Marx and Capitalism

Professor John Kay, the Oxford economist, stated a few years back in a series of article “capitalism in crisis” run by the FINANCIAL TIMES, that Marx did not use the word “capitalism” in the first volume of CAPITAL (Our system is no longer capitalism in its Original form, 10th January 2012). The Professor thought that this omission was profoundly important but he did not say why.

Professor Kay went on to say that Marx instead used the expression “mode of production”. And indeed Marx said so right at the beginning of the first volume of CAPITAL. He wrote:

The wealth of societies in which the capitalist mode of production prevails appears as an “immense collection of commodities… (CAPITAL Vol 1 p. 125 Penguin 1990)

He then claimed that the capitalist mode of production Marx had spent a life-time studying had “disappeared” by the end of the 19th century. And he concluded:

Sloppy language leads to sloppy thinking. By continuing to use the 19th-century term capitalism for an economic system that has evolved into something altogether different, we are liable to misunderstand the sources of strength of the market economy and the role capital plays within it.

And what had 19th century capitalism “evolved into”? What role does “capital” play? According to Professor Kay during the 20th century, unlike the 19th century, most large scale companies were in the process of being owned by banks, pension funds and insurance companies on the one hand and run by professional managers on the other. For Professor Kay this change was a neat way to dispose of Marx. If Marx’s CAPITRAL describes a form of capitalism which no longer exists then we have no need to read his works or pay him any attention.

Of course, Professor Katy is being disingenuous. He does not apply his reasoning to Adam Smith and the WEALTH OF NATIONS which just happens to be the bible of the free marketers like Kay himself. Smith’s flawed example of the pin factory, for example, is uncritically acclaimed while his free trade and free market doctrines are unquestionably applied with religious fervour to the 21st century and all its economic woes.

Professor Kay’s argument it totally bogus and only demonstrates the poverty of economic teaching found in today’s universities. It is Kay who uses sloppy language and consequently sloppy thinking in dismissing as out-of-date the contradictions and their consequences Marx investigated taking place in a market economy. We feel sorry for his students. Who will teach the teacher?

Capitalism has not evolved into another system. The social forces of production are still being constrained by class relations of production. The problems Marx investigated in the 19th century are exactly the same problems facing the working class in the 21st century; production taking place for profit instead of meeting human need, economic crises and periodic high levels of unemployment, class exploitation, social alienation and poverty.

What of industrial production; who benefits? Capitalists may have left the factories but the managers who have replaced them still have to ensure the company makes profits for shareholders and profits still derive from the exploitation of the working class just as they did in Marx’s day. Increased share dividend to the investors is the name of the game. And you will not last long as a manager if you do not deliver yearly profits.

What then of the capitalist mode of production? Does Marx’s critique of capitalism adequately describe the century in which we live?

Marx and the Mode of Production

Marx described capitalism as “a mode of production” based upon commodity production and exchange for profit. The mode of production is defined by Marx as the way in which a social system is organized to produce goods and services.

The mode of production consists of two major and interrelated factors: the social forces of production and the social relations of production.

The social forces of production include land, raw materials, and energy as well as human skill and co-operative and social labour to run the machinery, tools, factories, transport and communication system and distribution facilities.

The relations of production include those who own the machinery of production and distribution and those who do not.

Under capitalism the relations of production are class relations where a capitalist class and its state, including the armed forces, face a working class struggling to resist the intensity and extent of exploitation. In the COMMUNIST MANIFESTO Marx pointed out that the class struggle is a political struggle over the ownership of the means of production and distribution.

And under capitalism workers do not own the means of production, they are forced onto the labour market to buy and sell their labour power to employers. And during their time at work, workers are exploited producing what Marx called “surplus value” the origin of the unearned income of rent, interest and profit. Workers are therefore wage slaves imprisoned within the wages system.

A Rose by another Name

Marx’s explanation of class exploitation faced by the working class is as true today as it was in the 19tyh century. Capitalism has not changed into something else. Marx did in fact go on to use the word “capitalism” in the second volume of CAPITAL published and edited after his death by Frederich Engels as one of our readers to Socialist Studies pointed out. This is what Marx wrote when discussing replacement costs:

These replacement costs are significant in nations where there is a developed capitalism. (CAPITAL, VOLUME TWO, pelican 1978, p.213)

And on the following page he continues:

But all labour that adds value can also add surplus-value and will always add surplus-value on the basis of capitalism

Some might say isn’t it all a little academic? Possibly? Just a rose by another name. Yet the Professor Kay’s of the world have an ulterior motive. Economists cannot answer Marx. All they can do is use subterfuge and artifice to avoid confronting his ideas. After all that is what they are paid to do. Sycophants and hired gunslingers one and all. In CAPITAL they see their own ugly image reflected back at them:

…the vulgar economists confine themselves to systematizing in a pedantic way, and proclaiming for everlasting truths, the banal and complacent notions held by the bourgeoisie agents of production about their own world, which is to them the best possible one (CAPITAL VOL 1, Ch. 1 note 34 p 175).

Whether “capitalist mode of production” or “capitalism” is used to describe the exploitive social system we currently live under, the Socialist party of Great Britain’s position on the profit system is quite clear:

Capitalism is a system of society based on the class ownership of the means of production and distribution in which wealth is produced by propertyless wage workers, to be sold on the market with a view to profit. Capitalism, therefore, is a class society with a privileged few living off the labour of the exploited many (QUESTIONS OF THE DAY, Socialist Party of Great Britain, “What is Capitalism” p. 5)

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Object and Declaration of Principles


The establishment of a system of society based upon the common ownership and democratic control of the means and instruments for producing and distributing wealth by and in the interest of the whole community.

Declaration of Principles


1. That society as at present constituted is based upon the ownership of the means of living (ie land, factories, railways, etc.) by the capitalist or master class, and the consequent enslavement of the working class, by whose labour alone wealth is produced.

2. That in society, therefore, there is an antagonism of interests, manifesting itself as a class struggle, between those who possess but do not produce and those who produce but do not possess.

3.That this antagonism can be abolished only by the emancipation of the working class from the domination of the master class, by the conversion into common property of society of the means of production and distribution, and their democratic control by the whole people.

4. That as in the order of social evolution the working class is the last class to achieve its freedom, the emancipation of the working class will involve the emancipation of all mankind without distinction of race or sex.

5. That this emancipation must be the work of the working class itself.

6. That as the machinery of government, including the armed forces of the nation, exists only to conserve the monopoly by the capitalist class of the wealth taken from the workers, the working class must organise consciously and politically for the conquest of the powers of government, national and local, in order that this machinery, including these forces, may be converted from an instrument of oppression into the agent of emancipation and the overthrow of privilege, aristocratic and plutocratic.

7. That as all political parties are but the expression of class interests, and as the interest of the working class is diametrically opposed to the interests of all sections of the master class, the party seeking working class emancipation must be hostile to every other party.

8. The Socialist Party of Great Britain, therefore, enters the field of political action determined to wage war against all other political parties, whether alleged labour or avowedly capitalist, and calls upon the members of the working class of this country to muster under its banner to the end that a speedy termination may be wrought to the system which deprives them of the fruits of their labour, and that poverty may give place to comfort, privilege to equality, and slavery to freedom.