates, like in the discussion of liquidity and financial problems, the constraints that the company will “get rid of” because they threaten its continued existence! See LÖFFELHOLZ, p. 599: “The main reasons for conversion are: 1. broadening the capital base and credit ... 2. reducing the risk by limiting the liability ... 3. increasing credit ... 4. reducing the tax burden ... 5 preparing for a merger ...”