Capital III, Chapter 27 - Part 4

In the joint stock company, the functioning capitalist, i.e. the manager, is not thereby the owner of the means of production, but only another worker, though a very skilled and specialised type of worker. As a consequence, labour is completely separated from ownership of the means of production. The capitalist no longer obtains profit because they own means of production, and use it to to employ labour-power, so as to extract surplus value. They rather obtain interest from their ownership of money-capital, which seems to be its innate quality, and totally unrelated to the production process, whereby labour, be it that of the manager or the day labourer, is simply paid for the service it provides.

“This result of the ultimate development of capitalist production is a necessary transitional phase towards the reconversion of capital into the property of producers, although no longer as the private property of the individual producers, but rather as the property of associated producers, as outright social property. On the other hand, the stock company is a transition toward the conversion of all functions in the reproduction process which still remain linked with capitalist property, into mere functions of associated producers, into social functions.” (p 437)

But, this has important economic consequences too. In Capital II, Marx makes clear that although capitalism is characterised by expanded reproduction, at the heart of it remains simple reproduction. This is true in two ways. Firstly, the circuit of productive-capital requires that the physical capital consumed in production, is reproduced.

The circuit P...C' – M'. M – C...P, illustrates this, in that, as Marx says, even if M' is reinvested so as to bring about an accumulation of capital, what really occurs is the establishment of two circuits.

M' divides into M and m. On the one hand, M is the money equivalent of the value of the original C, and thereby reproduces it, even if its value has changed exogenously, during the production process. Meanwhile, m which is the money equivalent of the surplus value produced in the production process, may be consumed unproductively or accumulated.

But, for a private capital, a portion of m must always be consumed unproductively, because the capitalist must live. This is the second reason simple reproduction must remain at the heart of the process. The less developed capitalist production, the greater the portion of m will be required by the private capitalist to cover their necessary consumption, so as to live. For a private capital, therefore, there is a minimum level of profitability that must be achievable, because below it, the private capitalist simply cannot produce enough profit to finance their necessary consumption, let alone invest in expanded reproduction.

But, this limitation does not exist for socialised capital, be it that of the joint stock company or the co-operative. Both of these latter forms only have to reproduce the value of the capital they consume plus a small amount of interest for the money-capital they borrow. This means they are not restricted by the limitations of a falling rate of profit, and can thereby continue expanding production in a way that a private capitalist cannot. As Marx puts it,

“Before we go any further, there is still the following economically important fact to be noted: Since profit here assumes the pure form of interest, undertakings of this sort are still possible if they yield bare interest, and this is one of the causes, stemming the fall of the general rate of profit, since such undertakings, in which the ratio of constant capital to the variable is so enormous, do not necessarily enter into the equalisation of the general rate of profit.” (p 437)

However, Engels points out that it is this fact, of being able to continue to expand production, in this way, whilst the expansion of the market is limited, which results in crises of overproduction.

[“Since Marx wrote the above, new forms of industrial enterprises have developed, as we know, representing the second and third degree of stock companies. The daily growing speed with which production may be enlarged in all fields of large-scale industry today, is offset by the ever-greater slowness with which the market for these increased products expands. What the former turns out in months, can scarcely be absorbed by the latter in years. Add to this the protective tariff policy, by which every industrial country shuts itself off from all others, particularly from England, and also artificially increases domestic production capacity. The results are a general chronic over-production, depressed prices, falling and even wholly disappearing profits; in short, the old boasted freedom of competition has reached the end of its tether and must itself announce its obvious, scandalous bankruptcy.”] (p 437-8)

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