Fundamental Economic Law of Capitalism

the law of motion of the capitalist economy, the content of which is determined by the fundamental production relation between wage labor and capital, which is the process of production and appropriation of surplus value.

According to F. Engels, the mechanism of the capitalist mode of production and of the mode of appropriation based on it is formed by the “core around which the whole existing [capitalist] social order has crystallized” (K. Marx and F. Engels, Soch., 2nd ed., vol. 20, p. 211). As Marx pointed out, this production relation constitutes “the hidden basis of the entire social structure” of capitalism (ibid., vol. 25, part 2, p. 354).

The essence of the fundamental economic law of capitalism was revealed by Marx in his theory of surplus value. Although he did not use the term “fundamental economic law of capitalism,” he did present the law of surplus value as the absolute law of the capitalist mode of production. Marx observed that the essential aim and compelling motive of capitalist production is “the snatching of surplus value and its capitalization, in other words, accumulation” (ibid., vol. 24, p. 573). The fundamental economic law of capitalism is characterized by the production and accumulation of surplus value, which constitutes the specific content of the operation of capital, the essence of capital. At the same time, the fundamental economic law of capitalism is characterized by the creation and appropriation by the workers of the value of the necessary product, which is equal to the value of the specific commodity—labor power—consumed in production. The value created by necessary labor constitutes the direct economic motive for labor activity and is the chief material condition for the existence of wage laborers—the greater part of the population of the capitalist countries. This constitutes the second, minor aspect of the fundamental economic law of capitalism, which was investigated by Marx in his theory of labor power as a commodity. The production of surplus value and of the value of the necessary product constitutes a dialectical unity and identity of opposites that presuppose and determine each other. Engels formulated the fundamental economic law of capitalism as the law of value in its specific form—the law of surplus value, which by no means displaces the law of the value of labor power (ibid, vol. 20, pp. 210–11, 322–24).

The fundamental economic law of capitalism begins to operate under the historical conditions in which the two main criteria of capitalism appear, marking it as a new mode of production distinct from feudalism. The first of these criteria is a higher level of commodity production, in which labor power itself becomes a commodity—that is, the necessary product takes the form of a value making for the reproduction of human labor as the chief productive force in society. The second criterion of capitalism is the production of a surplus product in the form of surplus value embodied in the means of production, which rule wage labor. As capitalism takes shape, its fundamental economic law operates more and more completely, determining the basic processes of the functioning and growth of the capitalist economy, as well as the development and intensification of its contradictions and of the antagonism between the two main classes.

The production of surplus value constitutes the basis for the entire mechanism of the fundamental economic law of capitalism and engenders the permanent tendency of capital to lengthen the workday, to reduce wages and the share of wage labor in the national income, and to enslave and plunder the peoples of other countries. Corresponding to this tendency are two modes for the intensification of exploitation—the production of absolute surplus value and the production of relative surplus value. The second, minor aspect of the fundamental law of capitalism gives rise to a countervailing tendency, which is expressed in the struggle by the proletariat for social, labor, and factory legislation, for a shorter workday, and for increased wages. The clash of the tendencies of capital and labor is manifested in the changing degree of exploitation of the proletariat, as expressed in the rate of surplus value.

The fundamental economic law of capitalism continues to operate as long as the capitalist mode of production develops, but its manifestations differ, depending on the stage of capitalist development. Even in the epoch of premonopoly capitalism the law is manifested in an evolved form, in the laws of the rate of profit and price of production, which regulate the flow of capital and labor power among the various branches of production. In the age of imperialism and the general crisis of capitalism the fundamental law is manifested in the even more complex forms of monopoly profit and monopoly price. The operation of the fundamental economic law of capitalism intensifies and aggravates the basic contradiction of the system—the contradiction between the social character of production and private capitalist appropriation. Thus, the fundamental law of capitalism deepens the inadequate satisfaction of the material and especially the cultural needs of the masses and the anarchy of the world capitalist economy and its crises and unemployment. Finally, it paves the way for the revolutionary overthrow of capitalism by socialism.

The fundamental economic law of capitalism is of decisive significance in the formation of the class structure of capitalist society. “It is precisely the exploitation of wage labor that is the basis for the entire modern system of robbery, that causes the division of society into irreconcilably opposed classes, and it is only from the point of view of this class struggle that all the other manifestations of exploitation can be consistently evaluated” (Lenin, Poln. sobr. soch., 5th ed., vol. 7, p. 45).

Pointing to the increasing percentage of laborers engaged in mental labor (as many as 50 percent of all wage laborers) in contemporary advanced capitalist countries, the revisionists argue that the field of operation of the law of surplus value has been narrowed, that the class contradictions of capitalism have faded, and that a gradual deproletarianization and transformation of capitalism into socialism is under way. They reiterate a point of view advanced by A. Smith and refuted by Marx: “the primitive view, according to which surplus value must invariably be expressed in some sort of material product” (K. Marx and F. Engels, Soch., 2nd ed., vol. 46, part 1, p. 285). In actuality, because an increasing number of those engaged in mental labor are subject to capitalist exploitation and are creating surplus value by their labor, they must be counted as workers.

During the industrial revolution of the 19th century the law of surplus value subordinated industry to itself once and for all. Likewise, with the intensive and extensive development of capitalism and especially under the circumstances of the scientific and technological revolution of the 20th century, the law of value has become the regulator of every aspect of social reproduction. This retards the development of the productive forces and aggravates the social antagonisms of capitalism, dooming it to inevitable destruction.

Official economics in the capitalist countries wages an endless war against Marx’ theory of the fundamental economic law of capitalism. In the 20th century a number of bourgeois and petit bourgeois theories of surplus value directed, to varying degrees, against Marx have appeared. Among them are the theories of the Austrian economist J. Schumpeter, the German O. Spann, the English economist R. Hawtrey, the American T. Veblen, the French economists A. Aftalion and H. Brochier, the American F. Knight, and the Swede G. Myrdal. In general, these theories ignore the more profound processes of the production and the distribution of value and emphasize the study of superficial transmutations of practical importance, in which the fundamental economic law of capitalism operates. “The central core of modern economics [is] the theory of consumers’ choice and the theory of equilibrium of exchange and production” (E. Roll, A History of Economic Thought, New York, 1956, p. 462).

The neoliberal school considers consumption the object and motive force of capitalist production. The “voices of sovereign consumers,” the spontaneous commodity-money exchange mechanism, are thought to determine directly what is produced. The system of free competition, of risk and uncertainty, of profit and loss is said to decide who will produce goods and how they will be produced. Neo-Keynesian economists argue that the stage of economic development emphasized by the neoliberals has already been passed and assert that the goal of the corporations is to achieve stable, planned growth in production. The corporations and the state are said to have overcome the anarchy of money and commodities and have arrived at a stage where they manipulate the consumer through advertising, credit, and other similar devices, while the state successfully regulates production as a whole.

The neoclassical synthesis tries to take a middle position, supplementing liberal views with the recognition of the dominant role of the giant corporations in the market and acknowledging that the quest for maximum profits is the chief motive for corporate activity. At the same time, the regulating role of the state and the state sector is emphasized. The hidden foundation common to all these schools is the theory of the factors of production, which denies the exploitation of wage labor, the antagonistic class structure, the mounting internal contradictions, and the inevitable destruction of capitalism.