With the development of the capitalist mode of production, the rate of profit therefore falls, while its mass increases with the growing mass of the employed capital. Given the rate, the absolute increase in the mass of capital depends on its existing magnitude. But on the other hand, if this magni- tude is given, the proportion of its growth, the rate of its increment, depends on the rate of profit. The increase in the productive power (which, we repeat, always goes hand in hand with a depreciation of the productive capital) cannot directly increase the value of the existing capital, unless it increases, by raising the rate of profit, that portion of the value of the annual product which is reconverted into capital. So far as the productive power is concerned (since it has no direct bearing upon the value of the existing capital), it can Internal Contradictions. 2gi accomplish this only by raising the relative surplus-value, or reducing the value of the constant capital, so that those com- modities which enter either into the reproduction of labor- power or into the elements of constant capital are cheapened. Both of these things imply a depreciation of the existing cap- ital, and both of them go hand in hand with a relative re- duction of the variable as compared to the constant capital. Both things imply a fall in the rate of profit, and both of them check it. Furthermore, so far as an increased rate of profit causes a greater demand for labor, it tends to increase the working population and thus the material, whose exploita- tion gives to capital its real nature of capital.
Indirectly, however, the development of the productive power of labor contributes to the increase of the value of the existing capital, by increasing the mass and variety of use- values, in which the same exchange value presents itself and which form the material substance, the objective elements, of capital, the material objects of which the constant capital is directly composed and the variable cajiital at least indi- rectly. With the same capital and the same labor more things are produced, which may be converted into capital, aside from their exchange value. Things which may serve for the ab- sorption of additional labor, and consequently of additional surplus-labor, and which therefore may become additional capital. The amount of labor, which a certain capital may command, does not depend on its value, but on the mass of raw and auxiliary materials, of machinery and elements of fixed capital, of necessities of life, of which it is composed, whatever may be their value. As the mass of the employed labor, and thus of surplus-labor, increases, so does the value of the reproduced capital and the surplus-value newly added to it grow.
These two elements playing their role in the process of ac- cumulation should not, however, be observed in their quiet ex- istence side by side, as Kicardo does. They imply a contra- diction, which expresses itself in antagonistic tendencies and phenomena. These antagonistic agencies oppose each other simultaneously.
292 Capitalist Production.
Together with the incentives for an actual increase of the laboring population, which originates in the augmentation of that portion of the total social product which serves as capital, there are the effects of other agencies, which create merely a relative over-population.
Together with the fall of the rate of profit gi-ows the mass of capitals, and hand in hand with it goes a depreciation of the existing capitals, which checks this fall and gives an acceler- ating push to the accumulation of capital-values.
Together with the development of the productive power grows the higher composition of capital, the relative decrease of the variable as compared to the constant capital.
These different influences make themselves felt, now more side bj side in space, now more successively in time. Peri- odically the conflict of antagonistic agencies seeks vent in crises. The crises are always but momentary and forcible solutions of the existing contradictions, violent eruptions, Avhich restore the disturbed equilibrium for a while.
The contradiction, generally speaking, consists in this that the capitalist mode of production has a tendency to develop the productive forces absolutely, regardless of value and of the surplus-value contained in it and regardless of the social conditions under which capitalist production takes place; while it has on the other hand for its aim the preservation of the value of the existing capital and its self-expansion to tlie highest limit (that is, an ever accelerated growth of this value). Its specific character is directed at the existing value of capital as a means of increasing this value to the utmost. The methods by which it aims to accomplish this comprise a fall of the rate of profit, a depreciation of the existing capi- tal, and a development of the productive forces of labor at the expense of the already created productive forces.
The periodical depreciation of the existing capital, which is one of the immanent means of capitalist production by which the fall in the rate of profit is checked and the accu- mulation of capital-value through the formation of new capi- tal promoted, disturbs the existing conditions, witliin which the process of circulation and reproduction of capital take?
Internal Contradictions. 293 place, and is therefore accom23anied bj sudden stagnations and crises in the process of production.
The relative decrease of variable capital as compared to the constant, which goes hand in hand with the development of the productive forces, gives an impulse to the growth of the laboring population, while it continually creates an artificial over-population. The accumulation of capital, so far as its value is concerned, is checked bj the falling rate of profit, in order to hasten still more the accumulation of its use-value, and this, in its turn, adds new speed to the accumulation of its value.
Capitalist production is continually engaged in the attempt to overcome these immanent barriers, but it overcomes them only by means which again place the same barriers in its way in a more formidable size.
The real harrier of capitalist production is capital itself. It is the fact that capital and its self-expansion appear as the start- ing and closing point, as the motive and aim of production; that production is merely production for capital, and not vice versa, the means of production mere means for an ever ex- panding system of the life process for the benefit of the society of producers. The barriers, within which the preser- vation and self-expansion of the value of capital resting on the expropriation and pauperisation of the great mass of pro- ducers can alone move, these barriers come continually in collision with the methods of production, which capital must employ for its purposes, and which steer straight toward an unrestricted extension of production, toward production for its o\\Ti self, toward an unconditional development of the productive forces of society. The means, this unconditional development of the productive forces of society, comes con- tinually into conflict with the limited end, the self-expansion of the existing capital. Thus, while the capitalist mode of production is one of the historical means by which the mate- rial forces of production are developed and the world-market required for them created, it is at the same time in continual conflict with this historical task and the conditions of social production corresponding to it.
294 Capitalist Production.
III. Surplus of Capital and Surplus of Population. With the fall of the rate of profit grows the lowest limit of capital required in the hands of the individual capitalist for the productive employment of labor, required both for the exploitation of labor and for bringing the consumed labor time within the limits of the labor time necessary for the production of the commodities, the limits of the average social labor time required for the production of the commodities. Simultaneously with it grows the concentration, because there comes a certain limit where large capital with a small rate of profit accumulates faster than small capital with a large rate of profit. This increasing concentration in its turn brings about a new fall in the rate of profit at a certain climax. The mass of the small divided capitals is thereby pushed into adventurous channels, speculation, fraudulent credit, fraud- ulent stocks, crises. The so-called plethora of capital refers always essentially to a plethora of that class of capital which finds no compensation in its mass for the fall in the rate of profit — and this applies always to the newly formed sprouts of capital — or to a plethora of capitals incapable of self-dependent action and placed at the disposal of the managers of large lines of industry in the form of credit. This plethora of capital proceeds from the same causes which call forth a relative over-population. It is therefore a phenome- non supplementing this last one, although they are found at opposite poles, unemployed capital on the one hand, and un- employed laboring population on the other.
An overproduction of capital, not of individual commodi- ties, signifies therefore simply an over-accumulation of cap- ital — although the overproduction of capital always includes the overproduction of commodities. In order to imderstand what this over-accumulation is (its detailed analysis follows later), it is but necessary to assume it to be absolute. When would an overproduction of capital be absolute? When would it be an overproduction which would not affect merely a few important lines of production, but which would be so abso- lute as to extend to every field of production?
There would be an absolute overproduction of capital as Internal Contradictions. 295 soon as the additional capital for purposes of capitalist pro- duction would be equal to zero. The purpose of capitalist production is the self-expansion of capital, that is, the ap- propriation of surplus-labor, the production of surplus-value, of profit. As soon as capital would have grown to such a proportion compared with the laboring population, that neither the absolute labor time nor the relative surplus-labor time could be extended any further (this last named extension would be out of the question even in the mere case that the demand for labor would be very strong, so that there would be a tend- ency for wages to rise); as soon as a point is reached where the increased capital produces no larger, or even smaller, quantities of surplus-value than it did before its increase, there would be an absolute overproduction of capital. That is to say, the increased capital C + A C would not produce any more profit, or even less profit, than capital C before its expansion by A C. In both cases there would be a strong and sudden fall in the average rate of profit, but it would be due to a change in the composition of capital which would not be caused by the development of the productive forces, but by a rise in the money-value of the variable capital (on account of the increased wages) and the corresponding reduc- tion in the proportion of surplus-labor to necessary labor.
In reality the matter would amount to this, that a portion of the capital would lie fallow completely or partially (be- cause it would first have to crowd some of the active capital out before it could take part in the process of self-expansion), while the active portion would produce values at a lower rate of profit, owing to the pressure of the unemployed or but partly employed capital. Matters would not be altered in this respect, if a part of the additional capital were to take the place of some old capital crowding this into the position of additional capital. We should always have on one side the sum of old capitals, on the other that of the additional capitals. The fall in the rate of profit would then be accom- panied by an absolute decrease in the mass of profits, since under the conditions assumed by us the mass of the employed labor-power could not be increased and the rate of surplus- 296 Capitalist Production.
value not raised, so that there could be no raising of the mass of surplus-value. And the reduced mass of profits M^ould have to be calculated on an increased total capital. — But even as- suming that the employed capital were to continue producing value at the old rate, the mass of profits remaining the same, this mass would still be calculated on an increased total cap- ital, and this would likewise imply a fall in the rate of profits. If a total capital of 1,000 yielded a profit of 100, and after its increase to 1,500 still yielded 100, then 1,000 in the second case would yield only 66§. The self-expansion of the old capital would have been reduced absolutely. A capital of 1,000 would not yield any more under the new cir- cumstances than formerly a capital of 666f.
It is evident that this actual depreciation of the old capital could not take place without a struggle, that the additional capital A C could not assume the functions of capital without an effort. The rate of profit would not fall on account of competition due to the overproduction of capital. Tlie com- petitive struggle would rather begin, because the fall of the rate of profit and the overproduction of capital are caused by the same conditions. The capitalists who are actively en- gaged with their old capitals would keep as much of the new additional capitals as would be in their hands in a fallow state, in order to prevent a depreciation of their original cap- ital and a crowding of its space within the field of production. Or they would employ it for the purpose of loading, even at a momentary loss, the necessity of keeping additional capi- tal fallow upon the shoulders of new intruders and other com- petitors in general.
That portion of A C which would be in new hands would seek to make room for itself at the expense of the old capital, and would accomplish this in part by forcing a portion of the old capital into a fallow state. The old capital would have to give up its place to the new and retire to the place of the completely or partially unemployed additional capital.
Under all circumstances, a portion of the old capital would bo compelled to lie fallow, to give up its capacity of capital and stop acting and producing value as such. The com- Internal Contradictions. 297 petitive struggle would decide what part would have to go into this fallow state. So long as everything goes well, com- petition effects a practical brotherhood of the capitalist class, as we have seen in the case of the average rate of profit, so that each shares in the common loot in proportion to the mag- nitude of his share of investment. But as soon as it is no longer a question of sharing profits, but of sharing losses, every one tries to reduce his own share to a minimum and load as much as possible upon the shoulders of some other com- petitor. However, the class must inevitably lose. How much the individual capitalist must bear of the loss, to what extent he must share in it at all, is decided by power and craftiness, and competition then transforms itself into a fight of hostile brothers. The antagonism of the interests of the individual capitalists and those of the capitalist class as a whole then makes itself felt just as previously the identity of these in- terests impressed itself practically on competition.
How would this conflict be settled and the " healthy '' movement of capitalist production resumed under normal con- ditions? The mode of settlement is already indicated by the mere statement of the conflict whose settlement is under dis- cussion. It implies the necessity of making unproductive, or even partially destroying, some capital, amounting either to the complete value of the additional capital C, or to a part of it. But a graphic presentation of this conflict shows that the loss is not equally distributed over all the individual cap- itals, but according to the fortunes of the competitive struggle, which assigns the loss in very different proportions and in various shapes by grace of previously captured advantages or positions, so that one capital is rendered unproductive, an- other destroyed, a third but relatively injured or but momen- tarily depreciated, etc.
But under all circumstances the equilibrium is restored by making more or less capital unproductive or destroying it. This Avould affect to some extent the material substance of cap- ital, that is, a part of the means of production, fixed and cir- culating capital, would not perform any service as capital; a portion of the running establishments would then close down.
298 Capitalist Production.
Of course, time would corrode and depreciate all means of production (except land), but this particular stagnation would cause a far more serious destruction of means of production. However, the main effect in this case would be to suspend the functions of some means of production and prevent them for a shorter or longer time from serving as means of production.
The principal work of destruction would show its most dire effects in a slaughtering of the values of capitals. That portion of the value of capital which exists only in the form of claims on future shares of surplus-value of profit, which consists in fact of creditor's notes on production in its various forms, would be immediately depreciated by the reduction of the receipts on which it is calculated. One portion of the gold and silver money is rendered unproductive, cannot serve as capital. One portion of the commodities on the market can complete its process of circulation and reproduction only by means of an immense contraction of its prices, which means a depreciation of the capital represented by it. In the same way "the elements of fixed capital are more or less depreciated. Then there is the added complication that the process of re- production is based on definite assumptions as to prices, so that a general fall in prices checks and disturbs the process of reproduction. This interference and stagnation paralyses the function of money as a medium of payment, which is condi- tioned on the development of capital and the resulting price relations. The chain of payments due at certain times is broken in a hundred places, and the disaster is intensified by the collapse of the credit-system. Thus violent and acute crises are brought about, sudden and forcible depreciations, an ac- tual stagnation and collapse of the process of reproduction, and finally a real falling off in reproduction.
At the same time still other agencies w^ould have been at work. The stagnation of production would have laid off a part of the laboring class and thereby placed the employed part in a condition, in which they would have to submit to a re- duction of wages, even below the average. This operation has the same effect on capital as though the relative or absolute surplus-value had been increased at average wages. The time Internal Contradictions. 299 of prosperity would have promoted marriages among the la- borers and reduced the decimation of the offspring. These cir- cumstances, while implying a real increase in population, do not signify an increase in the actual working population, but they nevertheless affect the relations of the laborers to capital in the same way as though the number of the actually working laborers had increased. On the other hand, the fall in prices and the competitive struggle would have given to every capi- talist an impulse to raise the individual value of his total prod- uct above its average value by means of new machines, new and improved working metliods, new combinations, which means, to increase the productive power of a certain quantity of labor, to lower the proportion of the variable to the constant capital, and thereby to release some laborers, in short, to create an ar- tificial over-population. The depreciation of the elements of constant capital itself would be another factor tending to raise the rate of profit. The mass of the employed constant capital, compared to the variable, would have increased, but the value of this mass might have fallen. The present stagnation of production would have prepared an expansion of production later on, within capitalistic limits.
And in this way the cyole would be run once more. One portion of the capital which had been depreciated by the stag- nation of its function would recover its old value. For the rest, the same vicious circle would be described once more under expanded conditions of production, in an expanded market, and with increased productive forces.
However, even under the extreme conditions assumed by us this absolute overproduction of capital would not be an ab- solute overproduction in the sense that it would be an abso- lute overproduction of means of production. It would be an overproduction of means of production only to the extent that they serve as capital, so that the increased value of its in- creased mass would also imply a utilisation for the production of more value.
Yet it would be an overproduction, because capital would be unable to exploit labor to a degree required by the " healthy, normal '' development of the process of capitalist production, 300 Capitalist Production.
a degree of exploitation, which would increase at least the mass of profit to the extent that the mass of the employed cap- ital would grow; which would therefore exclude any possi- bility of the rate of profit falling to the same extent that cap- ital growls, or of the rate of profits falling even more rapidly than caj^ital grows.
Overproduction of capital never signifies anything else but overproduction of means of production — means of produc- tion and necessities of life — which may serve as capital, that is, serve for the exploitation of labor at a given degree of ex- ploitation; for a fall in the intensity of exploitation below a certain point calls forth disturbances and stagnations in the process of capitalist production, crises, destruction of capital. It is no contradiction that this overproduction of capital is accompanied by a more or less considerable relative over-pop- ulation. The same circumstances, which have increased the productive power of labor, augmented the mass of produced commodities, expanded the markets, accelerated the accumula- tion of capital both as concerns its mass and its value, and lowered the rate of profit, these same circumstances have also created a relative over-population, and continue to create it all the time, an over-population of laborers who are not em- ployed by the surplus-capital on account of the low degree of exploitation at which they might be employed, or at least on account of the low rate of profit, wdiich they w^ould yield with the given rate of exploitation.
If capital is sent to foreign countries, it is not done, because there is absolutely no employment to be had for it at home. It is done, because it can be employed at a higher rate of profit in a foreign country. But such capital is absolute surplus- capital for the employed laboring population and for the home country in general. It exists as such together with the relative over-population, and this is an illustration of the way in which both of them exist side by side and are conditioned on one another.
On the other hand, the fall in the rate of profit connected with accumulation necessarily creates a competitive struggle. The compensation of the fall in the rate of profit by a rise in Internal Contradictions. 301