Accumulation: the motor of capitalism
We are often told that what drives capitalism is greed - the endless desire to accumulate more and more wealth. The idea that individuals are just self-interested was promoted by classical political economists such as Adam Smith. Smith attributed to humans a natural propensity to "truck and barter". This was, he argued, all part of the "economic man".
It was reinforced by neoclassical economists who characterised each individual as a "utility maximiser" always looking for personal gain. They argued that by abstaining and denying themselves consumption, capitalists saved money to reinvest in production.
Marx revealed that it was by neither choice nor abstinence that capitalists reinvested in production - rather it was by compulsion.
Capitalism is a system of production that is dominated by exchange value. In other words, capitalists do not produce things for direct consumption, but instead everything is geared towards the market which becomes the regulator of our daily "well" being.
A capitalist is indifferent to the actual use value of what is produced. What matters is not the usefulness of any product or service but the capacity to make more money out of it. Therefore surplus value that is squeezed out of workers is reinvested in further production.
This is because capitalists are always competing with other capitalists on the market and are dependent on finding buyers for their products. To do so, they must be able to minimise the price of their commodities. Marx pointed out that "the battle of competition is fought by cheapening of commodities. The cheapness of commodities depends...on the productivity of labour."
It is not because capitalists are greedy that they accumulate more capital. It is the pressure of competition that forces them to do so. A capitalist needs not only to make their workers work faster, but also to equip them with the most up to date machinery to increase productivity.
Under feudalism production was limited by the private consumption of the feudal lord. Marx wrote that "the walls of the feudal lord's stomach set the limits to his exploitation of the peasant".
But unlike feudalism there is no limit to accumulation for the capitalists. They constantly aim to invest in new technology. By making production as efficient as possible and minimising the costs they hope not to go out of business.
By constantly attempting to maximise their profits, a capitalist will be faced by two powerful obstacles: workers and other capitalists. Workers will resist efforts to squeeze profits out of them. By doing so, they can limit the productivity and profitability of the firm. Other capitalists will try to increase their share of the market, thereby reducing that of their rivals. Both of those constraints mean that capitalists are forced to continually invest in new technologies.
The drive to accumulate is at the heart of capitalism. Marx wrote that "the development of capitalist production makes it constantly necessary to keep increasing the amount of capital laid out...To fulfil their role as a capitalist, they must accumulate."
Marx linked this to the trend of capitalism more generally. He said we see the "accumulation of wealth on one hand, of poverty on the other". Bringing in new and expensive technology results in workers being laid off. The introduction of Samuel Crompton's spinning "mule" in 1779, for example, made it possible for one spinner to produce as much thread as 200 workers.
A capitalist cannot afford to rest as the threat of being overtaken by rivals is constantly present and competition is now far more rife than it was at the time Marx was writing.
This drive to accumulate underlies the great historical achievement of capitalism and the expansion of the forces of production. Capitalists are governed, as Marx put it, by the slogan "Accumulate, accumulate! That is Moses and the prophets... Accumulation for the sake of accumulation, production for the sake of production."
As workers are the sole source of profit, the need by capitalists to buy into new technologies ends up undermining the rate of profit. Whether it is the small corner shop or a big multinational, mechanisation is crucial to speed up production and to reduce the price of goods. This is why the source of surplus value and profit (living labour) tends to become less and less over time.
Accumulation is the essence of capitalism, but also gives rise to acute contradictions for the system. On the one hand it explains the rapid expansion of the system, but on the other it is the source of chronic crises.
Next month: Does money make the world go round?